McKinsey contracts could cost Trudeau
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Prime Minister Justin Trudeau sometimes seems like the Teflon PM. He has been elected and re-elected (albeit to lead minority, rather than majority, governments) despite economic decline, a pandemic and several small scandals hitting both his government and him personally.
But that could change, in light of a new scandal slowly unfolding in Ottawa.
The scandal relates to contracts paid by the federal government to McKinsey & Company, an international management consulting firm that advises both corporations and governments. The number and value of these contracts has climbed sharply under the Liberals (the previous Conservative government did little business with the company), as the government has turned to McKinsey to receive advice or to outsource tasks.
Government payments to McKinsey jumped from $3.4 million in 2018-19 to $17.2 million in 2020-21.
But the bonanza was just beginning. A subsequent $4.9 million contract to help repair the government’s beleaguered Phoenix payroll system ballooned to an estimated $27.2 million as the contract was amended.
The most recent update from the government pegs the company as receiving a grand total of $101.4 million as a result of 23 contracts awarded since the Liberals were first elected in 2015.
Three of these contracts were awarded through open, competitive processes. But strikingly, the other 20 contracted were either sole-sourced or established through a “call up,” meaning McKinsey did not have to compete with other firms to secure them.
The political problem with this eye-popping increase in contracts is that McKinsey is well-connected to figures in the Liberal Party. Dominic Barton, for example, advised the Liberal government while he was still head of the company (he stepped down in 2018). Barton also chaired former finance minister Bill Morneau’s Advisory Council on Economic Growth on a pro bono basis, and was thought to be a frequent adviser to the cabinet.
In a recent interview on the topic, journalist Robert Fife described Barton as a “buddy of the prime minister.” And in 2019, after Barton stepped down from his role at McKinsey, Trudeau handed him the plum appointment as ambassador to China.
It is eyebrow-raising enough that a Liberal-connected firm has seen its revenue jump from very little under the previous Conservative government to a total of $101.4 million since 2015, a portion of which was awarded via sole-sourced contracts.
But some of the company’s past business dealings will likely lead Canadians to question whether they want their tax dollars going to McKinsey. One example: in 2021, the company agreed to pay almost $600 million to settle state investigations into its role advising Purdue Pharma on how to “turbocharge” sales of Oxycontin during a deadly, devastating opioid crisis.
An investigation conducted by Radio-Canada found McKinsey’s growing role in advising the federal government has raised concerns from professional civil servants in Ottawa. The major concern is that Liberal ministers are increasingly turning to slick-talking consultants rather than career bureaucrats for specialized advice.
This is particularly true for Immigration, Refugees, and Citizenship Canada, which has turned to McKinsey for assistance more than any other department since 2015.
The civil servants interviewed by Radio-Canada also expressed concern about the potential influence of McKinsey over the government’s policy stances, especially with regard to immigration targets. The government recently announced that Canada would aim to accept 500,000 new permanent residents by 2025, a jump from the current number.
A boost in the number of new permanent residents (in addition to recent changes announced by the government that will lead to more temporary foreign workers entering Canada) is welcome news for corporations that are concerned about labour-market shortages but are also resistant to shouldering any additional labour costs.
This proposed increase in the number of new permanent residents lines up nicely with the recommendations in a 2016 report issued by Morneau’s Advisory Council on Economic Growth, which was chaired by Barton.
Incidentally, Barton was also the co-founder of the Century Initiative, a registered charity and lobbyist organization that advocates for increasing Canada’s population to 100 million by 2100, in large part through increased immigration targets.
Last week, in response to concerns raised over whether the new targets were the best way to address skilled-labour shortages, Immigration Minister Sean Fraser asserted that if the government’s new targets are not met, Canada would face a future in which we might not be able to “afford schools and hospitals.”
Statements such as this are more likely to provoke ridicule than concern from Canadians.
Facing pressure and mounting criticism from all three opposition parties, Trudeau has pledged the government will co-operate with the parliamentary government and operations committee, which this week voted to investigate the McKinsey contracts.
With a majority of MPs on the committee hailing from opposition parties, we are likely to hear more about McKinsey and its increasingly prominent role within the Liberal government in the months to come.
Royce Koop is a professor of political studies at the University of Manitoba and academic director of the Centre for Social Science Research and Policy.