Government Directed Contracts to McKinsey: Procurement Ombud Report

A sign of U.S.-based McKinsey & Company management consulting firm in Geneva on April 12, 2022. (Fabrice Coffrini/AFP via Getty Images)

The federal government has created a “strong perception” of favouritism for consulting firm McKinsey & Company when awarding  government contracts, says a new report from Canada’s Office of the Procurement Ombud.

The report said Public Services and Procurement Canada (PSPC) failed to justify McKinsey’s being chosen for projects. It found 18 non-competitive contracts, valued at $43 million, were awarded to the firm with no justification on file.

“The lack of diligence and oversight of departments in this regard is troubling,” said the procurement ombud. “Swift action is required to ensure processes are developed so that this situation does not repeat itself.”

According to the report, which was 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 to justify modifying the procurement processes to allow the consulting firm to participate.

McKinsey, which provides professional services to corporations and governments, has received an increasing number of government contracts since the Liberal government took power in 2015. The procurement ombud’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 to 14.6 billion from 2015 to 2022.

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A previous Epoch Times analysis suggested 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.

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 and in 2019 became 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, seven resulted from competitive procurement processes. Of those seven, two had been modified after McKinsey had bid.

In the case of a CBSA contract valued at $1.8 million, it was found that McKinsey was only pre-qualified under one of two methods of supply. The requirements were then modified so that McKinsey was qualified to bid. A similar change was made for a $450,000 ISED contract, which was modified, allowing McKinsey to bid.

The report said that although the procurements “ultimately ‘fit’ within” the required supply arrangement, the 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 also noted numerous McKinsey files lacked adequate documentation to support “fairness in the evaluation of bids.” In three files awarded by the CBSA, ISED, and PSPC, the documentation for 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 January ombud’s report on the ArriveCan application found a lack of documentation justifying why certain contracting decisions were made, which included incomplete worksheets on file for more than 30 individuals.

Recommendations

The ombud’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.

The Conservatives have used the report to criticize the government, saying McKinsey received preferential treatment due to close ties with the Liberals. MPs Stephanie Kusie and Kelly Block said in a statement the 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.