Actions by the federal government have created a “strong perception of favoritism” for the consulting firm McKinsey & Company when handing out government contracts, with the procurement agency failing to seek justification for the company being chosen for projects, according to a new report by Canada’s procurement ombud.
The Office of the Procurement Ombud (OPO) found that 18 non-competitive contracts, valued at $43 million, were awarded to the firm by Public Services and Procurement Canada (PSPC) with no justification on file.
“The lack of diligence and oversight of departments in this regard is troubling,” says the OPO. “Swift action is required to ensure processes are developed so that this situation does not repeat itself.”
According to the report completed in March and released on April 15, the federal government’s procurement strategies were modified to allow for McKinsey’s participation in Canada Border Services Agency (CBSA) and Innovation, Science and Economic Development Canada (ISED) contracts. Additionally, there was insufficient documentation filed to justify decisions to modify procurement processes to allow the consulting firm to participate.
McKinsey, which provides professional services to corporations and governments, has received an increasing amount of government contracts since the Liberal government took power in 2015. The procurement ombudsman’s report noted that most contracts awarded to the firm from 2011 to 2018 were competitive and did not exceed $5 million in value, but by 2021 the contracts totalled $30 million and most came from a non-competitive process.
According to The Globe and Mail, federal outsourcing of contracts increased 74 percent from 2015 to 2022, rising to a total of $14.6 billion.
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A previous Epoch Times analysis suggests McKinsey made up a relatively small share of the contracts, receiving $117 million over that period compared with $1.3 billion for Deloitte, $1 billion for PricewaterhouseCoopers, and $338 million for Accenture.
Back in March 2023, McKinsey Managing Partner Robert Palter testified before the government operations committee that politics had played no role in the increasing number of contracts, and that they were awarded based on “merit-based criteria used by the public service, not as a result of any relationship at any political level.”
Conservative MPs have accused Prime Minister Justin Trudeau of being friends with former McKinsey boss Dominic Barton, who left the firm in 2018 to eventually become Canada’s ambassador to China. Mr. Barton told the government operations committee in early 2023 that while he had a “professional relationship“ with Mr. Trudeau and met with him several times, he had never discussed offering McKinsey’s services to the government.
Competitive Contracts Modified so McKinsey Could Qualify
According to the procurement ombud’s report, which examined 32 McKinsey contracts with a total value of $112.8 million, two of the seven competitive contract files were modified after it was discovered that McKinsey would have been ineligible to bid under a supply arrangement method.
For a CBSA contract valued at $1.8 million, when it was found that McKinsey was only pre-qualified under the Task and Solutions Professional Services (TSPS) solutions-based arrangement, the contract was modified from a task-based arrangement so the firm would be applicable. A similar change was made for a $450,000 ISED contract, which was modified from a solutions-based to a task-based arrangement.
“Though these procurements ultimately ‘fit’ within the TSPS solution-based supply arrangement, these examples demonstrate the importance of robust controls and oversight of procurement as a process may appear to follow the applicable rules but not result in a process that was fair, open and transparent,” the report said.
The report also noted that for numerous files with McKinsey, there was inadequate documentation to support “fairness in the evaluation of bids.” In three files awarded by the CBSA, ISED, and PSPC, the documentation regarding individual and consensus bid evaluations was “incomplete or absent from the file.”
“The general deficiency of documentation observed is an ongoing area of concern for OPO that extends beyond the parameters of this review,” the report said.
A previous ombudsman report from January on the ArriveCan application found a lack of documentation to justify why certain contracting decisions were made, which included incomplete worksheets on file for more than 30 resources.
The latest report said the establishment of the McKinsey Benchmarking Services (MBS) in 2021 may have been “improperly” done, as the sole-source justification documents provided did not contain the required information needed to justify this sole-source standing offer.
The report also found that the “vast majority” of call-ups issued against the MBS did not have descriptions of the requirement-specific work to be carried out by McKinsey, nor did they have evidence on file that a statement of work had been developed before determining the procurement strategy.
“In these cases, it is impossible for OPO to determine the extent to which McKinsey defined the requirement for these departments, which is a serious threat to the fairness of the procurement process,” the report said.
Recommendations
The ombudsman’s report recommended that CBSA and ISED implement procedural controls to ensure procurement strategies are based on “satisfying operational requirements rather than engaging specific suppliers.” It also recommended that PSPC put in place “appropriate governance” over the establishment of non-competitive contracts for professional services.
While PSPC said it accepted the report’s recommendations and most of its findings, it said there were “legitimate reasons” for why it took the approach it did when awarding non-competitive contracts.
Conservative MPs have used the report to criticize the government, saying McKinsey has received preferential treatment due to close ties with the Liberals. Stephanie Kusie and Kelly Block said in a statement that Tories would fix the budget by firing “high-priced Liberal consultants.”
The Epoch Times reached out to McKinsey for comment, but has not yet heard back.
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