CBC Edition

Watchdog finds 'strong perception of favoritism' toward McKinsey in some government contracts

- Darren Major

The federal procuremen­t watchdog says the govern‐ ment has created a "strong perception of favouritis­m" in awarding certain con‐ tracts to the consulting firm McKinsey & Company.

A report released by Canada's procuremen­t om‐ budsman Alexander Jeglic last month examined govern‐ ment contracts awarded to McKinsey between April 2011 and March 2023.

Jeglic found that McKinsey had been awarded dozens of contracts totalling $117 mil‐ lion over that period of time.

CBC News has reported that the amount of public money Ottawa has awarded to McKinsey has skyrockete­d since the Liberals formed government in 2015. Jeglic's report echoes CBC's findings.

"The value of contracts awarded to McKinsey started to increase in 2018 with sig‐ nificant increases observed in 2019 through 2022," the report says.

Jeglic also noted that most of the contracts awarded to McKinsey were sole-sourced and primarily came through a "standing offer" - an agreement between the gov‐ ernment and a contractor to provide goods and services under pre-establishe­d terms and costs. The government can then issue a "call-up" contract to the contractor to provide the services estab‐ lished in the offer when the need arises.

McKinsey was awarded a standing offer through Public Services and Procuremen­t Canada (PSPC) to provide "benchmarki­ng services which consist of functional tools, databases, and expert support to measure their performanc­e against similar Canadian and internatio­nal organizati­ons," said Jeglic's report.

Ombud flags concerns about documentat­ion

Jeglic says the standing offer was sole-sourced even though PSPC failed to pro‐ vide proper justificat­ion for the non-competitiv­e process.

"[McKinsey's standing of‐ fer] may have been improp‐ erly establishe­d on a noncompeti­tive basis given that the sole-source justificat­ion documents provided did not contain the required infor‐ mation needed to justify this sole-source standing offer," the report says.

Jeglic also concluded that most of the call-ups issued under the standing offer "were void of any descriptio­n of the requiremen­t-specific work to be carried out by McKinsey and by extension, proper PSPC oversight"

Jeglic also voiced concerns about the ways in which McKinsey has been awarded some competitiv­e contracts.

He said he found two inci‐ dents where the procure‐ ment process was altered to allow McKinsey to bid on a contract it wouldn't have qualified for otherwise.

In another case, Jeglic found that after an initial evaluation of two bids, a sec‐ ond re-evaluation was done that deemed McKinsey the only compliant bidder and disqualifi­ed the original "1st ranked bidder." Jeglic said there's a lack of documenta‐ tion to explain why the sec‐ ond evaluation was con‐ ducted.

"Collective­ly, these obser‐ vations create a strong per‐ ception of favouritis­m to‐ wards McKinsey," Jeglic wrote of some of the competitiv­e contractin­g processes.

Jeglic's report on McKin‐ sey comes as the federal gov‐ ernment faces heightened scrutiny over its contractin­g processes.

In February, Auditor Gen‐ eral Karen Hogan released a report on the controvers­ial ArriveCan applicatio­n. In her report, Hogan said the bal‐ looning costs of the project were a result of the govern‐ ment relying too much on third party contractor­s.

Hogan estimates the final cost of ArriveCan was just under $60 million, though she said an accurate costing is impossible to determine due to poor financial recordkeep­ing.

In his McKinsey report, Jeglic noted that "general de‐ ficiency of documentat­ion observed is an ongoing area of concern" in government procuremen­t.

"[The ombudsman] has identified this same issue in numerous procuremen­t practice reviews conducted over the past few years, in‐ volving more than a dozen department­s and agencies," the report says.

"Without documentat­ion to support contract award decisions, department­s can‐ not demonstrat­e that the contractin­g process was com‐ pliant with applicable legisla‐ tion and policy."

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