InnovationAus.com - Government faces ANAO scrutiny over PsiQuantum deal

The national audit office has flagged a potential review of the federal government’s use of specialist investment vehicles in the wake of its controversial deal with Californian quantum startup PsiQuantum.

Auditor-General Rona Mellor agreed to consider the audit over the next 12 months after the PsiQuantum investment was referred to the Australian National Audit Office by the federal opposition.

Shadow science minister Paul Fletcher wrote to Ms Mellor requesting the investigation late last month, arguing that “serious questions” remained unanswered about the investment and the process that led to it.

He asked that the Auditor-General examine whether the investment complied with section 71(1) of the Public Governance, Performance and Accountability Act, which requires a minister to not approve expenditure unless satisfied it is a “proper use of relevant money”.

The federal government has provided $470 million in equity and loans to the company to build the world’s first fault-tolerant, error-corrected quantum computer. The Queensland government will also chip in another $470 million.

But the process that led to the investment has been mired in controversy since it emerged that the Department of Industry, Science and Resources (DISR) conducted a secretive EoI process last year.

The EoI, which has been described as a sham by both opposition and independent MPs, followed more than six months of formal due diligence and economic analysis on an unsolicited proposal from PsiQuantum. Other proposals were ruled out in just 10 days.

In a letter to Mr Fletcher on Monday, Ms Mellor said she had decided to add a potential audit on the federal government’s use of investment vehicles to the ANAO work plan finalised at the start of July, but stopped short of opening an full-blown audit.

“I have considered your request and the information provided by you and DISR and have decided to add a potential audit topic on the investment vehicles used by the Australian Government to achieve Commonwealth purposes on the 2024-25 work program,” she said.

“This audit, if commenced, may include the Australian Government’s investment in PsiQuantum.”

The federal government will provide its share of equity and loans to PsiQuantum through Export Finance Australia, one of eight special investment vehicles (SIVs) used by the government to invest public funds.

The loan was the largest through Export Finance Australia last financial year, with a $218 million loan guarantee for the Hai Long offshore wind project in the Taiwan Strait the next closest.

Other SIVs include the $15 billion National Reconstruction Fund, which the ANAO opened a separate audit into earlier this month. The audit will look at the corporation, which was set up to oversee the fund last year.

Paul Fletcher declared the prospect of a potential investigation a “victory for taxpayers”, with the investment – one of the government’s signature Future Made in Australia moves – now firmly on the Auditor-General’s “radar”.

“The Auditor-General’s letter suggests that she considers Labor’s use of ‘investment vehicles’ – of which PsiQuantum is but one – is deserving of further investigation,” Mr Fletcher said in a statement.

He added that the opposition had uncovered a “growing body of evidence pointing to a captain’s pick by Labor and an unfair reverse engineered process designed to benefit an American company over Australian-based quantum companies”.

A spokesperson for Industry and Science minister Ed Husic said “any potential review by the ANAO of the government’s process considering this investment” was welcome, reiterating comments made by Mr Husic himself earlier this month.

“[The investment] was subject to rigorous, lengthy due diligence covering legal, technical, financial and national security assessments, conducted at arm’s length by senior departmental officials and external experts,” the spokesperson said.

Last week, Mr Husic said the investment in PsiQuantum would ensure Australia was well placed to benefit from a leading approach to quantum computing, avoiding a repeat of past ‘mistakes’, as he described rejecting an Intel deal of the late 1990s.

The government has faced fierce resistance to the investment during debate on its Future Made in Australia Bill this month, with opposition and independent MPs criticising both the decision and opaque process that led to it.

Among the concerns raised are that the investment in PsiQuantum bypassed assessment under the new nation interest framework, which will apply to all future FMiA investments once the bill passes.

Author: Justin Hendry

This article appeared in innovationaus.com on 27 August 2024