Federal outsourcing on pace to reach record $21.4-billion this year

The Canadian Press / Adrian Wyld

Amid growing public scrutiny on the billions spent annually on outside help, the Parliamentary Budget Officer (PBO) says federal outsourcing could set another record this year at $21.4 billion.

PBO Yves Giroux analyzed Ottawa's spending plans presented to Parliament for the current fiscal year that ends March 31.

In a PBO report, Giroux notes that outsourcing costs — officially described as professional and special services — have increased by over a third since the 2017/18 fiscal year. Simultaneously, the federal public service climbed to 335,957 employees in 2022, up 28% from 262,696 in 2017.

"You wonder, what is all that money doing?" said Giroux, noting that Canadians face issues across various federal services, including passports, Veterans Affairs, Employment Insurance applications and delays for access-to-information requests.

"More public servants, more professional and special services. But the level of services and the service standards are not increasing commensurately with all these increases. Quite the opposite," he said.

Amid ongoing labour negotiations between the Public Service Alliance of Canada (PSAC) and the Treasury Board, the latter mandated a hybrid work model where public servants return to the office at least two or three days a week.

Treasury Board President Mona Fortier announced that all public servants must abide by the work mandate by the end of March in January.

PSAC then filed a complaint against the Federal Public Sector Labour Relations and Employment Board and said they would help employees file grievances related to the mandate. 

Union leaders have insisted that remote work is practical and say departments have poorly prepared office spaces for hybrid work arrangements. 

But the Treasury Board maintains that the work location is the employer's right.

"Are public servants still working from home? Maybe. Maybe not," said Giroux 

PSAC also demanded the Treasury Board provide them with a double-digit wage hike to account for higher inflation after the feds offered them a 2% yearly wage hike over three years, which could push PSAC towards a strike vote in April.

"Apparently, they're more productive at home," said Giroux. "Evidence does not suggest that."

The House of Commons government operations committee is in the midst of conducting three studies on federal outsourcing, including one on the growth in outsourcing in general, another on the cost of the ArriveCan app and a third study on spending with consulting firms like McKinsey & Company.

Canada's auditor general confirmed she would conduct a separate performance audit of the $54 million ArriveCAN app used by the federal government to learn the COVID vaccination status of Canadian travellers.

According to the federal public works department, the controversial US consulting firm McKinsey & Company has received $104.6 million in contracts from Ottawa since 2015. However, they said information from other departments could see that number rise.

In the last supplementary 2022/23 fiscal year estimate, Giroux stated that federal outsourcing costs taxpayers $21.4 billion. 

A recently tabled forecast for 2023/24 showed spending in that category could amount to $19.5 billion, which could increase later in the year.

According to the PBO, the federal professional and special services budget was $8.4 billion in the 2015/16 fiscal year, despite Prime Minister Justin Trudeau's pledge to cut back on the use of external consultants during the 2015 federal election.

Public Services and Procurement Canada, the government's central procurement agency, hired more staff as part of efforts to negotiate billions in contracts for personal protective equipment, vaccines, and COVID tests.

But Giroux said "it's a bit late" to attribute service issues to the COVID pandemic.

The CD Howe Institute also released a shadow budget simultaneously with the PBO report, urging fiscal discipline and a 10% rollback on government contracts to external consultants. It proposed a five-year freeze on department operating appropriations for wages and salaries.

To accomplish this, the authors make several proposals they acknowledge are likely politically challenging for any government to implement. These include raising the federal sales tax, increasing the eligibility age for seniors benefits, and aborting the recently promised $46 billion increase in health care transfers.

The report admits hard choices are necessary to ensure the current generation that benefited from pandemic spending also contributes to paying off the cost of that spending rather than leaving a higher debt load for future generations.

In August, the Fraser Institute uncovered total federal spending rose 27% this year since 2019/20 — an average annual increase of 9%. Much of the uptick in federal expenditures remained independent of the pandemic, "representing a permanent long-term ramping up of federal expenditure."

But COVID pandemic expenditures partly increased federal spending by 73% to $644.2 billion in 2020/21 before declining by 21% to an estimated $508 billion in 2021/22.