Thank you.
I'd like to begin by acknowledging that the land on which we gather is the traditional unceded territory of the Algonquin Anishinabe people.
Thank you, Mr. Chair and members of the committee, for inviting me here today.
My name is Alex Jeglic and I appreciate the opportunity to appear again before this committee to shed a light on the findings of my office’s recent report on procurement practices of contracts awarded to McKinsey & Company.
With me today is Derek Mersereau, director of inquiries, quality assurance and risk management.
My office is independent of other federal organizations, including Public Services and Procurement Canada, or PSPC. I submit an annual report to the Minister of Public Services and Procurement, but the minister has no influence over the results of my reviews or reports, and all my activities are conducted at arm’s length from PSPC and other federal organizations.
As a neutral and independent organization, our legislative mandate includes the review of procurement practices of federal departments in order to assess fairness, openness, transparency and consistency with laws, policies and guidelines, which is what we're here to discuss today.
On February 3, 2023, the Minister of Public Services and Procurement requested that I conduct a review looking into contracts awarded to McKinsey & Company. Once my office was able to establish reasonable grounds as per our regulatory requirements, the review was launched on March 16, 2023. As per our legislated deadline, my office completed the review of McKinsey contracts on March 15, 2024, and the report was published on our website on April 15, 2024.
My office examined the procurement files of 32 McKinsey contracts and one national master standing offer, or NMSO, issued to McKinsey through competitive and non-competitive procurement processes in order to assess their fairness, openness, transparency and compliance with legislation, regulation, policy and procedural requirements. PSPC was the contracting department for 23 contracts and the national master standing offer. The review did not include contracts awarded by federal organizations that are not in my mandate, such as contracts awarded to McKinsey by Crown corporations.
With regard to competitive procurement practices leading to the awarding of contracts, my office identified instances where procurement strategies were changed to allow for McKinsey's participation in the procurement process, creating a perception of favouritism towards McKinsey. We also observed deficiencies related to bid evaluations in multiple files, including missing or incomplete documentation, failure to conduct evaluations as per the planned approach, and the inappropriate re-evaluation of bids, leading to McKinsey being deemed the only compliant bid.
My office also identified shortfalls related to personnel security clearances, including lack of documentation to show that the security clearances of proposed resources were verified before they were authorized to work, or to confirm that contracts were sent to PSPC's contract security program when required.
With regard to non-competitive procurement practices leading to the awarding of contracts, my review found that the sole-source justification used by PSPC to establish the McKinsey benchmarking services NMSO did not contain the required information needed to justify this sole-source standing offer. Nineteen contracts known as “call-ups” with a total value of almost $49 million were issued to McKinsey without competition against this standing offer. We also found that the vast majority of call-ups issued against the McKinsey benchmarking services NMSO were void of any description of the specific work to be carried out by McKinsey and, by extension, proper PSPC oversight.
In these files, there was no evidence that a statement of work had been developed in advance of determining the procurement strategy or contacting McKinsey with the requirement. In these cases, it was impossible for my office to determine the extent to which McKinsey defined the requirement for these departments, which is a serious threat to the fairness of the procurement process.
All call-ups issued against the McKinsey benchmarking services NMSO were non-competitive. The majority of these call-ups also lacked sole-source justifications. Sole-source justifications were never sought by PSPC in its capacity as the contracting department. In total, 18 of the 19 competitive call-ups were awarded by PSPC in the absence of justification on file.
We also noted conflicting information regarding the use of the McKinsey benchmarking services NMSO for call-ups with security requirements.
My office examined practices for issuing contract amendments and task authorizations for McKinsey. Overall, contract amendments were appropriate and in line with policy and guidelines, but several issues were noted, including an instance where the contract amendment was not on file, an instance where the contract amendment was not issued prior to contract expiry, and an instance where the call-up was amended to increase the value by nearly $2 million without a clear description of the changes to the scope of work.
We also examined practices related to the disclosure of contract awards. In most instances, necessary disclosures were made on the proactive disclosure website. However, we noted issues with respect to the accuracy of information.
In total, there were five recommendations made by my office, which were all accepted by the implicated departments. It should also be noted that PSPC accepted most of the findings in the report but took issue with some observations.
I would be pleased to discuss all of these matters with you.
Thank you for your attention.
I would be pleased to answer your questions.
