Government Operations Committee on Sept. 19th, 2024

[The Chair, Conservative, Kelly McCauley]

Good morning, everyone.

I call this meeting to order.

Welcome to meeting number 139 of the House of Commons Standing Committee on Government Operations and Estimates.

This is a reminder to everyone to keep your headphones away from your microphones at all times so we can protect the hearing of our very valued interpreters.

There is also a reminder to the witnesses that our committee has passed a motion. Any documents requested are required within 21 days of the request.

Before we open up with Mr. Mills for an opening statement, briefly.... Mr. Kusmierczyk and I were having a discussion at the end. I made some comments that came out not as I intended, so I do withdraw them. I apologize to Mr. Kusmierczyk. We've worked well over many years here at OGGO. That was not my intent as the words came out.

I thank you for your patience and, more importantly, I thank you for bringing it to my attention, Mr. Kusmierczyk.

[Irek Kusmierczyk, Liberal, Windsor—Tecumseh, ON]

Mr. Chair, I appreciate that. Thank you.

[The Chair, Conservative, Kelly McCauley]

We will now turn things over to Mr. Mills for five minutes, and then Ms. Boudreau will have five minutes.

The floor is yours, Mr. Mills. Go ahead, please.

[Michael Mills, Associate Deputy Minister, Department of Public Works and Government Services]

Thank you, Mr. Chair and members of the committee.

Before I begin, I acknowledge that we're gathered today on the traditional territory of the Algonquin Anishinabe nation.

Joining me today from PSPC is Dominic Laporte, assistant deputy minister for procurement.

I'd like to thank the committee for inviting me today to speak to the findings of recent reports related to the contracts awarded to McKinsey & Company.

Public Services and Procurement Canada takes these reports, including those tabled by the procurement ombud and the Auditor General of Canada, very seriously. We are actively working to strengthen procurement practices in response to its recommendations. Most of them have already been put in place.

I'll note that no instances of political interference, wrongdoing or fraud have been found by the numerous internal and external reports on this matter. Nonetheless, the findings of these reports give us an opportunity to improve our processes when it comes to professional services.

I can tell you that Public Services and Procurement Canada, or PSPC, continues to work with client departments and agencies to address these concerns and is implementing measures that strengthen and streamline oversight and controls.

Mr. Chair, we know that, to ensure value for taxpayer money, our processes and decisions must be clearly documented. We're committed to transparency.

With this in mind, we have already taken immediate improvements in our processes and procedures. For example, this spring PSPC created the contract quality and records compliance office. This new function helps to ensure that procurement policies and processes are followed and that business decisions are properly documented. So far this new office has launched tools for peer-to-peer supervisor and director reviews of files and has established governance to review the findings and to develop action items where required.

With regard to the issue of the contracting vehicle used for McKinsey benchmarking services, as this committee has heard, establishing a non-competitive national master standing officer was a long-standing approach that has been in place for many years.

That said, we recognized that competition is the norm and a review of this procurement vehicle was overdue. These procurement instruments have expired and are no longer in place. PSPC is now requiring that the professional services covered by this vehicle be subject to competitive bidding.

Recent reports concerning McKinsey also raised concerns about the issuance of security clearances to contractors.

Let me echo previous assurances provided to the committee by our deputy minister in May that all the McKinsey resources added through task authorizations as part of the contracts reviewed by the procurement ombud had the required security level to perform the work and access sensitive information and assets.

To address the underlying issue of insufficient documentation, we require confirmation that proof of security clearances has been received from clients before any work is undertaken going forward. These requirements are reflected in a new mandatory checklist that now needs to be completed for all professional service procurement files.

In addition, PSPC has addressed the Auditor General's recommendation regarding conflicts of interest. Although conflict of interest provisions were already included in the department's code of conduct, PSPC has since modified its guidance and tools to integrate obligations into the department's procurement process for professional services. Technical experts and procurement specialists who play a key role in awarding contracts must reaffirm that they don't have any conflicts of interest at various steps in the process.

Finally, in April my department launched a new sector to ensure better oversight, consistency and control over the procurement of all categories of professional services. This new sector underscores our commitment to enhancing efficiency and transparency and to fostering innovation in government procurement processes while delivering value for Canadians.

Mr. Chair, these are only a number of important measures we implemented over the last few months to address concerns around procurement of professional services.

[The Chair, Conservative, Kelly McCauley]

Thanks, Mr. Mills.

Ms. Boudreau, welcome back—and, of course, welcome back to everyone else here today.

Go ahead, Ms. Boudreau.

[Annie Boudreau, Comptroller General of Canada, Treasury Board Secretariat]

Thank you, Mr. Chair, for this opportunity to speak to the committee about the consulting contracts awarded by the federal government to McKinsey & Company.

I'm joined today by Sheri Ostridge, assistant comptroller general in the internal audit sector; and Emilio Franco, executive director of the procurement, materiel and communities directorate in the acquired services and assets sector.

As this committee knows, the Treasury Board Secretariat, or TBS, and Public Services and Procurement Canada, or PSPC, conducted a review of the McKinsey & Company contracts in early 2023.

We asked departments to conduct an internal audit of the contracts awarded to McKinsey between January 1, 2011, and February 7, 2023. We wanted to assess whether the contracts complied with the Treasury Board policies and departmental internal control frameworks.

The 10 departments that awarded contracts to McKinsey conducted independent compliance audits and developed management action plans to address opportunities for improvement. These documents were provided to the Standing Committee on Government Operations and Estimates and posted online.

These audits established that there wasn't any evidence of political interference in the awarding of contracts. However, they identified cases where procurement rules and requirements weren't always adhered to.

In the final report of the joint TBS and PSPC review, which took into account this committee's proceedings, TBS identified broader measures to strengthen procurement practices. These measures included strengthening expectations for the regular review and testing of procurement controls.

In addition, to make the rules clear, in fall 2023, the Treasury Board Secretariat published “Manager's Guide: Key Considerations When Procuring Professional Services.” It shared this guide with the chief financial officers and communities of practice, including procurement specialists. Key parts of this guide have been incorporated into the mandatory procedures set out in the directive on the management of procurement.

In addition, in March, the President of the Treasury Board and the Minister of Public Services and Procurement announced further government measures to strengthen procurement activities.

In her audit, “Report 5: Professional Services Contracts”, the Auditor General found evidence of gaps, similar to our own findings, in adherence to procurement requirements. Quite simply, contracting organizations need to do better, and we will continue to work across government to reinforce the responsibilities of those involved in contracting. As her sole recommendation, the AG recommended that the government effectively monitor and ensure that officials involved in procurement do not have conflicts of interest. TBS, which responded on behalf of the 10 audited departments and agencies, agrees with this recommendation.

In exercising their duties, public servants must uphold the values and ethics code for the public sector and adhere to the directive on conflict of interest. The new mandatory procedures I mentioned provide additional measures to ensure managers are clear about their responsibilities and accountabilities related to oversight, conflict of interest, and values and ethics when contracting for professional services. Specifically, they require managers to certify that, first, they acknowledge their responsibilities in managing the contract; second, they do not have a conflict of interest; third, they have not directed which resources should be working under the contract; and as the last one, the contractor did not assist in or have unfair access to the solicitation process.

We are committed to ensuring effective stewardship of public funds and managing its procurement activities responsibly. Practitioners across the procurement community are dedicated professionals who have an important and often complex job to do. TBS is continuously examining how best to support them through guidance, tools and training to ensure that procurement makes the best use of public funds and preserves public trust.

I'm now happy to answer your questions. Thank you.

[The Chair, Conservative, Kelly McCauley]

Thank you very much, Ms. Boudreau.

We'll start with six minutes to Mrs. Kusie.

Please, go ahead.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Thank you very much, Mr. Chair.

Thank you very much to our witnesses for being here today.

We are here, of course, to discuss federal government consulting contracts awarded to McKinsey & Company. This is an issue that, as you know, we've been looking at for some time.

I do believe, however, one of our significant conclusions in doing this large study on McKinsey was the inexplicable fact of the implication of Mr. Dominic Barton. This is something that the official opposition focused on significantly, the implication of Mr. Barton and his efforts with this government to run the government.

However, we now have a new player. Lo and behold, it's the new and latest adviser to the Prime Minister, Mr. Mark Carney—“carbon tax Carney”, if you will, or “conflict of interest Carney”, if you will.

For those of you who are listening who do not know Mr. Carney, I'd like to read an excerpt from Maclean's. It says:

Carney strides down the hall, beaming and vigorous, a man who looks born to inhabit the slimmest, silkiest Savile Row suit that sterling can buy. (With a much-publicized pay packet of $1.7 million, he can well afford it.) Young aides scurry around him clutching files, checking encrypted phones, trying and failing to keep up with their 54-year-old boss. Much has been written about Carney's good looks, but in person it's not so much the symmetry of his face that's remarkable as the way he moves, which is fast with the loose-limbed precision of a dancer.

Mr. Chair, perhaps he'd like to try some Bollywood with the Prime Minister sometime.

However, his ties to McKinsey are also clear and evident. I have here the schedule from COP28:

McKinsey at COP28: Insights from our events

How can we deploy climate finance at scale?

...McKinsey's Cindy Levy and Joseba Eceiza led a discussion on closing this net-zero finance gap with [carbon tax Carney] Mark Carney, UN Special Envoy for Climate Action and Finance....

This is the first implication.

I mentioned the tie-in, Mr. Chair, of his good friend Dominic Barton. We have here, in the same Maclean's article, a quote, which says, “He makes no effort to hide what his friend Dominic Barton, former McKinsey chief and now Canadian ambassador to China”...and I'll also add that, lo and behold, it was Mark Carney who took the place—after Dominic Barton—of the advisory chair of the economic growth group that the Prime Minister put together. Barton described Mark Carney as “the giant computer sitting on top of his head”, so indeed, these two are very good friends.

As well, this Maclean's article points to a part-time gig performed by Mr. Carney where he was paid the sum of one dollar U.S. per year. It sounds very similar to the amount that Dominic Barton was in fact paid to lead this economic growth group, but I think the most relevant piece here today is that Mark Carney, in his role as the chair of the Bank of England, called in, who else, but McKinsey to overhaul the process at the Bank of England.

I have this news report here.

Mark Carney has called in US management consultants McKinsey to oversee a shake-up of the Bank of England's strategy...to impose a radical makeover on the Old Lady of Threadneedle Street.

Again, I point to the relationship between Mark Carney and Dominic Barton, someone who's been inextricably tied to McKinsey and McKinsey's implication in the running of this government.

When its managing director, Carney's fellow Canadian Dominic Barton, was asked in a recent interview with Management Today if he knew [conflict of interest Carney], he replied: 'Yes! He's a great guy. A tri-sector athlete—public sector, private sector and government. He's fully rounded, gets into debate. A great signal that the UK gets talented people in from abroad.

Is it talented people or people connected to McKinsey? That's my question here today.

Mr. Mills, my first question is, in 2013, when Mark Carney was the governor of the Bank of England, one of his first decisions was to use McKinsey to completely overhaul the bank's organization, as I indicated. Based on your experience with McKinsey, in your opinion, is it a good idea to allow an outside organization, such as McKinsey, and not public servants, to completely overhaul government systems?

[Michael Mills]

I would not be well-placed to answer whether that was advisable in that circumstance, but I would say that if you were to do a major transformation of any organization, you'd want to have a plurality of views and perspectives to get the best result.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Thank you very much.

Madame Boudreau, I'll continue with you.

A former member of the bank's monetary policy committee at the time said, “It's not clear what the government is getting from the highly priced Carney, who is supposed to do this stuff himself.”

Do you think Canada is headed in a similar direction? We've seen a lot of unrest in the public service lately and displeasure with this government and with your minister, Anita Anand, who is, of course, responsible for the Treasury Board and the public service. Do you think Canada is headed in a similar direction, and that we are using highly paid consultants and friends of the Prime Minister rather than the people who should be able to do the work themselves?

[Annie Boudreau]

As we have shared with the committee on a few occasions, it's always a question of seeing if we have in-house capacity to do the work. When it's not the case, we need to go outside to get the proper skills we need to advance the priorities.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Thank you.

Dominic Barton and, now, conflict of interest, carbon tax Carney are tied to McKinsey.

Thank you very much.

[The Chair, Conservative, Kelly McCauley]

Thanks, Mrs. Kusie.

Mr. Kusmierczyk, please go ahead for six minutes.

[Irek Kusmierczyk, Liberal, Windsor—Tecumseh, ON]

Thank you so much, Mr. Chair.

Thank you all for being here at the OGGO committee. It almost feels like a second home for you guys as we've had you in front of the committee so often. Thank you very much for your work and your testimony.

Oftentimes on Parliament Hill, you see those who are here searching for clips and making performative statements, and then there are those of us who are searching for answers and who are really seeking to improve the work of government.

I wanted to ask you, first of all, a quick question right off the bat. In any of the analyses and investigations that have been done, whether by PSPC, TBS, the AG or the procurement ombudsman, has there been any evidence you have seen or that you're aware of that there was any political interference?

[Annie Boudreau]

Based on the work that was performed last year by the internal audit departments, which perform the independent internal audit function of each department and also work in conformity with the Institute of Internal Auditors, the conclusion was that there was no interference.

[Irek Kusmierczyk, Liberal, Windsor—Tecumseh, ON]

Based on any of the investigations that were done, whether by the Auditor General, the procurement ombudsman, PSPC or Treasury Board, was there any evidence of corruption that you came across?

[Annie Boudreau]

I will refer again to the OPO report, as well as the AG report and our own internal audit. There was no political interference.

[Irek Kusmierczyk, Liberal, Windsor—Tecumseh, ON]

Was any evidence of corruption found in those four investigations?

[Annie Boudreau]

It was the same conclusion: no.

[Irek Kusmierczyk, Liberal, Windsor—Tecumseh, ON]

In the procurement ombudsman's report, there was a discussion, and a flag was raised about potential favouritism towards McKinsey. That is something I know that obviously raised serious questions around this table, and rightfully so.

Was there favouritism in the awarding of contracts to McKinsey? Because I am forward focused and future focused as well, we're interested in seeing improvements to the processes at hand. How is this being addressed?

The two questions are whether there was any favouritism towards McKinsey in your estimation and how this is being addressed.

[Michael Mills]

The ombud's report explicitly says that they applied negative inference to come to the conclusion that there was bias. While we find the findings of fact correct and we agree with the recommendations, we do not agree with the negative inference that there was bias by PSPC employees in the selection of McKinsey.

What we do take from this as a strong lesson is that when you do not have proper documentation, you do not explain your procurement process and you do not explain clearly your rationale for the choice of a firm or a method, it can create a vacuum into which people can make negative inference.

[Dominic Laporte, Assistant Deputy Minister, Procurement Branch, Department of Public Works and Government Services]

If I may, I would also like to point out that various instruments, similar to the one that was established with McKinsey, have been established over time, since 1995, with different suppliers. I think it's important to put this long-standing practice—which needed to be improved, for sure, and we welcome the recommendation of the AG and the OPO—in context and to appreciate that McKinsey got 13% out of these contracts, in terms of value, over the time.

[Irek Kusmierczyk, Liberal, Windsor—Tecumseh, ON]

One of the weaknesses that both the procurement ombudsman and the AG report flagged or highlighted is the lack of documentation. That was repeated over and over again—a lack of documentation, insufficient documentation, gaps in documentation and the importance of showing your work.

Mr. Laporte, when you appeared before this committee in May, you mentioned 98% of PSPC procurement is now covered by an e-procurement system. We're talking about improvements, and how we can strengthen documentation and administration of procurement. Can you explain to us a little about what e-procurement is and its benefits, especially as they relate to oversight and documentation?

[Dominic Laporte]

Basically, in terms of the value of contracts that are now on the EPS platform, a cloud platform, we're talking about $25 billion, so it's a lot of procurement that is now captured by this EPS platform.

If we go back a few years ago, a procurement officer would work on files and get emails, faxes and, basically, also receive hard copies of bids, so you can imagine all the interactions. There were also different teams and people working on those files. One of the huge pluses of the EPS platform is being able to consolidate all the interactions, the questions and answers that potential bidders may have on procurement, so everything is safeguarded as part of this cloud platform. In terms of openness, it's also much more transparent with the ability to bid electronically, so there are a lot of benefits that we've seen. We've also been able to make 17,000 legacy contracts available on EPS.

Huge progress has been made. This is not the only solution, but it is addressing, in part, some of the deficiencies that were witnessed. Our ADM mentioned the creation of a new position of a chief of the quality assurance and records compliance office. This is a huge thing.

[The Chair, Conservative, Kelly McCauley]

Thanks, Mr. Laporte.

Ms. Boudreau mentioned compliance audits. The 10 compliance audits were given to us in March last year. If you're looking for them, they are in our digital binder.

We go to Mrs. Vignola, please, for six minutes.