Time to overhaul how Ottawa hires contractors, procurement watchdog tells MPs

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The federal procurement watchdog told MPs Monday that the government’s multibillion-dollar contracting system urgently needs a wide-ranging overhaul to increase competition and sideline substandard contractors.

Alexander Jeglic, the Procurement Ombud, said that after years of expressing concern through various reports, he is now deliberately using stronger language to underscore the importance of the issue.

“I do think the time is now to act. We really need to consider federal procurement in its totality. I know it seems like a pretty dramatic thing to say,” he said, drawing MPs’ attention to the fact that his office has raised numerous concerns over several years now about the way Ottawa spends billions of dollars each year on outside help.

“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 Band-Aid solutions are the answer. I think there needs to be a significant rethinking as to how federal procurement is done,” he said.

The watchdog said a clear plan for weeding out poor-performing contractors and boosting genuine competition for government contractors would be two priority areas for improvement.

Mr. Jeglic appeared before the Commons Government Operations Committee, where he spoke publicly for the first time about his office’s recent report that found “a strong perception of favouritism” in federal contracts awarded to global consulting firm McKinsey and Company.

A spokesperson for McKinsey pushed back on the ombud’s report’s findings when they were released, saying the company follows all procurement laws and any suggestion to the contrary is inaccurate.

Consulting is just one area of federal contracting that has come under scrutiny in recent years. Two parliamentary committees, as well as several federal watchdogs, have also been probing IT contracts – with a particular focus on how public funds were spent to develop the federal government’s ArriveCan app for cross-border travellers.

Internal audits of McKinsey contracts raise fairness, transparency concerns

Mr. Jeglic’s office was one of those watchdogs, and released a report in January that raised several concerns about ArriveCan, which cost an estimated $59.5-million.

That ArriveCan report found outsourcing companies repeatedly won contracts by listing subcontractors who ultimately did no work, a practice Mr. Jeglic has called “bait and switch.” His office is planning further study into the practice, provided that it receives additional federal funding.

Mr. Jeglic’s most recent report said McKinsey was awarded contracts with a total value of $117-million between 2011 to 2023, with the value of contracts significantly increasing between 2019 and 2022.

The Globe first reported in January, 2022, that the value of outsourcing contracts to McKinsey had climbed steadily under the Liberals.

Throughout 2016 and 2017, Dominic Barton served as both the head of McKinsey and the chair of a federal economic advisory council to then-Liberal finance minister Bill Morneau. Mr. Barton has denied any connection between his volunteer advisory work and the growth in federal contracting with McKinsey.

A 2023 federal government review found no evidence of political interference with respect to the McKinsey contracts.

In response to questions from Liberal MPs, Mr. Jeglic said Monday that his review did not find any evidence of fraud or political interference. He said there was one case where a minister, Filomena Tassi, was involved in approving a McKinsey contract, but he said that was because the rules required ministerial approval for a contract of that size.

Mr. Jeglic said his main recommendation for improving the procurement system is for Ottawa to develop a way to grade private contractors.

“I do think a part of this is an avoidance of poor performers. Currently, there is no vendor performance management framework,” he said.

He also recommended simplifying the rules and ensuring there is more genuine competition to encourage lower prices and reduce the need for sole sourced contracting.

“A lot of money is ultimately wasted where competitions lead to no competition in the pricing,” he said.

The federal government announced a package of measures in March aimed at improving federal procurement practices. This included updated rules for managers, strengthened conflict of interest policies and launching a series of government-wide audits related to contracting.

Procurement Minister Jean-Yves Duclos and Treasury Board President Anita Anand announced the policy updates on the same day that the government revealed an internal review found nearly $5-million in fraudulent billing by three private subcontractors. Ottawa has declined to identify the three subcontractors.

In an interview after his appearance Monday, Mr. Jeglic said the government’s recent package of reforms is positive provided it is fully implemented.

“But I wouldn’t describe it as transformational,” he said.