Evidence of meeting #70 for Transport, Infrastructure and Communities in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was mckinsey.
A recording is available from Parliament.
Noon
Former Global Managing Director of McKinsey & Co, As an Individual
No, there was nothing at all like that. Minister Flaherty was wonderful to work with, God rest his soul. He always wanted to hear ideas. If he travelled and I happened to be in that city, we would meet, but we never had any questions.
Noon
Liberal
The Chair Liberal Peter Schiefke
Thank you very much, Mr. Barton, and thank you, Ms. O'Connell.
We'll now go to Mr. Barsalou‑Duval for two and a half minutes.
Noon
Bloc
Xavier Barsalou-Duval Bloc Pierre-Boucher—Les Patriotes—Verchères, QC
Thank you very much, Mr. Chair.
Mr. Barton, if I've understood correctly what's been said so far, McKinsey's method is basically to give free advice and, once it's got its foot in the door, to create a dependency relationship in order to reap maximum profits—a bit like a drug dealer who offers a customer the first hit for free.
Let's go back in time. In March 2018, after the Canada Infrastructure Bank was created, McKinsey made an offer to work as a consultant for the bank. McKinsey indicated that, thanks to its past work with the bank, it had a deep understanding of the bank and the important context surrounding it, as well as its objectives. This suggests that your work, and the secretariat McKinsey provided to the Advisory Council on Economic Growth, may have served to pad McKinsey's offer to work for the bank.
In fact, it also explains the reasons behind some of Mr. Michael Sabia's decisions. At his most recent committee appearance, he revealed to us that when he was chair of the board of directors of the Canada Infrastructure Bank, in order to get the bank out of difficulty, he awarded a $1.4‑million contract to McKinsey with no call for tenders. His justification for that decision was that it was advantageous to use some of the McKinsey people who had been involved in conceiving the bank, to draw on their accumulated knowledge.
I find that interesting, Mr. Barton. In the end, your volunteerism and that of McKinsey helped change the bank's direction. In a way, it veered the bank away from what was set out in the Liberal platform, where the idea had come from, and put the bank more at the service of the private sector. What's more, that enabled you to go out and win more contracts for McKinsey. What do you think of that?
Noon
Former Global Managing Director of McKinsey & Co, As an Individual
First of all, McKinsey didn't change the approach of what the CIB would be. That was done on the growth council, as mentioned.
Second, a very clear procurement process was followed. You heard that from Janice at the outset and from Bruno. There was a process; other consultants were considered.
Third, an area of expertise for McKinsey is doing infrastructure and pension fund work, so I'm not surprised they—
12:05 p.m.
Bloc
Xavier Barsalou-Duval Bloc Pierre-Boucher—Les Patriotes—Verchères, QC
Thank you. Should I take it that you did not benefit in any way from volunteering?
12:05 p.m.
Liberal
The Chair Liberal Peter Schiefke
Thank you very much, Mr. Barton and Mr. Barsalou-Duval.
Next we have Mr. Bachrach.
Mr. Bachrach, the floor is yours. You have two and a half minutes.
12:05 p.m.
NDP
Taylor Bachrach NDP Skeena—Bulkley Valley, BC
Thank you, Mr. Chair.
Mr. Barton, what I've taken from the conversation is that one of the main goals of the bank was to crowd into private investment to meet the needs of public infrastructure. Is that a fair characterization?
12:05 p.m.
Former Global Managing Director of McKinsey & Co, As an Individual
Yes. It was, above all, to increase the amount of infrastructure spending that we'd be able to do in Canada and to draw on the private sector to add more capital, but also to ensure that it was standing on its own two feet.
12:05 p.m.
NDP
Taylor Bachrach NDP Skeena—Bulkley Valley, BC
I ask this because the bank announced that it was going to invest in a $655-million transmission line to the United States. This was being proposed by a giant company with $58 billion in assets that was very financially successful and able to undertake an investment of that size. They were able to secure public investment from the CIB. Well, they weren't able to secure it, but they were certainly heading down that path.
How should we understand this in light of the goals of the bank? It feels like crowding public investment into private projects that can stand on their own two feet.
12:05 p.m.
Former Global Managing Director of McKinsey & Co, As an Individual
I'm not familiar with the details of that. It may be worth asking someone who's actually at the bank and doing it. I'm not aware of all the—
12:05 p.m.
NDP
Taylor Bachrach NDP Skeena—Bulkley Valley, BC
I'm sorry, Mr. Barton. Maybe it's a question better directed to Mr. Guilmette.
12:05 p.m.
Former Interim Chief Investment Officer, Canada Infrastructure Bank
Could you repeat your question, please? I wasn't paying attention, since you weren't talking to me.
12:05 p.m.
NDP
Taylor Bachrach NDP Skeena—Bulkley Valley, BC
The question was around the contrast between the idea of crowding private investment into the needs of public infrastructure versus crowding public investment into private infrastructure.
The Lake Erie Connector is an example of a huge project being proposed by a private company that had the means to build it and stand on its own two feet. The bank seemed to have come along and convinced ITC to take public investment.
How is the public to understand the CIB going after private projects with public money?
12:05 p.m.
Former Interim Chief Investment Officer, Canada Infrastructure Bank
The role of the Canada Infrastructure Bank is to link public infrastructure projects and leverage money from other investors or private debt to make it possible to build more infrastructure in Canada, so there is a link.
12:05 p.m.
Liberal
The Chair Liberal Peter Schiefke
Thank you very much, Mr. Guilmette.
Thank you very much, Mr. Bachrach.
Next we have Dr. Lewis.
The floor is yours for five minutes.
12:05 p.m.
Conservative
Leslyn Lewis Conservative Haldimand—Norfolk, ON
Thank you, Chair.
Mr. Barton, you seem to have misled the OGGO committee in not disclosing the meeting of June 23, 2020. In fact, the evidence you gave was that there was no contact between you and McKinsey and the Infrastructure Bank. Now, today, you're stating that you had extensive contact with Mr. Sabia.
Can you undertake to provide the committee with a list of communications between you and Mr. Sabia, the Infrastructure Bank and McKinsey while you were ambassador of China?
12:05 p.m.
Former Global Managing Director of McKinsey & Co, As an Individual
I'd be very happy to do that.
I would also say, on Michael Sabia, that sometimes he would just call. I don't know if I can remember them, but there were a number of conversations. I can't remember how many. I'll try my best to look at it. I'm happy to do that.
12:05 p.m.
Conservative
Leslyn Lewis Conservative Haldimand—Norfolk, ON
I'm happy with a best efforts undertaking.
My next question is for Ms. Fukakusa.
Ms. Fukakusa, thank you so much for coming today.
When you were chair of the bank, you approved two contracts with McKinsey. That was actually contrary to the bank's interim procurement policy requirements. Is that correct?
12:05 p.m.
Inaugural Board Chair of the Canadian Infrastructure Bank, As an Individual
Just for some context, a procurement policy was being developed, and I developed it in conjunction with the infrastructure department and the CIB transition office. The way the rules worked was that you would have up to two to three bidders, but if there was a case in point that the work needed to be done more quickly and you had experience with the contractor, then it could be done. For the two—
12:10 p.m.
Conservative
Leslyn Lewis Conservative Haldimand—Norfolk, ON
Ms. Fukakusa, it does not say two to three bidders. It says three bidders. That is your policy.
You just gave evidence that it's two to three bidders. That's not true. Is that correct?
12:10 p.m.
Inaugural Board Chair of the Canadian Infrastructure Bank, As an Individual
It says up to three bidders.
12:10 p.m.
Conservative
Leslyn Lewis Conservative Haldimand—Norfolk, ON
No, it says “at least three” bidders, and I will take you to the policy. It's point (b) in the policy. It says, “Before any procurement contract where the estimated expenditure exceeds $100,000 is entered into [by the Bank], the Bank will solicit bids”. Point (b) says, “inviting bids on a proposed procurement from potential suppliers identified by the Bank as potentially suitable—where possible, bids should be invited from at least three potential [bidders].”
It does not say “up to three”, Ms. Fukakusa. Where are you getting that information?
12:10 p.m.
Inaugural Board Chair of the Canadian Infrastructure Bank, As an Individual
I think it's from further down in a clause that basically says, if there's an urgent necessity, it can be fewer bidders and one can be appointed directly with the sign-off from the transition office.
With respect to the studies that happened when we engaged McKinsey for the risk management work and for setting up the investment parameters, we had bids from McKinsey, Boston Consulting Group and PricewaterhouseCoopers. McKinsey was chosen because of the strength of its infrastructure and advisory practice.
12:10 p.m.
Conservative
Leslyn Lewis Conservative Haldimand—Norfolk, ON
Ms. Fukakusa, you're stating that you had three bidders, but in fact, in an email from Annie Ropar to Frédéric Duguay, Annie said, “Janice”, which is you, “confirmed they had 2 bidders for both the investment strategy work (the first engagement) as well as the risk work”.
Why did you tell Annie that you only had two bidders when you're telling us today that you actually had three bidders?
