Finance Minister Nicola Willis speaks about KiwiRail cancelling its mega Cook Strait ferry contract with the South Korean shipyard Hyundai Mipo Dockyard.
Video / Mark Mitchell
The Ombudsman is investigating KiwiRail’s refusal to disclose the cost of advice from McKinsey & Company.
“Of course, from time to time, people need to pay specialist consultants for specialist advice but from what I’ve seen, this was straightforward advice.
“Frankly, if I were on the board, I would have been asking why couldn’t my executive come up with this themselves.”
Finance Minister Nicola Willis says she was immediately concerned by the magnitude of the consultant cost when she found out about it. Photo / Mark Mitchell
The Herald asked Willis about the cost after KiwiRail would not disclose the amount because of commercial sensitivity.
Willis sought advice to publicly release the figure but was told by KiwiRail that this would breach their contract with McKinsey.
The Herald then complained to the Ombudsman, arguing there was significant public interest in the cost, especially because the Finance Minister had said she would have problems defending it in the public arena.
The Chief Ombudsman has now started an investigation.
Willis told the Herald this week that her views on both the strategic review and the non-disclosure of its cost have not changed.
“I await the outcome of the Ombudsman’s investigation with interest.”
A spokesman said KiwiRail had no comment on the Herald’s complaint. “We maintain the need for commercial confidentiality on the cost of the advice.”
Victoria University Faculty of Law professor Dean Knight has said commercial confidentiality is not necessarily absolute.
There are cases where the public interest in disclosing the information could trump the commercial reasons for withholding it, Knight said.
“I would have thought there is significant public interest in knowing the quantum of public money spent by a state-owned enterprise on consultants, especially when the minister is concerned they are outsourcing business-as-usual work that ought to have been done in-house.”
KiwiRail has been in the spotlight since the Government came to power and pulled the plug on its plan to replace its ageing Interislander fleet with two mega-ferries. Photo / Bevan Conley
When asked earlier this year to justify the cost of the McKinsey report, former KiwiRail board chairman David McLean said the board expected KiwiRail to lift its performance.
“KiwiRail currently moves around 18 million tonnes of freight a year and we want to grow our share of the freight market by improving our reliability and competitiveness.
“Similarly, we want Interislander to take a bigger share of the Cook Strait market.”
McLean said achieving both goals depended on delivering a better customer experience, which will become the focus of KiwiRail’s growth ambition and “certainly justify the cost of our investment in consultants”.
He declined an interview with the Herald at that time to discuss the highlights and challenges of his term, his vision for KiwiRail’s future and the state of Interislander’s ferries.
Rob Jager, who was an existing director on the board, accepted the position as acting chairman. His career includes more than 43 years with Shell in various executive roles, including chairman and vice-president of the Shell companies in New Zealand.
KiwiRail has been in the spotlight since the Government came to power and pulled the plug on its plan to replace the ageing Interislander fleet with two mega-ferries. This was after overall costs, including new terminals and wharf upgrades, ballooned to almost $3 billion.
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.
