Government Operations Committee on Feb. 13th, 2023

[Gord Johns, NDP, Courtenay—Alberni, BC]

Mr. Duguay, I'll start with you.

You talked about the secrecy and confidentiality at McKinsey. If you look at other highly paid consultant companies, can you talk about this secrecy erodes accountability and transparency to the public and erodes the government's credibility?

[Dr. Benoit Duguay]

Secrecy, to my mind, does harm to the credibility of the clients, whether they are governments or organizations.

That's why I said in the beginning that this culture of secrecy is very, very harmful for McKinsey, for all the clients and for the governments involved.

I don't know if that answers your question.

[Gord Johns, NDP, Courtenay—Alberni, BC]

Thank you.

Mr. Hutton, can you tell the committee about your expert observations regarding the Business Development Bank of Canada contract, which we talked about in the last meeting, and the pay centre contract? Both were awarded to McKinsey.

[David Hutton]

I only know what's in the public domain about these contracts. I've no special inside knowledge.

With regard to the Business Development Bank, to me, as an experienced person in this field, there are red flags all over the situation. The public is outraged at it, and rightly so. I don't think there are any hidden facts that we're unaware of that would make this all seem good. It looks to me just like what the public thinks it is.

With regard to the pay centre, I have some inside information there because I've been following Phoenix very closely and actually conducted my own investigation using whistle-blowers at one point. I'm just stunned that so much time, money and effort would have been spent looking at the pay centre when the fundamental problem in Phoenix is that the software does not work and has never worked.

I'll give you some statistics. For five years after the rollout, somewhere between 40% and 51% of all employees' pay slips were wrong in the course of a year. Finally, in the sixth year, there was some improvement. However, there were five years of zero improvement in the software, so clearly the government is working on the wrong things.

Focusing on the pay centre.... The pay centre has had two roles in this whole saga. One is as a dumping ground for problems. Anyone who would have spent time at the pay centre would have known years before the rollout that this project was doomed. The other role of the pay centre is being a scapegoat. We see all this focus on the backlog, which is actually a huge pile of rework caused by faulty software, and these poor people are struggling in trying to do all of this rework.

It's really insane to be putting up huge amounts of money, and I can guarantee you that McKinsey's involvement at the pay centre was highly disruptive to the operations and difficult for the staff. As to whether it produced any results, I'd be very skeptical.

[Gord Johns, NDP, Courtenay—Alberni, BC]

We heard from public servants about the impact on the morale, from the imposition of Phoenix to having highly paid consultants replacing them in their jobs to having people like the BDC give advice that countered what the others were saying.

A minister who was here, the Minister of Public Services and Procurement, talked about the morale being solid and not being impacted by any of these things. Do you have any inside feedback on the morale situation in the public service due to these decisions?

[David Hutton]

I would say that when a consulting contract is going wrong in this fashion, it affects the leadership structure and the engagement of employees. It's a real downer for employees, and people leave in droves. All kinds of bad things happen.

I would say that in terms of people like this committee being informed as to what's going on, there is the public sector employee survey. I think that should be very closely scrutinized and should actually be better used to identify where there are morale problems, because when there are morale problems, you have management problems and performance problems.

[Gord Johns, NDP, Courtenay—Alberni, BC]

When you say people leave in droves, I imagine that it leaves a gap, which leads to hiring more highly paid consultants to fill the gap.

[David Hutton]

It could be, yes.

[Gord Johns, NDP, Courtenay—Alberni, BC]

Now McKinsey—

[The Chair, Conservative, Kelly McCauley]

I'm afraid that's our time, Mr. Johns.

Mrs. Block, you have five minutes, please.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you very much, Mr. Chair, and thank you to our witnesses for joining us today.

Mr. Hutton, I'm going to ask you my first question. Today, in response to what I'll call my colleague's badgering about whether or not your appearance at this committee is relevant, you stated that you thought a conversation around the strengthening of whistle-blower protections was in fact very relevant to the conversation that we're having here today.

I just want to reiterate whether you think that if there were stronger whistle-blower protections, the out-of-control spending on high-priced consultants with dubious practices around the world would have come to light sooner, both with regard to the Phoenix pay system that you've spoken about publicly and also with regard to the IRCC departmental staff who came forward to provide some insight as to what was happening with the McKinsey contract.

[David Hutton]

Here's the way to answer that: Whistle-blower protection would provide a tremendous amount of additional information about what is really going on. In the case of Phoenix, there's absolutely no question, in my mind, that Phoenix would not have been allowed to continue anywhere near the rollout date. It would have been canned long before that if senior leaders in the government had known what was going on. There were extraordinary efforts made to keep all of that information under wraps, and that was done successfully.

I would also observe that because we still don't have good whistle-blower protection, we don't know what's going on with Phoenix today. I am extremely skeptical about what I see going on. I have already explained the lack of progress in fixing basic functional problems. I'm skeptical about what I see going on with the pay centre. I don't think the government has learned lessons from Phoenix, and therefore it has not changed the management system. We have the same system that produces disasters. It is perfectly designed to produce more of them, because we don't know what's going on.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you very much.

Mr. Thomas and Mr. Duguay, I'm assuming you're here because you're as concerned as we are in this committee about the influence of consultants on the current government, in particular McKinsey & Company.

I want to ask some broader questions. Do you think the use of external consultants has become an all too common practice under this current government? Do you think it is a waste of money to be paying for in-house expertise and outside, high-priced consultants at the same time?

I will give you both an opportunity to answer.

[Dr. Paul Thomas]

Yes, I am concerned about the growing use of consultants to do core functions of government, such as policy advisory work and, in particular, any application of policy. That belongs in the hands of the public service. Other countries, such as Australia and New Zealand, have embarked on programs to reduce their reliance on outside firms for core governing purposes.

I think the secrecy and confidentiality that surround contracting out the delivery of public services make it very difficult for parliamentarians and the public at large to know whether they are getting value for taxpayers' dollars. That's why I'm proposing that the knowledge and information derived from the contracting process be subject to the scope of the Access to Information Act. It's not a panacea, but it might help. I also think there need to be more opportunities for parliamentarians to see documents that are not totally redacted. I think we can trust parliamentarians to be more responsible in their behaviour.

[The Chair, Conservative, Kelly McCauley]

I'm afraid that's our time, Mrs. Block and Mr. Thomas.

Go ahead for five minutes, please, Mr. Bains.

[Parm Bains, Liberal, Steveston—Richmond East, BC]

Thank you, Mr. Chair.

Thank you to the witnesses joining us today.

My first question is for Monsieur Duguay.

The current integrity regime puts five- and 10-year bans on companies deemed to be in violation of the ineligibility and suspension policy. Are these appropriate penalties for unethical conduct?

[Dr. Benoit Duguay]

I'm sorry. I cannot say I fully understand your question.

[Parm Bains, Liberal, Steveston—Richmond East, BC]

Is Canada's regime out of step with international peers when it comes to our five- and 10-year bans on companies deemed to be in violation of the ineligibility and suspension policy? Do you believe these penalties, these five- and ten-year bans, are appropriate?

[Dr. Benoit Duguay]

I understand you're asking if Canada is out of step in comparison to other countries.

I would say that Canada is doing pretty much the same thing that France has done. In terms of all other countries I know about or that are reported in the book that I showed earlier, Canada is doing exactly the same thing. If that is correct or isn't correct, I can't say, but they are doing exactly the same thing.

The recipe for McKinsey is to do the same all over, all the time, everywhere in the world, so they are doing the same thing in Canada as they have been doing for very many years. It's no different here from what it has been elsewhere. The French Senate said there can be such a thing as too much consulting, and there can be such a thing as too much consulting in Canada.

As an example, a journalist was talking to me the other day. He was saying that they asked McKinsey for consulting in the field of tourism. My colleague knows that in his university there's a school of tourism, and in my university there's a school of tourism, and there are God knows how many schools of tourism in Canada. Why do we ask McKinsey for consulting in the field of tourism? All they had to do was call those universities to ask for consulting, which would have cost a very small fraction of what they paid to McKinsey.

[Parm Bains, Liberal, Steveston—Richmond East, BC]

That goes to my next question, then. Do you believe government doesn't have the capacity internally? I know you mentioned something about a shadow public service. Would you agree that in some instances it's necessary, as you just mentioned, to use outside consulting when there is no internal capacity?

[Dr. Benoit Duguay]

I'm not saying at all that the government does not have internal capacity. On the contrary, I think we have a very competent public service. I think that—and this is something that the French Senate also said—we are doing too much consulting, and it's a nuisance for the people working for the public service, and they're saying so. I've read so many reports about that. People inside the public service of Canada just...how should I say it?

They are not comfortable with that. It is encroaching on their prerogatives as government employees.

I apologize for switching to French, but I was unable to answer in English.

[Parm Bains, Liberal, Steveston—Richmond East, BC]

That's okay, thank you.

Dr. Thomas, do you have a reason to believe anything was done incorrectly by awarding those contracts from a procurement process perspective? Some have suggested that government helped their friends. What evidence shows that?

[Dr. Paul Thomas]

I have no evidence to point to about whether there was favouritism involved.

One of the best arrangements for contracting is to leave it at the professional public service level to make those kinds of judgments so that there isn't micromanagement by ministers or direct involvement by ministers. We have to be careful about delineating the stages in the contracting process and ensuring the right decision-makers are in charge at the right point in time. As I said, when it comes to the tendering of policy advice, that has to end with the minister.

[The Chair, Conservative, Kelly McCauley]

I'm sorry to cut you off again, Dr. Thomas, but that's our time for that round. I apologize again.

We'll go to Mr. Garon for two and a half minutes, please.

[Jean-Denis Garon, Bloc, Mirabel, QC]

Thank you, Mr. Chair.

I'm going to turn to Mr. Hutton again. As I stated earlier, last week we learned that senior officials asked their subordinates to be careful what they put in writing. This leads me to ask an important question.

Do you think that whistleblowers are adequately protected in Canada?