‘Seems a Bit Incestuous’: Bloc MP Raises Concerns About Links Between Advisory Council and Infrastructure Bank

Then-Minister of Finance Bill Morneau announces his resignation during a news conference on Parliament Hill in Ottawa, on Aug. 17, 2020. (Justin Tang/The Canadian Press)

A Bloc Québécois MP has raised concerns about potential conflicts of interest regarding links between the government’s Advisory Council on Economic Growth and the Crown corporation Canada Infrastructure Bank, with consulting firm McKinsey straddling the two.

The House of Commons committee on infrastructure has been studying the role of McKinsey in the creation of the Canada Infrastructure Bank (CIB), and heard from former Finance Minister Bill Morneau on June 8.

Bloc MP Xavier Barsalou-Duval remarked to Morneau that former head of McKinsey Dominic Barton and then-president of the Quebec pension fund CDPQ Michael Sabia had worked for free on Morneau’s now-discontinued Advisory Council on Economic Growth, which supported the establishment of the CIB.

After the CIB’s creation, McKinsey obtained consulting contracts worth $1.43 million with the bank, while Sabia was appointed the bank’s chair in April 2020. The CIB was established in 2017 to attract private investments in infrastructure projects. Its current CEO is a former McKinsey partner.

One of the CIB’s largest projects is the REM, a light-rail network in Montreal, with a $1.28 billion loan. The largest stakeholder is the CDPQ, with a $2.95 billion investment announced in 2018. Sabia left the CDPQ in February 2020 and became chair of the CIB shortly after.

“For me, it seems a bit incestuous to see that ... those who set the table are the ones who will be eating on it. But on your end, you don’t see anything that could look like a conflict of interest?” asked Barsalou-Duval.

“It was from my perspective important that we sought out people for my Advisory Council on growth that would be able to bring a perspective to the table and that included people like Dominic Barton and Michael Sabia,” said Morneau.

He added that he had not had any exposure to the decisions made by the CIB on how it would meet its goals.

Morneau said the CIB is independent of the government, but Barsalou-Duval asked why, if that was the case, the federal government had changed the $1.28 billion REM direct investment into a loan.

“I’m not aware of how those two decisions were taken, other than to say that we would see a project like the REM project as being a positive infrastructure project for the country,” Morneau answered.

The Bloc MP was referring to the testimony from Sabia at committee on May 16, where he was asked why the government had made that decision on the REM.

“That was a decision made by the government and, indeed, the government informed us of that change,” said Sabia, who is currently the federal deputy minister of finance.

Barsalou-Duval asked Sabia whether this showed the CIB was not independent of the government as claimed.

“That’s a good question,” Sabia answered. “Given the importance and size of this investment, at the time there was good collaboration between the government and the Infrastructure Bank, because it was just at the beginning of the bank’s operations.”

McKinsey as ‘Secretariat’

Sabia, who is leaving the Department of Finance for the top role with Hydro-Québec this summer, provided more insight during his testimony on the extent of McKinsey’s involvement in the Advisory Council.

He said the company was “essentially act[ing] as a secretariat, on a volunteer basis” for the council. “As you know, an advisory board needs a secretariat, and McKinsey played that role. So they have been very involved in our reports and our deliberations.”

Sabia told the committee that Morneau, as finance minister, asked him to take over the chair of the CIB in April 2020 since its activities had been “quite slow.” To speed up the CIB’s operations, Sabia chose to hire McKinsey consultants.

“In order to do that in the quickest and most economical way, the decision taken at the time was to use some of the people from McKinsey who had been involved in the initial thinking around the Infrastructure Bank, to draw on their accumulated knowledge of this so that we wouldn’t have to start from ground zero and would be able to move ahead quickly, which we were able to do,” he said.

Sabia also reached out for advice to Barton, the former McKinsey boss and former chair of the Advisory Council, who had been appointed Canada’s ambassador to China in 2019.

An email presented in committee shows that McKinsey was aware of Barton’s schedule and played a role in organizing the meeting with Sabia.

“Dom’s calendar has been pretty tight, so [it] looks like this is the only time we could get him. Given he’s by himself, we’re hoping to limit attendance to a few people,” McKinsey partner Zak Cutler wrote to Annie Ropar of the CIB on June 17, 2020.

“Could we hold attendance at just you and John for this one? It’s a bit delicate and [I] don’t want to offend, but want to make sure Dom is able to speak freely. Let me know if any issues.”

Barton told the committee on May 18 that he wasn’t aware McKinsey had been on the call with Sabia. “There was one conversation, which apparently there’s an email about. I was not aware McKinsey was in that,” he said.

Conservative MP Leslyn Lewis asked Sabia on May 16 whether there was a potential conflict of interest there.

“Did it not seem like a conflict to you? ... The chair of the CIB meeting with the ambassador who helped create the bank.”

Sabia replied: “How could that possibly be a conflict of interest, when Dominic Barton was simply providing some further thinking to help accelerate our own thinking. ... There’s not even the potential for a conflict of interest there.”

The infrastructure committee started its study of McKinsey’s role in the CIB on May 2. It follows another study by the government operations committee on the contracts awarded to McKinsey by the Trudeau government since 2015.

That study stems from media reports indicating that contracts to McKinsey have increased exponentially under the Trudeau government, but ultimately they remain a small piece of the pie among the consulting firms taking Ottawa dollars.