‘King’s ransom’ paid for secret review of Sydney’s mega rail projects

The NSW government paid external consultants almost $1.1 million for eight weeks’ work on a secret review of the agency charged with overseeing the state’s metro rail projects at the centre of major cost blowouts.

The revelation that Boston Consulting Group (BCG) carried out a strategic review of Sydney Metro comes just weeks after the government confirmed it is preparing todelay several multibillion-dollar mega projects due to rapidly escalating costs and labour shortages.

Premier Dominic Perrottet and Transport Minister David Elliott tour a new metro rail tunnel under Central Station in February.

Premier Dominic Perrottet and Transport Minister David Elliott tour a new metro rail tunnel under Central Station in February.James Gourley

Amid growing concerns about government departments’ reliance on external consultants,internal documents show Sydney Metro agreed to pay BCG more than $270,000 for an extra two weeks’ work,which took the total cost of the strategic review to $1,082,677 late last year.

The cost of the external consultants is contained in a response to aHerald request under freedom of information laws for the strategic review of Sydney Metro,which is overseeing the construction of several major new rail lines whose cost will run into the tens of billions of dollars.

The government has refused to release BCG’s final report,as well as drafts of it,on the basis that the information is cabinet in confidence.

Labor finance spokesman Daniel Mookhey said Sydney Metro was now a “honey pot” for the world’s most expensive consultancy firms. “They are paying these firms a king’s ransom because the costs of their major projects are exploding. The more desperate the government gets,the more they rush to buy the world’s most expensive advice,” he said.

Mookhey said Transport Minister David Elliott needed to release the results of the strategic review because,“if the public paid for this work,the public has the right to see it”.

TheHerald has previouslyrevealed that the cost of the government’s signature City and Southwest Metro rail line under Sydney Harbour and the CBD has blown out by at least $2.2 billion.

A well-placed source said it was unusual for Sydney Metro to hire a top-tier management consulting firm such as BCG. “You only get BCG or McKinsey if you’ve got something serious to solve,” the source said.

Sydney Metro said in a statement that the strategic review was designed to ensure it could “continue delivering state-of-the-art transport projects as well as precincts that best serve local communities”.

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“This report contains information which is cabinet in confidence,” the agency said,adding that it was responsible for delivering and operating a package of works worth more than $60 billion.

The transport minister declined to comment while BCG directed questions to Sydney Metro.

The NSW Auditor-General Margaret Crawford has been highly critical of the use of external consultants,warning in a report in February that agencies run the risk of shopping for opinions to support their desired outcomes.

A recent parliamentary inquiry into a controversial state-owned rail corporation revealed the extent to which government agencies rely on external consultants,and what they charge taxpayers.

The government forked out $550,000 to BCG for six weeks’ work in late 2020 to help devise a strategy for the Transport Asset Holding Entity (TAHE).

The government ended up spending more than $2 million on consulting fees for BCG work on the controversial rail entity and a similar amount for accounting firm KPMG. Other big-four consulting giants commissioned by the government to advise on TAHE included PwC and EY.

NSW Treasury’s annual report,which was released in January,shows its spending on external consultants more than doubled last financial year to $40 million.

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Matt O'Sullivan is transport and infrastructure editor at The Sydney Morning Herald.

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