Public servants often disregarded rules when awarding McKinsey contracts, AG finds

OTTAWA — Government organizations frequently disregarded federal contracting and procurement rules when awarding contracts to consulting firm McKinsey & Company, the auditor general concluded in a report released Tuesday.

At the request of the House of Commons, auditor general Karen Hogan probed 97 contracts awarded to McKinsey between 2011 and 2023, with a total value of $209 million.

Federal contracts with McKinsey came under scrutiny last year after media reports highlighted the rapid growth of the company's work under Prime Minister Justin Trudeau's Liberal government.

The audit found nine out of 10 departments and agencies, as well as eight out of 10 Crown corporations, failed to follow all aspects of their own procurement policies and guidelines on at least one contract.

Organizations also didn't justify the fact there was no competitive process for 18 out of 19 contracts that went directly to the consulting firm, the auditor found.

And the government may not be getting value for its money, the auditor flagged, noting that in a sample of 33 contracts, the cost was not estimated in advance for 30 of them.

Hogan offered one recommendation on strengthening conflict-of-interest rules, which the federal government accepted.

She said the government doesn't need to layer new rules onto existing ones, but rather, it needs to ensure its existing policies are followed.

The federal funds that went to McKinsey amount to only 0.27 per cent of the total amount spent on consultants for similar services, the auditor said.

Contracts with McKinsey came under particular scrutiny because of the firm's former global managing director's link to the Liberal government, which raised questions about what influence McKinsey had on public policy.

However, Hogan said the pattern of non-compliance existed before the Trudeau government was elected.

"We saw non-compliance, either with procurement rules or difficulty demonstrating value for money, throughout the whole 12-year period of time," Hogan said, describing a pervasive pattern across government organizations.

"That's why I have the belief that it isn't limited to McKinsey, it is likely a bigger issue of making sure that the rules are not forgotten, and people are paying attention to them."

Nevertheless, Conservatives pinned the auditor general's findings squarely on the Liberal government.

"It's not a surprise that Trudeau gave McKinsey hundreds of millions of dollars. At the time, McKinsey was led by Dominic Barton, a close friend and adviser of Justin Trudeau and Chrystia Freeland," a statement from the Conservatives said.

Meanwhile, NDP Treasury Board critic Blake Desjarlais said the report revealed that consecutive Conservative and Liberal governments "have been favouring McKinsey over professional public service workers."

"New Democrats are calling on the Liberals to strengthen the procurement process and make it more transparent for Canadians, and not just to benefit their ultrarich Bay Street friends."

Procurement Minister Jean-Yves Duclos outlined some of the steps the government has taken to strengthen its contracting processes, including increasing scrutiny on contracts awarded as part of a non-competitive process.

"I will also note that we have created a new position of chief contract quality assurance and records compliance office. That action would ensure that critical elements of decision-making throughout the procurement process are properly documented, that guidelines and tools are put in place and that quality is being actively monitored," Duclos said at a news conference Tuesday,

The Treasury Board released a report last year that reviewed contracts awarded to McKinsey.

The departmental audits found no evidence of political interference and no evidence that the integrity of the procurement process was not maintained, the Treasury Board's final report said last year.

But they did find some administrative requirements and procedures were not consistently followed.

In a separate audit released Tuesday, Hogan found an arm's-length foundation that's supposed to award funds to develop new climate-change technology handed out money for ineligible projects.

Of the 58 Sustainable Development Technology Canada projects the auditor looked at, 10 were ineligible but got funding anyway. Those 10 projects received a total of $59 million.

Innovation Minister François-Philippe Champagne said it was Parliament's decision to deliver the funds through an arm's length agency 20 years ago.

After several investigations, including the auditor's, the government has proposed a new model, he said.

"We're going to move the activity to the National Research Council, and this has (a) number of benefits," the minister said Tuesday.

"One of which is that they're going to be subject to (the) Treasury Board's rules in terms of how you manage public funds."

This report by The Canadian Press was first published June 4, 2024.

Nojoud Al Mallees, The Canadian Press