I call this meeting to order. Good afternoon, everyone.
Welcome to meeting number 54 of the House of Commons Standing Committee on Government Operations and Estimates, a.k.a. “the mighty OGGO” or the only committee that matters.
Pursuant to the motion adopted by the committee on Wednesday, January 18, 2023, the committee is meeting on the study of the federal government consulting contracts awarded to McKinsey & Company.
We have with us Mr. Mendicino. I understand you have a five-minute opening statement. Welcome to OGGO, sir. You have five minutes.
I'm sorry. Before he starts, colleagues, we are very short of time today. I'm going to be ruthless with our time, so if you could, please watch your clock so that I'm not being rude and interrupting you. Thank you very much.
I'm sorry, Minister. Go ahead for five minutes, please.
Thank you very much, Mr. Chair.
I want to begin by thanking the members of this committee for their study of this important issue.
I'm joined by Erin O'Gorman, who is the president of the Canada Border Services Agency, and Ted Gallivan, who is the CBSA's executive vice-president.
Today I will provide an overview of the Canada Border Services Agency's operating context and its work with McKinsey.
Service contracts are widely used by governments in Canada and around the world. They're used to complement the work of Canada's public service, and our government is committed to making sure that the public service operates in a way that best serves Canadians.
The growth in the use of consultants in the public service is an important topic, and that's why the Prime Minister has asked my colleagues, ministers Fortier and Jaczek, to review the government's practices and conduct a review of all procurements with McKinsey & Company Canada.
Additionally, has written to the Office of the Procurement Ombudsman to ask for a review of the procurement processes associated with the awarding of contracts to McKinsey by all federal departments.
Let's turn to the agency we are here to focus on: the CBSA.
The CBSA operates in a challenging and fast-paced environment. The agency manages the flow of approximately 80 million travellers per year, as well as goods, at 117 land border ports of entry, 207 airports and 213 marine facilities, and it enforces more than 100 acts and regulations that keep Canadians safe.
To ensure the ongoing integrity of our borders and the safety and prosperity of our communities, the CBSA strives to be proactive, adaptive and innovative.
As other large organizations do, the agency seeks outside expertise to fill knowledge gaps or to complement its own efforts. The work done by McKinsey has informed some of the largest digital and organizational renewal efforts at the CBSA.
McKinsey has been paid $4,337,610 against three contracts since 2016. Mr. Chair, a fourth contract was ended before work began, as it was determined that this work could be performed with in-house resources. Therefore, no funds were spent against it.
All contracts over $10,000 are published online in the agency's proactive disclosure report protocol on a quarterly basis.
The CBSA's first contract with McKinsey took place between May and October 2016. That contract value was $1.9 million, of which $1.7 million was spent. This initial contract was established to review and validate the options, risks and impacts associated with the CBSA's assessment and revenue management project, also known as CARM. McKinsey brought global experience to augment the CBSA's operational capacity.
Their expertise was used to plan for this major business transformation, which aims to reduce the burden on Canadian importers and improve revenue management for goods imported into Canada.
Once fully implemented, CARM will significantly improve how the agency collects duties and taxes on imported goods.
The CBSA's second contract with McKinsey was from October 2017 to October 2018, and that work was done to support analysis on border modernization. The original value of the contract was $791,000, and it included the option of a one-year extension. In January 2018, the contract was amended to include additional requirements, which brought the total contract value to $1.7 million. That contract ended in October 2018, with a total of $1.5 million spent.
The third contract was established through a PSPC contract for up to $1.3 million between October 2018 and 2019.
The fourth and final contract was initiated in October 2022 for a total value of $1.9 million, but there was no money spent against it.
In summary, these contracts aided the CBSA to support the independent, non-partisan public service in fulfilling its duties.
I will now be happy to respond to any questions you may have.
I would add generally that based on business requirements, the CBSA will undertake contracts that may be sole-sourced, may be competitively tendered or may use supplier arrangements that have been set up by PSPC.
In this case, one of the contracts was competitively tendered. Another used the mandatory benchmarking standing offer that had three companies qualified under it. The other two were national master standing offers or supplier arrangements. In other words, they were pre-qualified by PSPC, and CBSA drew down on those. For two of the contracts, CBSA was the contracting authority, and for two of the contracts, PSPC was the contracting authority.
That's another very good question, Ms. Vignola.
Before determining its immigration targets, the government must consider certain factors.
First, there is the economy and its needs. This decision is the result of consultation with all the provinces and territories, including Quebec, with which we have a very good relationship.
Then there is our goal of family reunification.
Finally, we have a category for resettling asylum seekers and refugees, which is really important. So different factors are taken into account before determining immigration targets, but the decision is made by the government.
What I was hoping you would talk about is the strategic planning needed to accommodate 500,000 new residents, specifically with regard to housing.
I'm not just talking about economics, because a happy worker is a worker who can not only put bread on the table, but also find suitable housing. If he falls ill, he must be able to get proper hospital care. His children must be able to attend a school that is not overcrowded.
So we need to invest in schools, in hospitals and in building housing. We need a long-term vision. As it happens, all of these areas are the responsibility of Quebec and the other Canadian provinces.
So you're saying that Canada, like the McKinsey company—that's what Mr. Dominic Barton said when he appeared before this committee—has thought first and foremost about the economy and productivity, before thinking about the basic needs of these 500,000 people who enter the country every year. This number is in fact a minimum, because the target is 1.25% of the total population.
What is the strategic plan for receiving these people? Do we welcome them by asking the provinces to cope somehow, while demonstrating that they are not capable of managing the situation?
The cause of the problem is that the basic needs of these people were not taken into consideration before letting them in.
Minister, across the country, thousands of people have died from a toxic drug crisis, including young people. Two 17-year-olds died yesterday in my community of Port Alberni from the toxic drug crisis. Family members, workers and loved ones are dying because of the toxic opioids that are on our streets.
We learned that McKinsey & Company received millions of dollars from your government, as we know. This is a company that settled on an $800-million lawsuit for their role in the opioid epidemic in the United States. What's the threshold for your government for companies that have been embroiled in scandal?
I'm not going to put all of the toxic drug crisis on McKinsey, because your government has taken an incremental approach to this health crisis. Incrementalism kills when it comes to a health crisis. The Conservatives spread misinformation. Misinformation kills people in a deadly health crisis as well.
I want to know what your threshold is.
An hon. member: I didn't kill anybody.
Mr. Gord Johns: But you're contributing to it.
Good afternoon, Minister, Mr. Gallivan and Ms. O'Gorman.
I'd like to come back to the famous contracts.
Minister, in your opening remarks you referred to the four initial contracts. Of these, three have been completed and one has been terminated before work has begun.
The committee made an access to information request about the contracts, but, as you can see, the documents we received were redacted. In other words, we have no access to any information about the contracts awarded to McKinsey.
From 2016 onwards, there was an explosion in the number of contracts awarded to McKinsey, which everyone found very strange. You said that the first contract, worth $1.9 million, was entered into between May and October, 2016, and was regarding the Canada Border Services Agency's Assessment and Revenue Management project. Data was sought from McKinsey on how to proceed with billing.
Why don't the documents the committee receives contain this information? Is it because the information involves national security?
We received the letter last night, and we are taking action.
As far as the redaction is concerned, we have complied with the act.
We redacted, for example, the bid of the unsuccessful bidder in one case—the per diem rates and other information that would be classified as commercial confidential.
We also disclosed the names of individuals related to the project. As for other individuals who worked for the company, but were not involved in the project, their names have not been released publicly. We have checked all names, and redacted those of individuals who were not part of our project.
Minister, on November 18, I attended the meeting of the Standing Committee on Citizenship and Immigration; your colleague the , Mr. Fraser, was also present.
In fact, I asked him a question in connection with an article in the Journal de Montréal. It said that 25,804 people had been denied asylum and given deportation notices, but it was not known where they were in the country.
This morning I received the response from Ms. Fox, the Deputy Minister of Immigration, Refugees and Citizenship Canada, who was present at the November 18 meeting. There are currently 223,630 asylum claims that...
Welcome, Minister, and your two colleagues.
I would like to begin with you, Ms. O'Gorman. It's about something that you referenced in an earlier round of questions, which is the transformation of business process. I assume a tremendous amount of work is involved in digitalizing the department. Could you speak to this work, particularly the timeline of the work? Then could you relate it to the circumstances that, in that time, led to outsourcing? If not, what would lead to outsourcing? I'm really interested in a deeper dive into what the transformational business process looks like.
I would be happy to take that.
There are two elements. The first was kind of re-documenting the expectation from our commercial system in terms of revenue increase, in terms of facilitating the passage of compliant goods, in terms of the acceptance of trade chain partners. It was to kind of reconfirm that we were looking at the right things to judge the success of this, and then to ensure that we were set up to monitor it on an ongoing basis.
There were a series of conversations in which we said, “Well, that's not something we just need one time. That's something that we should be looking at day in and day out after the next decade.” We decided to build that model ourselves. For validation of that model, our independent internal audit unit stepped up. They had some capacity and offered to lend the element of independence. I think we forwent the expertise of an outside vendor to build the in-house capacity so that we could stay focused on it on a more ongoing basis.
Thank you for your question.
In terms of immigration, we have an agreement with the Province of Quebec. According to this agreement, hundreds of millions of dollars more will be paid to Quebec each year, for the benefit of the Quebec population. In addition, other types of support and assistance are available to newcomers.
You mentioned infrastructure needs. Newcomers and immigrants who have the skills could help in the health sector, for instance.
This is one of the reasons why we need to continue the consultation work. We also need to continue to provide support on the ground, to support the economy and build communities where there is essential infrastructure.
Minister, one of the major concerns that I have about McKinsey is how they intentionally work multiple sides of the same issue, serving competitors in the same commercial space, serving regulators at the same time as the clients they regulate and even sometimes having the same analysts working both sides. The New York Times has, for example, reported on analysts working simultaneously for Purdue Pharma and for the FDA responsible for approving those drugs.
In your areas of responsibility in the security space, I'm concerned about the possibility that McKinsey and even specific analysts at McKinsey worked for the CBSA and worked for hostile foreign actors, and that they perhaps applied lessons that they learned in their advice to other actors.
My first question is this: Before retaining McKinsey, did you seek information about what other clients they worked for in the areas of security and defence, especially clients who are hostile to Canada's interests and values?
Minister, I'd like to welcome you and your staff to this committee.
Minister, right off the bat in your opening remarks you broke down the four projects. Many of our colleagues have asked various questions about the scope of this project, the length of this project, what it was focused on and so on. What I'd like to give Canadians a sense of is really one level higher, if I can. This is about the overall direction that the CBSA is embarking on.
As you know, CBSA is embarking on an ambitious renewal agenda. There are three very specific goals highlighted in there—improving clients' compliance; automating, optimizing and harnessing the power of analytics; and very close collaboration with some of our colleagues.
Minister or any other participants here, can you put into perspective how these three projects fit specifically into that agenda? How does your renewal agenda bring us to the level at which we could be a strong partner for our other alliances in the world?
I want to thank you very much for the question, Mr. Jowhari. I'll allow Ms. O'Gorman to elaborate on that question.
Again, I want to assure you that as we contemplate partnerships beyond government, we do set it against the business needs of the CBSA when they cannot be met internally. Those criteria then drive competitions that are based on those criteria, and those competitions are transparent and done in a manner that follows the law.
Most importantly, Mr. Chair, this does come back to Mr. Genuis's last question, which is one that I think does bear some clarification from you, because it does misstate the information that was provided by me.
I want to provide Ms. O'Gorman with an opportunity to complete her answer to Mr. Jowhari's question.
Thank you very much, Mr. Chair.
Thank you to all of you for being here today.
I am going to pick up on some of the questioning of Mr. Jowhari and perhaps others who have asked about this contract that was cancelled. I think that it's not quite as cut and dried as your answers would suggest.
In response to our committee's motion, a letter from Ms. O'Gorman dated February 22 informed the committee that a fourth contract was cancelled. It is my understanding that during the contracting process, you need to justify outsourcing to the department and you must be able to demonstrate that the work cannot be done in-house, so you would have gone through that whole process.
This contract was awarded to McKinsey. It was set to start on October 21 of 2022 and then was cancelled less than two months later—on December 19, to be exact. What changed? You had awarded the contract, and in two short months you suddenly no longer needed it. I'm going to speculate that perhaps the mounting interest both by the media and perhaps by the official opposition through their order paper questions may have had something to do with that, but what changed?
Thank you, Minister Mendicino, for being here at OGGO today and for your testimony.
Thank you so much for your regular visits to Windsor. I think you have been there four times in the last six months. We really appreciate the attention you're providing to the Ambassador Bridge and the good folks at CBSA who work there. I know you visited and toured CBSA a number of times, so thank you so much for all the attention you're bringing to our community and that important crossing. I also want to thank you for advocating help to cover the cost of policing of the bridge protests. Thank you for being a champion for our community.
I want to speak about one particular contract, the CARM contract. This is the CBSA assessment and revenue management system. CBSA is the second-largest revenue collector, second only to the CRA. I believe they bring in approximately $31 billion, which is a sizable amount, in terms of duties and imports.
Could you or one of the other folks around the table speak to the purpose of the McKinsey contract as it relates to the CARM?
Again, I think in designing this new system we want to facilitate the process so that small importers, casual importers, one-time importers can do it easily. At the same time we want to have the data that can help us detect errors and clean those up. We also want the data to audit people who are creating an unlevel playing field by deliberately breaking the rules and not paying what they should.
In getting that calibration right, talking to somebody like McKinsey, which advises dozens of multinationals and other governments—they have seen this many times—about how you define those objectives and how you make the trade-offs between them....
If we had a system that shut down the border and didn't let anybody through but maximized revenue, that wouldn't be good for anybody else. There would be no revenue to collect because it would be too onerous.
I think it really was around that benchmarking to look at our plans and tell us whether we're hitting the sweet spot to let the compliant people through quickly and address the non-compliant people as quickly as possible.
Earlier, Ms. O'Gorman, you were talking about the redaction that was done according to the standards.
I invite you to compare the French version and the English version, because the French version has redaction that is not present in the English version. In addition, there are several pages of the McKinsey documents that are purely and simply illegible, misspelled. And I'm not even talking about the translation: instead of translating “deep dive” as “deep analysis”, it was translated as plongée profonde “deep dive”; I don't know which scuba diver they used. This really should be looked into, because it is so unprofessional that it borders on a breach of parliamentary privilege. This is really unfortunate. I have the impression that a machine was used to do the translation, a type of program like Google Translate. Even my students didn't have permission to use it.
I will continue on the subject of French. I had a surprise when I read appendix A of the statement of work. In clause 10, it says that the principal working language is English, with the possibility of English and French. I accept this. However, I was surprised that the deliverables were to be in English only, and that the in‑person presentation would be in English, or French, if necessary. I thought Canada was a bilingual country. Even in the contracts, it would seem that that is not the case.
Will a change be made to this? I think the McKinsey company also works in France. So they are able to translate their documents into both official languages.
Minister, you talked about learning best practices from having a company like McKinsey, this global company. Some of the lessons that they've learned are awful. We've heard some of them detailed, and while I appreciate that we're offering them in anecdotal form, they are well reported and documented and are the subject of legal cases. We've seen that reported, whether it's with respect to Homeland Security and ICE in the United States or whether it's their practices on other shores, be it China, South Africa or France. Are those the kinds of best practices that we want to import to Canada?
There are good lessons and bad lessons. I would say that there seem to have been a lot of bad lessons that they've learned, and to go back to Mr. Genuis' questions, we don't know if the same folks who worked on those projects overseas, as have been detailed today, are working on projects here in Canada.
You mentioned that there are best practices that you get from them. I would argue that there's a downside risk to that. There's also the reputational risk to Canada and also the policy risk of having folks who would advise doing the types of things that we've talked about today also advising on other things in Canada.
You say that you have systems in place. Do the systems screen out and prevent those folks who are involved with those bad behaviours and bad practices from being employed and deployed here in Canada?
That would be your time.
We are going to suspend in a moment to go in camera, but before we do, Mr. Gallivan and Ms. O'Gorman, thanks for joining us again.
Minister, before you go, I just want to make a comment and use a couple of seconds of the committee's time. There's a veteran in my riding, Jeremy Pruegger, who works for the Correctional Service. He started a program called the Incarcerated Veterans Support Resources program to help veterans in prison.
I understand, Minister, that you're going to have your folks contact him and help him out so that we can serve our veterans, even those who are incarcerated. Thank you very much for following up on that. I sincerely appreciate it, on behalf of Mr. Pruegger and the great work he is doing.