Renewables agency forced to spend $100m on consultant and labour hire after staff cuts

The Australian Renewable Energy Agency has been forced to spend more than $100 million of funds earmarked for renewable energy projects to cover a growing bill for consultants and labour-hire contracts, following years of cuts to staffing by the Morrison government.

During a hearing of senate estimates, officials from the Department of Industry, Science, Energy and Resources confirmed that ARENA is required to pay for consultants and labour-hire contracts using its grant funds.

“Is it the case that spending on consultants, whether it’s labour-hire or specialist technical consultants from ARENA, comes from essentially the same pool of funds as the project grants?” Labor Senator Jenny McAllister asked deputy secretary of the industry department, Jo Evans, on Thursday.

“ARENA has its funding which is appropriated – up until this year, it has been appropriated under the [ARENA] Act – and that’s a single line of funding. It’s not broken up. So that’s right,” Evans responded.

Analysis of the agency’s financial statements shows a massive decline in the number of staff provided to the agency by the Morrison government.

At the same time, ARENA has been forced to cover a growing bill for labour-hire services and consultants out of its grant funding pool, diminishing the amount of funds available to support renewable energy projects.

In 2020-21, ARENA spent more than three-times as much on consultants ($15 million), than the value of public service staffing provided to the agency by the industry department ($4.9 million).

The analysis suggests that under the Coalition government, ARENA has been progressively gutted of its staffing resources and forced to spend tens of millions in grant funding on temporary replacements to remain operational.

According to ARENA’s annual reports, the number of public service staff provided to the agency has fallen dramatically, having operated with a peak of more than 70 full-time equivalent staff in 2013-14, to now having just 22.7 full-time equivalent staff in 2020-21.

It represents a 67 per cent fall in the staffing resources provided to ARENA under the Coalition government.

When the figures were put to the department during estimates, Evans confirmed to senate estimates that the gap was being filled by consultants.

“I’m not sure about the precise numbers there. But the order of magnitude described is correct in terms of the number of staff provided by the Department to ARENA,” Evans said.

“They have, at the same time expanded their activity into more technical areas, growing their portfolio and so on. So they do still have a larger complement of people working for ARENA, but they are drawing on contractors to provide that.”

During this period, ARENA’s spending on consultants and labour-hire contracts has risen considerably. ARENA spent just $6.3 million in 2013-14 on consultants.

But in the prevailing seven years, this figure has almost tripled, including a $15.0 million spend on consultants and labour-hire contracts in the 2020-21 financial year.

All up, ARENA has spent $102.8 million over the last eight years on consultants and labour-hire contracts, money that could otherwise be provided as grant funding for renewable energy technologies and projects.

Under ARENA’s legislation, the agency, which administers almost $2 billion worth of grants that support the development of new renewable energy projects and technologies, is provided with public service staff by the industry department ‘free of charge’.

ARENA is also able to directly engage a range of contractors and specialist consultants to provide additional support to the agency, but the cost for these additional services needs to be paid for out of ARENA’s own pool of funding, that would otherwise be used for providing grants to renewable energy projects.

ARENA is expected to continue spending funds on labour-hire contracts for at leas the next two years, with recent disclosures showing it currently has $35.4 million worth of active labour hire contracts, some running until June 2024.

An additional $46.6 million will be spent on an unspecified number of “specialist consultants”, and a further $8.5 million on in-house legal advice.

The figures would suggest that ARENA has been compelled to dip into its available grant funding to engage additional staff to make up for the shortfall in staff provided by the industry department.

Officials from the industry department told estimates that they believed the change reflected the changing priorities for the agency, and an increased need for specialist staff.

“The transition into higher technical skills has resulted in ARENA looking beyond the standard public service market to get those technical skills that we don’t necessarily have,” the industry department’s CFO Rob Hanlon told the senate estimates hearing.

However, it does mirror a wider trend across government departments under the Coalition government, where public servant staff are increasingly being replaced by temporary consultants and labour hire services.

Since 2012, it has been estimated that as many as 17,000 public service jobs have been cut from the federal public service, while expenditure on consultants has surged.

Following the election of the Abbott Government in 2013, the Coalition sought to abolish ARENA altogether, only narrowly failing to do so after the attempts were thwarted by the federal senate.

Under the Morrison government, federal energy and emissions reduction minister Angus Taylor has also sought – unsuccessfully – to redirect ARENA funding to a range of technologies preferred by government, including carbon capture and storage projects.

The latest attempt, made through a change to ARENA’s regulations, was recently blocked by the federal senate, following a motion to ‘disallow’ the regulations made by Liberal senator Concetta Fierravanti-Wells.

Fierravanti-Wells chairs the influential oversight committee for delegated legislation, which recently concluded that the ARENA regulations issued by Taylor seeking to redirect the agency’s funds for non-renewable technologies were likely to be unlawful.

ARENA did not appear before senate estimates on Thursday, and has been contacted for additional comment.