Federal outsourcing on pace to reach record $21.4-billion this year

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Federal outsourcing is on pace to set another record this year – $21.4-billion – and the growing expense faces increasing public scrutiny over whether the billions spent each year on outside help is providing good value for taxpayers.

Parliamentary Budget Officer Yves Giroux highlighted the increase in a report Thursday that analyzes the federal government’s final round of spending plans presented to Parliament for the current fiscal year that ends March 31.

The PBO report notes that spending on outsourcing – officially described as professional and special services – has increased by more than a third since the 2017-18 fiscal year. Meanwhile, the size of the public service climbed to 335,957 employees in 2022, up from 262,696 in 2017, a 28-per-cent increase.

“You wonder, what is all that money doing?” said Mr. Giroux in an interview Thursday. He noted that Canadians are facing issues across a wide range of federal services, including passports, Veterans Affairs, Employment Insurance applications and delays for access-to-information requests.

“More public servants, more professional and special services. But the level of services and the service standards are not increasing commensurately with all these increases. Quite the opposite,” he said.

Mr. Giroux said “it’s a bit late” to be attributing service issues on the COVID-19 pandemic.

“Is it public servants still working from home? Maybe. Maybe not. Apparently, they’re more productive at home,” he said. “Evidence does not suggest that.”

Public service unions are currently seeking new labour agreements with the federal government. Union leaders have insisted that remote work is effective and say departments have done a poor job of preparing office spaces for hybrid work arrangements. Treasury Board President Mona Fortier has said all public servants must return to the office at least two or three days a week by the end of March.

The House of Commons government operations committee is holding three separate-but-related studies of outsourcing after a series of Globe and Mail stories on contract spending. The studies include one on the growth in outsourcing in general, another on the cost of the ArriveCan app and a third study on spending with consulting companies such as McKinsey & Company.

Spending plans are presented to Parliament in the form of main estimates at the start of the year, followed by up to three supplementary estimates. The $21.4-billion figure is contained in the latest supplementary estimates for the 2022-23 fiscal year. The recently tabled main estimates for 2023-24 show spending in that category of $19.5-billion, which could be increased later in the year.

For context, the federal budget for professional and special services was $8.4-billion in the 2015-16 fiscal year, when Prime Minister Justin Trudeau’s Liberal government was first elected on a platform that included a pledge to cut back on the use of external consultants.

Also on Thursday, the C.D. Howe Institute released a shadow budget that urges the government to cut back on consultants as part of a stronger focus on fiscal discipline.

The report’s authors – Bill Robson, Don Drummond and Alexandre Laurin – also question why outsourcing and the size of the public service are both on the rise.

“Perversely, this expansion of the public service has coincided with a now notorious expansion in government contracting for work public servants can or should be doing, and some well-publicized cases of reduced provision of important services,” the report states.

The C.D. Howe Institute’s shadow budget proposes a five-year freeze on departments’ operating budgets for wages and salaries. It also recommends cutting federal spending on consultants by 10 per cent.

The overarching theme of the report is that after the pandemic, it is time for the federal government to change course and focus on eliminating the deficit.

To accomplish this, the authors make several proposals that they acknowledge would likely be politically challenging for any government to implement. These include raising the federal sales tax, increasing the eligibility age for seniors benefits and not following through with the recently promised $46-billion increase in health care transfers.

The report says hard choices are necessary to ensure that the current generation that benefited from pandemic spending also contributes to paying off the cost of that spending, rather than leaving a higher debt load for future generations.

Finance Minister Chrystia Freeland has said spending to attract business investment in clean energy and to compete with recent incentives in the United States will be a centrepiece of the budget.

Mr. Robson, the institute’s CEO, said that would be ill-advised.

“It’s a bottomless pit,” he said in an interview. “I don’t think it makes sense to get into a subsidy war with the United States.”