A taxpayer-funded external review of the failed Robodebt scheme found "a lot of flaws" but a full report was never completed after the government said it was not required, a royal commission has heard.

Shane West, a partner at consulting giant PricewaterhouseCoopers (PwC), said in early 2017 then Department of Human Services (DHS) secretary Kathryn Campbell engaged the firm to review the Coalition-era budget-savings program that became known as Robodebt.

Around that time, the Commonwealth ombudsman was investigating the Centrelink debt recovery scheme after questions were raised about the legality of its central method, "income averaging".

The PwC contract was worth almost $1 million.

Mr West told the hearing the firm "put considerable time" into developing a 70-page detailed draft report but mid-year, the DHS said it was no longer "required" and a "visual presentation" given to then-human services minister Alan Tudge would suffice.

He said he does not recall how PwC was informed the department no longer needed the report or any reasoning provided.

"We weren't able to find any [texts] or email correspondence to that effect," Mr West said.

After receiving that direction from the department, he said PwC ditched its investigation into the scheme entirely.

Counsel assisting Justin Greggery KC said: "Surely, you must, as the lead on the project, have gone back to Kathryn Campbell and said: 'You've paid for the report, we've done the work, why don't you want it?'"

"No, we didn't," Mr West said.

Commissioner Catherine Holmes asked: "You didn't do anything to confirm with them [the department] that it did not need to be delivered, you just waited for them to pay the bill and took that as confirmation?"

"No … my assumption, but I can't recall … is there must have been a conversation between the department and us," he said.

"It seems a very laissez-faire approach to carrying out a contract. Does PwC usually just rely on a word that's not documented anywhere?" Commissioner Holmes asked.

Mr West replied: "I can't speak for the firm at large, but..."

"Do you?" she asked.

"Sometimes," Mr West said.

Commissioner Holmes said: "One possible view is that there's been a … nod and a wink, a 'don't give us it, thanks' [from DHS] somewhere along the line, Mr West, you can see how a cynic might wonder about that?"

Mr West said: "I can, yes … but I cannot recall ever being provided such a nod and a wink."

Commissioner Holmes said it was "really remarkable" and "challenges credulity" that nobody in the DHS ever "got wind of the existence" of the report, and, that PwC abandoned it "without any documentation" of how it happened.

"That's my recollection," Mr West said.

Review found 'room for improvement'

The inquiry was shown an interim summary of the audit and Mr West agreed with Mr Greggery that PwC's assessment of the scheme was "a very poor report card" for the department.

"It was woeful, wasn't it?" Mr Greggery asked.

"I think our view was that there were things [in the scheme] that should have been considered but weren't," Mr West said.

"[We found] room for improvement."

Mr West later conceded PwC's review found the system had "a lot of flaws" and there was "clear evidence … savings weren't going to be achieved".

The commission was also shown minutes from a meeting between the DHS and PwC in March 2017, in which department officials suggested that "political criticism [of Robodebt] has lost steam" and the ombudsman's report "will say aspects of the systems are good", a month before it was released.

The commission heard that former senior DHS executive, Jason McNamara, told PwC that the government "only cares about the money" and "doesn't care what they do with compliance to achieve it [budget savings]".

"Other than the department doing something politically silly, they don't care," the minutes show Mr McNamara saying.

'We've got advice that it's not legal'

Former deputy secretary of social security at the Department of Social Services (DSS), Nathan Williamson, has also given evidence.

The inquiry has previously heard a DSS official requested external legal advice from law firm Clayton Utz on the scheme in 2018, which found the use of "income averaging" to raise welfare debts was unlawful, but it was left in draft form and never acted on.

The scheme continued until November 2019, accusing hundreds of thousands of welfare recipients of owing money to Centrelink.

Former branch manager at DSS, Allyson Essex, told the commission last week that she briefed her boss, Mr Williamson, on the advice in August 2018 and raised concerns, saying "I told him … we've gotten advice that it's not legal".

She told the commission, he replied: "It is legal, it's really clear that it's legal."

Mr Williamson told Friday's hearing he does not recall that conversation with Ms Essex or being briefed on the advice at the time.

"That sort of response does not sound like … the response I would give. That's not my style," he said.