Government Operations Committee on Sept. 19th, 2024

[The Chair, Conservative, Kelly McCauley]

Thanks very much.

We now go to our next round and start with Mr. Genuis. As usual, in our first round we allowed everyone to go over time. I just ask everyone to keep an eye on the clock and leave time for a response.

Mr. Genuis, go ahead.

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

Thank you, Chair.

Thank you to the witnesses.

To build on some of the comments of my colleague, Mrs. Kusie, my biggest concern is that we have this “McKinsey model” of inappropriate relationships between government and big business that is actually being deployed again with the appointment of Mark “carbon tax” Carney.

In general, I would say that a free market economy requires a sharp distinction between government and business, especially big business. Public entities have to be able to make neutral and fair decisions based on the common good and without personal favouritism. They respond to democratic deliberations about the common good. Private entities, on the other hand, are partial. They seek to advance their own interests. They are primarily responsible for advancing particular goods, as opposed to the common good, and play an important role in our economy as players on the field advancing their own particular interests.

One of the biggest problems we saw in politics over the last nine years was a blurring of these lines, with big government and big business getting together and, in particular, big business getting into government and seeking to shape outcomes to their advantage. The call for good people to engage in public service is used as an excuse for allowing some very elite personalities to keep a foot in both worlds. It's fine for someone to come from the business world into politics, provided that they're prepared to sever ties and not bridge these two worlds in a way that creates serious conflict of interest problems, yet we've seen this what I would call a McKinsey model.

Dominic Barton was chairing the finance minister's advisory council on economic growth. Andrew Pickersgill at McKinsey supported Dominic Barton's efforts by supplying analysts to the government, and at the same time Mr. Pickersgill was involved in selling to the government. There was a generous so-called offer from McKinsey to serve while at the same time using the access they gained to sell, and they made a lot of money in the process. That is, I see, the core problem that undermines independent, impartial public deliberations about the common good and skews the playing field to the advantage of a well-connected private company.

Today we see the deployment of the McKinsey model again in the case of Mark Carney's appointment as an economic adviser to the Liberal Party, which is, of course, in government for the time being. He is, at the same time, maintaining various leadership positions in the private sector, particularly with Brookfield. It came out that Mark Carney is the sitting chair of Brookfield. At the same time as he's advising the governing party, Brookfield is applying to Ottawa for the creation of this massive multi-billion dollar asset fund that would be extremely advantageous to Brookfield, the company he is in charge of.

I look at what's happening here, from the Dominic Barton corporatist fusing together of government and big business, and then I see the same thing happening again with Mark Carney, and it just brings home the point. After nine years, have these people learned nothing? Maybe they have learned something but they learned the wrong lessons. They learned that they want to further refine this model of bringing together big business and big government to the advantage of a few well-connected elites.

I want to put it to the officials. Do you see a problem with this model, this structure that allowed McKinsey and that is now allowing Brookfield to have a level of access that simply would not be available to any other normal private company?

[Michael Mills]

I really can't speak to the relationship and the role of these entities in advising the Prime Minister or the government. We're not involved in that at all.

I can say, with respect to McKinsey, the volume of contracts went up when we put in place a non-competitive benchmarking instrument. Lots of departments were looking for benchmarking. Right now, we're taking measures that—

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

I press you to comment on this advice piece because you see the problem. Dominic Barton comes in. Andrew Pickersgill, running the Canadian operations, is supplying analysts to the government at the same time as he's selling to the government. That access is access that others didn't have. Getting from there to the master standing offer, it's pretty clear that there is some relationship between the access and the result.

[The Chair, Conservative, Kelly McCauley]

Could we have a brief answer, please?

[Michael Mills]

As a brief answer, I fail to see a connection between advice to the Prime Minister and the government on economic policy and a director general from a department, such as ESDC, that's implementing an IT project seeking a benchmarking study.

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

If it's the same person?

[The Chair, Conservative, Kelly McCauley]

Thanks very much.

Mr. Bains, go ahead, please.

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

Thank you, Mr. Chair.

Thank you to our witnesses for joining us again at OGGO.

I want to talk a little bit about the manager's guide for which TBS released an update, “Key Considerations When Procuring Professional Services”. How will this additional guidance from TBS improve the spending of taxpayer dollars?

[Annie Boudreau]

Thank you for the question.

Indeed, the updated manager's guide was done on March 20, 2024, so this fiscal year. The update includes reinforcing manager responsibilities for five elements. The first element is examining existing human resources and staffing strategies prior to deciding to procure professional services. The second is providing a clear statement of work and fair evaluation criteria by which a supplier is selected. The third one is exercising due diligence to maintain the integrity of a procurement. The fourth is ensuring that there is no conflict of interest. The last one is monitoring and documenting the delivery of services and ensuring that obligations under the contract are met, including by subcontractors prior to issuing payments.

Thank you.

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

TBS is also introducing a new risk and compliance process to more actively oversee government-wide management practices and outcomes. We just heard how that oversight became limited. What changes will be made there to introduce the new risk and compliance? How will they actively be doing this oversight?

[Annie Boudreau]

You are correct that the risk and compliance process was announced in budget 2024. TBS is taking the lead.

TBS is doing a lot of work to make sure that we are scoping in the right elements to be looked at. In fact, it is to reinforce accountabilities and responsibilities. The risk and compliance process will assess the department compliance and performance in areas of administration with a view to ensuring that deputies have a line of sight on the challenges and risks related to their accountabilities. This process will allow TBS to identify and address systemic challenges across government.

The process, which, as I was saying, is in the early stages of development, will examine a range of core areas, including procurement, service delivery, financial management and cybersecurity, to ensure that departments and public funds are being well managed. That will reinforce the importance of management excellence and stewardship. This process will track improvements needed to address deficiencies and include clear consequences where non-compliance with rules and requirements is not addressed.

In summary, procurement will be included in the risk and compliance, but it will be broader and will also include financial management, the estimates process and human resources.

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

On the financial management piece there, we've seen consulting firms and service contracts rise year over year, if we even go way back to 2010. Can you talk a little bit about the decline we're seeing now and to what extent the federal government is depending on these firms?

[Annie Boudreau]

As previously discussed here by me, actually, the government went ahead last year with refocusing government spending. The refocusing of government spending had two components. One of them was to reduce operating budgets and grants and contributions. The other component was to reduce professional services.

The President of the Treasury Board tabled, during supplementary estimates (B) last year, a reduction in professional services of about $250 million. When she tabled the main estimates, there was an amount there in the reduction of professional services as well.

[The Chair, Conservative, Kelly McCauley]

Thanks very much.

Mrs. Vignola, you have two and a half minutes, please.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you, Mr. Chair.

Mr. Mills, one of my colleagues referred earlier to the Office of the Procurement Ombud's report, which found no sign of favouritism. Nevertheless, your response suggested that the procedure lacked the necessary steps to confirm or deny this. This tells me that the idea of favouritism, despite the report, is currently difficult to confirm or deny given the lack of documents.

How can you make sure that you'll never again lack the documents needed to rule out favouritism and that, if it has occurred, you can take action? Right now, it's difficult to confirm whether favouritism has occurred.

I know that the public service is a big boat. In terms of manoeuvrability, it could be a huge cruise ship. Let's just say that it can't turn on a dime, like a rowboat. Nevertheless, you need the ability to turn it around. Otherwise, you'll end up with a Titanic.

How can you do so as quickly as possible?

[Michael Mills]

Thank you for your question.

I would say that one of the things we've taken to heart is the need to, at the front, define the statement of work and what it is we want to see, define a procurement process and rationalize why we're choosing that process against that statement of work. That alone will reduce significantly any ability to actually have favouritism. For more significant contracts, within PSPC we put in place a procurement review committee, where we're actually bringing in those statements of work and those procurement strategies early on in the process for another layer of due diligence to ensure that we have a strategy that is rational, makes sense and can stand probity.

I think by having those measures in place, we will reduce the risk of having favouritism. Again, as you mentioned, it's a very large organization. In a department there's always an opportunity that someone could favour one group or another, but we are taking measures to really reduce that risk and to bring more due diligence to avoid it.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you, Mr. Mills.

[The Chair, Conservative, Kelly McCauley]

Thank you, Mrs. Vignola.

Mr. Bachrach, go ahead, please.

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

Thanks, Mr. Chair.

I'll try to pick up where I left off. We were talking about the internal audit process.

It seems to me, on a simplistic level, anyway, that a risk-based audit process would look at areas where it's more likely that you're going to see things going wrong. It would focus attention on those areas as opposed to spending attention on areas of lower probability or lower consequence. Now, in this case, it seems like the internal audit process totally missed something that's really bad. According to the Auditor General in her scathing report, this is really bad stuff. Then, when you did a joint review as ordered by the Prime Minister, you found that indeed it was really bad.

The internal process missed all this stuff because it was looking elsewhere. How is the internal risk-based audit process going to change so that you don't continue to miss big stuff based on your assessment of the risk?

[Sheri Ostridge]

Thank you for the question.

As I was explaining, risk-based audit plans have been done. There would have been ones done on procurement before. I will say that, while I don't have a copy of all of them here, a lack of documentation generally is not a surprising finding. There would be audits in the past showing that information management practices could have been improved. I do not believe the internal audits missed this. There's also a requirement, based on internal auditing standards, that if we, on any audit, see improvements, gaps or possible fraud, we have an obligation to report those. Those would have been, over the past, improved.

As to how we didn't find this particular issue with one company, as we've heard at committee, the Government of Canada is a large organization across the board. Audit is spread out. We have small teams at departments, but we won't find every single thing. It is based on risk, but there have been audits done in the past in this area and they will continue. We're doing a new one, a horizontal, that will hopefully also strengthen our areas of focus in this area until the risks are diminished.

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

Can I interpret that as you saying there's no bird's-eye view? Our teams are all focused on specific departments and they have their heads down in their binders. No one's looking at the fact that this global consulting firm seems to be getting all the work and it's not being flagged as a risk.

[Sheri Ostridge]

I have oversight across all audit shops for that, but audit.... I don't want to use too much technical language in audit, but it's a third line. The responsibility of good management practices first is with management. It would be with the leads of procurement with deputy heads as the accounting officers. That's where the responsibility is for good business practices. Audit is down the line based on the risks to find and actually advise deputy heads where they may be offside and need to come back. That's where we're an advisory and also an independent voice to tell deputies when there is an item.

[The Chair, Conservative, Kelly McCauley]

Thank you very much.

Mrs. Kusie, go ahead, please.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Thank you very much, Mr. Chair.

I'm just reviewing again through OPQs—Order Paper questions—some of the contracts that were awarded. It was $1.8 million to McKinsey, with a contract extension, to advance cultural evolution through stakeholder analysis. That's quite the contract for $1.8 million. There is a $339,000 sole-source contract. There's another sole-source contract for half a million dollars—$517,387—and then a contract for $5.7 million from August 2022 to February 2023. These are significant contracts.

On February 6, 2023, your minister at the time, Helena Jaczek, said, “Of the 24 contracts that were awarded to McKinsey by PSPC since 2011, three of them, worth more than 50% of the total value, were awarded through open, fair and transparent competition.” However, according to the AG's report, you were responsible for only three contracts totalling over $26 million, and only one of those was competitive.

Why was that the case, please?