The New South Wales government spent $400,000 on consultants’ reports before the outsourcing of a Sydney Water asset revealed in an explosive tranche of documents, which Labor has used to accuse the Coalition of wanting to privatise the utility.
Annual reports published by the state-owned corporation reveal the consultancy firm KPMG was paid in the 2019-20 and 2020-21 financial years for advice on an advanced water recycling centre in Kemps Creek.
The reports have become the centre of a political storm before the looming state election after Labor accused the government of having sought to privatise Sydney Water, having repeatedly ruled out such a move.
Last October, the government contracted the plant to a private company with links to the Chinese Communist party for up to 10 years.
The Coalition says the outsourcing of the plant was “standard industry practice” and that it will be “owned and controlled” by Sydney Water.
But consultants’ reports – including one by Clayton Utz – seemed to reveal consideration of a wider privatisation of the utility.
A report prepared by KPMG in 2020 outlined “financial challenges” faced by Sydney Water in providing “all that is needed for growth and drought” in the city’s west.
“Both Sydney Water and the NSW general government sector budget lack capacity to carry all of the water and other capital projects being contemplated – and sees major structural changes being contemplated,” the report stated.
“Decisions relating to [the plant] are likely to shape the long-term structure of water services in Australia.”
A separate report to the Sydney Water board revealed consideration of a public-private partnership of the plant and stated ministers had “been seeking cash inflows through asset recycling and increased dividends”.
It canvassed a series of options including “long-term ownership models” and “major structural changes”.
A second KPMG report prepared in 2021 canvassed a variety of possible structures on the outsourced plant in an attempt to avoid “adversely impacting on Sydney Water’s balance sheet”.
Annual reports published by Sydney Water show KPMG was paid about $392,000 in total over two financial years for advice on the outsourcing.
Labor’s shadow treasurer, Daniel Mookhey, seized on the cost of the reports, saying it suggested the government had seriously considered a wider selloff and questioned whether other sales had been considered.
“You’ve got to ask yourself, why did the NSW Liberals spend close to half a million dollars on consultants and advice on how to privatise Sydney Water, if they don’t intend to sell it?” he said.
“The government needs to come clean with the people of NSW that no other similar advice has been sought about other state assets.”
Labor has sought to make privatisation a key issue in the upcoming election and has accused the government of planning future selloffs if it is re-elected.
But the treasurer, Matt Kean, this week accused Labor of running a “scare campaign” and said it was normal practice for agencies to contract private companies.
“There’s no privatisation of Sydney Water and there is no privatisation of Sydney Water assets. We’ve already made that very clear,” he said this week.
“It’s not unusual that Sydney Water uses contractors that work for them,”
The Coalition has previously been criticised for its use of private consultancy firms.
The NSW auditor general released a report last month which found $1bn had been spent on private consultants since 2017 and that in many cases departments did “not procure and manage” the cost of private consultants effectively.
Most, it said, “do not have a strategic approach to using consultants, or systems for managing or evaluating their performance”.
