Auckland Mayor Wayne Brown said the cost has horrified him and promised to clamp down on spending by consultants. Photo / Michael Craig
The “Big 4″ global accounting firms and top New Zealand law firms have been pocketing more than $100,000 per day in fees from the Super City over the past five years, a Herald investigation has found.
Law firms have accounted for $127 million over the five-year period, followed by the “Big 4″ accountant firms of PwC, Deloitte, Ernst & Young, and KPMG, which have been paid $63m between them, coming to a total of $190m.
The investigation follows a similar probe in 2021, which found that the Super City has become a $10 billion goldmine for multinational corporations and local companies.
Critics have described the figures as eye-watering and troubling during a time of pandemic budget cuts.
They have also horrified Auckland Mayor Wayne Brown, who has promised to clamp down on spending by consultants from “the big end of town”.
The average $104,000-a-day cost to ratepayers continued through the emergency and recovery Covid-induced budgets that led to cuts in public transport and road maintenance due to a sharp fall in income. The period does not cover the $375m budget hole addressed in Brown’s first budget this year.
Last month, the Herald revealed Brown had spent $299,053 with the law firm Meredith Connell in his first five months on the job.
Topping the list is the law firm Simpson Grierson, which has billed the Auckland Council $27m in the past five financial years, and a further $9m to Watercare.
Simpson Grierson has long been a go-to law firm for councils in Auckland, with partner Bill Loutit having acted as senior legal adviser to the former Auckland City Council, and assisted the Auckland Council group with resource consents for the America’s Cup, Eastern Busway and Huia water treatment plant in the Waitākere Ranges.
Other laws firms earning big bucks to the nearest million are Minter Ellison Rudd Watts ($21m), Heaney & Partners ($13m), DLA Piper ($10m), Buddle Findlay ($9m), Russell McVeagh ($5m), Brookfields ($4m), Meredith Connell ($4m) and Bell Gully ($3m).
PwC and Deloitte have each earned about $22m over the past five years from the Auckland Council and the council-controlled organisations (CCOs), followed by EY on $14.4m and KPMG on $4m.
The Auckland Council is by far the biggest spender on law firms, but when it comes to the accountancy firms, Auckland Transport (AT) and Watercare have racked up big bills.
The Auckland Council accounts for $95m of the spending on law firms and spends a further $9m a year on its own legal services team of 63 lawyers and legal executives, who also do much of the work for the CCOs Tātaki Auckland Unlimited and Eke Panuku Auckland.
Auckland Council general counsel Helen Wild said about 80 per cent of the council’s legal work is handled in-house, but it is not feasible to resource complex projects or litigation in-house due to fluctuating and unpredictable work requiring specialist support.
“At any one time, legal services has over 3000 open files. Many matters are relatively straightforward, however, the works include some of New Zealand’s largest projects and legal proceedings in size, complexity, value, and time to complete. These matters have increased over time,” Wild said.
Brown said he was elected on a platform to stop wasting money and had long been concerned about the millions of ratepayer money being sucked up by consultants.
The mayor said he had given a clear direction on spending with lawyers and consultants and expected costs to reduce. The issue would also be addressed as part of a new 10-year budget, he said.
“Sometimes we need to get external advice, especially when we are trying to do things differently, but this spending must be reined-in and more closely scrutinised.
“There is also a broader question about whether contracting out some functions in a few mega-contracts has led to significantly higher costs.”
Brown needn’t look further than across the corridor in the mayoral office where his head of finance and budget, Jazz Singh, was a key player in a 2018 “innovative legal procurement process” to save 10 per cent to 20 per cent on external lawyers.
About 30 law firms pitched for 13 workstreams across commercial, property, public law, litigation, regulatory and prosecution work, and 10 firms were awarded contracts, including three on “fixed price” terms for high-volume work.
At the time, Singh said the council was “thrilled” with the results of the procurement process and he was “confident that these contracts will achieve significant savings in our annual legal expenditure”.
The council has gone from spending $17.5m in the 2018 financial year to $22.3m, $20m, $14.1m, and $21.6m since the new procurement process was introduced.
Wild said the more competitive pricing in 2018 had resulted in lower prices than the previous ad hoc approach and a further procurement process in 2021 built on this.
She said the lower rates had delivered savings, but the council was not able to control the volume of work, with a recent spike in very large claims. They include a big leaky building claim brought by the New Zealand Retail Property Group that was successfully defended; the judicial review of the council’s hotel bed tax; and the local alcohol policy.
“Where successful at trial or on appeal, the council will seek costs, as it is currently in a number of matters,” Wild said.
AT, which spends almost as much on the “Big 4″ accountancy firms as the Auckland Council, utilises their consulting skills for things like complex procurement of bus, rail, ferry and road maintenance contracts, says AT finance boss Mark Laing.
“They also help with things like ensuring compliance with holiday pay, internal audit, and probity reviews. Very little of this spend is accounting related,” he said.
For example, said Laing, PwC had advised AT on property issues with the Eastern Busway, and EY on ferry matters and a holiday pay review.
Councillor Mike Lee, a longtime critic of contracting out council services, said it was revealing how the council remained so protectively generous to the law firms and the international accountancy corporates but was willing to cut spending for libraries and community services.
Given the council was meant to be dealing with a budget crisis, the scale of the financial largesse was also troubling, said Lee.
“All too often we have seen Auckland Council employ these law firms against its own ratepayers - always expensively and often unsuccessful, including the $1 million-plus failed litigation in defence of decisions of the Maunga Authority,” he said.
Jordan Williams, a spokesman for the Auckland Ratepayers’ Alliance, said the spending figures on external accountants and lawyers were eye-watering.
“Along with staffing costs continuing to balloon we now find out that external lawyers and consultants are on the pig’s back too,” Williams said.
“Only at Auckland Council does a procurement project to save money and described by spin doctors as ‘innovative’ ‘result in even more costs being lumped onto ratepayers.
“This is the sort of back-office spending Wayne Brown was elected to rein in. It’s time he lined up the consultants and followed through on his promise.”
Bernard Orsman is an Auckland-based reporter who has been covering local government and transport since 1998. He joined the Herald in 1990 and worked in the parliamentary press gallery for six years.
The man is now in a critical but stable condition in hospital.