“I am satisfied in this case that the public interest does not outweigh the threat to McKinsey and Company in future negotiations that could come as a consequenceof [the] release of such specific information”, Chief Ombudsman Peter Boshier told the Herald in his final decision.
KiwiRail engaged McKinsey to undertake a strategic review intended to lift performance across its rail freight and ferry business.
Finance Minister Nicola Willis was unhappy when she found out about the cost of the review in a Treasury report from last year.
“I was immediately concerned by the magnitude of this cost. I view it as excessive and not justifiable.”
Chief Ombudsman Peter Boshier said KiwiRail was entitled to refuse to release the cost.
KiwiRail has always maintained the cost is commercially sensitive.
The Herald complained to the Ombudsman, arguing there was significant public interest in the cost, especially because Willis had said she would have problems defending it in the public arena.
Boshier acknowledged the Herald’s comments about the public interest in how public money is spent, ensuring that agencies were accountable for the expenditure.
However, he said KiwiRail was entitled to refuse to release the cost.
The Herald was advised earlier this month that this would likely be the Ombudsman’s final opinion.
Investigation and resolution team acting manager Penny Eathorne said KiwiRail had submitted that releasing the cost would disadvantage the company in any negotiations for consultancy work in the future.
“The Ombudsman is likely to agree that there is public interest in ensuring the integrity of the tender process involving State Owned Enterprises, in this case, KiwiRail needs to be accountable for the expenditure of public money.
“However, disclosure of information about costs is likely to threaten the tendering process, which by commercial necessity needs to be fair to all tenderers.
“In this case, enabling the company’s competitors to see such details places the company at a significant disadvantage, and would remove the ‘level playing field’ that a tendering process requires.”
KiwiRail has always maintained the cost of the consultants was commercially sensitive.
When previously asked to justify the cost of the McKinsey report, former KiwiRail board chairman David McLean said the board expected KiwiRail to lift its performance and grow its share of the freight and Cook Strait markets.
Boshier is also investigating a separate complaint by the Herald after KiwiRail refused to release the resignation letters of McLean and other board directors.
KiwiRail withheld this correspondence citing the need to protect the privacy of individuals.
The Herald argued the letters should be released, given the board is accountable for an organisation funded by public money.
The Ombudsman’s investigation into this matter is ongoing.
Georgina Campbell is a Wellington-based reporter who has a particular interest in local government, transport, and seismic issues. She joined the Herald in 2019 after working as a broadcast journalist.
