Mona Fortier, President of the Treasury Board, waits to appear at the Standing Committee on Government Operations and Estimates in Ottawa on Feb. 8. The Treasury Board says internal audits of contracts with McKinsey & Co. show departments didn't consistently follow some administrative requirements and procedures.Adrian Wyld/The Canadian Press
Internal auditors have found several concerns with the federal government’s contracting with McKinsey & Co. – including questions related to fairness, transparency and conflicts of interest – but have not found evidence of political direction, according to a wave of reports released Friday.
The federal government has awarded 39 contracts with the New York-based global consulting company worth a combined $117.4-million since 2011, across 10 departments and two Crown corporations.
An internal audit of Canada Border Services Agency contracts with McKinsey found the consulting company was under consideration by management before bids were solicited, a practice auditors said raises concerns about the overall fairness of the process.
The audit report also found the agency could not prove that all McKinsey consultants had the required security clearances, nor could the agency provide evidence showing that management monitored the performance of the McKinsey consultants.
The review looked at four CBSA contracts with McKinsey between 2016 and 2022. In two of the contracts, of which one was later terminated, auditors found McKinsey was being considered before the tender process.
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“This raises questions as to the overall fairness and openness of the processes as it could be perceived that McKinsey’s bids were favoured by the CBSA,” the audit report states. With respect to a third contract, two non-McKinsey bidders had requested extensions that were denied “with no clear rationale,” leaving McKinsey as the only bidder on the $1.3-million contract to create a “value management office.”
The internal audit of CBSA was one of nine internal audit reports released Friday by government departments to the House of Commons committee on government operations, which is studying federal spending on contracts with McKinsey and other consulting firms. A 10th report by Public Services and Procurement Canada will be released in the coming days, according to the government.
An audit report on spending by the Department of National Defence found several concerns. The department has awarded 15 contracts worth a combined $26.9-million with McKinsey since 2011, most of which occurred within the past three years.
Auditors said they could only find the department as “partially compliant” with conflict of interest rules, owing to a lack of information provided about potential conflicts of interest. Auditors found several reservists were employed by McKinsey at the time of the contracts. Auditors also found that at least three former department or Canadian Forces members were employed at McKinsey.
Auditors found DND was “not compliant” with federal rules requiring the pro-active disclosure of all contracts worth $10,000 or more.
“Several contracts were not pro-actively disclosed while others were inaccurately disclosed as competitive instead of non-competitive,” the report states.
Treasury Board president Mona Fortier said in a statement that while the audits found “certain administrative requirements and procedures were not consistently followed,” they also show contracting decisions were managed independently of ministers’ offices.
“Based on TBS’ preliminary observations of audit results from departments, the audits reveal no evidence of political interference, and broad compliance with values and ethics commitments,” she said.
The government operations committee launched a study of federal contracting with McKinsey earlier this year. The Globe and Mail first reported in January, 2022, that the value of outsourcing with the company has climbed steadily under the Liberals.
McKinsey is connected to the Liberal government via Dominic Barton, who in the early years of the Trudeau government served as both the head of the company and as the volunteer chair of former finance minister Bill Morneau’s advisory council on economic growth. He was also later ambassador to China.
Mr. Barton has appeared as a witness in the committee study. He said there is no connection between his past role as an adviser to the government and the growth in federal contracting with his former company.
Prime Minister Justin Trudeau said in January he had asked Ms. Fortier and Public Services and Procurement Minister Helena Jaczek to look into federal spending with McKinsey.
That work has involved asking internal audit teams inside federal departments to review contracts with McKinsey. The reports released Friday are interim updates. The government is promising to produce a final report by June 30, 2023.
CBSA president Erin O’Gorman said in a written response that the agency accepts the audit findings and has developed an action plan to address the recommendations. An agency spokesperson said the CBSA is planning an additional internal audit of its contracting policies.
Conservative MP Stephanie Kusie said in a statement Friday that her party still has significant concerns about preferential treatment for McKinsey.
“Canadians deserve to know that the government’s procurement processes are fair, transparent and not just benefitting well-connected government insiders,” she said.
Auditor-General Karen Hogan recently said her office will be conducting an audit of federal contracts with McKinsey.