Opening Statement before the Standing Committee on Public Accounts Professional Services Contracts

Professional Services Contracts

Andrew Hayes
Deputy Auditor General

Mr. Chair, thank you for this opportunity to discuss our report on professional services contracts, which was tabled in Parliament in June 2024. I want to begin by acknowledging that we are gathered on the traditional unceded territory of the Algonquin Anishinaabe people. Joining me today from our office are Nicholas Swales, Principal, and Aliya Haji, Director.

This audit looked at whether federal contracts awarded to McKinsey & Company between 2011 and 2023 complied with applicable policies and provided Canadians with value for the money spent. These contracts spanned 20 federal organizations, including 10 Crown corporations. The total value of contracts awarded to McKinsey & Company during the period totalled $209 million, of which about $200 million was spent.

We found that the organizations awarding the contracts showed a frequent disregard for federal contracting and procurement policies and guidance. We also found that each organization’s own practices often did not demonstrate value for money.

The extent of non‑compliance and risks to value for money varied across organizations. For example, in 10 of the 28 contracts that were awarded through a competitive process, the bid evaluations did not include enough information to support the selection of McKinsey & Company as the winning bidder.

When it came to non‑competitive contracts, organizations often issued these without documenting the required justification for doing so. About 70% of the 97 contracts we looked at were awarded to McKinsey & Company as non‑competitive contracts, and their value was approximately $118 million.

We also sampled and reviewed 33 contracts to assess value for money and found that almost half of the contracts lacked an explanation of what need or gap the contract was intended to address. In 15% of contracts, there was no clear statement of what the contract would deliver, and in 18% of contracts there was no confirmation that the government had received all expected deliverables.

As the central purchasing and contracting agent and subject matter expert for the Government of Canada, Public Services and Procurement Canada did not challenge organizations when awarding some contracts on their behalf. The department did not challenge the organization requesting the contracts about whether the procurement strategy used was appropriate when multiple contracts were awarded to McKinsey & Company for a similar purpose and within a short period of time.

Our single recommendation focused on the need for federal organizations to proactively address conflicts of interest in the procurement process. Other aspects of our findings were covered in observations and recommendations that we made in recent audit reports, and they have since been reinforced by recommendations made by internal audit functions.

Treasury Board of Canada Secretariat has taken the actions to which they committed on behalf of departments and agencies in response to our recommendation.

While this audit focused on contracts awarded to McKinsey & Company, it highlights basic requirements and good practices that all federal organizations should follow when procuring professional services on behalf of the Government of Canada. Our audit of contracts awarded to GCStrategies Inc., over much of the same period, showed many of the same weaknesses in federal organizations’ adherence to contracting rules and ability to demonstrate value for money.

Federal contracting and procurement policies and rules exist to ensure fairness, transparency, and value for Canadians—but they only work if they are followed. The solution isn’t necessarily about creating new rules, but rather about making sure that these rules are well understood and properly applied.

Mr. Chair, this concludes my opening remarks. We would be pleased to answer any questions the committee may have. Thank you.