Minister asks Procurement Ombudsman to conduct independent review of McKinsey outsourcing

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Federal Procurement Minister Helena Jaczek says she has asked the Office of the Procurement Ombudsman to look into federal outsourcing with McKinsey & Company to ensure there is an independent review.

The Minister of Public Services and Procurement also told MPs Monday that the government is reviewing its integrity regime, which determines when a company may become ineligible to receive federal contracts.

Prime Minister Justin Trudeau asked Ms. Jaczek and Treasury Board President Mona Fortier in early January to review federal spending with McKinsey.

Ms. Jaczek said this will include reviews by internal audit teams.

“While we have found no indication to date that any rules or policies were broken, I also know that there’s always room for improvement. I welcome these reviews which may help determine what further adjustments or refinements should be undertaken,” she said.

Ottawa contracts comprise up to 10 per cent of McKinsey Canadian revenue

Procurement Ombudsman Alexander Jeglic leads an independent government office that has a mandate to help resolve contracting disputes between businesses and the federal government and recommend ways to improve procurement practices.

Ms. Jaczek made her comments at the government operations committee hearing, which is part of a study into federal outsourcing spending to McKinsey. The study is one of three that are under way by the committee. The others are focused on the growth in federal spending on outsourcing in general and on the $54-million cost to build and maintain the ArriveCan app.

The committee tabled a brief report Monday calling for the Auditor-General to conduct “as soon as possible” a performance and value-for-money audit of the contracts awarded to McKinsey since 2011. The Conservatives forced a debate on that report Monday on the floor of the House of Commons.

“We cannot trust these Liberals, who are responsible for these scandals, to then come in and say that they are going to investigate themselves,” Conservative MP Garnett Genuis said. “That is why, as an urgent matter, we are saying that it is time to ask the Auditor-General to come in and get to the bottom of what happened here.”

During that debate, opposition MPs listed various international controversies involving the global consulting firm to question why the Liberal government continues to work with McKinsey.

The company reached a settlement in 2021 over its role in promoting opioid sales and is being investigated by France’s financial prosecutor over tax fraud allegations. It was recently charged in South Africa for its role in an alleged corruption scandal.

Opposition MPs also raised these examples directly with Ms. Jaczek Monday and asked whether any of these would preclude the government from working with McKinsey.

“Clearly they’ve had problems in South Africa. In France. This is a company that’s riddled in scandal after scandal and Canadian taxpayers deserve to know what that threshold is,” NDP MP Gord Johns said.

Ms. Jaczek’s deputy minister, Paul Thompson, replied that while the government monitors these issues, “these activities have not triggered our integrity regime, in the sense of there have been no criminal convictions.”

Conservative MP Michael Barrett later pressed Mr. Thompson to explain the threshold further. The senior public servant said there is a range of criteria and potential consequences, including reviews, suspensions or penalties.

“There’s various arrangements that can be pursued under the existing policy. But as the minister noted, the existing policy is being looked at and there’s a range of improvements that are on the table,” Mr. Thompson said.

Federal officials have said the total value of federal contracts awarded to McKinsey since 2015 is at least $116.8-million. The growth in annual spending with McKinsey is part of a broader increase in outsourcing, which has risen to $14.6-billion in 2021-22, up from $8.4-billion in the 2015-16 fiscal year.

The committee heard testimony last week from Dominic Barton, who was the global managing partner of McKinsey from 2009 to 2018. In 2016 and 2017, he acted simultaneously as a volunteer chair of an influential advisory committee on economic growth to then-finance-minister Bill Morneau.

Mr. Barton told MPs his role on the advisory committee had nothing to do with the fact that federal contract spending with McKinsey rose sharply after his work on the advisory council, which was supported by pro-bono research from McKinsey.

The committee also heard last week from Carleton University researcher and associate professor Amanda Clarke, who specializes in the study of federal outsourcing. Dr. Clark told MPs that a study specifically focused on McKinsey “is a bit of a distraction” and that the committee’s time would be better spent focusing on outsourcing generally.

During Monday’s hearing, Mr. Thompson said examples of work McKinsey provides is to use a proprietary database that allows it to analyze the cost of various projects or responsibilities – such as managing a pay centre – and determine whether departments are receiving good value.