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The Department of Veterans Affairs paid consultants PwC $73 million to forestall a Royal Commission as part of a billion-dollar program intended to avoid reforming “not fit for purpose” legislation. Stuart McCarthy reports.

The Department of Veterans’ Affairs (DVA) paid disgraced consulting firm PwC (PriceWaterhouse Coopers) $73 million to implement a “veteran centric reform” program aimed at forestalling the Royal Commission into Defence and Veteran Suicide.

More than $1B in public expenditure sunk on this program has since become the justification for the government to avoid the “urgent” legislative reform recommended in the Royal Commission’s interim report. The program was used as an opportunity to promote a discredited software platform by health information technology (HIT) start-up company Innowell Pty Ltd, co-owned by PwC and established using a $30 million grant from the federal health department.

Public advocacy for the Royal Commission began in earnest around the time of a 2015 Senate inquiry into the mental health of defence force personnel. These efforts were supported by media coverage highlighting a dysfunctional veterans’ affairs bureaucracy that the Productivity Commission found in 2019 was “not fit for purpose”, requiring “fundamental reform” to its “byzantine” and “archaic” legislation.

Under the existing legislation, veterans are required to submit multiple claims for conditions resulting from the same injury or illness, a process that often takes months or years. This bureaucratic dysfunction has long been identified as one of the key factors contributing to the veteran suicide crisis.

Veteran Suicides Investigation

Days before a six-month investigation ($) into veteran suicides by award-winning journalist Ruth Lamperd hit the front pages in 2016, Prime Minister Malcolm Turnbull called a press conference to announce a National Mental Health Commission (NMHC) review into suicide prevention services for veterans and families and re-announce several other initiatives from the previous budget.

The NMHC was chaired by Professor Ian Hickie from Sydney University, who is notorious for criticising general practitioners and other primary health care providers for their involvement in patients’ mental health care.

Three days before Turnbull’s press conference, DVA awarded PwC an $8 million contract to act as the department’s “primary strategic partner” in developing a second pass business case for the proposed “veteran centric reform”(VCR)  program.

The Department was allocated funding in the 2016-17 Budget to begin planning to significantly improve its policies, provision of services, and information & communications technology (ICT) infrastructure. One of the key assumptions of the business case was that “no significant legislative reform” would be required.

Actuarial modelling included in the business case suggested “reforms” to business processes, ICT and “departmental culture” would realise $500 million to $1 billion in departmental cost savings over the next 50 years, or $10-20 million per annum.

The suicide ‘business case’

Following the government’s April 2017 approval of the business case, DVA agreed to a $73M deed of standing offer with PwC, for consulting services to assist with the design and implementation of VCR.

The initial $27.5M contract in 2017-18 was the single largest ($) government consulting services contract awarded that year, representing a quarter of the Commonwealth’s total spend on consulting services. KPMG was awarded $7.3M in contracts for VCR-related consulting services including “assurance activities.”

The first $166M tranche of the VCR funding was announced by Turnbull’s Veterans Affairs Minister, Dan Tehan, in the 2017-18 budget. A 2021 Australian National Audit Office report shows that $653.7M was spent in the first three years of the six-year program.

Analysis of this report, government budget papers, ministerial media releases and DVA annual reports suggest the program’s total cost exceeded $1 billion.

There is a discrepancy of more than $300 million between the commitments identified in the budget papers and the program’s total estimated cost, largely attributable to the contracted labour hire needed to keep the department running while the program was being rolled out.

Additional staffing costs were not included in the business case. ANAO has thus far declined to audit the rest of the VCR program subsequent to its 2021 report.

Among the attendees at Tehan’s parliament house office party on budget night in May 2017 was Hickie’s colleague Professor Jane Burns, who declared of the $166M announcement over a glass of champagne, “Winners are veterans and families.”

Burns, who chaired the DVA veterans’ and families’ counselling service national advisory committee, is the co-founder of the HIT start-up company Innowell.

Innowell Pty Ltd

Innowell’s primary business venture was the Project Synergy software platform, initially developed using $5.5M in federal health department funding,

based partly on the discredited concept of gamifying a suicide prevention phone app.

As the initial funding dried up, Hickie publicly lobbied Turnbull for further public funding in the lead-up to the 2016 federal election.

In 2017 the health department awarded a $30M non-competitive grant to a PwC/University of Sydney joint venture to continue Project Synergy.

Innowell was registered as a private company earlier that year. Burns’ co-founder was PwC partner Kristin Stubbins, who later became the company’s acting Australian chief executive.

Weeks before the $30M grant was awarded, a 45% Innowell shareholding was given to PwC, with 45% going to the University of Sydney, 5% to Hickie and 5% to Burns. Turnbull later appeared in a live promotional video for Project Synergy with Burns and Hickie,

without declaring Innowell was established as a private company using public funds.

Tehan, Turnbull, Ley

Malcolm Turnbull, Dan Tehan and Sussan Ley at a press conference addressing veteran suicides in August 2016.

Failed software trials

DVA clients and other vulnerable groups were used to trial Innowell’s software platform under Burns’ oversight as the national advisory committee chair and during the VCR rollout managed by PwC consultants.

Despite an independent academic report finding in 2019 that there was no evidence the trials proved the software platform was effective, PwC publicly stated that the trials were “successfully delivered,” providing commercialisation and investment opportunities. The Innowell website now says the company “provides research-validated digital tools and personalised insights to connect your people to the support they need when they need it.”

Hickie has complained that the current Senate consulting services inquiry poses a  “clear danger … that unnecessary and preventable harms are caused to many rather innocent bystanders.”

He was awarded an AM on Australia Day this year for “distinguished service to psychiatric research and reforms as an advocate for improved mental health care and awareness.”

Royal Commission

The Royal Commission was eventually established in 2021 after a petition was signed by hundreds of thousands of members of the public. Then a motion was supported unanimously in both houses of parliament.

The first “urgent” recommendation of its interim report last year was fundamental reform to the dysfunctional legislation identified in a succession of previous reports, including the Productivity Commission. The same dysfunctional legislation the government sought only to band-aid with the billion-dollar VCR program. Among the hundreds of Royal Commission witnesses was DVA medical adviser Dr Felix Sedal, who testified at a public hearing that the

‘reformed’ departmental IT system ‘was harder to use than the paper files.’

But the Albanese government is now resisting these calls for fundamental legislative reform, on the perverse basis that it would be too expensive.

Sources involved in the legislative consultation process announced by current veterans’ affairs minister Matt Keogh in response to the Royal Commission’s interim report say the minister intends to retain the Military Rehabilitation and Compensation Act – an inherently complex piece of legislation that retains the “archaic” processes identified by the Productivity Commission – with only minor amendment, for the sake of political expedience and concern over the cost of introducing new ICT systems and staff training necessitated by more fundamental reforms that would meet the needs of injured veterans and their families.

Keogh has publicly highlighted the government’s efforts to rebuild the Australian public service after years of outsourcing by the previous government.

The former Community and Public Sector Union delegate in 2022 increased DVA staffing by 500, at a cost of $234M, with a further $87 million to “modernise IT systems.”

No cost savings

Analysis of these figures shows that, rather than saving the department the $10-20 million per annum predicted in the PwC business case, the actual outcome of the $1 billion VCR program has been an increase in departmental operating costs of around $60-124 million per annum.

Australian Peacekeeper and Peacemaker Veterans’ Association chairperson Ian Lindgren says he is “stunned” by Keogh and his department’s lacklustre response to the Royal Commission’s recommendation for legislative reform, telling MWM: 

We believe the proposed legislation will fail to meet the Royal Commission’s recommendations.

“The ‘simplified’ legislation will continue to create the angst, complexity, and trauma which contributes to suicidality in the defence and veteran community.”

Lindgren participated in a “multi-act working group” led by senior DVA officials, but says the “purported consultation process” prompted him to withdraw on the first day of the activity. He says key veteran advocates “have been told that we will not know which elements of the recent consultation will be incorporated until the draft legislation is tabled [in parliament].”

Royal Commission chair Nick Kaldas wrote in February this year:

“It appears there has been a catastrophic failure of leadership at a government level and within the military to prioritise the urgent reforms and implement effectively the previous recommendations required to deliver improved health and wellbeing outcomes for defence personnel and veterans – and, as such, the senseless loss of life continues today. It is a national disgrace.”

With a veterans’ affairs minister clearly more concerned about protecting the interests of his CPSU cronies than he is with properly reforming his “not fit for purpose” department, that same catastrophic leadership failure is now afflicting the Albanese government.

The Senate Consulting Services Inquiry’s final report is expected to be published this week, while the Royal Commission’s final report is due in September.

Ziggy plays for time: PwC’s dual ‘independent reports’ a dual whitewash

Stuart McCarthy is a medically retired Australian Army officer whose 28-year military career included deployments to Afghanistan, Iraq, Africa, Indonesia and Papua New Guinea. Stuart is an advocate for veterans with brain injury, disabilities, drug trial subjects and abuse survivors. Twitter: @StuartMcCarthy_

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