The explosion in government spending which suddenly ramped up last May will leave the incoming government buried in debt but worse, it will leave whoever wins the impending federal election tied to billions of dollars in spending commitments which never went to tender.
There have been $153 billion in “amended contracts”, or untendered contracts struck by the government between March 2016 and February this year, the bulk of it in the past ten months, and the vast bulk of that in Defence spending.
“One of the puzzling aspects of this data is the significant, sudden and sustained increase in the value of amended (untendered) contracts commencing in May-2018 when compared to any prior month,” says data expert Greg Bean who has been analysing the data over the past year.
“I’ve watched this data for the 6 months since Sept-2018, up to the latest full month being Feb-2019, curious to see if that May-Sept 2018 increase was an anomaly.
“It is now quite clear it was not.”
These amended contract values are not actual expenditure in most cases, says Bean. What they are is a commitment, under contract, to future expenditures. A commitment that the current LNP government may never have to fulfil – assuming Labor comes to power – but “will be hung around the almost certain incoming ALP government’s neck like an albatross. Contracts worth billions of dollars that will hamstring the ALP’s ability to allocate funds to those initiatives the ALP prioritises”.
The other point to make about the spending patterns is the concentration of spending in Defence on 20th century technology. The bulk of the spend is with US arms-maker Lockheed Martin for the troubled F-35 Joint Strike Fighter program.
There is a good chance, says Bean, the submarines, jets, helicopters, armoured cars, and other antiquated equipment will be found wanting in the modern warfare of cyberattacks and drones.
“And what a massive waste of financial resources purchasing even one jet for $200 million – 300 million that costs $100,000 an hour to fly when it can be defeated by a $20 million drone that costs only a fraction as much to operate.
Multiply that by hundreds of antiquated pieces of equipment all easily defeated by drones, including nuclear armed and powered submersible drones with unlimited range, or cyberattack as we’re now witness in Venezuela, at a fraction of the cost and one soon realises the folly of these massive military expenditures.
The other point to make about the apparently reckless binge on untendered contracts is that much of it is struck directly with corporate entities of foreign manufacturers which are domiciled offshore. This means that billions of dollars are escaping Australia’s tax net.
Besides the mostly US defence companies, the major winners from the splurge on Defence are the Big Four accounting firms who have been picking up hundreds of millions of dollars in consulting contracts for delivering advice to government.
Almost 60 per cent of government billings by the Big Four global accounting firms over the past two years has been harvested out of the Department of Defence. And the DoD accounts for the lion’s share of the blow-out in government spending.
Analysis of government contracts by Greg Bean last year showed that, of the $998 million that KPMG earned, they billed $612 million from DoD, 61 per cent of their billing and almost twice the amount billed by the closest Big Four rival PwC.
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