The system, according to Advertising Federation of Australia (AFA) chief executive, Lesley Brydon, effectively asks agencies to work for no profit.
"Agencies pitching for this business have realised that with this formula, the Government is unreasonably delving into agency costs and (they realise) it is also an unprofitable formula. What they are asking you to do is to apply a multiple of two to the base salary cost, now that's unprofitable, she says.
Government assignments were last year worth more than A$160 million (US$90 million), making it the country's biggest single advertiser. Agencies pitching for the most recent piece of Government work - a A$12 million campaign for its Pharmaceuticals Benefits Scheme - were required to complete complex cost templates which ask agencies to disclose the head cost per hour of staff working on the business. It is a request which has angered the five pitching agencies and the AFA.
While the Government has remained characteristically tight lipped about its dealings with agencies, it did say the template system was to create greater transparency in fees.
But Brydon, who was consulted on the proposed new system after approaching the Government Communication Unit on behalf of concerned agencies, said the templates encouraged a guess at costs, which defeated the Government's stated aim.
"The templates are not clear and we do not believe the Government has achieved its goal of making costs more transparent, she said. "I think the Government is doing itself a major disservice because some of the agencies would not be willing to work on Government briefs at the kind of rates they are trying to screw them down to."
She said there was also no room for agencies to alter cost forecasts if a campaign got snagged in Government red tape and had to be altered, which was not unusual.
