Transport Committee on May 11th, 2023

[John Cartwright]

I don't share the attitude of some members of the committee who are disparaging McKinsey.

I think this is something we call “corporate capture” at the Council of Canadians, where think tanks, lobbyists and others who represent Bay Street and, sometimes, global finance capital have taken public policy and shifted it dramatically.

The reality is that there's no such thing as free money. Somebody doesn't come along and give you $26 billion for free. There are strings attached. They want a huge return on investment. There's a surcharge they get, but most importantly, there's a deficit of public accountability and control when you move to P3s.

We're happy to hear where the bank has invested directly with municipalities and directly with indigenous communities. That's what we see as the proper role. That role is defined by responding to this climate emergency in front of us. We sure want the bank to stay away from water. The one time they tried to do that, the municipality backed away. We don't want any of that.

We need to retain and regain control of public assets and public services fully in the public good and not have that distorted by corporate interests and money swirling around the globe interfering with Canadians' future.

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

Thank you, Mr. Cartwright.

[The Chair, Liberal, Peter Schiefke]

Thank you, Mr. Cartwright.

Thank you, Mr. Bachrach.

Next we have Mr. Genuis.

The floors is yours. You have five minutes.

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

Thank you, Chair.

Here's what I think is going on.

McKinsey's sales process is selling without selling. That's well known. That's been in various books written about McKinsey's process. McKinsey's analysts past and present have talked about about selling without selling.

This means that McKinsey does not advertise in the crude sense of it. They pitch themselves as experts in certain areas. They meet with clients to talk about their expertise and their ability to perform certain tasks. The goal of those engagements is of course to be able to gather business. That is the sales process. In many contexts, there's nothing wrong with that sales process.

The problem is that, on the government side, this has amounted to lobbying without lobbying. McKinsey self-identifying experts meet with government to share their expertise with the goal of doing business with the government and very successfully getting over $100 million in contracts from the government.

The sort of doublespeak of selling without selling or lobbying without lobbying masks the fact that this so-called pro bono work that is done through the growth council and other vehicles has been the effective equivalent of selling. It has given preferential access as a result of that engagement, and it has resulted, in fact, in contracts that, according to the government's own press release, did not follow the rules in every case. We have an ATIP showing the process of effective pitching without pitching.

I want to zero in on this question of whether this activity constitutes lobbying.

Mr. Pickersgill, were any of the people from McKinsey who met with the government in these various engagements registered to lobby?

[Andrew Pickersgill]

Mr. Chair, we are not a registered lobbyist.

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

Okay. Nobody in any of these meetings from McKinsey was registered to lobby.

Were any of these engagements registered with the lobbying commissioner?

[Andrew Pickersgill]

The answer is no.

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

Okay. You were engaging in what was effectively sales and lobbying activity. You won't describe these as sales meetings. You won't describe these as lobbying meetings, yet something happened that led to this massive spike in contracts with McKinsey of over $100 million over the 10 years of this government. That seems like an obvious problem because, in the wording of the Lobbying Act, the requirement for impartiality in the awarding of contracts is not supposed to be gotten around with this sort of business lingo, doublespeak: “selling without selling” or “lobbying without lobbying”.

I want to put to you that I think that's the problem. I'll just invite you to respond to those points if you want to, but I do have one more question to get in before the end of my time.

[Robert Palter]

As I testified at OGGO, where these questions came up, there are a couple of facts I'd like to share.

McKinsey's contracts with the federal government are less than 0.5% of the federal government's spend on consulting. That's point number one.

Point number two is that 74% of those contracts in question were awarded through a competitive RFP run by the public sector, scored independently and evaluated by the public sector on their evaluation criteria.

Three, by my own records as the lead of the Canadian practice, we lose 60% of the RFPs that we submit to the federal government, so if there is any question about the competitiveness of the process, I'm not sure that's relevant.

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

Okay. I don't think any of that has anything to do with the issues I raised about being registered to lobby, about selling without selling or about the preferential access issues.

I have one more question I want to get to in the time remaining: Is the Government of Canada currently part of a class action lawsuit against McKinsey over its role in the opioid crisis?

[Robert Palter]

Yes, it is. As I stipulated at OGGO, McKinsey has done no work on opioid sales and marketing in Canada.

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

In spite of everything that has happened in the relationship between the government and McKinsey, the Government of Canada is now joining a lawsuit to sue you.

Is it your position that, in spite of paying over half a billion dollars in compensation to the United States, you think there was no wrongdoing?

[Robert Palter]

As I said at OGGO on these questions, McKinsey's settlement with the United States had no admission of wrongdoing. We did nothing illegal.

In Canada, we did no opioid marketing and sales work.

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

Yes, but did you do something immoral.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

Mr. Chair, I can't hear.

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

It's my time.

[The Chair, Liberal, Peter Schiefke]

Regardless, Ms O'Connell—

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

On a point of order, the interpreters can't interpret if there are two people speaking simultaneously, so if the member would like to take his time back—

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

You just jumped in.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

I'm on a point of order.

I think, Mr. Chair, it's really frustrating for the interpreters.

[The Chair, Liberal, Peter Schiefke]

We need to ensure that we're providing all of the time necessary for our interpreters to be able to hear what is being said, to interpret it and also to look after their health. I would kindly remind all members not to speak over one another or the witnesses.

The time is up, Mr. Genuis. Thank you very much.

We'll go with Mr. Badawey as the final slot for today.

You have five minutes, sir.

[Vance Badawey, Liberal, Niagara Centre, ON]

Thank you, Mr. Chairman.

I am not going to be distracted or to waste anybody's time in this room with the use of political tactics, or manipulate a desired outcome by the opposition attempting to fit, quite frankly, a square peg into a round hole. I will use this time to be productive and at least to get something out of this study.

With that, we'll focus on the business of government, which in this case is to expedite capital projects and capital investments such as infrastructure to service Canadians with what they need for their personal, business and overall lifestyle interests by leveraging—and I will underline and bold that word—and therefore mitigating a financial burden on taxpayers.

Therefore, may I request, Mr. Palter, first, that you elaborate—as you started to earlier with the questions asked by Mr. Iacono—with respect to addressing and expediting work that needs to be completed to lessen the infrastructure gap within all levels of government and the responsibility that they otherwise have to try to provide those services for our residents while mitigating the cost to those taxpayers at every level.

Second, how does it mitigate the financial burden on taxpayers—once again, at every level—whether it's through financing debt through operating, capital investments or lessening debentures? The list goes on.

Third, please elaborate on leveraging the development of the economy to encourage economic growth within all sectors.

Of course, the fourth includes climate adaptation.

Mr. Palter.

[Robert Palter]

That's a lot of territory to cover.

This committee today has spent a lot of time talking about the financing of infrastructure projects. That's an incredibly important topic, but the financing of infrastructure projects, particularly greenfield infrastructure projects...and really we're talking about greenfield infrastructure projects. Let's not talk about privatization of brownfield. Let's talk about greenfield infrastructure projects, because that's really what CIB is focusing on.

Financing is just part of the puzzle necessary to get greenfield infrastructure built. Obviously the financing pays for construction workers. It pays for steel. It pays for aggregate. It pays for technology. A nexus of things has to come together to get a greenfield infrastructure project built. You have to have siting, permitting and environmental reviews. You have to have land rights of way, expropriation and community support. All of these pieces need to come together in the same place at the same time to actually successfully put a shovel in the ground. Financing is just one part of the puzzle.

I do think it's important that we as Canadians and the government think about the intersection of these pieces, because solving one doesn't solve the problem. You have to solve all of them simultaneously if you want to achieve the objective of building more greenfield infrastructure. This problem is not unique to Canada. This is a problem that governments trying to build infrastructure in democracies around the world are wrestling with.

I think that's your question on speed.

With respect to risk, the nature of greenfield infrastructure is risk pricing and risk transfer. Who is going to take siting risk? Who is going to take development risk? Who is going to take construction risk? Who is going to take operations risk? What's the price of that risk? What's the duration of that risk? All the participants in a project bear some element of risk.

Private funds seek a return for the risk they are taking on. The market clears though. If the risk is exorbitant, the deal doesn't get done. If the return is exorbitant, the deal doesn't get done. There's a role for market participation in understanding and pricing risk. Is it perfect every time? No, it's not perfect every time. Sometimes it does go wrong. I wouldn't sit here and say it happens perfectly every time.

There are many academic studies that have looked at the economic benefit of infrastructure. It depends on the type of infrastructure. Roads can have a reasonably high GDP multiplier. For transmission lines, it's slightly lower. Some infrastructure projects can have significant front-end job creation opportunities and then fewer operations opportunities and vice versa.

Every project needs to be viewed uniquely and independently in the context in which it's being delivered to determine what the economic and job creation benefits of that project are. However, by and large, the academics and the economists would concur that infrastructure is a net positive for economic growth and job creation.

I don't think I've gotten to your climate question yet.

[Vance Badawey, Liberal, Niagara Centre, ON]

That just leads me to my final comment, Mr. Palter. You confirmed the need for that involvement. In my region, in Niagara, we're really building upon our strength, which is being a trade corridor that includes the Welland Canal, the St. Lawrence Seaway, road, rail and air. Those very investments you're speaking about, those partnerships and that leveraging you're speaking about are critical to then expand the actual direction we're taking with respect to the investments that need to be had and, therefore, the capacity we will then have to be recognized as a national trade corridor.

Thank you for that validation.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Mr. Badawey.

Colleagues, we do have eight minutes left. Is there a desire for colleagues to each get perhaps one minute per party for one final question? If not, we'll conclude it there. I just want to see if there's any general consensus.