Outsourcing Lacks Transparency, First Committee Meeting on McKinsey Contracts Is Told

Prime Minister Justin Trudeau responds to a question during Question Period, January 30, 2023 in Ottawa. (Adrian Wyld/The Canadian Press)

There is a lack of transparency and accountability in how federal taxpayer money is being spent on outsourcing, the House of Commons government operations committee heard on Jan. 30 as it began its study into the over $100 million dollars awarded to U.S. consulting firm McKinsey since 2015.

Focusing on the general problem of outsourcing, Amanda Clarke, an associate professor of public policy and administration at Carleton University, said the scrutiny afforded to McKinsey was “a bit of a distraction.”

Clarke said in her opening remarks that the focus should be broader, with her research suggesting the public service “breaches acceptable best practice in responsible public administration” when awarding large contracts to consulting firms.

Her concerns relate in part to the value for the money, the lack of accountability, and the hollowing of state capacity.

“I appreciate that there’s particular dynamics that have led to this specific focus on McKinsey, but in my opinion I don’t think it makes sense to focus on McKinsey,” she said.

CBC first reported in early January that contracts awarded to McKinsey had grown 30-fold since the Liberals took power.

The $66 million they initially reported is now confirmed to be well over $100 million, according to Public Services and Procurement Canada (PSPC).

Despite calling the focus a “distraction,” Clarke said McKinsey contracts had seen the highest rate of growth between 2017 and 2021, but said she had not seen reliable evidence to explain the phenomena.

“When I speak with public servants about the firms they are worried about they very rarely say McKinsey,” she said, pointing instead to other consulting giants.

Moments prior to Clarke sharing her views on the usefulness of scrutinizing the McKinsey contracts over others, Liberal MP Anthony Housefather had spent his allotted time to chip at the witnesses credibility in addressing the issue.

He asked whether Clarke or the other witness had any nonpublic information to share about McKinsey, or if they had been involved in contract negotiations or administration. They answered “no” to all questions.

‘Distraction’

Clarke clarified her comments on McKinsey being a “distraction” when asked about its involvement in controversies by Conservative MP Michael Barrett.

“Do you know of or have you read reports of some of the other firms that you mentioned—PricewaterhouseCoopers, IBM, KPMG—holding corporate retreats within a couple of thousand meters of a concentration camp?” Barrett asked.

The MP was making a reference to McKinsey holding a corporate retreat in China’s Xinjiang region in 2018.

The House of Commons voted on a motion in 2021 to declare that the Chinese Communist Party (CCP) is committing genocide against Xinjiang’s Uighur population.

Clarke recognized there are some “problematic lines” on McKinsey’s resume, and said it would be a legitimate question to ask whether ethical rules should be built regarding the matter.

“I think focus on McKinsey can be distracting, but there is an interesting policy question around at what point does a firm’s broader ethical behaviour and kind of values mean that they’re just like a no go zone?” she said.

High Figures for Other Firms

The other witness on the panel was Sean Boots, a senior policy advisor with the Treasury Board Secretariat (TBS).

He said he conducted research on government contracts with Clarke and noted issues with how the information is publicly shared.

“The main theme is that it’s hard to understand at a government wide scale where money is being spent and which vendors are the most prominent,” he said.

Boots said the data provided openly is hard to track due to issues such as names of vendors aren’t consistent or there is no data on money spent annually for multi-year contracts.

Boots pointed out that spending on management consulting firms like McKinsey has increased over time and that other firms have been receiving much more money.

For the 2021-2022 fiscal year, he said Deloitte received $172 million in contracts, PricewaterhouseCoopers $115 million, and Accenture $94 million.

First Questions of the New Year

The topic of contracts awarded to McKinsey was the first to be raised as the House of Commons held its first question period since reconvening after the holiday break.

Conservative Party Leader Pierre Poilievre asked where the money spent by the Trudeau government went, which “doubled” the national debt and created “inflationary deficits,” and how much of it went to McKinsey.

The debt almost doubled from 2015 to 2022, with the marked increases in years 2021 and 2022 due to COVID-19 supports.

Trudeau said he was elected on the promise to invest in the middle class and that he fulfilled it, with the Canada Child Benefit and support for seniors and students.

“We managed to create millions of jobs and get people out of poverty, but unfortunately, at every step of the way the Conservatives oppose us,” he said.

“I asked the prime minister how much McKinsey got? He said ‘Well, it was all for the middle class.’ He’s always had difficulty defining what the middle class is,” Poilievre replied.

“Now we know his definition. It’s his friends who make $1,500 an hour as high price consultants for his government over at McKinsey, where his personal friend Dominic Barton was the boss.”

Barton, who left the helm of McKinsey to become Canada’s ambassador to China from 2019 to 2021, is set to testify before the Commons government operations committee on Feb. 1.

Trudeau did not provide a direct answer to Poilievre, with the responsible departments themselves currently working on sorting the data.

“The prime minister has asked the president of the Treasury Board and I to conduct a review to take a close look at the numbers and to look into the circumstances and we are doing just that,” Minister of Public Services Helena Jaczek said in taking a question about the contracts.

PSPC said on Jan. 26 that it has awarded $104.6 million in contracts to McKinsey since 2015 and indicated that other federal organizations also gave contracts to McKinsey under their own authorities.

McKinsey has defended its work with the federal government in a previous statement.

“Our government work in Canada is entirely non-partisan in nature and focuses on core management topics, such as digitization and operations improvement. Our firm does not make policy recommendations on immigration or any other topic,” the firm said on Jan. 10.