Criticism of the Australian government’s A$940m ($612m) of financial support for a US quantum computing investment in Queensland has come to a head this month, with the state’s newly elected government investigating its share of the agreement for the “complete secrecy” of its award process. 

The taxpayer-funded investment in California-headquartered PsiQuantum to build the world’s first ‘utility-scale fault-tolerant’ quantum computer in Brisbane, was announced in April under the new Future Made in Australia Act, the country’s subsidies package launched in response to the US Inflation Reduction Act (IRA). 

PsiQuantum’s package, which comprises share purchases, grants and loans — and is split between the Queensland and federal governments — has sparked pushback by politicians across the aisle for its size and transparency shortcomings, and for local competitors allegedly being given insufficient opportunity to apply. 

“We have raised concerns about the complete secrecy of the tender process,” said Queensland treasurer David Janetzki via email. His Liberal National Party, which came to power on October 28 after winning the state election, has quickly started reviewing its predecessor’s agreement with the US firm.

“We are continuing to take briefings to determine how the PsiQuantum deal came together under the previous Labor government … [and] will assess the deal once we have all the facts,” he said.

‘Probity, accountability and openness’

PsiQuantum’s dealings with the government haven’t been made public. But local sources understand the firm, two of whose co-founders are Australian, approached the government for a number of years regarding the prospect of them subsidising a local quantum computing project. 

In parliament earlier this year, Mr Janetzki said the tender process excluded Australian start-ups, and forced firms to sign a non-disclosure agreement. 

The federal opposition party called for an inquiry into the federal government’s share of the PsiQuantum investment on similar grounds. It claims the government entered into a non-binding agreement with the firm, and then conducted a rushed expressions-of-interest process with select competitors via email.

fDi was not able to substantiate these claims. But Rod Bristow, former CEO of a venture capital firm operating in Australia, says “it appears not all Australian quantum computing companies may have had the opportunity to participate” in the tender.

George Tanewski, an accounting professor at Australia’s Deakin University, stresses that it’s not yet known whether the government did “anything sneaky” in choosing PsiQuantum as the award recipient. But there is a problem in the fact the award wasn’t an “open and transparent process”, he says

“There are probity, accountability and openness issues about the PsiQuantum [award],” he explains. “To give PsiQuantum A$940m in financial incentives, it’s very important the government documents publicly why it did it. This is taxpayers’ money, and they have to justify it … but they haven’t.”

Risks of picking winners

The review of PsiQuantum’s award shines a light on the risks firms face when accepting or pursuing financial incentives that may not be supported by subsequent governments. 

It comes as Donald Trump’s impending return to the White House sparks speculation over the future of IRA subsidies following his campaign promises to support the fossil fuel industry and his climate scepticism. 

Mr Bristow warns that flip-flopping on subsidies can hit investor confidence in the country and its subsidies. “If governments can’t be relied on to take a bipartisan view [with incentives], then industry is less likely to seek grant funding as they need certainty,” he says. 

PsiQuantum has also brought to light the longstanding lack of transparency in Australia’s grants process. Mr Tanewski, who led a study of the past four years of publicly available data on federal business grants, said the selection of recipients is a “shrouded process” which is “deeply flawed …  opaque and non-competitive”. 

The Australian National Audit Office’s most recent grants review found that closed, non-competitive selection processes were used to award 42% of grant funding, while ad hoc grants — like PsiQuantum’s — were the most common by number (24%). 

Mr Tanewski has urged Australia’s government to follow the example set by the UK and US which have “tightened up” their grant processes over the past two decades to focus on awarding grants via open, competitive basis. The UK government states: “By default, government grants should be subject to an appropriate form of competition.”

PsiQuantum did not reply to a request for comment.

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