McKinsey's NBN bloc demands scrutiny

McKinsey's growing influence on the National Broadband Network Company is a concerning fact that should continue to be closely scrutinised.
Written by Renai LeMay, Contributor
Renai LeMay

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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.

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