Government Operations Committee on March 20th, 2023

[The Chair, Conservative, Kelly McCauley]

Colleagues, we'll get started please. I call this meeting to order.

Welcome to meeting number 56 of the House of Commons Standing Committee on Government Operations and Estimates—as I like to call it, the mighty OGGO: the only committee that matters.

Pursuant to the motion adopted by the committee on Wednesday, January 18, 2023, the committee is meeting on the study of the federal government consulting contracts awarded to McKinsey & Company.

We have with us Minister Anand.

I understand that you have an opening five-minute statement. Welcome back, Minister.

Just before you start, I will say for colleagues that we are very short on time. I am going to be very rude in cutting people off exactly at their allotted time today so that we can get to our business and also to the PBO.

Minister, I'm sorry. Please go ahead.

[Anita Anand, Liberal, Minister of National Defence]

Thank you very much, Mr. Chair.

Good afternoon, everyone.

The Department of National Defence is tasked with protecting Canadians, safeguarding our values and securing our interests at home and abroad. One of the ways we do this is by procuring the modern equipment and services our Canadian Armed Forces need to meet the threats of an increasingly dangerous world. This is, it goes without saying, a vitally important task.

I take my role as a steward of public funds very seriously. In particular, as minister, I understand that each dollar counts, especially when it comes to protecting Canadians and equipping our soldiers, sailors, aviators and special forces.

National Defence adheres to the policies laid out by the Treasury Board Secretariat, which require departments to have stringent procedures and financial controls in place to ensure the effective use and sound stewardship of public funds.

National Defence works closely with other federal departments, including PSPC, as well as with the defence industry. We look to assuring that we have in place best practices of our partners and allies, as well as a wide range of competencies within the defence team. Like many other departments, in specific cases we may seek third party expertise externally.

Third party experts may be important in three circumstances: when we need to acquire specialized expertise or experience that does not exist within the department; when we need to focus on achieving a particular outcome quickly, without interrupting the important work our internal teams are already doing; and when we need to fill a specific role.

As with all our financial practices, National Defence takes great care to be open and transparent, in adherence with Treasury Board policies.

Since 2011 and in the following 12 years thereafter, National Defence has awarded 15 contracts to McKinsey for a total value of approximately $29.6 million. Just one of those contracts is still active.

Twelve of them have been call-ups against the national master standing offer, for which PSPC is the contracting authority. McKinsey was selected because they offered proprietary benchmarking and other tools that best met the department's needs. The contracts were for corporate services intended to complement National Defence's in-house expertise.

Let me give you an example.

As the Canadian Armed Forces undertakes massive systemic organizational change, the chief of professional conduct and culture used the firm's services to engage with more than 9,000 defence team members about their lived experiences to inform our efforts on institutional culture change. That included more than 280 engagement sessions across the country, from small group discussions to town halls. In fact, Lieutenant-General Carignan is here with me today as chief, professional conduct and culture, and can provide more detailed information.

Using an external firm was important to undertaking such a large effort in a short period of time, as well as to analyzing and reporting the findings of these critical conversations. When institutional change of this sort is needed, outside experts can play an important role.

To wrap up, as Minister Fortier explained before this committee, departments must maintain the integrity of process, define intended outcomes, get best value at a fair price and ensure the deliverable meets the quality expected. I have expectations for my department to maintain this integrity and to always seek to improve processes.

As elected officials and public servants, it is incumbent on all of us to ensure that we are using public funds responsibly and transparently. This is a priority for National Defence and for me personally.

I am now happy to take your questions.

[The Chair, Conservative, Kelly McCauley]

Thank you, Minister.

We'll start with six minutes for Ms. Kusie, please.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Thank you, Chair.

Thank you, Minister, for being here today.

Thank you, also, to your colleagues for being here today. Thank you very much for your service. On behalf of all Canadians, we are truly grateful.

Minister, you said in your opening statement that your department is here to protect Canadians and that your department is here in an increasingly dangerous world where, in fact, Xi and Putin are meeting as we speak.

You said, Minister, that your department is responsible for safeguarding the values of Canadians. They are values that include democracy, human rights and the rule of law. Why then, Minister, would you choose to work with a company that has a history of working with Rostec, a Russian state-owned enterprise that helps manufacture the missiles that are currently being used in Ukraine today? Why, Minister?

[Anita Anand, Liberal, Oakville, ON]

First and foremost, thank you for the question.

You are exactly right. This is an increasingly dangerous world, where we see global threats in various theatres, including Ukraine and the Indo-Pacific.

In terms of your question, relating to the work of a third party expert, I want to first and foremost say that we take these concerns very seriously. I value the work of OGGO. I know the work that you do quite intimately, having been at this committee numerous times in my previous portfolio.

It is for that reason that the Prime Minister asked the minister of PSPC and the Treasury Board minister to review the matter and to take a close look at the circumstances and numbers.

I will say that the government will continue to maintain the highest standards of openness, transparency and fiscal responsibility. Looking to see how we can do better is extremely important. In terms of the actual contracts at issue, they related to operational aspects of the organization. They did not put in jeopardy in any way, shape or form the security, the privacy or the individuals' own necessity for maintaining the confidentiality that is required.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Thank you, Minister.

Why would you and your department choose to work with a company that did work with VEB, a Russian state-owned company that is known to be intertwined with Russian intelligence and that is currently under U.S. sanctions? Why would your department choose to work with a company that also consulted for the China Communications Construction Company, which built and militarized islands in the South China Sea in violation of international law?

If you take these duties so seriously, which you say you do, why would you and your department choose to work with such a company, Minister?

[Anita Anand, Liberal, Oakville, ON]

We have strong processes in place to ensure that security is maintained. Security screening, for example, is conducted for organizations and individuals who have taken on the role that is being discussed here. Steps are taken to protect government assets, as another example, including IT systems. Necessary security requirements are specified in the terms and conditions of all contracts.

Having said that, I want to reiterate that I agree with you. Integrity is crucially important, including the integrity regime that is maintained by Public Services and Procurement Canada. I do not have, at the current time, the oversight over that integrity regime, and I am here to discuss DND contracts. I have no reason to believe that those contracts have been unethical. They have been executed in large measure—all except one of them.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

How can you say that, Minister, when your Department of National Defence chose to work with a company that ousted Saudi dissidents, including one who fled to Canada and, as a result, his brother was imprisoned? How can you say that?

You spent millions on McKinsey to have them do work on, as you say, improving “culture”. How is having a company that works with Russia and that works with China—who are meeting today, by the way—that has corporate retreats next to internment camps and that ousts dissidents of dictatorship regimes producing recommendations positive for a culture that you're responsible for?

McKinsey was, in fact, the project lead for the Canadian joint operations command. Why would we want a company that has been working with our adversaries providing recommendations to the Canadian joint operations command? It's the organization and the leadership that has oversight for our entire armed forces, Minister.

Why would you and your department make these choices?

[Anita Anand, Liberal, Oakville, ON]

The government agrees that we need to strengthen our policies. That's why my colleagues have been mandated, as I mentioned, to strengthen federal procurement policies and integrate human rights, environmental concerns, corporate governance principles and supply chain transparency. This work is under way.

In the meantime, we welcome any of the results that emerge from the important work of this committee.

What I can tell you, in the meantime, is that security measures are in place—including through contractual mechanisms—to protect the safety and security of our country and ensure that, going forward, we have the necessary expertise.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Minister, you spent $29.6 million on leadership that could have been provided by the people sitting beside you here today.

Thank you, Minister.

Thank you, Mr. Chair.

[Anita Anand, Liberal, Oakville, ON]

I would actually disagree with that last statement, Mr. Chair.

[The Chair, Conservative, Kelly McCauley]

Thank you, Mrs. Kusie.

Thank you, Minister.

Our time is up.

Mr. Kusmierczyk, you have six minutes.

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

Thank you, Mr. Chair.

Thank you, Minister and General, for being here with us today. It is an honour to have you here at committee. I just want to thank you so much, on behalf of everyone here, for your leadership and service. I also thank all the men and women of our Canadian Armed Forces for their service, dedication and sacrifice.

Furthermore, thank you so much for your leadership and support of Ukraine in its time of need. As we speak, Canadian soldiers are in Poland training Ukrainians on how to use Leopard tanks. That makes me very proud, as a Polish Canadian. I just want to thank you very much for everything you are doing to support Ukrainians in their struggle.

Minister, Stephen Rosen, one of the leading thinkers on innovation and the modern military, summarized the problem well when he said, “Almost everything we know in theory about large bureaucracies suggests not only that they are hard to change, but that they are designed not to change.”

I want to ask you this: In seeking support and insight from McKinsey, what value does a tool like McKinsey's organizational health index, or OHI, provide to the Department of National Defence?

[Anita Anand, Liberal, Oakville, ON]

Thank you so much for those comments. I couldn't agree with you more that the EU work we are doing internationally, including in Ukraine, is pivotal in terms of global security and the democracy that we hope will be restored there.

I would like to take a moment of my time to respond to the previous comment made at the very end of the previous intervention. That comment was about why we would need a firm with third party expertise. Why do we need that? The insinuation was that it isn't necessary because the expertise rests in-house with the people right beside me.

That is simply untrue. It is not the case that the expertise for the items contracted for rested, in large measure, in-house. I want to give a few examples, if I could.

To begin, as you may all be well aware, the Canadian Armed Forces is undertaking massive systemic change, as you mentioned in your introduction, in order to ensure that it is an institution where all members who put on a uniform can do so in a protected and respected manner. When they are serving our country, they are not subject to discrimination, harassment, sexual harassment or sexual misconduct.

The Canadian Armed Forces has been criticised for decades because it has been too insular, and it has been unable to change. Why would we then choose to go inside to seek the expertise in terms of how to change a culture that has wrought discrimination, sexual misconduct and sexual harassment on its own members?

I believe, and it is truly the case, that the expertise that was sought from the outside third party was important. It was important to have that outside voice, that external expertise, in things like ensuring a complaints system that operates for victims and survivors and ensuring that the recommendations from other external judicial experts—over 500 of them—were able to be implemented in this extremely complex institution. Then, in the case of the Royal Canadian Navy, it was important to have the organizational expertise to be able to place individuals in the most efficient manner possible, through a digitized system, where that expertise to provide it did not exist in-house.

Mr. Chair, calling on the third party was extremely important to complement the skills that existed in the defence team. It is not the case that those skills rested in-house.

At this point, I will ask Lieutenant-General Carignan if she would like to add anything to that particular intervention I made.

[Lieutenant-General Jennie Carignan, Chief, Professional Conduct and Culture, Canadian Armed Forces, Department of National Defence]

Thank you, Minister.

Thank you, Mr. Chair.

I just want to highlight that, as the CPCC was stood up at the end of April 2021, basically the team consisted of 11 people, and there was an urgency to act. I would qualify the work that we needed to do as open heart surgery on a running patient. There was no question that the patient needed to keep running, because we just can't put defence on pause while we are embarking on unprecedented change in terms of the organizational culture within defence.

This is the state we were in as of June 2021. As the minister mentioned, we needed to seek external help to figure this out.

[The Chair, Conservative, Kelly McCauley]

That would be our time.

Thank you, sir.

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

Thank you, Mr. Chair.

[The Chair, Conservative, Kelly McCauley]

Mrs. Vignola, you have six minutes, please.

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

Thank you, Mr. Chair.

Thank you, ladies and gentlemen, for being here with us today. I'd also like to thank you for your service and your dedication. Members of my family have served in the Canadian Forces and I know just how difficult it has been for them and their families.

Having been awarded contracts with Canada, McKinsey is closely involved in many of the Canadian government's most important decisions. That's also the case in other countries. When you were with Public Services and Procurement Canada, and in your time with National Defence, did you always feel that you had control over decisions, or did you feel pressure to adopt consultants' recommendations indiscriminately?

[Anita Anand, Liberal, Oakville, ON]

There's no pressure at all. I have the responsibility, oversight and capacity to make the required decisions in my current department. That was also the case when I was the Minister of Public Services and Procurement. It's my role and my responsibility and I have to continue to fulfill them.

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

When McKinsey was awarded contracts from your department, how did you go about working with them? Did you deal directly with the consultants?

[Anita Anand, Liberal, Oakville, ON]

I understand the question, to be sure, but I wasn't the minister when the contracts were confirmed.

I'll turn this over to my deputy minister, Mr. Matthews.

[Bill Matthews, Deputy Minister, Department of National Defence]

Thank you for the question.

At Public Services and Procurement Canada, and at National Defence, I was never in contact with the McKinsey firm. To my knowledge, that was also the case for the deputy minister who preceded me. He never communicated with them.

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

With whom did McKinsey mainly communicate when it was working under contract for a department?

[Anita Anand, Liberal, Oakville, ON]

I'm going to ask General Carignan to answer this one, because she and her team were involved.