McKinsey received $200 million in federal contracts, auditors decry ‘favouritism’

On Tuesday, Canada’s auditor general documented ‘favouritism’ in awarding millions in federal contracts to McKinsey & Company, a firm formerly led by a friend of Finance Minister Chrystia Freeland.

McKinsey received $200 million in federal contracts, auditors decry ‘favouritism’
THE CANADIAN PRESS/Adrian Wyld
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Auditors continue to scrutinize consulting firm McKinsey & Company over suspicious ties between a former executive and a senior Liberal minister.

On Tuesday, Canada’s auditor general documented “favouritism” in awarding millions in federal contracts to McKinsey, a firm formerly led by a friend of Finance Minister Chrystia Freeland. 

Procurement Ombudsman Alexander Jeglic also reviewed contracts with the firm, tabling their collective worth at $117 million months earlier.

The audit followed an April 15 report, Procurement Practice Review Of Contracts Awarded To McKinsey & Company, that found federal departments bent rules to benefit McKinsey. “There was favouritism towards McKinsey,” Jeglic said at the time.

The value of total contracts started increasing in 2018, with further increases observed the following year through 2022.

The audit, Professional Services Contracts, counted 97 contracts awarded to McKinsey & Company. Since 2015, the firm has received $200.4 million in federal contracts.

“Across the 97 contracts awarded to McKinsey & Company we found frequent disregard for procurement policies and guidance,” wrote Hogan. She detailed a previously unreported $110.9 million in McKinsey contracts from Crown corporations including the Trans Mountain Corporation ($32.2 million), Canada Post ($26.6 million), Business Development Bank ($21 million) and Export Development Canada ($12.3 million).

Less than a third, 28 of the 97 contracts were awarded through a competitive process, reported Blacklock’s Reporter.

Among competitive contracts “we found there was a change in strategy that made it easier for McKinsey,” said Hogan. “Those are the cases where it looks like it was done to suit them,” she added.

The Procurement Ombudsman previously urged “significant rethinking” on federal contracts moving forward. “People are using the system in ways it shouldn’t be used,” said Jeglic. 

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

Irregularities included “failure to show why a contract was necessary,” lack of a “clear statement of what the contract delivered” and “no confirmation the government received all expected deliverables,” said Auditor Hogan. Ombudsman Jeglic was first to allege the contract irregularities.

Procurement Practice claimed that most of McKinsey’s contracts were sole-sourced and awarded under pre-established terms and costs.

On August 16, 2022, Employment and Social Development Canada (ESDC) formalized a non-competitive contract worth $5,742,857.53 to McKinsey and Company. It was a call-up against a Public Services and Procurement Canada (PSPC) procurement tool.

Former PSPC minister Filomena Tassi signed off on the contract against the recommendation of department staff. Her tenure ended two weeks later.

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 standing offers received by the firm “may have been improperly established on a non-competitive basis,” wrote Ombudsman Jeglic. 

He considered the lack of documents a “significant” irregularity that the federal government could not adequately defend.

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

Bloc Québécois MP René Villemure testified last year that much regarding McKinsey arouses suspicion. “Like it or not, even in good faith there are reasons for mistrust. 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.”

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 McKinsey executive said he also personally introduced Prime Minister Justin Trudeau to businesspeople at a 2016 World Economic Forum conference in Davos, Switzerland. 

The Prime Minister in 2019 appointed Barton as ambassador to Beijing. “I think he respects me,” said Barton.

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