The rise of the Department of McKinsey

The Department of McKinsey is an up-and-coming part of official Ottawa, with a raft of near-instant expertise available for a ministry that just can’t afford to wait but can afford the very best advice.

The department (known more formally as McKinsey & Co.) has teamed up with eight federal ministries and agencies over just the last four years, most notably the defence and immigration departments, according to an analysis by Carleton University.

Since 2015, the management consultancy has been awarded 34 contracts valued at least $116.8-million, a turnaround from the total of $0 that the firm received in the final stretch of the Harper government. And as The Globe and Mail reported earlier this week, those federal contracts account for up to 10 per cent of the consultancy’s gross revenue for its Canadian operations between November, 2016, and February, 2022.

A Commons committee is probing the relationship between McKinsey and the federal government, a necessary effort given the government’s ties with Dominic Barton, a former global managing partner of McKinsey. Other later entries on his resume include providing policy advice to the government and, of course, a two-year stint as Canada’s ambassador to China. Mr. Barton told the committee that the process for awarding contracts is “very rigorous” and said he was not involved in any business given to his former firm.

The opposition parties continue to poke away at those ties, and potential conflicts of interest that might exist. But in truth, McKinsey’s success in burrowing into a wide swath of government departments is a relatively small manifestation of a much bigger problem with the Liberal government, which is spending billions of dollars a year on outsourced expertise, even as it balloons federal payrolls year after year.

One concern is transparency, including the question of potential conflicts between private sector clients and the government. To state the obvious: such conflicts of interest do not automatically equate to wrongdoing.

But McKinsey has advised the federal government on military and defence computer systems, and has also provided advice to U.S. defence and information technology companies. That clearly raises questions about conflict of interest, which the Commons committee is right to probe. There are bound to be many other examples of conflicts involving companies other than McKinsey, given the scale of outsourced contracts: 380,316 since the start of the 2018 fiscal year for a broad range of services, not just consulting.

There is also the matter of exactly what services are being purchased. For the most part, that detail is shrouded by privacy and competitive concerns, aided by Ottawa’s reflexive secrecy. Some departments do not even disclose the dollar value of contracts, claiming even that limited information would damage Canada’s economic interests or bargaining power. It’s impossible to determine the merits of such contracts without more detail. (McKinsey has said its work is non-partisan in nature.)

A related concern is accountability. In theory (if, sadly, not so much in practice), a deputy minister and the department that they run will be called to account should grandiose proposals crash to the ground. That won’t happen with short-duration outsourcing contracts. By the time the glow has faded from overly sunny projections, the consultants have long since left the building.

But the more fundamental problem is the cost of outsourcing, a concern all the more pressing because of the government’s hiring spree over the last seven years.

The amounts paid to McKinsey are just a few extra dribbles in the vast sea of spending that is the federal budget. However, there is the much larger amount that Ottawa pays on outsourced contracts – at least $22.2-billion in fiscal 2022, according to the tally from the Carleton study. Even by government standards, that’s real money.

In the same fiscal year, the Liberals added 8,570 new employees to the core public service, part of an expansion that has increased the ranks of civil servants by more than 30 per cent since the Trudeau government first took power.

Whatever the explanation for the Liberals’ enthusiasm for outsourcing, including consultancies such as McKinsey, lack of staff is not it.

Canadians deserve clarity on the rise of the Department of McKinsey. More than that, they deserve a plan from the Liberals on how to roll back the ballooning cost of government.