Procurement Ombudsman Calls for Overhaul of Federal Contracting Procedures Amid Favouritism Allegations

Procurement Ombudsman Alexander Jeglic prepares to appear before the Standing Committee on National Defence in Ottawa, on Oct. 24, 2023. Justin Tang/The Canadian Press

Procurement Ombudsman Alexander Jeglic is calling on the federal government to overhaul its contracting process following the publication of his report detailing “a strong perception of favouritism” in the awarding of contracts to a U.S. consulting firm.

Mr. Jeglic told the Standing Committee on Government Operations and Estimates on April 29 the current procurement process suffers from multiple “systemic issues.”

“I do think the time is now to act, we really need to reconsider federal procurement in its totality. I know that seems like a pretty dramatic thing to say,” Mr. Jeglic said.

“I’m fearful that if I don’t start acting in a more aggressive manner, significant changes will not come. And I don’t think bandaid solutions are the answer. I think there needs to be significant rethinking as to how federal procurement is done.”

Mr. Jeglic’s statements come after the publication of his report on procurement practices related to U.S. multinational consulting firm McKinsey & Company.

The report concluded the company was handed $43 million in contracts despite an absence of justification for being chosen. McKinsey & Company is headquartered in New York City, and has offices in Toronto, Montreal, Calgary, and Vancouver.

The ombudsman’s report also found the federal government had created a “strong perception” of favouritism toward McKinsey and that Public Services and Procurement Canada had not fully justified why the company had been chosen.

“The lack of diligence and oversight of departments in this regard is troubling,” the report said. “Swift action is required to ensure processes are developed so that this situation does not repeat itself.”

McKinsey has earned $112 million from government contracts since 2011, making more than $30 million in 2020 alone, the report found.

Conservative MPs have previously made accusations on the matter against Prime Minister Justin Trudeau, saying his relationship with former McKinsey head Dominic Barton may have played a role in the company being awarded contracts. Mr. Barton left the company in 2018 and became Canada’s ambassador to China the following year.

Among the 32 McKinsey contracts examined by the procurement ombudsman, seven were from competitive procurement processes, but the report noted that two had been modified following bids from McKinsey.

The first, a Canada Border Services Agency contract worth $1.8 million, was modified to allow McKinsey to fully bid on it, the report found. A second contract worth $450,000 for Innovation, Science and Economic Development Canada was also modified.

Conservative MP Larry Brock asked Mr. Jeglic at the committee meeting if an argument could be made that favouritism toward McKinsey over other contractors contained an element of fraud.

Mr. Jeglic said he found no evidence of fraud, adding that there was not a single department that showed multiple examples of favouritism.

When pushed if he thought an argument could be made for the government defrauding the taxpayer by favouring McKinsey over other vendors, Mr. Jeglic said, “Could an argument be made? Yes. Did we see it? No.”