A legacy deal between ActewAGL and Icon Water worth tens of millions of dollars per year should be put out to tender, ACT Opposition leader Alistair Coe says.
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The $27 million per year arrangement sees ActewAGL provide IT support, human resources, payroll, billing and economic advisers among other services to Icon Water.
The deal has been in place for 11 years, with the contract due to expire in 2023. Icon Water, which is owned by the ACT government, has a 50 per cent stake in ActewAGL.
But Mr Coe said the arrangement raised serious questions about "the integrity of this $300 million expenditure".
"Other government agencies, such as Health, Education, Treasury and the Legislative Assembly use the ACT government's in-house provider," Mr Coe said in a statement.
"For some reason, Icon Water has given a sweetheart deal to the private company, ActewAGL rather than use the in-house services."
But Icon Water's managing director John Knox told budget estimates hearings on Tuesday they had chosen to "seek synergies" by keeping the shared services agreement in place once ActewAGL lost the contract to manage Canberra's water and sewerage network in 2012.
Under questioning from Mr Coe, Mr Knox said it wasn't put out to tender because the services were already being provided.
"It was more a formalisation of an arms length agreement as opposed to what was an in-house service," Mr Knox said.
Mr Coe said: "That contract, that's worth $27 million per year, you didn't think about putting it out to market?"
However Mr Knox said it was better to "preserve those synergies rather than laying off a whole lot of people".
"It made sense because it was a continuation of service," Mr Knox said.
Mr Coe questioned what mandate Icon Water had to keep staff at ActewAGL.
He probed the transparency of the arrangement given it does not appear on the ACT government's contract register, and asked whether it was value for money.
"I'm just surprised a $300 million contract would be entered into without going out to tender or using other in-house services that are available," Mr Coe said.
However Mr Knox said it was a "good deal".
He pointed to the expertise ActewAGL's economic advisers had in the energy sector as an example of how the arrangement benefited Icon.
"It's a no-brainer you've got synergies on those services," Mr Knox said.
"Many of these agreements were in-situ when the joint ventures were formed in 2000 so it's very difficult to disentangle some of these services ... the separation of those could be quite costly."
The ACT's water and utilities were once managed by ACTEW Corporation, an acronym derived from ACT Electricity and Water.
In 2000, ACTEW entered a joint partnership, with its retail arm part-owned by AGL Energy Ltd. and its distribution arm part-owned by Jemena Ltd, which includes Singapore Power and China's State Grid Corporation.
In 2012 the water supply and wastewater responsibilities were handed back to ACTEW Corporation, which rebranded to Icon Water in 2015.
The rebrand alone cost more than half a million dollars.
