OGGO committee briefing binder: Appearance by the Deputy Minister of Employment and Social Development Canada – June 21, 2023

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OGGO submission details

For each of the 4 contracts awarded to McKinsey by ESDC, the following information was requested and provided:

(i) contracts entered into, including any amendments thereto,

All copies of original signed contracts for ESDC’s 4 McKinsey contracts, including the amendment for 4501110404. A copy of the National Master Standing Offer (NMSO) and the 2 amendments to the NMSO were also provided

(ii) all correspondence and electronic communications including emails, text messages, message app communications, and handwritten notes pertaining to these contracts

ESDC provided all emails included in the 4 contract files. Senior managers and directors (DG and Sr. Director) were also asked to perform searches of their own files. Draft copies of contracts and documents that appeared as attachments in the emails, but were otherwise provided in the OGGO package, were removed

(iii) statements of work performed by McKinsey & Company under each contract.

ESDC provided the statements of work (SOWs) from the NMSO as well as the additional SOWs drafted by the Technical Authorities

(iv) the hourly and or daily rates McKinsey & Company charged for each employee working on all respective contracts the company has received since January 2011

ESDC provided the basis of payment grids from the NMSO and/or respective contracts

(v) the names of project managers and or project authorities from McKinsey & Company on all respective contracts and projects the company received since January 2011

ESDC provided the information regarding the McKinsey representative(s) listed in the clauses of each contract. The names were all released because they were already in the public domain. Email addresses and telephone numbers were withheld pursuant to the Privacy Act

Purpose of these contracts

For all 4 contracts, McKinsey provided on-demand access to expert advice related to the governance of large-scale, multi-year transformation programmes and business development of the organization’s service delivery model to drive Service Canada as a service. McKinsey provided support of departmental initiatives, projects, and business cases in relation to transformation.

Deadlines

ESDC Internal Processing

Correspondence with OGGO

Chair

Kelly McCauley

• Conservative, Edmonton West
• Chair since October 2022
• Member since 2016

Vice-Chairs

Majid Jowhari

• Liberal, Richmond Hill
• Member since January 2018
• Vice-Chair since Dec 2021

Julie Vignola

• Public Services, Tourism, Government Operations & Procurement Critic
• Bloc Québécois, Beauport–Limoilou
• Member and Vice-Chair since Feb 2020

Members

Michael Barrett

• Critic for Ethics and Accountable Government
• Conservative; Leeds, Grenville, Thousand Islands and Rideau Lakes
• Member since October 2022

Kelly Block

• Critic for Public Services and Procurement
• Conservative; Carlton Trail, Eagle Creek
• Member since October 2022
• Also a Member from 2011 to 2020

Stephanie Kusie

• Critic for Treasury Board
• Conservative, Calgary Midnapore
• Member since October 2022

Gord Johns

• Mental Health, Public Services and Procurement Critic
• New Democratic Party; Courtenay, Alberni
• Member since December 2021

Parm Bains

• Liberal; Steveston, Richmond East
• Member since December 2021

Anthony Housefather

• Parliamentary Secretary to the Minister of Public Services and Procurement
• Liberal, Mont-Royal
• Member since December 2021

Irek Kusmierczyk

• Parliamentary Secretary to the Minister of Employment, Workface Development and Disability Inclusion
• Liberal; Windsor, Tecumseh
• Member since February 2020

Joanne Thompson

• Liberal, St. John’s East
• Member since December 2021

Chair - Kelly McCauley, (Edmonton West), Conservative

• Elected as the Member of Parliament in 2015 for Edmonton West, re-elected in 2019 and 2021
• Also serves on the Standing Committee on Public Accounts
• Former Conservative Shadow Minister for Treasury Board
• Previously served on the COVID-19 Pandemic committee as well as the Subcomittee on Agenda and Procedure of OGGO in 2020
• Before his election in 2015, Mr. McCauley was a hospitality executive specialized in managing hotels and convention centres
• He has a graduate of BCIT in the Hospitality Management program
• He has a history of advocacy for seniors and veterans
• Pushes for a reform in the PSDPA to protect whistleblowers

1st Vice-Chair - Majid Jowhari, (Richmond Hill), Liberal

• Elected as the Member of Parliament in 2015 for Richmond Hill (Ontario), re-elected in 2019 and 2021
• Also serves on the Subcomittee on Agenda and Procedure of OGGO as well as the Standing Committee on Health
• Previously served on the Stranding Committee of Industry, Science and Technology as well as the COVID-19 Pandemic committee
• Born in Iran, he is the first federal MP of Iranian heritage
• He has a degree in industrial engineering from Ryerson University and an MBA from York University’s Schulich School of Business
• Before his election in 2015, Mr. Jowhari was a consultant and engineer

2nd Vice-Chair - Julie Vignola, (Beauport-Limoilou), Bloc Québécois

• Elected as the Member for Parliament in 2019 for Beauport-Limoilou (Québec), re-elected in 2021
• Bloc Québécois Critic for Public Services, Tourism, Government Operations and Procurement
• Also serves on the Subcomittee on Agenda and Procedure of OGGO
• Previously a member of the COVID-19 Pandemic committee
• Before her election in 2019, she was a teacher in a private high school
• Ms. Vignola has a bachelor’s degree in history and geography teaching from the Université du Québec à Rimouski
• Interested in issues affecting Quebec, notably producers and the phoenix pay system
• Believes that the PDSPA does little to help

Michael Barrett, (Leeds—Grenville—Thousand Islands and Rideau Lakes), Conservative

• Elected as the Member of Parliament in 2018 for Leeds—Grenville—Thousand Islands and Rideau Lakes, re-elected in 2019 and 2021
• Conservative Shadow Minister for Ethics and Accountable Government
• Also sits on the Standing committee on Access to Information, Privacy and Ethics, as well as the Special Joint Committee on Medical Assistance in Dying (Vice-Chair)
• Previously served on many committees, including Justice and Human Rights, Health and Procedure and House Affairs
• Prior to his election, Mr. Barrett served in the Canadian Army and worked as a human resources manager
• Also served as municipal councillor in Edwardsburgh/Cardinal from 2014 to 2018.

Kelly Block, (Carlton Trail—Eagle Creek), Conservative

• Elected as the Member of Parliament in 2008 for Carlton Trail, Eagle Creek, re-elected in 2011, 2015, 2019 and 2021
• Shadow Minister for Public Services and Procurement
• Previously served as Parliamentary Secretary to the Minister of Natural Resources and Member of Panel of Chairs during the 41sst Parliament
• Previously sat on many committees, including Public Accounts, Veteran Affairs, Liaison, Health and Natural Resources
• Prior to her election, Ms. Block served 2 terms as mayor of Waldheim, Saskatchewan

Stephanie Kusie, (Calgary Midnapore), Conservative

• Elected as the Member of Parliament in 2017 for Calgary Midnapore, re-elected in 2019 and 2021
• Conservative Shadow Minister for Treasury Board
• Also serves as counsellor on the Canadian Section of ParlAmericas and as a member of the Canadian Group of the Inter-Parliamentary Union
• Previously sat on many committees, including Official Languages, Procedure and House Affairs and Transport
• Has a B.A in political science from the University of Calgary and an M.B.A. from Rutgers University
• Prior to her election, Ms. Kusie occupied multiple positions, including chargé d'affaires ad interim for Canada to El Salvador, consul for Canada to Dallas, Texas and senior policy advisor to Peter Kent in Latin America
• Some of her duties before her time in office included negotiating free trade deals, work related to the Keystone Pipeline project, and lobbying the United Nations to place Canada on the Security Council

Gord Johns, (Courtenay—Alberni), New Democratic Party

• Elected as the Member of Parliament in 2015 for Courtenay—Alberni (British Columbia), re-elected in 2019 and 2021
• NDP’s Mental Health, Public Services and Procurement Critic, as well as Deputy Critic for Fisheries, Oceans and the Canadian Coast Guard
• Previously served on several standing committees, including Veterans Affairs (Vice-Chair from 2019 to 2020), and Fisheries and Oceans (Vice-Chair in 2019)
• Before his election, Mr. Johns was a businessman and city councillor in Tofino
• Disagrees with the budget for the PDSPA

Parm Bains, (Stevenston–Richmond East), Liberal

• Elected as the Member of Parliament for Stevenston–Richmond East (British Columbia) for the first time in 2021
• Also serves on the Standing Committee on Access to Information, Privacy and Ethics
• Prior to his election, Mr. Bains was an instructor at Kwantlen Polytechnic University. He also worked as a media and public relations officer with the British Columbia provincial government
• He has attended the British Columbia Institute Of Technology as well as the Royal Roads University, where he got a Masters degree

Anthony Housefather, (Mont-Royal), Liberal

Parliamentary Secretary to the Minister of Public Services

• Elected as the Member of Parliament for Mont-Royal (Québec) in 2015, re-elected in 2019 and 2021
• Also serves on the Standing Committee on Canadian Heritage
• Previously served on several standing committees, including Justice and Human Rights, Liaison, Library of Parliament and the COVID-19 Pandemic committee
• Before his election Mr. Housefather was a lawyer in Montreal, as well as the Vice-President of a multinational technology company, Dialogic Corporation
• He served as Mayor of Côte Saint-Luc from 2005 to 2015
• Supports the idea of modifying the PSDPA

Irek Kusmierczyk (Windsor–Tecumseh), Liberal,

Parliamentary Secretary to the Minister of Employment, Workface Development and Disability Inclusion

• Elected as the Member of Parliament for Windsor—Tecumseh (Ontario) in 2019, re-elected in 2021
• Previously served on the COVID-19 Pandemic committee
• Born in Poland, he immigrated to Canada in 1983 after his father was imprisoned for being a member of a movement opposed to communism.
• Before his election, was a city councillor for the Windsor City Council
• PhD in Political Science from Vanderbilt University, an MSc in government from the London School of Economics and a bachelor in Journalism from Carleton University

Joanne Thompson (St. John's East), Liberal

• Elected as the Member of Parliament for St. John’s East (Newfoundland and Labrador) for the first time in 2021
• Also serves on the Standing Committee on Environment and Sustainable Development
• Before her election, she was an executive director of the Gathering Place in St. John’s
• Has bachelor in nursing as well as an MBA specializing in Social Enterprise from the University of Fredericton
• Has a history of advocacy for Human Rights issues

Hon. Helena Jaczek (Minister of Public Services and Procurement)

While we have found no indication to date that any rules or policies were broken, I also know that there is always room for improvement. (…)

Of the 24 contracts awarded to McKinsey by PSPC since 2011, 3 of them, worth more than 50% of the total value, were awarded through open, fair and transparent competition. (…)

With the exception of one low dollar value contract, the remainder were awarded as call-ups through what is referred to as a “National Master Standing Offer”. (…)

I recognize that there may be some confusion related to the terms standing offer and supply arrangements, which I would like to clear up. Standing offers and supply arrangements are not contracts and do not guarantee a company future business with the government. They are administrative tools that streamline procurement for departments and agencies, and reduce red tape and costs for governments and businesses.

A company's status on a standing offer or supply arrangement list is reviewed regularly and can be revoked at any time if it no longer qualifies. In addition, standing offers have expiry dates, as these are instruments whereby goods or services are provided at pre-established prices.

Supply arrangements, on the other hand, do not have expiry dates. That is because supply arrangements are established to allow for regular refreshes of qualified suppliers and to allow competition among pre-qualified suppliers for each contract. For administrative and technological reasons, an arbitrary end-date—far into the future—is used when reporting supply arrangements on our website. To be clear, there are no 80-year contracts with McKinsey. That said, I have asked my officials to address the way in which these standing offers are reported in order to avoid future confusion.

(…) we have an integrity process in terms of analyzing whether companies should continue to do business with the Government of Canada. My understanding is that notwithstanding what I've heard through the media, McKinsey was not excluded from doing business with the Government of Canada.

Mr. Paul Thompson (Deputy Minister, Department of Public Works and Government Services)

The total number of contracts is 24. The value of those contracts is $104.6 million. To clarify, those contracts were administered by PSPC, not by other departments and agencies.

To clarify, are you asking in how many contracts PSPC was the client department and user of the services? That was one of the 24. It was one of the competitive contracts. There was also a small, non-competitive contract worth less than $25,000. The one contract, the larger one that I mentioned, was $29.6 million, and it was for services to support our pay centre operations.

The supply arrangements, as I mentioned, do some of the steps of a procurement in advance, particularly the pre-qualification of companies. They would be put on a list for a range of services, but it does not constitute a contract.

A standing offer goes a bit further than that and puts in place a pricing mechanism so that goods or services could be procured at a predetermined price and called up by a department. They are different instruments that help facilitate procurement by other government departments. (…)

As I noted, there are a range of different benchmarking methodologies and services. McKinsey comes with a certain tool kit of methodologies and data sets that it can use. They're used often by service-providing organizations. Employment and Social Development Canada has used these services to compare its offerings to those of other peer organizations. They've been used by CBSA, EDC and BDC, as well as the Department of National Defence.

They can be used in a service delivery context. They can also be used for very in-depth IT comparisons between the costs of developing and running an IT system in one organization versus another. There are a host of different situations that all benefit from this kind of independent review. (…)

The last thing I would note is that the Treasury Board policy on management of projects actually requires and encourages independent advice on these large transformation projects that are undertaken by the government. It's part of the due diligence on a large project.

Hon. Mona Fortier (President of the Treasury Board)

Service contracts are widely used by governments and private organizations in Canada and around the world. They're generally used to complement the work of Canada's professional public service. Contractual services may be used to provide specific types of expertise, to deal with unexpected fluctuations in the workload, or to obtain independent opinions pertaining to projects.

Since 2011, spending on professional services as a percentage of total government expenditures has largely remained the same. Compared to spending on the public service, the use of professional services has also remained relatively consistent since 2011. (…)

In each department, a senior official is responsible for procurement. This official establishes, implements and maintains a framework for the processes, systems and controls. Departments must maintain the integrity of the process and protect it from fraud; define the intended outcomes; get the best value, including a fair price; and ensure what's delivered meets the quality, standards and service levels in the contract. (…)

Actually, I'd like to inform you that, under the previous government, an integrity regime was put in place. We have continued to use this integrity regime, which makes sure that we foster ethical business practices. At this time, as you know, McKinsey is not deemed an ineligible supplier under the integrity regime. (…)

Since 2015, McKinsey was awarded 34 contracts worth a total of $116.8 million. Two factors account for nearly the entire amount. I believe that it's important to be aware of the fact that McKinsey was awarded 3 competitive contracts worth a combined $55.8 million. It was also awarded a contract under a national master standing offer, for benchmarking analysis services worth $48.8 million.

Mr. Roch Huppé (Comptroller General of Canada, Treasury Board Secretariat)

(…) I will start off by saying, as a premise, that the procurement process is probably one of the activities in the government today for which we have a set of processes and controls that are what I would consider very mature. We have a very impressive control framework around these activities that start and include what I'll call documentation, which is legislation, regulation, our policies and very detailed supply manuals that are available to everyone and are made public and available in a very transparent fashion. (…)

I have to say that the controls are also based on the premise of delegation. Everyone is accountable within the process, and it varies. In departments, for example, delegation instruments exist that will prescribe who has the authority to approve which types of contracts, whether competitive or non-competitive, different types of goods and so on.

Hon. Sean Fraser (Minister of Immigration, Refugees and Citizenship)

It's not unusual that a department might seek external advice on how to face certain challenges with its various departments or to achieve ambitious goals. However, to be clear, the advice we may have received over the course of a couple of contracts with McKinsey prior to my appointment to this position didn't touch on immigration policy, but rather efforts to digitize the process through which applications are processed at IRCC. (…)

McKinsey was engaged—as I mentioned, before I was appointed as minister—on 2 instances through an open bidding process that was run by the department under its authority to do so. Those particular contracts were designed to provide advice around the modernization of the immigration system and to enhance digital services, which are rolling out as we speak, although I would suggest there are greater benefits to be seen in the years ahead as we move to a fully digitized system. (…)

Like all departments and agencies, IRCC relies on different partnerships to improve the way we serve clients. Sometimes we have to rely on third parties to provide specialized expertise for specific and typically time-limited purposes.

That's why, in 2018, the department determined it needed specific expertise to review how it serves clients and to recommend improvements. This resulted in 2 contracts between 2018 and 2020 being awarded to McKinsey. It represented in those particular years, for what it's worth, less than 1% of the department's operating expenditures.

The allegation that McKinsey is making decisions around immigration levels policy is false. The truth is that there were 2 contracts between 2018 and 2020 that were geared towards improvements to the digital processing of cases and movement towards a fully digitized system at IRCC, but it is not a true allegation that McKinsey has somehow been able to set the federal government's immigration policy. (…)

Look, this is an important question. We have standards that are put in place that allow companies to qualify as bidders on federal contracts. They are designed to protect against certain kinds of bad actors gaining favour from the federal government.

My understanding is that the rules through the PSPC process were, in fact, followed. Does there need to be work on individual accountability where people run afoul of moral norms? In most instances, yes, but I hesitate, without having the full information of the present circumstances, to place judgment upon what you're asking me to.

Ms. Christiane Fox (Deputy Minister, Department of Citizenship and Immigration)

(Question: Just on the contracts, does the department review contracts to assess vendor performance and outcomes?) Absolutely. We definitely look at our internal practices in terms of how we manage the contract from start to finish. I think that we're also always looking at best practices either through recommendations from the Auditor General or the procurement ombudsman. For instance, I know that for the McKinsey contract, as a result of a past AG report, the department ended up running, let's say, a price certification process prior to awarding a contract to ensure that we were getting the right price point based on the competitive and transparent bid that the department did. This is just one example of how we continuously try to improve from a procurement management side of things.

Hon. Marco Mendicino (Minister of Public Safety)

As other large organizations do, the agency seeks outside expertise to fill knowledge gaps or to complement its own efforts. The work done by McKinsey has informed some of the largest digital and organizational renewal efforts at the CBSA.

McKinsey has been paid $4,337,610 against 3 contracts since 2016. Mr. Chair, a fourth contract was ended before work began, as it was determined that this work could be performed with in-house resources. Therefore, no funds were spent against it. All contracts over $10,000 are published online in the agency's proactive disclosure report protocol on a quarterly basis.

The CBSA's first contract with McKinsey took place between May and October 2016. That contract value was $1.9 million, of which $1.7 million was spent. This initial contract was established to review and validate the options, risks and impacts associated with the CBSA's assessment and revenue management project, also known as CARM. McKinsey brought global experience to augment the CBSA's operational capacity.

(Question: Then why are resumés redacted? Why are projects that McKinsey worked on in other countries redacted? Why are per diems redacted? What are you trying to hide, Minister?) Absolutely nothing, Ms. Kusie, and that is because we follow the laws that relate to privacy and the charter.

Ms. Erin O'Gorman (President, Canada Border Services Agency)

The nature of the contracts with McKinsey were of a transformational business process nature, not a policy nature. (…)

As far as the redaction is concerned, we have complied with the act. We redacted, for example, the bid of the unsuccessful bidder in one case—the per diem rates and other information that would be classified as commercial confidential. We also disclosed the names of individuals related to the project. As for other individuals who worked for the company, but were not involved in the project, their names have not been released publicly. We have checked all names, and redacted those of individuals who were not part of our project.

The Chair

There is nothing to go over. The committee requires them unredacted. The comments of Mr. Gallivan and Ms. O'Gorman seem to indicate they were reconsidering. There is nothing to reconsider. We do require them unredacted, as the committee has requested. Thanks.

Mr. Ted Gallivan (Executive Vice-President, Canada Border Services Agency)

A global firm that has seen this in dozens of jurisdictions or in a commercial context can help inform the decision. I think that's an important point to make. They just give us advice. The ultimate decision rests with CBSA, but I think that before making decisions that affect billions of dollars or millions of people, it's useful to get the benefit of some outside advice.

Mrs. Julie Vignola

I invite you to compare the French version and the English version, because the French version has redaction that is not present in the English version. In addition, there are several pages of the McKinsey documents that are purely and simply illegible, misspelled. And I'm not even talking about the translation: instead of translating “deep dive” as “deep analysis”, it was translated as plongée profonde “deep dive”; I don't know which scuba diver they used. This really should be looked into, because it is so unprofessional that it borders on a breach of parliamentary privilege. This is really unfortunate. I have the impression that a machine was used to do the translation, a type of program like Google Translate. Even my students didn't have permission to use it.

I will continue on the subject of French. I had a surprise when I read appendix A of the statement of work. In clause 10, it says that the principal working language is English, with the possibility of English and French. I accept this. However, I was surprised that the deliverables were to be in English only, and that the in‑person presentation would be in English, or French, if necessary. I thought Canada was a bilingual country. Even in the contracts, it would seem that that is not the case.

Hon. Anita Anand (Minister of National Defence)

Third party experts may be important in 3 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.

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. (…)

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. (…)

(…) I want to build on the point that the deputy minister was trying to make. All of the subject matters of the contracts were in relation to corporate improvement, improvements in the way in which the institutions function. This was not a matter of state secrets being provided. (…)

In them, there are standard clauses that include a number of clauses to protect against conflicts of interest. Let me give you some examples. Suppliers are required to maintain the confidentiality of all information provided to them in connection with a contract. They can't disclose any such information without the written permission of the Government of Canada. They're also required to follow the applicable security measures in the contract. (…)

The value of the contracts awarded to McKinsey in 2021 to 2022 of approximately $17 million represented 0.07% of our overall expenditures that year. The idea embedded in this figure is that it's a very low amount of our overall expenditures.

Mrs. Kelly Block (Carlton Trail—Eagle Creek, CPC)

This committee was very clear in its order for unredacted documents. However, many departments have made the decision and have taken it upon themselves to determine that they have the right to limit the powers of the House of Commons.

Minister, we received a letter from your department about the redactions made. I just showed you one page. I have more. They were made or done in the name of security, yet you have just stated here that these were not security matters. I'm wondering if you could explain why many of the redactions included the number of weeks McKinsey worked, their weekly pricing and descriptions of the services they offered. Who ordered these redactions? If it wasn't you, who was it and why?

Hon. Anita Anand: We have made every effort while respecting disclosure requirements. I will say that the contract is between McKinsey and the Government of Canada. We are both, as contracting parties, required to comply with the confidentiality provisions in that contract. On the other hand, we don't have that same contract with you or Parm or any other member on the committee. We are respecting the terms of the contract and complying with the disclosure requirements to the best of our ability.

Mr. Bill Matthews: The test we are using in terms of redactions is built around the same test used for access to information. That would include commercially confidential information. We are trying our best to align with other departments in terms of consistent approaches, but given the timelines and the volume of documents, there are a number of inconsistencies, I'm sure. We're doing our best to work through that process.

Mr. Garnett Genuis

It's important to say that, when a parliamentary committee requests information, it's not the same standard as a citizen using ATIP. Parliamentary committees have the status of a court, and if a court requests documents, I believe you would provide them.

Speaker Rota has been very clear—and this is a convention that goes back a hundred years—that parliamentary committees have a right to unfettered access to documents, yet repeatedly your government, across departments, has not applied that standard, including in very basic, simple cases. We're not talking about a potential threat to national security. We're talking about commercial information that would be provided to the committee in camera so that we would be able to review it. Very specifically on the issue of redactions, will you apply the standard of Speaker Rota's ruling? (…)

Minister, it's a legal requirement. It's not for you to tell the Speaker, “I'm sorry. I'm going to strike a balance that's outside of the law.” The Speaker has said that parliamentary committees have a right to order documents. I would submit to you that, if you went before another court, and the court said that you must hand over the documents, you would hand over the documents, yet you're treating a parliamentary committee that has the established constitutional right to order these documents in a different way. I would ask you to take that back and consider it, because you have a legal obligation.

The Chair

The green book by Bosc and Gagnon is very clear. I want to quote quickly from it. It says, “The Standing Orders do not delimit the power to order the production of papers and records. The result is a broad, absolute power that on the surface appears to be without restriction.”

I have to express my extreme disappointment that this department is one of several from this government that has refused to recognize the supremacy of Parliament and a very clear directive from this committee to provide unredacted documents. I hope you will provide those to us as soon as possible.