June 4, 2024

Inspector General criticizes federal government over McKinsey contracts


Canada's auditor general has slammed federal departments and agencies for ignoring their own procurement policies and failing to manage risks in contracts awarded to McKinsey & Company.

In a new report filed Tuesday, Auditor General Karen Hogan found that the organisations “frequently ignored” contracting and procurement processes when awarding contracts to global management consulting firms.

The audit found that the majority of companies did not adequately comply with all aspects of their policies in at least one contract, and many organisations did not necessarily have the means to demonstrate that their contracts were cost-effective.

“We conclude that professional services contracts were often not awarded to McKinsey & Company in accordance with applicable policies,” the report states. “The federal agency's frequent disregard for policies and guidelines was manifested by lack of bid evaluation and the improper use of noncompetitive approaches.”

Ten federal agencies and 10 government-sponsored companies have awarded McKinsey & Company a total of 97 professional services contracts worth $209 million between January 2011 and September 2023, of which $200 million has already been spent.

Hogan found that of the 97 contracts awarded to McKinsey, about 70 percent were issued as non-compete agreements and at least four appeared to have been designed and executed specifically to favor McKinsey & Company.

“Federal contracting and procurement policies exist to ensure fairness, transparency and value for Canadians, but they only work if they are followed,” the report states.

Hogan also concluded that in many cases, the organizations failed to clearly indicate whether a contract was necessary, what the expected deliverables were, whether all of the deliverables had been delivered, and whether the ultimate intent of the contract issued to McKinsey & Company had been achieved.

The Attorney General's latest audit was initiated after the House of Representatives unanimously passed a motion calling for a cost-effectiveness audit of the contract with McKinsey & Co. in February 2023. The request from lawmakers came after a lengthy investigation into the proliferation of government contracts by the House of Representatives Standing Committee on Government Operations and Budget.

McKinsey came under fire in 2022 after it was revealed that a large number of contracts had been awarded to the consulting firm under the Liberal government. At the time, the Canadian government said that Public Services and Procurement Canada had awarded 23 contracts to McKinsey totaling $101.4 million since 2015, up from $2.2 million under the previous Harper government. The spike raised questions about how federal funds were being spent and the firm's influence over the Liberal government.

In his report, Hogan highlighted that department and agency spending on professional services contracts in areas such as information science services, management consulting, human services and other services has increased since 2015, with contracts with McKinsey & Company in particular having surged since 2017.

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