Province steps in as MPI untendered contracts come to light
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Manitoba Public Insurance awarded more than $12 million in untendered contracts to global consulting giant McKinsey & Company in a desperate bid to stop additional cost overruns for its Project Nova, the Free Press has learned.
Concern about the untendered agreements has prompted Justice Minister Kelvin Goertzen (minister responsible for MPI) to take the unusual step of issuing a ministerial directive to limit the Crown auto insurer awarding future contracts outside the normal competitive bid process.
In an interview, Goertzen said he was “generally concerned” about all untendered contracts. However, in this instance, he agreed MPI had to bypass the competitive bid process to get Project Nova — its significantly over-budget online insurance portal — back on track.
However, several hours later, Goertzen’s office emailed a statement indicating he was seeking a ministerial directive: a powerful legal tool used by cabinet ministers to directly intercede in Crown corporation operations in exceptional circumstances.
“While our government is reluctant to interfere in the operations of Crown corporations, there are expectations both of the public and government that need to be met,” the statement reads.
“I have advised MPI officials of this concern and am recommending a ministerial directive under the Crown Corporations and Governance Accountability Act to bring greater transparency, oversight and stricter criteria regarding untendered contracts issued by Manitoba Public Insurance Corp.”
Started in 2018, Project Nova had an original price tag of $100 million. However, in the years following, its costs ballooned to $290 million.
In its latest rate application decision (Jan. 11), the Public Utilities Board rebuked MPI for a lack of management control leading to the increased project costs.
In October 2021, arguing a competitive bidding process would lead to further delays, MPI president and chief executive officer Eric Herbelin, in consultation with his executive team, opted to award a $2.3-million untendered contract to McKinsey for a “diagnostic assessment” of Nova.
In February 2022, MPI agreed to award McKinsey an untendered six-month, $5-million contract to oversee Nova. McKinsey was also awarded, without tender, an option for a second six-month, $5-million extension that was exercised in October 2022.
Byron Williams, a lawyer who represents the Consumers Association of Canada-Manitoba at PUB hearings, said he does not accept the argument contracts needed to be awarded to McKinsey without tender.
MPI was fully aware in September 2021 that Nova was in trouble and needed more project management expertise, he said.
“Untendered contracts of this magnitude are bad practice,” Williams said Tuesday. “In our client’s view, MPI should have known by September or October 2021, they were struggling. There was more than enough time to have a full competition or an expedited competition.”
Williams also noted, for three years prior to McKinsey starting its work, MPI had already been receiving detailed oversight from consulting firm PricewaterhouseCoopers, which won a tendered, $2.5-million contract to monitor Project Nova on behalf of MPI’s board of directors.
MPI sources confirmed PwC provided detailed briefings to the Crown’s board that identified many of the issues McKinsey was purportedly brought in to address. The sources said those reports were extremely unflattering for the MPI executive team and those tasked with working directly on Project Nova.
To date, MPI has not provided a detailed explanation of why, after three years of work by PwC assessing Project Nova, it needed to bring in McKinsey for a $2.3-million “diagnostic assessment” without a proper tendering process.
NDP Leader Wab Kinew said MPI and the Progressive Conservative government owe Autopac customers a better explanation about why they have spent so much money on untendered contracts.
Kinew noted the PUB recently approved a 1.5 per cent Autopac rate increase, in large part because of Project Nova.
“This is costing Manitobans money,” Kinew said. “The mess at MPI has already turned what should have been a rate decrease into a rate increase. Where was the oversight from government before now?”
Born and raised in and around Toronto, Dan Lett came to Winnipeg in 1986, less than a year out of journalism school with a lifelong dream to be a newspaper reporter.