An upgraded Eden Park is endorsed to be Auckland's main stadium and Auckland Hospital disestablishes hospital supporter roles. Video / NZ Herald, Getty
The Ombudsman has asked KiwiRail to reveal the “excessive” amount it spent on consultants McKinsey & Company, despite earlier ruling the figure should stay secret.
In January, Chief Ombudsman Peter Boshier said KiwiRail was entitled to refuse to release its spend on the global management consultants.
Finance Minister Nicola Willis was unhappy when she found out about the cost of the review, describing it in June 2024 as “excessive and not justifiable”.
KiwiRail refused to make the cost public, citing commercial sensitivity.
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.
He began investigating in November, and in his January decision, Boshier said he was satisfied the public interest did not outweigh the threat to McKinsey & Company in future negotiations that could come as a consequence of the release of such specific information.
But shortly after, Boshier again contacted the Herald advising he was assessing another complaint about the same matter, and would reconsider his decision.
In a final letter this week, he said he now believed after “fresh consideration” there were no grounds to withhold the information.
He said the amount paid and the information already available about McKinsey’s services did not reveal anything that would generally be considered commercially sensitive information, such as fee structures and pricing policies.
“It is also plain that past disclosures of information of this nature have not deterred private sector entities from conducting business with the public sector, including making further bids to provide services,” he said.
Boshier acknowledged there was public interest in state-owned enterprises operating successfully, and that maintaining commercial confidentiality in some areas impacted on that.
Chief Ombudsman Peter Boshier has changed his mind about whether KiwiRail should have to reveal its spend. Photo / Paul Taylor
However in this particular case he did not feel any withholding grounds applied.
A key way Crown ministers and officials were kept accountable to the public was by requiring transparency around the spending of public funds, he said.
He pointed to a High Court decision, which noted it was “fundamental” to the official information legislation that the public be given worthwhile information about how the public’s money and affairs were being used and conducted.
Revealing how money was used allowed the public to ascertain whether its money had been spent wisely, he said.
He considered the public interest was heightened in this case by the “substantial amount paid” and Willis’ commentary about the cost not being justifiable.
Boshier recommended KiwiRail release the total amount paid to McKinsey. He has asked them to notify his office by April 10 of what steps will be taken to do so.
A KiwiRail spokesman told the Herald they had received the Ombudsman’s advice and were considering it.
“We will come back to you when this process is complete.”
In a statement, Minister for Rail Winston Peters said he was aware of the Ombudsman’s decision.
“Our views were made perfectly clear to KiwiRail. KiwiRail needs to consider the Ombudsman’s decision, and we will expect to be engaged by the board on this next week.”
Victoria University Faculty of Law professor Dean Knight earlier 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 always maintained that the consultant spend is commercially sensitive. Photo / KiwiRail
In earlier correspondence with the Herald, the Ombudsman’s office explained its initial position on KiwiRail’s refusal to release the information.
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.”
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.
The Finance Minister raised concerns with McLean about the consultant cost a week before announcing his early retirement.
McLean retired in July last year. His exit was followed by the departure of KiwiRail directors Rachel Pinn, a transport consultant, Ed Sims, former chief executive of Canadian airline WestJet, and Maryan Street, a former Labour MP and minister.
Their resignation letters were only made public after the Herald complained to the Ombudsman about KiwiRail’s refusal to release them.
