Auditor general says feds didn’t follow rules on awarding McKinsey contracts

05 June 2024 Consulting.ca 2 min. read
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The federal government failed to follow procurement rules and was unable to show it got value for money in its contracts to consulting firm McKinsey & Company, according to a report from Auditor General Karen Hogan.

The AG on Tuesday delivered her report on the federal government’s contracting with the US-based consultancy between January 1, 2011 and February 7, 2023, during which approximately $200 million was spent. Of that $200 million, only $8.6 million was awarded to McKinsey under the former Conservative government.

When the Liberals came to power, spending on McKinsey consulting services rose to $10 million in 2015-16 and then steadily grew to more than $55 million a year by 2021-22. The rise mirrored a growing reliance of federal agencies and departments on outsourced professional services contracts, which ballooned from about $4.5 billion in 2015-16 to $8.4 billion in 2021-22.

The AG’s office said both the Conservative and Liberal governments failed to comply with procurement rules and demonstrate value for money.

Auditor general says feds didn’t follow rules on awarding McKinsey contracts

"We saw non compliance, either with procurement rules or difficulty demonstrating value for money, throughout the whole 12-year period of time and it was in almost all organizations," Hogan said on Tuesday.

The report found that nine out of 10 departments and agencies and eight out of 10 crown corporations failed to follow proper procurement procedures on at least one contract.

The report also found that only 28 of the 97 McKinsey contracts, worth approximately $91 million, were awarded through a competitive process. Of the 28 competitive contracts, 10 had insufficient documentation supporting the award to McKinsey.

Sixty-nine of the 97 contracts, worth $117.7 million, were awarded on a noncompetitive basis. Public Service and Procurement Canada set up a standing offer in 2021 for McKinsey wherein departments and agencies could award noncompetitive contracts to the consultancy, but the AG found the rationale for the creation of the standing offer to be “weak.”

The AG’s office also examined a sample of 33 contracts to determine if value for money was achieved. The audit found that in 19 of the contracts there were issues preventing the determination of whether the government got what it paid for – such as a failure to demonstrate the necessity of the contract, no statement of contract deliverables, or no confirmation of the receipt of deliverables.