Assurances on costs needed for wool report to have credibility

By Glenys Christian

Over the gate


Woolgrowers can hardly be blamed for being a little sceptical about the McKinsey business development plan, which was given the go-ahead at the Wool Board's annual meeting.

After all, they have seen a plethora of reports, all warmly welcomed and none really acted on. There was the Batelle Report back in the 1970s and the Arthur D Little Report of 1992. As well, a number of farmer visits to wool-buying countries on Nuffield Scholarships and Winston Churchill Fellowships have produced ideas of real merit which have ended up being packed away with their suitcases on return.

So the report by international management consultants McKinsey has a lot to live up to. It is also being carried out at a time when woolgrowers are more than usually cost-conscious and already have qualms about some of the figures.

The cost of the report has been put at $1.6 million. The board is at pains to say that the actual sum is $310,000 a month for five months. The larger issue is that the sum to be paid is in Australian rather than New Zealand dollars, bumping it up closer to the $2 million mark.

McKinsey can also run up expenses amounting to 20 per cent of the total figure.

Chris Lester, the chairman of Meat and Fibre Producers of New Zealand, says cost overruns are a real possibility.

As a member of the stakeholders committee overseeing the report, one of his major concerns is to clarify who will foot the bill for the work already done.

This has involved McKinsey staff in addressing a number of meetings both in Wellington and around the country, at considerable cost.

Mr Lester believes the board has agreed to pay this amount under a contract with McKinsey to the point of grower approval of the study.

But the board talks of a commercial arrangement whereby these costs would be picked up by McKinsey as part of the company's bidding to carry out the final report.

While board policy manager Roger Buchanan scoffs at farmer suggestions that the total cost of the study could top $3 million, he is adamant that McKinsey staff will need to travel to the United States and European countries such as Italy to see wool marketing first-hand.

There will have to be extensive consultations around the country to pick up woolgrowers' concerns about where the industry is headed compared with where they would like it to go.

Later this week, they will receive an information pack outlining the process, including an outline from McKinsey on how submissions should be made.

Growers need to have complete assurance about the financial details of the study before they open it.

Otherwise they might throw it in the rubbish bin, the finished report could end up there too and the board itself might follow very shortly afterwards.

* Glenys Christian can be contacted on e-mail at glenys@farmindex.co.nz