A new report reveals how Canada’s Trudeau Liberals have repeatedly rewarded contracts to McKinsey & Company, flouting procurement rules along the way. The report sparks serious concerns about cronyism and government outsourcing practices.

Canadian prime minister Justin Trudeau attends a welcome ceremony on day one of the G7 summit at Borgo Egnazia on June 13, 2024 in Fasano, Italy. (Antonio Masiello / Getty Images)

In early June, Canadian auditor general Karen Hogan issued a report into the federal government’s habit of contracting out services to global consulting firm McKinsey & Company. She found that Prime Minister Justin Trudeau’s administration violated its own procurement policies in its dealings with McKinsey.

Hogan also discovered that Trudeau’s Conservative predecessor, Stephen Harper, violated procurement norms when contracting services to McKinsey, but that the quantity of McKinsey contracts vastly increased once Trudeau came to power.

In February 2023, a parliamentary motion unanimously tasked the auditor general (AG) with examining McKinsey contracts to determine whether the government complied with federal procurement regulations and received value for its money. Deeper questions, such as why the government is so keen to award private sector contracts to deliver public services, and what it says about the role of the state under neoliberalism, were elided by the AG investigation’s limited scope.

McKinsey might strike some as an odd choice for delivering Canadian government services, given its track record of helping Canada’s largest grocery chain while it was artificially fixing the price of bread from 2000 to 2015, the year Trudeau was first elected. However, McKinsey management has long-standing and deep ties to the Trudeau government.

The company employed Dominic Barton as its global managing director from 2009 until his appointment as ambassador to China in 2019, in which he secured the release of Canadians Michael Kovrig and Michael Spavour — the “two Michaels,” at least one of whom was almost certainly a spy — from Chinese captivity. In 2016 and 2017, Barton held dual roles as both McKinsey’s global managing director and a member of former finance minister Bill Morneau’s economic advisory panel, raising reasonable inferences about a conflict of interest.

Hogan’s report examined contracts awarded to McKinsey from January 2011 to September 2023. During this twelve-year period, ninety-seven contracts for “professional services” were awarded to the consulting firm by ten federal ministries and ten Crown corporations. These contracts were worth a combined $150 million, of which $145 million was spent.

“An Overreliance on the Supplier”

AG Hogan found that organizations awarding the contracts “showed a frequent disregard of federal contracting and procurement policies and guidance.” Less than a third of these contracts, Hogan found, were awarded through a competitive bidding process.

Of twenty-eight competitive bids, six appeared to have been designed specifically with McKinsey in mind based on their job description. Another ten of these bids lacked sufficient documentation to justify awarding them to McKinsey, leaving only twelve contracts out of ninety-seven awarded through a transparent, open bidding process.

In four cases examined by Hogan, open bids enabled McKinsey to obtain additional sole-source contracts for “continuous or related work,” suggesting “an overreliance on that supplier.” This indicates that better deals could potentially have been found for the same services with other contractors.

Out of a sample of thirty-three contracts selected by Hogan’s office for detailed examination, nineteen were sole-source contracts. The government provided a rationale for its uncompetitive process in only one of these cases. Of the $145 million spent on McKinsey contracts over the past dozen years, about $131 million was spent by just three government agencies and three Crown corporations.

Worst Offenders Include Tar Sands Pipeline

AG Hogan found that the departments most reliant on McKinsey from 2011 to 2023 were National Defence, Public Services and Procurement Canada (PSPC), and Immigration, Refugees and Citizenship Canada (IRCC), Hogan found.

National Defence awarded fifteen contracts to McKinsey worth a combined $19 million, of which just two were the result of open bidding. McKinsey received an additional $19 million from PSPC for three contracts, only one of which was the product of a competitive bid. The firm was awarded two contracts worth $18 million total by IRCC, both of which went through a competitive bidding process.

The worst offending Crown corporations were Business Development Bank of Canada, Canada Post, and Trans Mountain Corporation.

Trans Mountain Corporation, which manages the overbudget pipeline purchased the Trudeau Liberals in 2018, paid McKinsey $24.7 million for a single sole-source contract in October 2022.The pipeline, set to open this year, will nearly triple the amount of tar sands crude available for export.

Canada Post purchased fourteen contracts from McKinsey totaling $19.3 million, with five awarded through a competitive process. The Business Development Bank awarded McKinsey eleven contracts worth $16 million, with five obtained through open procurement. In one case, McKinsey was awarded a contract even though it didn’t offer the government the best procurement price. The government didn’t offer an explanation for this decision.

Trudeau Has Increasingly Relied on Private Contracts for Public Services

While the AG report examined a period that included both the Harper Conservative government (2006–2015) and Trudeau’s Liberal government, Hogan told a parliamentary committee that Harper’s government spent $6.3 million on McKinsey contracts. This amount constitutes a mere 4 percent of the funds doled out to McKinsey since 2011.

However, Hogan added, the Conservative contracts were plagued by the same flouting of rules as the Liberal contracts. “We saw noncompliance, either with procurement rules or difficulty demonstrating value for money, throughout the whole twelve-year period of time and it was in almost all organizations,” the AG said.

The Liberals’ increasing generosity toward McKinsey reflects a broader trend, as the federal government’s reliance on professional services contracts has risen steadily since Trudeau took office. In the 2015–16 fiscal year, the government spent $3.3 billion on these contracts; by 2021, that figure had grown to $6 billion — almost double — with just a $72.7 million decrease by 2022–23.

Although the McKinsey contracts represent a drop in the bucket of this broader pattern, reasonable concerns of cronyism arise from Barton’s role in the company while advising the former finance minister and his immediate appointment to a sensitive diplomatic position. Hogan noted that the Liberals’ connection to Barton suggests an “apparent or perceived” conflict of interest, although she said she found no evidence of direct “ministerial involvement” in awarding any of the contracts.

In response to these concerns, the Liberal government commissioned an internal review led by the treasury board president and minister of public services procurement to investigate potential ministerial interference in awarding contracts to McKinsey. Predictably, the minister in charge of PSPC — the government agency that awarded McKinsey $19 million in mostly noncompetitive contracts — concluded that there was no cause for concern.

Privatization by Stealth

Left unsaid by Hogan is the reason why the government is awarding all these contracts to consulting firms in the first place. Her report merely notes that government agencies “may supplement internal capacity when needed to achieve their goals.” According to Hogan, “Some examples include contracting for services to temporarily expand capacity to complete a high volume of work in a timely manner or to obtain a specialized skill set that is not available internally or would not be cost effective to maintain on a permanent basis.” This determination, she added, is to be made by government agencies themselves.

The increasing use of outside contractors, some of whom happen to be affiliated with a specific politically connected firm, raises the question of whether the government should simply hire more people. The rationale underlying the Canadian government’s increasing reliance on private contractors is obscured by the AG’s laser focus on whether the government is getting value for a specific subset of contracts to the private sector.

Contrary to the usual hysterics from corporate-funded think tanks and their media allies about the size of government being out of control, the percentage of Canadians employed by the feds over the years tells a vastly different story. In 1983, the final full year of Pierre Elliott Trudeau’s tenure as prime minister, the rate of Canadians working in the federal public service was 0.99 percent.

That figure declined to 0.88 percent following Conservative prime minister Brian Mulroney’s eight years of austerity, reaching a low of 0.67 percent in 1999 after ferocious cuts by Jean Chretien’s Liberal government. By the time Justin Trudeau took office, that number had crept back up to 0.72 percent.

Trudeau Jr has presided over a significant increase in the size of the public sector workforce, but it’s still smaller than what it was before the ravages of neoliberalism. Last year, the percentage was at 0.9 percent — still lower than it was for the vast majority of Mulroney’s tenure. If Canadians want a state that’s capable of caring for its citizens, they might want to push the government to hire more public sector workers, thereby eliminating the underlying cause of professional services being outsourced to consulting firms like McKinsey.

Alas, instead of addressing the underlying issue and in an effort to present itself as fiscally responsible, the federal government plans to eliminate five thousand public sector jobs over the next few years to save $3 billion. Trudeau’s Liberals have seemingly learned the precise opposite lesson taught by these outsourcing mishaps and have committed to austerity rather than expansion.

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