Audit office to probe PsiQuantum deal legal fees blowout

The Auditor-General will probe a multimillion-dollar legal fees blowout by Ed Husic’s department supporting ‘due diligence’ on the $940m deal with US-based tech firm PsiQuantum.

Industry and Science Minister Ed Husic. Picture: NewsWire / Tertius Pickard

The Australian National Audit Office will probe a multimillion-dollar blowout in legal fees in Ed Husic’s department to support “due diligence” on the controversial $940m taxpayer- funded deal with US-based tech firm PsiQuantum.

The ANAO has confirmed it will investigate contracts engaged by the Department of Industry and Science with law firm King & Wood Mallesons, which swelled from $282,300 to almost $3.3m in nine months to May 28.

The Australian this month revealed there were nine contract variations with KWM since August last year, coinciding with the department’s secretive Expression of Interest process involving PsiQuantum and 20 domestic and international quantum firms.

Mr Husic, Anthony Albanese and Queensland Premier Steven Miles announced in April a joint $940m funding package for PsiQuantum to build a yet-to-be-developed, world-first fault-tolerant quantum computer in Brisbane.

The commonwealth’s $470m equity and loans commitment, supported by a network of Labor lobbyists and consultants with close ties to the Albanese government, was formalised in recent weeks after contracts were signed between PsiQuantum and Export Finance Australia.

Amid fierce global competition to build the quantum computer, questions have been raised about whether the EOI process favoured PsiQuantum and froze out local firms. There are also questions around the number and type of high-skilled domestic jobs.

EOI documents released by the government to a hand-picked media outlet last week confirmed what The Australian had previously revealed – that Australian companies were muzzled from publicly discussing the process. Acting Auditor-General Rona Mellor on Thursday wrote to NSW Liberal senator Andrew Bragg after he requested an audit into the PsiQuantum legal contracts.

“I am writing in response to your letter of 5 June 2024 requesting that I consider an audit into the contract for legal services between King & Wood Mallesons and the Department of Industry, Science and Resources regarding PSI Quantum,” Ms Mellor wrote.

“Payments made by the commonwealth, including in relation to legal matters, are subject to financial audit by the ANAO. The matters raised in your letter will be examined in the course of the ANAO’s 2023-24 financial statements audit of DISR.”

Ms Mellor said a report outlining the results of its audit into government entities would be tabled to parliament in December.

Senator Bragg’s letter to Ms Mellor said: “I am writing to seek your advice on the ANAO exercising its powers to conduct an audit of these matters to ensure the proper use of taxpayer funds.”

Senator Bragg expressed concern about the response of department chief legal counsel and legal and integrity division head Janean Richards in relation to her “personal engagement in the contractual revisions” since May 13.

In a Senate estimates hearing, Ms Richards told Senator Bragg: “The division was established only recently. I commenced in this role formally from 13 May. I have not personally had engagement or been involved in the contracts that were set up with King & Wood Mallesons.”

Senator Bragg told Ms Mellor: “In the case of significant expenditure of taxpayer funds, I am concerned that Ms Richards’ lack of engagement in these contractual revisions indicates an inappropriate governance structure for the management of this contract.

“I note the AusTender website displays there have been amendments to increase the maximum value of the contract nine times, with the most recent revision occurring on 28 May 2024. Furthermore, the interface displays the current contractual value at $3,280,311, compared to the original value of $282,300.”

Senator Bragg asked Ms Mellor to assess the “appropriateness” of departmental spending in relation to the “efficient, effective, economical and ethical” use of public resources.

A department spokesman previously told The Australian that KWM “were engaged to support legal due diligence … the contract was extended as each phase of due diligence increased in intensity and depth”.

“The government sought confidential independent advice and analysis as part of this process, ­including extensive commercial, legal and technical due diligence,” the spokesman said.