McKinsey's NBN bloc demands scrutiny

McKinsey's NBN bloc demands scrutiny

Summary: McKinsey's growing influence on the National Broadband Network Company is a concerning fact that should continue to be closely scrutinised.

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Renai LeMay

ZDNet.com.au
news editor
Renai LeMay

(Credit: CBS Interactive)

commentary Among the flurry of press releases issued by Communications Minister Stephen Conroy just before Christmas (there were three on the 23rd, and three the week before that), one stuck out like a sore thumb.

And I'm not talking about the internet filter project, which we have already discussed in great depth.

I refer, of course, to the insertion of yet another former partner of management consulting firm McKinsey deep into the bowels of the National Broadband Network Company.

Previously, the NBN Co had two former McKinsey partners on its board. Now it has three. And McKinsey is still the only consulting firm to have earned the honour of a single directorship by an ex-staffer, although law firm Freehills and industry parties like Telstra and Alcatel-Lucent are also represented through alumni.

McKinsey is also closely engaged with the NBN Co on another front — along with more mainstream professional services outfit KPMG, it is acting as lead advisor to the company, a role which will see it deliver in early February the wide-ranging implementation study that will guide the NBN's future over the next decade.

But wait, there's more.

As McKinsey's own alumni network notes, the consulting firm has another potential ally within the NBN Co in the person of Christy Boyce, a former McKinsey principal consultant, who in September was appointed the future broadband giant's head of industry engagement.

Now one way to look at all of these McKinsey appointments is that they are an extraordinary coincidence born of the company's strengths in telecommunications consulting in the local market and the NBN Co's need for top-tier help.

And that's a valid point of view. If you can afford McKinsey's services, the company has a reputation for quality. And it had better have — top-tier management consulting never comes cheap. And presumably, neither do its alumni.

It might have been the view espoused by the various parties concerned — but the NBN Co, the office of Communications Minister Stephen Conroy and McKinsey itself have not yet responded to requests for comment on the issue.

But the far more attractive alternative is to cast McKinsey's dream run with the NBN Co as what the poker players in Australia's consulting industry refer to as a "royal flush".

In other words, a king-hit confluence of potential influence by McKinsey on Australia's broadband future and the hundreds of millions of dollars of consulting fees that are likely to go into help building the $43 billion vision.

Call me cynical, call me misguided, but journalists always get suspicious whenever we see axes of power converging. It is, after all, our job to keep the powerful honest, whether they are bastards or benevolent.

The McKinsey old boys' network runs deep and strong, as does that of other top-tier consulting rivals like Boston Consulting Group and Bain. You never really leave one of these firms — you just use your contacts there to your advantage — and they use you. It is this fact that makes it perturbing that McKinsey already has so much influence on the NBN Co.

The McKinsey old boys' network runs deep and strong, as does that of other top-tier consulting rivals

Will McKinsey's prescence in the NBN Co ever cease to be required? Or will the potential conflict of interest poised by three ex-McKinsey directors cause the NBN Co account to become a perpetual evergreen on the books of the consulting giant?

Another worry also springs to mind. As we pointed out in August last year, top-tier consulting firms in general, and McKinsey specifically, tend to be a secretive bunch, and McKinsey by now is likely to be gatekeeping many of the NBN Co's sub-contractor commercial relationships due to its position (with KPMG) as lead advisor to the company, particularly in relation to the implementation study.

The government and the NBN Co have already made it clear that they do not feel bound by public sector regulations disclosing the release of contracts and tendering requests above a certain value.

As Conroy told ITNews around Christmas, "Australia Post don't publish their tenders", and so, reading between the lines, neither does the NBN Co — a fact which was illustrated by the award of a major IT services contract to local outfit Data#3 last year — without the public tendering process government agencies are required to go through.

All of this means it is currently extremely hard to know what the NBN Co is really up to when it comes to spending the billions of dollars in funding the government has allocated to it. Money that was provided by the Australian public, and will be used to serve it.

Individually, none of these NBN Co signs are too drastic. And your writer has developed a deal of trust in NBN Co chief executive Mike Quigley, based on the wisdom, transparency and political awareness he has demonstrated since taking the future telco giant's reins.

But taken together, they start to paint a picture of an organisation that is starting to hold many secrets close to its chest, and may suffer from structural conflicts of interest from its foundations up.

Topics: Government AU, Broadband, NBN

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35 comments
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  • .

    If nothing else NBN will be a case study into the effectiveness and usefulness of consultants.

    My concern is that without existing staff and powerpoint slides, what is there for McKinsey's to rebrand to their own powerpoint slides?
    anonymous
  • Journalists in australia are scum

    You said "Call me cynical, call me misguided, but journalists always get suspicious whenever we see axes of power converging. It is, after all, our job to keep the powerful honest, whether they are bastards or benevolent."

    That is NOT your job. Your job as a journalist is to report the FACTS in an UNBIASED way. It is NOT a journalists job to push his or her own opinion onto the populace, or to cast aspersions onto public figures.
    anonymous
  • A bit rude

    I think you will notice that it is an editorial written by the editor hence an OPINION piece (since you feel the need for capitals). I think he is fairly unbiased in his opinion also as he proposes several and concludes on the one that he thinks makes the most sense. This is a lot better than many opinion pieces which only give their side. And I do not think in any part did he suggest anything as fact that was not so
    anonymous
  • Not rude at all

    In the article he said (and yes, I'm paraphrasing) "It's the journalists job to keep the powerful honest".

    It is not. A journalists job is to report the facts in an unbiased manner, no more and no less.
    anonymous
  • The NBN verdict

    Interesting stuff, Renai. The costly NBN project is too important and of huge national interest which warrants the injection of investigative journalism.

    So far, its been a gathering of Chiefs with hardly any Indians. The smoke signals from the powwow next month will, no doubt, make even more interesting reading.
    anonymous
  • a journalist?

    you are not a journalist so stop pretending to be one. a journalists job is not to keep the powerful honest. as stated by anonymous it is to report the facts. if an editor cannot even grasp this simple point, the very basic meaning of what a journalist is, then let a real journalist take over and step aside and stop feeding us this nonsense. you are NOT a journalist so stop pretending.
    anonymous
  • One simple question

    All I want to know is when will I get access to NBN in my suburb here in Sydney or when indeed will Sydney start getting the NBN. No one seems to be able to answer this question.

    Will the NBN occur in my lifetime?
    Mekhios
  • Off topic much?

    1. Op Ed's can indeed raise opinions, that's what they are there for.

    2. Journalists can raise suspicions based on trends. Given the governments conspicuous silence on this issue I can hardly blame them.

    3. Anonymous posters on the internet who stake no credibility on their posts (as opposed to journalists) aren't in a great position to throw stones... =)
    anonymous
  • Take one thing to seriously?

    Could it be that by reporting the facts without political spin is keeping those in power honest? One could argue that a journalist's job is to keep people honest and the means to achieve that end is by reporting facts... It could also be argued that keeping people honest is a moral justification for the job of reporting facts. Truth is that trying to destroy an article by picking apart a single statement is just narrow minded.
    anonymous
  • Irresponsible

    Executive skill is largely a matter of trust. The consequence is that given a choice, people in place will put responsibility on who they know who can do a good job.

    While I disagree with Anonymous on the subject of journalistic scope, I think the point on the opinion piece is unfair. To state that there is an uncomfortable number of a specific group in NBN is fair enough. But to toe the line on their behavior regarding the matter of using public money without so much as a shred of evidence... I think is irresponsible.
    anonymous
  • No answer, it seems, to one simple question

    In Lane Cove, I've been lucky to be enjoying, for many years, fast broadband via Bigpond Cable Standard Liberty @ $59.95 for all I can consume.

    You too, have the right to expect such service long before 2018.
    anonymous
  • Kerry Packer's view of McKinsey

    Quoted in Paul Barry's "Who Wants to be A Billioaire":

    "But he saved his sharpest barbs for Fred Hilmer.. 'I wouldn't hire him as a f***ing sweeper' said Kerry witheringly...'For Fairfax to be run by a management consultant I think is just an act of stupidity. I think it's ridiculous... He came from McKinsey and he has never run a business in his life'"

    I wonder what KP would have thought of the current crop at the NBN.
    anonymous
  • Irresponsible?

    I've been in consulting 25 years and when a 'network' of 'experts' from the same convergent educational or career histories, control a cash cow then, regardless of whether they will do anything devious, it will generally mean all others will be shut out - as portrayed by the fact reported about the Data#3 (non) Tender. McKinsey may well have lots of good poeple, but so do other firms. So why should they be cut out of the loop of opportunity because they didn't work for a specific firm. If McKinsey really were as good as they believe, they would put every work opp up to tender and expect to win their "fair" share.
    anonymous
  • adsl (a stands for any!)

    Well I live on the Central Coast, now included in the greater Sydney area. I have been waiting for adsl for a decade. Good to hear Telstra will be sorting that out soon! Lucky you Vasso, your smug post is like eating in front of the starving. You have re-kindled my anger at Telstra!
    anonymous
  • Spot on Rick

    You have obviously worked with "consultants" before. In my 30 years working in corporate Australia, I have yet to see any value from any of the consultancies, especially US based ones.

    Consultancy is such a big conjob!
    anonymous
  • Not smug, but disappointed and feel a sorrow that, in the year 2010

    Government's of both persuasion have failed, and continue to fail us miserably on all counts.

    If its possible in some areas, it should be possible in yours.
    anonymous
  • What do McKinsey know about modern day Telecommunications?

    We'll find out next month when they release their feasibility study.
    anonymous
  • Not smug

    Can't argue with you there, very disappointing that in an area with +250,000 residents dialup is still the best we can do. (PS no 3G coverage yet!)
    anonymous
  • Which given...

    the original thrust of the Op Ed above, raises interesting questions.

    Feasibility study done, in part, by people who are cashing in on jobs at the NBNco?

    It doesn't matter how kosher it might be, it smells of pork.
    anonymous
  • Journalists are not anthropologists

    Journalists are there to report on interesting issues and help their readers form an opinion. That is what journalism is for, and always has been: these folks go and write stories about issues they want people to be aware of. The readers (that's you and me) might value more highly the opinion of journalists who we perceive to be unbiased - but that's really just another way of saying that we most like the journalists whose opinions most agree with our own.

    Anthropologists are the ones whose job it is to report merely the facts, without bias, with no opinion.

    Don't get the two confused.

    In the meantime, if you're going to tell a journalist what to do, the person to write to is the owner of the newspaper or journal. Anonymous comments on a blog post count for nought.
    anonymous