Government review of McKinsey contracts finds no evidence of political interference

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A government review of federal contracts with McKinsey & Co. has found no evidence of political interference, but Ottawa is updating procurement rules to take social and corporate governance issues into consideration when awarding outsourcing work.

Prime Minister Justin Trudeau asked two of his ministers – Treasury Board President Mona Fortier and Public Services and Procurement Minister Helena Jaczek – to review federal outsourcing with the global consulting firm in January after repeated questions from the opposition.

“Independent audits of contracts with McKinsey found no evidence of political interference,” the government said in a report released Tuesday, while adding that “there are always opportunities to further improve and strengthen the Government of Canada’s procurement practices.”

Conservative MP and Treasury Board critic Stephanie Kusie dismissed the report’s findings, saying the review was not truly independent.

“It’s no surprise that the Liberal government investigated themselves in an attempt to whitewash their dubious behaviour and clear themselves of political interference,” she said in a statement.

As The Globe and Mail first reported in January, 2022, the value of outsourcing contracts to McKinsey has climbed steadily under the Liberals. The total value of federal contracts awarded to McKinsey since 2015 is at least $116.8-million.

Throughout 2016 and 2017, Dominic Barton served as both the head of McKinsey and the chair of a federal economic advisory council to then-Liberal finance minister Bill Morneau. Mr. Barton has denied any connection between his volunteer advisory work and the growth in federal contracting with McKinsey.

That federal contracting with McKinsey overlapped with a period in which the New York-based firm has dealt with several international scandals, including a long-standing relationship with Purdue Pharma, the makers of opioid drug OxyContin.

Last month, The Globe reported that the federal government plans to join separate B.C. class action lawsuits against Purdue Pharma and McKinsey related to opioid marketing campaigns.

The B.C. statement of claim against the consulting company says McKinsey “has created or assisted in the creation of an epidemic of addiction in British Columbia and throughout every province and territory in Canada.”

The accusations have not been proven in court. McKinsey has rejected the allegations, saying they are not supported by facts and the case should be dismissed.

The company is being investigated for tax fraud in France and was charged criminally in South Africa last year in connection to a corruption scandal.

During committee hearings into the growth in outsourcing contracts with McKinsey, opposition MPs frequently questioned officials as to why such spending wasn’t curbed in light of these international controversies.

The government responded in February by saying those issues haven’t triggered the existing integrity regime because they have not concluded with criminal convictions.

In Tuesday’s report, the government says its Directive on the Management of Procurement was updated in April “to include new requirements to integrate human rights, the environment, social and corporate governance, and supply chain transparency principles in federal procurement processes.”

Some of the federal outsourcing with McKinsey was tied to what the government calls a standing offer for benchmarking services, in which departments could hire the company without going through a bidding process in order to obtain its research in areas such as the going rates for various services.

The report said the internal audit was unable to determine whether the use of the standing offer with McKinsey “was the best instrument” to meet the needs of departments. McKinsey’s standing offer expired in February.

The government has since updated its policies and is now, “consistently seeking sole-source justification for each contract.”

In addition to the internal audit process, federal outsourcing to McKinsey is being reviewed by the Procurement Ombudsman, various House of Commons committees and the Auditor-General of Canada.

NDP MP Gord Johns criticized the government report as “vague” and said he’s looking forward to what the Auditor-General and others have to say on the matter, adding that the personal ties between McKinsey and the Liberals through Mr. Barton are clear.

Still, he welcomed the changes to procurement policy that will now take into account a company’s record on social and human rights issues.

“That wouldn’t have happened without the pressure we applied.”