Government Operations Committee on Jan. 30th, 2023

[Anthony Housefather, Liberal, Mount Royal, QC]

It would be 50%. You would have 50 times more...from $100 to $5,000. Meanwhile, we have McKinsey gaining about $100-odd million over seven years of government. That's not a lot of money for these types of consulting firms, in the Government of Canada equation. We may have increased, for example, Deloitte's payments by a higher range from one year to the next, but that might only be doubling the amount paid to Deloitte versus 50 times.

Is that correct?

[Prof. Amanda Clarke]

It's hard to say. I agree there's something funny about the data and increase. I think there are potentially data entry errors or issues around how to count.

I want to clarify that I think Mr. Boots did a good job on that, but the data we present shouldn't be taken as a perfect snapshot, because we can only work with what we have. It's possible the McKinsey contracts were for more, before. We don't really know that yet.

[Anthony Housefather, Liberal, Mount Royal, QC]

What I'm saying is.... For example, if I had no contract with Oracle, or a tiny contract with Oracle, and then decided to put in an Oracle system, my exponential spending with Oracle would increase drastically, but it wouldn't be unreasonable, necessarily.

That's why we have to look into it. We need the specifics.

[Prof. Amanda Clarke]

Absolutely, and we've always said, when we've presented the data around what stands out as a huge percentage increase from McKinsey's contracts over the time period, is that it may very well just reflect specific contracts that were given at any given time to those different firms.

[Anthony Housefather, Liberal, Mount Royal, QC]

We'll find out.

Thank you so much.

[The Chair, Conservative, Kelly McCauley]

Thanks very much.

Mr. Boots and Professor Clarke, thank you for joining us again. It was fascinating. I really hope to see you back in OGGO whether for this or in other studies. It's been very interesting, so thank you for your time.

Colleagues, we're going to suspend for a few minutes so we can bring in our other witnesses virtually.

We are suspended.

[The Chair, Conservative, Kelly McCauley]

Thank you, everyone. We are back.

To the witnesses, again I'm going to try to save about the last 15 or 20 minutes for some urgent committee stuff that we have to take care of.

We'll start with a five-minute statement from Ms. Carr.

Ms. Carr, welcome back by the way. I think it may be your third appearance. A couple more and you'll get a free coffee with us.

Please, go ahead for five minutes.

[Jennifer Carr, President, The Professional Institute of the Public Service of Canada]

I will hold you to that.

Good afternoon, everybody. As mentioned, my name is Jennifer Carr, and I am the president of the Professional Institute of the Public Service of Canada. Today with me is Jordan McAuley, who is our expert on government outsourcing, to assist me in answering your questions this afternoon.

The Professional Institute represents 72,000 public service professionals across Canada, mostly in the federal jurisdiction.

Last October I testified before this committee. I thank you again for recognizing the Professional Institute as a leading subject matter expert on contracting out. We have prepared several reports on this critical matter, and we are available at any time to discuss our findings with you.

Over a year ago, a contract to McKinsey around the Phoenix pay system also made the news and opened up refreshed questions about the increase in government outsourcing. For years, we have seen the government over-rely on costly outsourcing. McKinsey is just one of the latest examples.

To summarize our position, work that is contracted out impacts the security of the government's IT systems and results in higher costs and a lower quality of services to Canadians. It's less transparent and less accountable. There is a loss of institutional knowledge and skills, and this hurts the ability of the government to recruit and retain the professionals it needs. Not investing in the public service costs taxpayers more and delivers less.

The contracts awarded to McKinsey are not only unnecessary and scandalous, given the dubious relevance and the quality of the advice they provided, they are just the tip of the iceberg. While the present government is now rightfully facing criticism on this issue, it is not a new problem. Previous governments of all stripes have invested ever-increasing amounts on contracting out.

Years of unchecked spending on government outsourcing by these various governments have created a shadow public service of consultants and temporary staff operating alongside the government workforce. This shadow public service plays by an entirely different set of rules. They are not hired based on merit, representation, fairness or transparency. They are not subject to budget restraints or hiring freezes, and they are not accountable to the Canadian public, yet, year after year, the federal government continues to make costly decisions on outsourcing. The Professional Institute alone has filed over 2,500 grievances where work was outsourced to this shadow public service.

To better situate outsourcing to McKinsey in the broader context of the use of consultants in the federal public service, I would like to provide you with some key numbers that we want to bring to your attention.

I will let Mr. McAuley describe the overall trends.

[Jordan McAuley, Data Analyst, The Professional Institute of the Public Service of Canada]

Thank you, President Carr.

My name is Jordan McAuley. I'm a data analyst at PIPSC. I've been working with the proactive disclosure data for at least five years now. I'd like to reiterate some of the things that were said in the last meeting.

There are serious data quality issues. We are very aware these are estimates and not precise figures necessarily. Looking at it closely enough, you can definitely identify certain trends. There are three that I would like to point out within the context of this hearing.

First, as President Carr alluded to, this was a problem going back far beyond 2015. There were years during the Harper government where spending on consultants approached a billion dollars a year. Specifically, we looked at IT consultants, management consultants and temporary help services. We think those three categories of consulting best represent personnel outsourcing, which is what we're most particularly concerned with.

The second point is that, since the Liberal government came in, in 2015, the problem has gotten worse. That's despite the commitment by the Prime Minister, when he was campaigning, to reduce outsourcing spending to 2006 levels. We see no indication in the data that this was a serious commitment. The spending, especially on IT, has continued to grow each year. Overall, the numbers look like they have roughly doubled between 2015 and 2022 in those three categories of consultants.

Lastly, on the $150 million of contracts that went to McKinsey, although it's great in that it got us here to have this discussion, it's very small relative to large IT contracts. I know that was discussed in the last meeting. A company like IBM, for instance, in 2016 received more than double what McKinsey did over an eight-year period in a single year. That's just for IT consultants.

Looking at the data and what we've been tracking over a number of years now shows that the scope of this problem goes far beyond McKinsey or any one company.

[The Chair, Conservative, Kelly McCauley]

Thank you.

That's our five minutes, I'm afraid. Thank you for your opening comments.

Mr. McAuley, it's always a pleasure to have another McCauley in committee today, even if you spell it wrong.

We're going to start with Mrs. Kusie, please, for six minutes.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Thank you, Chair.

Thank you very much, Ms. Carr and the other Mr. McAuley, for being here today.

On page 62 of the infamous book When McKinsey Comes to Town written by Walt Bogdanich and Michael Forsythe—and I'm sure you'll hear me make reference to it over the coming weeks as we study McKinsey—it states, “McKinsey burrowed deep into state and federal agencies by selling the idea that ordinary government workers lacked the training and experience to understand the nuances of [government]”.

I think that's something similar to what Ms. Carr was describing there.

I'm now going to go to a CBC article from January 4, 2023, which indicated the department that used McKinsey the most was Immigration, Refugees and Citizenship Canada. In this article, two public servants explain that the many policy decisions were decided by McKinsey rather than public servants. They also said these policy decisions were made without public interest as their top priority.

Ms. Carr, what is the morale of the public service when consulting firms come in and take over projects from public servants?

[Jennifer Carr]

You know, to be 100% honest, it hurts morale. We have a set of professional people who have been hired for their talents and skills. To not be part of the conversation is very damaging. It runs really deep into the workforce. When their work is outsourced, again those skills and expertise leave the public service when the contract ends. Basically, that means the outsourcing is much higher in cost rather than just dollars and cents. We lose accountability. We erode the capacity of our workers to work with those systems, and we hurt the ability to retain our staff.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Do you think that consulting firms prioritize what is best for public interest compared to public servants?

[Jennifer Carr]

I don't believe so. I believe they are in the business of making money, of being able to have a contract. I believe some of the contracts are actually written so they can perpetually have that work. One example I can give you is Phoenix, the pay system outsourced to IBM. Even if my members, very highly skilled IT workers, know how to go in and fix it, they can't because it's a sole-source contract and we aren't allowed to go in and make the fixes that we know would be helpful.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

When morale is down in the public service for reasons such as outsourcing to consulting firms like McKinsey, how do you think that impacts the efficiency and effectiveness of our public service?

[Jennifer Carr]

There are many levels to that question. I'd like to say it's disheartening for federal public servants to see that their work is being outsourced. The government is actually valuing that work by paying the market rate of the service plus markup, while public servants are perpetually being told the government can't meet market rates for them.

I won't lie, IT workers walk away from the public service to join contractors, because they are getting the respect they need and the pay they deserve. Why wouldn't they? It's an endless kind of cycle. If we don't break it now, it will decimate the federal public service.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Something that my leader mentioned in his McKinsey press conference two weeks ago was the value for money of having external contractors as compared to doing the work internal to the public service.

Do you think the government is getting good value for money by awarding contracts to McKinsey instead of doing the work internally?

[Jennifer Carr]

I don't think so.

I think we have a set of expertise in-house. It would be more prudent for the federal government to invest in and upskill those workers to allow them to do the jobs on behalf of Canadians, with value for money in mind—not the perpetual use of contracts that are employing and making shares and dividends for the companies.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

You touched on this in your opening statement. What accountability and transparency standards do public servants have to encounter compared with consulting firms?

[Jennifer Carr]

There are values and ethics, and disclosures of conflicts of interest. They also have to go through gender-based analysis and other programs to justify the solutions they come up with.

Of course, the federal public servants themselves have to be bilingual. They have to be reflective of the diversity of the nation. They have to have regional distribution. A sole-source or a big business does not have to meet all of these things to work with the federal public service.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Why do you think the government outsources to companies like McKinsey instead of developing the public service?

You made reference to this in your opening statement.

[The Chair, Conservative, Kelly McCauley]

Provide a very short answer, please.

[Jennifer Carr]

The short answer is that right now we need to upgrade our government hiring polices. We need to make sure they're hired quicker and more efficiently.

We have to modernize our IT procurement and invest in our in-house expertise. We also have to pay for that in-house expertise. Spending three or four times as much to outsource when we can pay a relatively good salary to provide that consistent delivery of services and programs that Canadians rely on.... It's ensuring that taxpayers receive value for money.

[The Chair, Conservative, Kelly McCauley]

Thank you, Ms. Carr and Mrs. Kusie.

We'll go to Mr. Kusmierczyk, please, for six minutes.

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

Thank you, Mr. Chair.

Thank you, President Carr and Mr. McAuley, for joining us again here at OGGO and for providing your excellent testimony. Furthermore, thank you to the tremendous public servants who you represent.

We've gone through so much in the last couple of years. Thanks to the workers—the public servants—you represent who are committed and dedicated, Canadians were able to get through the toughest two years. I just wanted to say thank you on behalf of everyone here around this table for the tremendous work of your members.

Since about 2015, our government has made tremendous investments in our public servants. You can look at the fact that since 2015, when this government took office, we've hired about 60,000 full-time employees in the public service, which is an investment of roughly an additional $20 billion. That's 60,000 full-time employees hired. I wouldn't say this federal government is shy about bringing services in-house, nor is it shy about investing in our federal public service.

I just wanted to ask you for a comment on the fact that we've seen a tremendous growth in the number of full-time public servants, and we've seen increased investment in our federal public service.