Auditor general criticizes federal government over McKinsey contracts

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

In a new report unveiled Tuesday, Auditor General Karen Hogan found that organizations “often disregarded” contracting and procurement processes when awarding contracts to a global management consulting firm.

The audit found that the vast majority of them did not properly comply with all aspects of their policies on at least one contract, and many organizations were not always able to demonstrate that the 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 said. “The frequent disregard of rules and guidelines by federal organizations was evident in the lack of 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 McKinsey & Company a total of 97 professional services contracts with a total value of $209 million. Of this amount, $200 million was spent.

Hogan found that of the 97 contracts awarded to McKinsey, approximately 70 percent were awarded as non-competitive contracts and at least four appeared to have been designed and implemented specifically for McKinsey & Company.

“Federal contracting and procurement rules are designed to provide Canadians with fairness, transparency and value, but they only work if they are followed,” the report says.

Hogan also concludes that in many cases, organizations were unable to clearly demonstrate whether a contract was needed, what the expected deliverables were, whether all deliverables were delivered, or whether the ultimate goal of the contract with McKinsey & Company was achieved.

The AG’s latest audit began following the unanimous adoption by the House of Commons in February 2023 of a motion to conduct a value for money audit of McKinsey & Company contracts. The MPs’ motion comes after a lengthy inquiry into the rise in government contracts by the House of Commons Standing Committee on Government Operations and Estimates.

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

In his report, Hogan highlights that department and agency spending on professional services contracts in categories such as IT services, management consulting, social services and other services increased after 2015, with contracts specifically awarded to McKinsey & Company increased after 2017

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