KiwiRail spent $8 million with McKinsey. Photo / File
KiwiRail spent $8 million with McKinsey. Photo / File
Winston Peters criticised KiwiRail’s $8 million payment to McKinsey as “unacceptable” and excessive.
KiwiRail engaged McKinsey in December 2023 without informing the Government until February 2024.
Finance Minister Nicola Willis expressed concern over the cost, describing it as “excessive and not justifiable”.
Minister for Rail Winston Peters has slammed KiwiRail for its “unacceptable” $8 million payment to global consultancy, McKinsey.
The figure was revealed today after a long wrangle with KiwiRail, which did not want to release the number.
Peters also revealed today that KiwiRail had gone rogue with thespend, engaging McKinsey on December 6, 2023, but not informing the Government it had done so until February 7 2024. KiwiRail said the approach to McKinsey began even earlier, in October 2023, with the board approving the consultants in November 2023.
KiwiRail did not disclose the total value of the spend to the Government until June 6 2024.
The Herald originally requested the figures under the Official Information Act in 2024, but KiwiRail refused to release them. citing commercial sensitivity.
The Herald appealed that decision to the Ombudsman Peter Boshier, who initially sided with KiwiRail. Earlier this month, the Ombudsman contacted the Herald, saying they were reconsidering their decision.
The spend caught the ire of Finance Minister Nicola Willis, who was unhappy when she found out about the cost of the review, describing it as “excessive and not justifiable”.
“I was immediately concerned by the magnitude of this cost. I view it as excessive and not justifiable,” she said earlier.
Willis previously sought advice on whether she could have released 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.
Peters was careful to say the Government was “not criticising McKinsey, whose services were tendered in a lawful and competitive manner”.
KiwiRail chief executive Peter Reidy, left, and then-chairman David McLean in 2023. Photo / Mark Mitchell
We are criticising the decision to pay that sum,” he said.
“The response to a difficult balance sheet should not be to bring in management consultants. This would not have happened had they told us their plans. The response should be to tighten spending, lift service quality and build the customer base, and that is exactly what KiwiRail is now doing,” he said.
KiwiRail chief executive Peter Reidy said “KiwiRail’s board, management, stakeholders and shareholder want to see a marked improved performance from the company to ensure that the company’s services business is able to sustainably stand on its own two feet financially, over time. KiwiRail will achieve this by transforming its business to materially reduce costs and improve the reliability of its services so that rail becomes the first choice for customers wanting to move freight, and to cross Cook Strait”.
Reidy said the consultants were brought in to “kick start and achieve this business transformation”.
He said they entered into discussions with McKinsey in October 2023 to support a strategic review of KiwiRail’s full potential and to assist KiwiRail in establishing a transformation to achieve the required performance improvement and growth”.
“KiwiRail has incorporated the work from McKinsey into its responses to letters of expectations, its Statement of Corporate Intent, Business Plans & Budgets and regular monitoring with its shareholder and Treasury. The total cost of McKinsey’s services was $8m (fixed fee with no further upside).
“In the six months to 28 February 2025, transformation initiatives, developed and implemented by KiwiRail as a result of the work with the consultants, have already achieved savings of $30m.
“These initiatives are ongoing, and we are seeing positive changes in the way our people are working together to further improve services, grow value and reduce costs. We are committed to continuous engagement with our people, our union partners and our shareholder as we move through a multi-year programme of change, growth and capability building,” Reidy said.
Thomas Coughlan is deputy political editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the press gallery since 2018.
