Question Period Note: Office of the Auditor General Performance Audit on Professional Services Contracts

On Tuesday, June 4, 2024, the Office of the Auditor General published its performance audit on Professional Services contracts awarded to McKinsey & Company.

PSPC welcomes the report of the Office of the Auditor General on Professional Services Contracts

• As the central purchasing agent for federal departments and agencies, PSPC is committed to conducting procurements in an open, fair, and transparent manner in accordance with established policies and procedures
• Contract management is a shared responsibility between PSPC and its clients, who are other government departments, agencies, and Crown Corporations
• We are focused on strengthening all aspects of contract management as part of the federal procurement process. This includes ensuring rigour that all procurement files are managed and documented in accordance with established directives, policies, and procedures, while ensuring oversight and transparency in contract administration

If pressed on the OAG recommendation/conflict of interest:

• PSPC accepts the Auditor General’s recommendation related to Conflict of Interest. As a department that has a proactive and rigorous process to identify actual or perceived conflicts of interest in the procurement process, PSPC will support the Treasury Board of Canada Secretariat in the implementation of its new mandatory procedures associated with professional services under the Directive on the Management of Procurement

If pressed on the implementation of measures outlined in management action plans:

• The findings in this report are in line with a number of previous internal and external reviews related to professional services contracts with McKinsey & Company and other procurements
• PSPC has instituted several changes and process improvements to address shortcomings in documentation, including implementing a new mandatory professional services Procurement File Completion Checklist
• In addition, a new position of Chief, Contract Quality and Records Compliance Office, has been created to improve rigour and ensure that critical elements of decision-making throughout the procurement process are properly documented, that guidelines and tools are put in place and that quality is being actively monitored 

If pressed on the non-competitive national master standing offer (NMSO) for professional services:

• Establishing a non-competitive NMSO with McKinsey was the approach, at the time, to support departments in the management and delivery of complex projects and programs, but we recognize that a review and modernization of this procurement vehicle was overdue
• In light of this, PSPC made significant process changes to improve the rigour in its administration of non-competitive standing offers for benchmarking professional services
• These changes include requiring that client departments draft all Statements of Work themselves and that a sole-source justification be provided for every contract awarded under a non-competitive standing offer for benchmarking services

If pressed on the lack of documentation:

• PSPC agrees that procurement files should include documentation that outlines decisions
• We are taking action to better document client driven decisions and actions and to promote recordkeeping diligence

PSPC welcomes the report of the Office of the Auditor General on Professional Services Contracts

• As the central purchasing agent for federal departments and agencies, PSPC is committed to conducting procurements in an open, fair, and transparent manner in accordance with established policies and procedures
• Contract management is a shared responsibility between PSPC and its clients, who are other government departments, agencies, and Crown Corporations
• We are focused on strengthening all aspects of contract management as part of the federal procurement process. This includes ensuring rigour that all procurement files are managed and documented in accordance with established directives, policies, and procedures, while ensuring oversight and transparency in contract administration

If pressed on the OAG recommendation/conflict of interest:

• PSPC accepts the Auditor General’s recommendation related to Conflict of Interest. As a department that has a proactive and rigorous process to identify actual or perceived conflicts of interest in the procurement process, PSPC will support the Treasury Board of Canada Secretariat in the implementation of its new mandatory procedures associated with professional services under the Directive on the Management of Procurement

If pressed on the implementation of measures outlined in management action plans:

• The findings in this report are in line with a number of previous internal and external reviews related to professional services contracts with McKinsey & Company and other procurements
• PSPC has instituted several changes and process improvements to address shortcomings in documentation, including implementing a new mandatory professional services Procurement File Completion Checklist
• In addition, a new position of Chief, Contract Quality and Records Compliance Office, has been created to improve rigour and ensure that critical elements of decision-making throughout the procurement process are properly documented, that guidelines and tools are put in place and that quality is being actively monitored 

If pressed on the non-competitive national master standing offer (NMSO) for professional services:

• Establishing a non-competitive NMSO with McKinsey was the approach, at the time, to support departments in the management and delivery of complex projects and programs, but we recognize that a review and modernization of this procurement vehicle was overdue
• In light of this, PSPC made significant process changes to improve the rigour in its administration of non-competitive standing offers for benchmarking professional services
• These changes include requiring that client departments draft all Statements of Work themselves and that a sole-source justification be provided for every contract awarded under a non-competitive standing offer for benchmarking services

If pressed on the lack of documentation:

• PSPC agrees that procurement files should include documentation that outlines decisions
• We are taking action to better document client driven decisions and actions and to promote recordkeeping diligence

In January 2023, the House of Commons Standing Committee on Government Operations and Estimates requested that the Auditor General of Canada conduct a performance and value-for-money audit of contracts awarded to McKinsey & Company since January 1, 2011 by any department, agency or Crown Corporation. A motion to concur was unanimously passed by the House of Commons on February 7, 2023.

The purpose of the audit was to determine whether professional services contracts were awarded to McKinsey & Company in accordance with applicable procurement policies and whether value for money for those contracts was obtained.

The audit included 20 of the 21 departments, agencies and Crown Corporations that reported having contracts with McKinsey & Company during the period of the audit, from January 1, 2011 to February 7, 2023. During this period, 10 federal departments and agencies and 10 Crown corporations awarded 97 contracts to McKinsey & Company for professional services that included benchmarking, management consulting, and information technology consulting, valued at $209 million.

• Audit samples were drawn from a population of 97 contracts, from 10 departments and agencies and 10 Crown Corporations
• Of the population of 97 contracts, Public Services and Procurement Canada (PSPC) was the Contracting Authority for 24 contracts, valued at $104.6 million
• 8 of the 24 contracts where PSPC was the Contracting Authority included in the sample of 33 contracts, were reviewed by the Office of the Auditor General from a value for money perspective
• The report examined contracts awarded under the PSPC non-competitive National Master Standing Offer (NMSO) awarded to McKinsey for benchmarking services, and noted that 16 contracts by 3 departments and agencies and 3 contracts by 2 Crown corporations were issued using this tool. These 19 contracts were awarded from February 2021 to February 2023, with a total maximum contract value of $42.4 million
• The report identifies shortcomings in administering the procurement process, specifically regarding compliance with procurement rules, documenting of procurement decisions, and quality control over procurement practices
• The Office of the Auditor General’s report acknowledges that some procurement policies and approaches have changed since the audit took place