Federal watchdog alleges ‘favouritism’ in McKinsey contracts over close ties to Freeland

Under Dominic Barton's leadership, McKinsey secured $117 million in federal contracts since April 2011, and now his relationship with Finance Minister Chrystia Freeland is being scrutinized by conservative MP Stephanie Kusie.

Federal watchdog alleges ‘favouritism’ in McKinsey contracts over close ties to Freeland
The Canadian Press / Sean Kilpatrick
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Another federal contractor is in hot water over allegations of favouritism by Canada’s procurement watchdog. 

McKinsey & Company, a consulting firm which receives dozens of federal contracts, faces intense scrutiny from a Commons committee over Finance Minister Chrystia Freeland’s close ties with a former executive.

Dominic Barton, McKinsey’s former managing director, testified last year he had dined at Freeland’s Toronto home. "She actually convened for dinner at her house," said Barton.

"Would you consider yourself a friend of Chrystia Freeland?" asked Conservative MP Stephanie Kusie. "I knew Chrystia Freeland," replied Barton. "I knew her from before."

The Commons government operations committee ordered an investigation after uncovering "a strong perception of favouritism" in McKinsey contracts, reported Blacklock’s Reporter.

Ombudsman Alexander Jeglic reviewed the contracts, which stem from April 2011 to March 2023. Their collective worth is $117 million. 

"The value of contracts awarded to McKinsey started to increase in 2018 with significant increases observed in 2019 through 2022," reads the April 15 report Procurement Practice Review Of Contracts Awarded To McKinsey & Company.

Jeglic wrote that most of McKinsey’s contracts were sole-sourced and awarded under pre-established terms and costs through a standing offer.

He also voiced concerns about how McKinsey has been awarded some competitive contracts. Procurement Practice claims McKinsey's standing offer “may have been improperly established on a non-competitive basis.” 

Public Services and Procurement Canada (PSPC) never explained its decision not to entertain a competitive process.

Courtesy of two contracts issued by the Canada Border Services Agency (CBSA) and Department of Industry, "it was discovered McKinsey would have been ineligible to bid." The firm received a second re-evaluation that disqualified the initial "1st ranked bidder." 

"The procurement Ombudsman found the government actually bent the rules to favour McKinsey," MP Kusie earlier told the committee. "Once again we see this Liberal government favouring its friends and insiders," she said.

Other Opposition MPs also expressed unease with the Liberal cabinet’s friendly ties to federal contractors, reported Blacklock’s Reporter

"There is much here that arouses suspicion," testified Bloc Québécois MP René Villemure last year. "Like it or not, even in good faith there are reasons for mistrust, yet the government’s actions should inspire confidence. In this case, this much doubt adds up to mistrust," he said.

The Ombudsman considered the lack of documents a "significant" irregularity that the federal government could not adequately defend. They were void of proper PSPC oversight and any description of "requirement-specific work to be carried out by McKinsey."

"Given circumstances combined with the absence of any documentation on file to otherwise support the legitimacy of this decision," she said, "the efforts on the part of the Agency and department to ensure McKinsey could participate create a strong perception of favouritism."

The Ombudsman identified similar issues in numerous procurement practice reviews conducted over the past few years, involving more than a dozen departments and agencies, according to Procurement Practice.

"Without documentation to support contract award decisions, departments cannot demonstrate that the contracting process was compliant with applicable legislation and policy," wrote the Ombudsman.

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