Government Operations Committee on June 10th, 2024

[Karen Hogan]

I think there are a lot of rules, and at times they can be complicated. There was a recent announcement by the Treasury Board about adding certain certifications around procurement processes, and I appreciate that additional layer that was added. It wasn't about adding a rule but about reminding people to certify that they had done certain things in the rules.

I would tell you there is some confusion if we look at the national master standing offer. I think most organizations believed that, because they had to use the standing offer, they could just pull off of it. What's clear is that it is just an offer of goods and services; it isn't a contract. When you create a contract that is done in a non-competitive way, the rules kick in that say you should justify why, and often that justification was lacking. I think it was that folks didn't necessarily understand what the rules were there. I think it's a bit of both: there are a lot, they're complex, and they're not always easy to follow.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you.

[The Chair, Conservative, Kelly McCauley]

Thank you, Mr. Jowhari.

Ms. Vignola, please go ahead.

[The Vice-Chair, Bloc, Julie Vignola]

Thank you very much, Mr. Chair.

Ms. Hogan, gentlemen, welcome. Thank you for being with us.

McKinsey is a small player in Canada. On the other hand, it's a big player internationally. The firm has the power to influence, and it's capable of pulling a lot of strings.

Among the 340,000 public servants, do you think there are many who are former McKinsey employees, at all levels?

[Karen Hogan]

That's a question I can't answer. I haven't done a survey to find out how many public servants previously worked at McKinsey.

[The Vice-Chair, Bloc, Julie Vignola]

Who would be able to determine this? Would it be the Conflict of Interest and Ethics Commissioner?

[Karen Hogan]

I don't know who could determine that. Treasury Board could probably figure it out.

I refer you to one of our findings. That's why declaring conflicts of interest is important during a procurement process.

[The Vice-Chair, Bloc, Julie Vignola]

I imagine these declarations are made once a year, as is the case for MPs, but not necessarily at the time a contract is awarded.

Is that correct?

[Karen Hogan]

That is why I recommended that a conflict of interest declaration be required at the time of a procurement.

[The Vice-Chair, Bloc, Julie Vignola]

Thank you.

There were several things that shocked me when I read your report, which is excellent. I congratulate you, and the members of your team, on your work.

I note that in about 45% of the cases you studied—these are not all contracts, but a sample—people did not know what they wanted, or whether it was necessary, or whether they received what they wanted, or whether they achieved their objectives. It's scary.

I wonder about the sustainability of these contracts in terms of the transfer of skills into our public service, as well as the duration over time and the value, or added value, of these contracts.

Are you asking yourself the same questions?

[Karen Hogan]

Yes, I do from time to time.

I think it really depends on the purpose of the contract. For example, in this case, we're talking about contracts that were for benchmarking, or to support a transformation. Sometimes it was to obtain professional advice. So it's difficult to assess. It's not like creating an application, as this type of work is very tangible.

In the case we're talking about, it was often a case of getting expert advice. In such cases, it's sometimes difficult to know whether the deliverables have actually been received.

In my opinion, there are some basic elements that should have been respected. A good way to start would be to ask yourself what the need is that you're trying to fill. Almost half of the contracts we looked at didn't have the documentation related to this question.

There should be an assessment or estimate of costs in advance to ensure that the budget is available. In 91% of the contracts we evaluated, this assessment or estimate did not exist. These are basic elements. At the end of the day, we found that for almost 20% of the contracts we evaluated, we had no way of knowing whether the deliverables had actually been received. As a result, I have a lot of questions. I think the problem starts right at the beginning.

[The Vice-Chair, Bloc, Julie Vignola]

So there's a problem right from the start of the process.

In one of my other lives, I was coordinator of the Stratégie d'intervention Agir autrement for underprivileged neighbourhoods. Within this framework, there was no question of launching a project if there was no assurance of sustainability. We didn't want to have to constantly put money back into the project to be able to maintain a resource.

What you're telling me is that, right from the start, we don't know what we want. What's more, in the deliverables, we're not sure, we don't have proof that we've analyzed the resources and offered this sustainability to our public servants.

Did we also forget, before turning to outside resources, to analyze the resources available internally and target the people who were capable of changing ways of doing things in order to bring added value?

[Karen Hogan]

At the beginning of the process, there's the needs analysis. What is the contract intended to achieve? If this information is missing, we're already starting a little late.

In the public service, contracting is often about helping the government to change, to transform itself. Having opinions from outside the public service is essential. It's human nature to always want to do things the same way. That's why we sometimes need to turn to someone from the outside.

That said, I would still expect there to be a report, something to demonstrate the value added by the contract.

[The Vice-Chair, Bloc, Julie Vignola]

I remember hearing someone here once ridiculing a newly appointed public servant who had ideas and whose ideas had been used. Having a fresh set of eyes can be helpful in better identifying what could be improved internally. This seems to be not only underutilized, but also somewhat ridiculed. The assumption is that if someone is in an entry-level position, they can't think.

In your opinion, should this mentality change? Would staff occupying the highest hierarchical levels ever need to go and sit in the cafeteria with a new employee?

[Karen Hogan]

My own office went through a transformation to get staff to work more efficiently. At first, I noticed some resistance to change. To bring another point of view, I then hired a few people from outside the office who came from the public service. As soon as there was openness to another point of view, we came up with a lot of great ideas. So I guess there are a lot of people in the public service who have good ideas for transforming government.

[The Chair, Conservative, Kelly McCauley]

Thank you very much. That is your time.

Mr. Bachrach, please, go ahead, sir.

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

Thank you, Mr. Chair.

Thank you, Ms. Hogan, for being back with the committee to share your work.

There are some disturbing findings, for sure. I think the questions my colleagues have already asked start to get at the nub of what we're trying to figure out as a committee.

In my view, there are two theses here. One is that the government is tight with McKinsey and is showing favouritism towards one vendor. The other is that there's a perception within the public service that the rules are overly restrictive, and in order to get things done, they have to break the rules.

I'm wondering which of those, in your view, is more likely to be the dominant contributing factor in what we're seeing.

[Karen Hogan]

In some of our findings, we found there were six contracts that seemed to be designed to suit McKinsey & Company, whether it was organizations waiting for them to have their own national master standing offer so that they could use them for benchmarking services when there were other existing standing offers with benchmarking services, or just changing their procurement strategy, as we talked about earlier on.

We saw that in six contracts, but what's more concerning to me is the frequent disregard for the rules. When we looked at a sample, in probably more than half, there was more than one rule that wasn't followed. It isn't that we just highlighted it when it was one rule.

This just points to both things working. There might sometimes be a tendency to look for a vendor, but there is clearly a tendency to not apply all of the rules, and we need to figure out why that is happening in the public service.

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

Would you expect to see the same pattern if your investigation were broadened to include other vendors?

[Karen Hogan]

Based on the findings here, because there were only six contracts that appeared to suit McKinsey, I have no reason to believe that this is unique to McKinsey & Company. I would expect to see similar behaviours for other professional services and other contracts in general.

When you add on the layer that we found issues with the rules being followed in nine out of 10 departments and agencies, and in eight out of 10 Crown corporations, that is a wide range, so it can't just be limited to McKinsey.

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

I'm curious. In the course of your work, did you speak with the people in charge of these procurements, and did you ask them why they seemed to be flagrantly breaking the rules that govern their work?

Did they provide an explanation?

[Karen Hogan]

We typically review files and then speak to individuals. On the degree to which we communicated, I'll have to turn to Nick and see how much he engaged, but we would have engaged with every single one of the 20 organizations.

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

Did you ask them why?

[Nicholas Swales]

We certainly spoke to the organizations, bearing in mind the time frame for the contracts.

In most cases, the individuals responsible were not in that role anymore. But Ms. Hogan made a comment earlier, particularly around the NMSO, that there was a lot of confusion about how the rules were supposed to be applied in that case. That came through in the conversations we had.

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

The people in charge of procurement were confused as to the rules they were required to follow?