Global management consulting giant McKinsey and Company says its contracts with the federal government make up as much as 10 per cent of its gross revenue in Canada.
The Canadian revenue figures for McKinsey’s Canadian operations, contained in a U.S. court filing, show how integral federal government contracts are to the New York-based firm, which has offices in Toronto, Montreal, Calgary and Vancouver.
McKinsey’s contracts with Ottawa are being investigated by the House of Commons committee on government operations and estimates, because of the company’s ties to the Liberal government and the many international controversies in which it has been involved.
The Globe and Mail has reported that the total value of federal contracts awarded to McKinsey since 2015 is at least $116.8-million, up from a previous estimate of $101.4-million provided by the government earlier this month.
The filing was made in May, as part of a court case in Puerto Rico. The document lists many of McKinsey’s significant clients in different countries.
In the filing, Dmitry Krivin, a partner in the company’s U.S. risk practice, says under oath that the Canadian government accounted for 5.01 per cent to 10 per cent of McKinsey Canada’s revenue between Nov. 26, 2016 and Feb. 28, 2022. A Globe and Mail search of the document found no other national government mentioned as a major client of a McKinsey local subsidiary.
The court documents also say that private-sector clients – such as Montreal-based Bombardier, Toronto Dominion Bank, Mastercard, the Canada Pension Plan Investment Board, Canadian Tire, Shell PLC and State Street Corporation – each accounted for 1.01 per cent to 5 per cent of McKinsey Canada’s revenue during the same period.
The filing mentions individual United States government departments. For instance, the U.S. Department of Defence is listed as accounting for 20.01 per cent to 25 per cent of the gross revenue for McKinsey’s Washington branch during the period from March 1, 2021 through Feb. 28, 2022.
Alley Adams, head of external relations at McKinsey Canada, said contracts awarded to the firm represent a small share of the Canadian government’s outsourcing compared to other consulting firms. Deloitte, Ernst and Young, KPMG and PricewaterhouseCoopers were paid a combined total of about $338-million in 2020-21 and $354-million in 2021-22, according to a Carleton University analysis.
“All of the contracts awarded to McKinsey by the federal government were won through the same competitive public procurement processes and governed by the laws and methods used to procure all goods and services in the federal government,” Ms. Adams said.
Konrad Yakabuski: The Trudeau government seems awfully cozy with McKinsey – and that demands scrutiny
In Monday’s Question Period, Conservative Leader Pierre Poilievre pressed Prime Minster Justin Trudeau about the total value of federal contracts to McKinsey, a company once headed by Dominic Barton, who has a close relationship with Mr. Trudeau and Finance Minister Chrystia Freeland.
“His friends at McKinsey are rolling in cash … where his personal friend Dominic Barton was the boss,” Mr. Poilievre told the House. “Will the Prime Minister finally answer the question? How much did he give McKinsey?”
The Prime Minister did not answer. Instead, he said he is focusing on helping people in need of dental care and low-cost housing.
NDP MP Gord Johns argued that McKinsey has been given “massive amounts of public money,” when their work could have been handled by public servants. “Justin Trudeau would rather fund his wealthy consultant friends as though they’re a government department,” he added.
Mr. Barton will appear Wednesday before the parliamentary committee reviewing McKinsey’s government contracts. He ran McKinsey for nine years, until 2018.
In the early years of the Liberal government, Mr. Barton acted as both the head of McKinsey and the chair of former finance minister Bill Morneau’s advisory council on economic growth. The council was supported by McKinsey staff and made several major policy recommendations, many of which were enacted by the government to at least some degree.
Among those suggestions was that the government dramatically increase Canada’s annual immigration targets and create a Canada Infrastructure Bank, both of which it ultimately did.
In September, 2019, after leaving McKinsey, Mr. Barton was named Canada’s ambassador to China. His foreign posting ended in December, 2021.
At the time of Mr. Barton’s appointment, Ms. Freeland told reporters he was trusted and well-known to her and the Prime Minister.
MPs resumed sitting Monday for the first time since mid-December, and the government operations committee immediately began its study of federal outsourcing to McKinsey.
The consulting giant is embroiled in many international scandals. In 2021, it reached a settlement over its role in promoting opioid sales. It is being investigated by France’s financial prosecutor over tax fraud allegations, and it was recently charged in South Africa for its role in an alleged corruption scandal.
The Globe and Mail first reported in January, 2022, that the value of federal outsourcing to McKinsey has climbed steadily under Mr. Trudeau’s government. While the company also received contracts under the previous Conservative government, the value of its federal contracting work had declined to zero in the final years before the Liberals formed government in 2015.
Amanda Clarke, a Carleton University associate professor of public administration and digital governance, told the committee on Monday that her research has found several problems with the government’s approach to outsourcing.
She said transparency around contracting information is weak and should be improved. She also said public servants have told her that internal red tape around hiring new staff, or around making decisions in general, sometimes leads departments to outsource in the interest of speed.
“Those fast solutions don’t tend to be good value for money, and they also happen in secret. And that’s what we should be worried about,” she said.
While Prof. Clarke said she was pleased to see MPs researching these issues, she also questioned the value of singling out McKinsey rather than focusing on broader concerns about outsourcing in general.
“In my opinion, I don’t think it makes sense to focus on McKinsey,” she said. “I think McKinsey is a bit of a distraction, if I’m being honest.”
Conservative MP Michael Barrett said during the meeting that McKinsey’s controversial history warrants closer scrutiny.
“Why we’re talking about McKinsey today is because of the type of company they are, the type of country we are, and the risk to damage to ‘brand Canada’ that they do,” he said.
Jennifer Carr, president of the Professional Institute of the Public Service, told MPs the growth in outsourcing ends up costing taxpayers and is hurting morale among federal workers.