Government Operations Committee on March 29th, 2023

[Robert Palter]

I have no insight on that question, Mr. Chair.

[Gord Johns, NDP, Courtenay—Alberni, BC]

Okay.

On services, in terms of McKinsey, can you talk about what services McKinsey provides to the government that can't be performed by public servants and that would be more efficient to outsource?

[Robert Palter]

McKinsey's work for the federal government is always a complement to the federal government. It's always a response to a need identified by the civil service that they then put out into the marketplace and procure through either an RFP or the NMSO.

As I alluded to previously, one example is that we have a dataset. It's a proprietary dataset. It's McKinsey's. It's nobody else's. The federal government and the civil service have determined that it is a highly valuable dataset to help implement decisions they have made.

Another example of where we've added value is our work on digital transformation, and you've heard me talk a bit about that. We have helped the federal government hire digital expertise. The government is trying to transform and modernize, and it needs digital capabilities to do that. A critical part of every contract that we take on with the federal government is helping to build those capabilities so that they don't have to rely on firms like ours going forward.

[Gord Johns, NDP, Courtenay—Alberni, BC]

Public servants are experts in their work, just like McKinsey is. How do you involve and consult them when you're working with the federal government?

[Robert Palter]

The nature of McKinsey's particular process with clients is this: We always do it together with clients in order to complement and help build upon what they are doing. We help accelerate it. We help improve it. We help refine it. We bring global best practices to support what they're doing.

[Gord Johns, NDP, Courtenay—Alberni, BC]

We've seen a huge increase in consulting. Our focus, as New Democrats, hasn't just been on McKinsey. It's been overall—on all of the large $100-million-plus club of expensive consultants, which has been growing at a rate that's four times more under this government and doubled under the Harper government. It's gone up tenfold in 10 years—just those six companies. It's a significant amount of growth.

We heard from Amanda Clarke from Carleton University. I'm sure you're familiar with Amanda. She told us the public service's loss of institutional knowledge and capacity continues to get worse and more eroded as we see consulting go up. It's a pretty vicious cycle. Apparently, the need to outsource means you don't end up developing that in-house knowledge and capability, so the next time an issue or need comes up, it's not there. The public service isn't there and doesn't have the tools or capacity to do it. Of course, it's outsourced again, and it creates that vicious cycle.

Can you speak about McKinsey and the work you do to reduce that loss, in terms of jobs in the public service? Specifically, how does McKinsey ensure that knowledge transfer is happening with public servants when government contracts are filled?

[Robert Palter]

Thank you. This is an important question.

Outsourcing, technically, is the movement of people and processes from one organization to another organization and letting the other organization take on that work. McKinsey does not actually provide outsourcing as a service.

Our work is intended to respond to a request from the civil service when they're looking for a specific capability that needs to be filled. Again, the example I will offer is around digitizing. The way we work with the civil service is that they have a request to implement a digital transformation. We will help set out the strategy, road map, technology requirements, organizational requirements and capability requirements; help them design and start the execution; and help find the people, hire the people, put them in the jobs, train them and make them capable of standing up, so that they can take that skill and roll it to other processes that need to be digitized.

[Gord Johns, NDP, Courtenay—Alberni, BC]

I appreciate that.

Help me, please, understand and square this up: We saw the Conservative cuts in the public service. We saw them cut at Veterans Affairs. We saw them cut staff and deliver a payroll system that turned out to be a flop—the Phoenix payroll system. We continue to see outsourcing. It skyrocketed at the time of cuts to the public service.

Can you give me some insight into where this is going? We're seeing all the outsourcing skyrocket. I imagine companies like yours are investing heavily in research and development—putting an eye on the prize to grow your relationship with the federal government, because you can't do this kind of volume of business without building infrastructure.

Where does it go? Where is the end to this, in terms of the amount going up?

[Robert Palter]

I have a couple of thoughts.

The first one, as I stated previously, is this: McKinsey doesn't do outsourcing work. We haven't partaken in any outsourcing with the federal government. That's not what we do. We provide a complement to the civil service. We upskill. We design. We support execution. We don't take jobs out and onto our books. That's not what we do. We never have and won't do that.

Where does this go? I don't know. We're not actually in that business, so I don't have a view on that. As I stipulated, McKinsey is less than 1% of the trend you're alluding to.

[The Chair, Conservative, Kelly McCauley]

I'm sorry. Thank you, Mr. Palter. Our time is up. Perhaps we can get back to it in the next round.

We have Mr. Barrett for five minutes.

[Michael Barrett, Conservative, Leeds—Grenville—Thousand Islands and Rideau Lakes, ON]

Thank you, Mr. Chair.

Thank you, Mr. Palter, for being here today.

How often does McKinsey lobby government, or officials for the federal government?

[Robert Palter]

McKinsey does not lobby on behalf of clients and takes its obligation to respect and honour the lobbying rules very seriously.

[Michael Barrett, Conservative, Leeds—Grenville—Thousand Islands and Rideau Lakes, ON]

Do you lobby on behalf of yourself? Does McKinsey lobby on behalf of McKinsey to the federal government?

[Robert Palter]

No, McKinsey does not lobby on behalf of McKinsey.

[Michael Barrett, Conservative, Leeds—Grenville—Thousand Islands and Rideau Lakes, ON]

Does anyone lobby the government on behalf of McKinsey?

[Robert Palter]

Nobody lobbies the government on behalf of McKinsey.

[Michael Barrett, Conservative, Leeds—Grenville—Thousand Islands and Rideau Lakes, ON]

How did McKinsey have those meetings that you indicated previously occurred between government officials and your company? Did the government call McKinsey first, or did McKinsey initiate contact? I'm just curious about who initiated the first contact.

[Robert Palter]

It's a slightly hypothetical question because I don't know the specifics, but what I can say—

[Michael Barrett, Conservative, Leeds—Grenville—Thousand Islands and Rideau Lakes, ON]

At some point in time, someone initiated the contact. Certainly, that first phone call did happen. How did it happen?

Companies like KPMG and the like would have records of those initial contacts and would also be able to articulate why they are on the lobbying registry.

[Robert Palter]

What I can say is that conversations between the government and any supplier, any adviser, any provider of goods and services, is a normal course of business behaviour that happens.

[Michael Barrett, Conservative, Leeds—Grenville—Thousand Islands and Rideau Lakes, ON]

Thanks for that.

Has your organization ever been in contact with the federal lobbying commissioner?

[Robert Palter]

I don't believe so.

[Michael Barrett, Conservative, Leeds—Grenville—Thousand Islands and Rideau Lakes, ON]

No one from your organization has ever contacted the lobbying commissioner to ensure that you are in compliance with federal lobbying regulations.

[Robert Palter]

Again, we take our obligation to honour the lobbying laws and regulations very seriously. Our compliance function, I suspect, understands our lobbying requirements very seriously and ensures that we adhere to them.

[Michael Barrett, Conservative, Leeds—Grenville—Thousand Islands and Rideau Lakes, ON]

Is that a no?