Policies, procedures often broken in awarding contracts to under-fire consulting firm: auditor general

Canada’s auditor general is blasting federal government departments and agencies for disregarding their own procurement policies and failing to manage risks relating to contracts awarded to McKinsey & Company.

In a new report tabled Tuesday, Auditor General Karen Hogan found that the organizations showed a “frequent disregard” for contracting and procurement processes when awarding contracts to the global management consulting company.

The vast majority of them, the audit reveals, failed to properly follow all aspects of their policies on at least one contract and many organizations did not always have a way of demonstrating contracts offered value for money.

“We concluded that professional services contracts were often not awarded to McKinsey & Company in accordance with applicable policies,” the report says. “The federal organizations’ frequent disregard of policies and guidance was evident by missing bid evaluations and poorly justified use of non-competitive approaches.”

Between January 2011 and September 2023, 10 federal government agencies and 10 Crown corporations awarded a total of 97 professional services contracts to McKinsey & Company, worth a total of $209 million. $200 million of that money has been spent.

Of the 97 contracts awarded to McKinsey, Hogan found about 70 per cent were issued as non-competitive contracts and at least four appeared to have been designed and implemented to suit McKinsey & Company specifically.

“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 concludes that in many cases, organizations could not clearly show whether a contract was needed, what the expected deliverables were, whether all the deliverables were provided or that the ultimate intent of the contract issued to McKinsey & Company was achieved.

The AG’s latest audit was launched after the House of Commons unanimously passed a motion in February 2023 requesting a value-for-money audit relating to McKinsey & Company contracts. The request from members of Parliament came after a lengthy study on the rise in government contracts by the House of Commons Standing Committee on Government Operations and Estimates.

McKinsey came under fire in 2022 after it was revealed a surge of contracts had been awarded to the consulting firm under the Liberal government. At the time, Ottawa said that since 2015, Public Services and Procurement Canada had awarded McKinsey 23 contracts valued at $101.4 million, up from the $2.2 million spent under the previous Harper government. The sharp increase raised questions about the use of federal funds and the company’s influence over the Liberal government.

In her report, Hogan highlights that spending by departments and agencies on contracts awarded for professional services in categories such as informatics services, management consulting, welfare services and other services increased after 2015, with contracts specifically to McKinsey & Company jumping after 2017.

This is a breaking news story. Check back for more information.