Department of Climate Change awards McKinsey a $1.2m contract for eight weeks work

The department that oversees the government’s climate agenda is paying a consulting firm $1.2m for just eight weeks work, in one of the most lucrative deals awarded since Labor came to power.

A major consultancy firm will receive almost $1.2m in taxpayers’ money for eight weeks work to provide economic analysis for the Albanese government’s plans to reduce emissions.

The contract awarded to McKinsey by the Department of Climate Change, Energy, the Environment and Water is one of the most lucrative yet for a consulting group since the government came to power in May last year.

It comes at a time when Anthony Albanese has pledged to slash hundreds of millions of dollars spent on external advice. This will include the creation of a new consulting team of 38 consultants housed inside the Australian Public Service.

McKinsey will provide the ­department, which comes under the ministerial control of Chris Bowen and Tanya Plibersek, detailed market, economic and policy analysis and modelling to supplement its internal policy work, including through on-the-job knowledge transfer.

A spokesman for the Department of Climate Change, Energy, the Environment and Water told The Australian that McKinsey’s services involved financial and economic analysis currently unavailable within the department at the scale required.

The department is under the guidance of Climate Change and Energy Minister Chris Bowen. Picture: Dan Peled / NCA NewsWire

“This analysis relates to the development of the government’s Energy and Electricity Sector plan, which involves consolidating work on significant existing electricity policy initiatives such as the Rewiring the Nation plan and Capacity Investment Mechanism, and additional consideration of renewable inducing policy settings,” the spokesman said.

The contract scheduled to run from August 2 to September 29 will result in McKinsey receiving about $150,000 for each week of the agreement, for a total of $1,193,500.

Analysis of publicly available government contracts published on Aus Tender shows that this contract had the second-highest weekly payday for a consulting group since the Albanese government came to power.

McKinsey was approached for comment but did not respond before publication.

The most substantial contract awarded during this period was $8.4m to EY Australia to help the Defence Department design a new agency to monitor safety ­issues associated with nuclear submarines as part of the AUKUS deal. The 12-month deal was the equivalent of $165,000 a week.

The third-highest deal was one for $145,000 a week for a total of $2.3m over 16 weeks to the embattled PwC in March for auditing services with the Department of Health and Aged Care.

Opposition Climate Change and Energy spokesman Ted O’Brien told The Australian the only “silver lining” to the hefty contract awarded to McKinsey was that it included economic modelling for the government’s climate policies.

Climate Change and Energy shadow minister Ted O'Brien said the only silver lining to a hefty contract was that the government was seeking economic advice. Picture: Mick Tsikas.

“Chris Bowen has repeatedly claimed he is leading the ‘biggest economic transformation since the Industrial Revolution’ yet, to date, has refused to have Labor’s energy policies modelled by Treasury or the department,” he said.

“Given a $60bn black hole has been exposed in Labor’s energy plan, it’s important that this work applies a ‘whole of system’ method of analysis so Bowen’s policy black hole can be filled.”

McKinsey will advise on the government’s Rewiring the Nation plan, a $20bn project that will provide “low-cost finance to upgrade, expand and modernise” the electricity grid. The department said that the Capacity Investment Scheme would unlock at least $10bn of new investment and 6GW of dispatchable power by decreasing financial risks for investors and encouraging more investment in capacity when and where it was needed.

The Department of Climate Change, Energy, the Environment and Water has spent $45.1m on external advice or services since the 2022 election.