PACP meeting 9 · 2025-10-09 — Committee Evidence — LegisWatch

Summary

This House of Commons Standing Committee on Public Accounts meeting examined Report 5, “Professional Services Contracts,” from the 2024 reports of the Auditor General of Canada, focusing on contracts awarded to McKinsey & Company. Witnesses included Andrew Hayes (Deputy Auditor General), Arianne Reza (Deputy Minister, Public Works and Government Services), Stefanie Beck (Deputy Minister, National Defence), Ehren Cory (CEO, Canada Infrastructure Bank), Catherine Poulin (Assistant Deputy Minister, Public Works), Dominic Laporte (Assistant Deputy Minister, Public Works), Nicholas Swales (Principal, Auditor General), and Paul Prévost (Chief, Professional Conduct and Culture, National Defence).

Andrew Hayes stated that the audit found frequent disregard for federal contracting policies across 20 organizations, with about 70% of 97 contracts awarded non-competitively and many lacking justification or clear deliverables. He emphasized that existing rules work only if followed and that the single recommendation—to proactively address conflicts of interest—has been acted on by the Treasury Board Secretariat.

Arianne Reza acknowledged weaknesses in compliance, documentation, and quality control, and outlined measures taken by PSPC, including new mandatory checklists, a chief of contract quality assurance, and limits on non-competitive national master standing offers. She noted that PSPC has stopped non-competitive benchmarking contracts and now requires clear justification from client departments, and she agreed with the recommendation on conflict of interest safeguards.

Stefanie Beck reported that DND awarded 15 contracts worth $29.6 million and has fully implemented all management action plans from the AG report and prior reviews. She highlighted new mandatory conflict of interest screening for all hires and staffing actions, as well as enhanced information management and training to ensure proper documentation and compliance.

Ehren Cory explained that the Canada Infrastructure Bank had three contracts with McKinsey, totalling $1.4 million, all from 2018-2020, and has not contracted with McKinsey since. He noted that the CIB has updated its procurement policy and code of conduct, and now requires contract owners to confirm no conflict of interest before any procurement moves forward, in line with the AG’s recommendation.

During questioning, members raised the ArriveCAN scandal and recovery of funds from GC Strategies. Arianne Reza and Catherine Poulin clarified that PSPC is seeking $198,000 in overbilling from GC Strategies through legal action, but that the broader $64 million recovery is the responsibility of the Canada Border Services Agency. Members also discussed the need for PSPC to better challenge client departments on procurement strategies, with Dominic Laporte noting that new measures require ADM approval for large professional services contracts and trigger reviews when only one bidder appears.

Sébastien Lemire questioned the increase in consulting budgets despite promised cuts, and asked about in-house expertise and reliance on firms like IBM. Arianne Reza noted that PSPC employs 500 engineers and that some expertise is hard to find in-house, while Dominic Laporte said PSPC’s budget for professional services decreased from $3.8 billion to $2.5 billion in 2023-24. Lemire also asked the Canada Infrastructure Bank to provide a written response on its regional economic development vision.

The committee also discussed the balance between national security and fair procurement, with Stefanie Beck and Arianne Reza emphasizing competitive processes and the new Defence Investment Agency. Andrew Hayes encouraged departments to understand why rules exist and to strengthen internal audit functions. No procedural debate, motions, or votes were recorded.

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Witnesses · 8

Andrew Hayes

Deputy Auditor General, Office of the Auditor General

Opening remarks

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 Anishinabe 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 money. 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 the organizations. For example, in 10 of the 28 contracts that were awarded through a competitive process, the bid…

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Arianne Reza

Deputy Minister, Department of Public Works and Government Services

Opening remarks

Thank you, Mr. Chair. Let me begin by acknowledging that we are gathered on the unceded territory of the Algonquin Anishinabe people. I want to thank this committee for providing Public Services and Procurement Canada with an opportunity to discuss the Auditor General’s report number five, on professional services related to McKinsey & Company. The report is, in fact, part of a series of audit reports. In 2023, the then prime minister asked the then president of the Treasury Board and the then minister of PSPC to undertake a review of contracts awarded to McKinsey. Moreover, the Office of the Procurement Ombud conducted their own independent study. Taken together, the findings and recommendations of these studies point to three areas for improvement: first, the need to better comply with existing procurement rules; second, the need to adequately document procurement decisions; and third, the need to improve overall quality control over our procurement practices. These areas for improvement are in no way unique to the focus of the audits on McKinsey contracts. Rather, these areas of improvement apply across all commodities and the procurement function. There is a fundamental…

Dominic Laporte

Assistant Deputy Minister, Procurement Branch, Department of Public Works and Government Services

Opening remarks

Yes, there are a lot of things that have changed since McKinsey. I'm very thankful also to the OAG for sharing some of those lessons. We want to make sure that competition is the norm. In the future, for any benchmarking professional services that we need or that client departments will need, we're going to make sure it's a competitive process and one of our competitive supply arrangements or standing offers is being used. I would say that even those non-competitive national standing offers remain very exceptional. They now require ADM approval. This is not something that I want to use in the future. We made that very clear. In terms of the challenge function, that was also almost a blessing from the OAG. Oftentimes, if you're a PG-03, you have to deal with the client at the DG level. It's not that easy to say, “We're going to challenge you on the procurement strategy that you want to put forward. You shouldn't be using a sole source here. We want you to compete, and it's going to take more time.” The statements that we had as part of the OAG report were very well received by our staff. It gives us this flexibility to say no to the client. We can tell them if it is not the…

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Public Accounts

Summary

Witnesses · 8

Bills mentioned