Down the drain: The huge sums spent on Three Waters consultants

Monday, 15 July 2024

Documents reveal $63.8M was spent on consultants for the Three Waters project, with PwC receiving $35M. The Department of Internal Affairs cited the need for surge capacity, while Labour defends the spending.

Labour spent $64m on consultants for the controversial Three Waters.

Official documents reveal PwC got the most - $35m.

A war of words has broken out between Labour and National over who’s to blame for the wastage.

The Labour Government paid consultancy firms a whopping $64m for work establishing the now defunct Three Waters reform project - money that ultimately went down the drain.

PwC was paid $35m for work developing the Three Waters programme.

Stuff can reveal that multi-national professional services company PricewaterhouseCoopers (PwC) was the biggest winner - paid $35m for work it did on the project.

Fellow “big four” companies EY ($9.3m), Deloitte ($532,000) and KPMG ($352,000) also raked in the cash as the Government worked to hand control of water management to four big regional entities.

The Water Industry Commission for Scotland was paid $1.3m for “reform advice” it gave at the start of the project.

All up, the controversial Three Waters - axed by the new National-led Government - cost $1.3b, of which about $800m was given to councils and other organisations to spend on infrastructure.

The figures were released to Stuff under the Official Information Act.

The revelation has sparked a war of words between Labour and National over who is to blame for the wastage, and how much money will have to be spent on water infrastructure going forward.

The Department of Internal Affairs, the lead agency for Three Waters, claims it had to hire consultants because it didn’t have the skills and expertise in-house, and it was a complex reform programme.

Work carried out by consultants included developing IT systems for the new water entities, as well as economic analysis, capital structure, debt management and governance design, a spokesperson said.

“It is simply not practical or cost effective for the Department of Internal Affairs to maintain this capability on a permanent basis.”

The OIA documents show several local consultancy firms also did well out of the money scramble:

Martin, Jenkins and Associates was paid $4m for providing “expertise, senior support and advice” for management and delivery of the reform programme.
Mafic Partners was paid $2.2m for commercial, rating agency and other financial advice.

Local Government Minister Simeon Brown claims the National-led Government will spend much less on water reform.

Senate Communications was paid $1.22m for communications services.

Asked why Senate Communications won a contract when the DIA had its own, in-house comms team, the spokesperson defended the move, saying the scale and nature of the work meant it was appropriate to engage an outside firm.

Labour’s Kieran McAnulty says the new Governmwent will end up having to employ consultants, after laying off thousands of people.

Much of the work involved communications with 67 local authorities, iwi and other stakeholders, the spokesperson said.

“The Department’s internal communications staff remained fully engaged on … business as usual activity.”

Local Government Minister Simeon Brown said Labour had “basically spent $1.3 billion and actually didn't achieve anything for New Zealanders”.

He said the new Government would spend “significantly” less on its Local Water Done Well programme and less on consultants.

“Just look at what we've done with Auckland, a deal with Auckland Council around Watercare, we spent about $350,000 and we did a deal … to ensure they avoided a massive increase in their water rates.”

But Kieran McAnulty, Labour’s Local Government spokesman, said the Government’s Auckland “workaround” was still costing ratepayers more, and wasn’t transferable to other parts of the country.

While the Local Water Done Well policy was cheaper for the Government, he said “it's not going to be cheaper for councils, and it's not going to be cheaper for ratepayers”.

National campaigned on having councils maintain control of water assets. This would mean councils, as happened in Auckland, would likely need to take on the financial burden of upgrading and repairing water infrastructure.

McAnulty, who was local government minister, said there was nothing unusual in bringing in consultants on a major change project.

“What we'll find with the new Government, after … cutting thousands of jobs, is that when they actually … do something, they won't have the expertise … and they'll need to employ consultants.”