Shine a brighter light on contract government
Ottawa's becoming addicted to consulting firms. Other countries have rung the alarm. It's time for the same to happen here.
Happy New Year! Thanks to subscribers for sticking with this newsletter while I took some time off. That vacation is now over, as I plan to make abundantly clear throughout January.
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From Radio-Canada, and not yet translated into English at this hour, comes news that the Trudeau Liberals have paid 30 times as much to the global consulting firm McKinsey and Company as the Harper Conservatives did, even though the Liberals have so far spent less time in office than the Conservatives did.
That’s $2.2 million in nine years under Harper, against $66 million in seven years under Trudeau.
And this chart, which I’ve taken from the Rad-Can report, shows the recourse to McKinsey is accelerating: the company’s take from the feds last year was almost as much as its combined take from all previous years.
Rad-Can reporters Romain Schué and Thomas Gerbet write: “What was the firm’s precise role? It’s impossible to know for sure. [McKinsey] refused to answer our questions… And despite our requests, Ottawa didn’t want to share the reports the firm produced.”
This is only the latest evidence of a massive trend in Canada’s federal government, in many provinces, and abroad: the contracting-out of complex problems to private firms that charge a premium; are never around when problems arise later; often produce work of questionable quality; and are too often exempt from even the minimal transparency and accountability that’s expected of work done in-house by the regular public service.
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We’re seeing that latter point play out in a Commons committee’s attempts to find out how the ArriveCan app came to cost so much. The app was developed by outside contractors (not McKinsey — today’s Rad-Can story is about McKinsey but the use of contractors benefits many firms), and MPs seeking details have so far received only shrug emojis from the Trudeau government.
This increasing resort to secretive external consultancies impoverishes public discussion about ideas for the future. It is brutally demoralizing to the professional public service, which means it pays nasty dividends by making public-service work ever less attractive to talented people. It allows timid elected officials to buy a backbone, in the form of a commissioned study supporting their preferred option, and the only cost is the burden on public finances, which elected officials plainly soon learn not to worry about.
In 2021 my colleague Shannon Proudfoot wrote about the general trend toward government-by-contract for our former employer, which used to find interesting things interesting. There’s been plenty of evidence since then about the recourse to blue-chip consultants every time governing threatens to become hard or interesting. Quebec premier François Legault paid McKinsey $35,000 a day for tips on managing the pandemic. Hydro-Quebec has paid McKinsey $38 million since 2016 for advice on running its power dams.
It’s important to emphasize that I have no reason to suspect any of the activity discussed here breaks any law. But something can be legal and still be a bad habit. As accountability rules tighten, making traditional bureaucracies more timid and hidebound, the tendency to seek freedom in an outside helper becomes more tempting. But it’s a vicious circle. Each precedent makes the next contract easier to write. And things start to spiral out of control.
Some of the most extraordinary recent evidence of too-tight relations between government and consultants comes from France, where simultaneous December raids by prosecutors on McKinsey and on French president Emmanuel Macron’s office capped a year of revelations on this front. (The link takes you to an article from Le Monde which the paper has thoughtfully translated into English for international audiences. Much of what follows in the next few paragraphs is in French only.)
In January of 2021, Politico reported on a widespread trend, the use of outside consultants to plan France’s vaccination effort. Which, in those early days, wasn’t going well.
By March of 2022, a French Senate committee had published a massive report, nearly 400 pages, on more than a billion euros of government consulting contracts with private firms. Le Monde summarized the report, which called for every government department to come up with a plan for bringing work that had been given to consultants back within its walls.
The report also showed that outside work often wasn’t good work: internal evaluations showed that one-quarter of consultant work was judged “unacceptable or barely acceptable in quality.” One firm, Capgemini, received a mark of 1 out of 5 for work the department said was “of near-zero added value, indeed sometimes counterproductive.” The firm nonetheless charged the government 280,200 euros for its work.
By November McKinsey’s relationship with Macron’s election and re-election campaigns in 2017 and 2022 was under investigation. And France’s minister of the economy was admitting that using such firms had become too easy and automatic.
It’s not just in France. By October an international team of investigative reporters was following the largest spending program in the history of the European Union: the 723-billion-euro Recovery and Resilience Facility, designed to help EU member states build back better, you should excuse the term. How does the mega-fund work? Member states had to draw up recovery plans to justify investments from the Facility. Many of them went to McKinsey, Deloitte and other blue-chip consultancies to produce the plans. Then they needed the same firms to help them implement the plans once the euros started flowing. You have to register for free to see the Recovery Files coverage, but it’s fascinating reading. Highlights:
For example, the Spanish government hired Deloitte to provide the information it needed to write up its energy plans. But during the same period, Deloitte also worked for the Spanish oil company Cepsa to help it win subsidies from the recovery fund.
The Greek government engaged PwC to work on its digitalisation plan. Then, as a consortium member, PwC managed to win a contract for a major digitisation project in Greece.
Recovery Files coverage forced the EU to be more transparent and accountable in distributing this fund than it originally planned. Is it time for this level of scrutiny in Canada, to force these firms and their government clients to become more transparent?
It’s probably long past time. As the Trudeau government’s recourse to outside firms grows by leaps and bounds, a Carleton University research team has tracked $15.1 billion in outside contracts. As Kathryn May, the most experienced reporter on the public service in Ottawa, has written, there’ve been tentative attempts to get more information and more accountability about the use of outside contractors in Canada’s federal government. The Commons committee on government operations has held a few meetings. But from the transcripts, they seem lackadaisical. The temptation to turn this question, like any question, into a partisan football is overwhelming. But as the European examples suggest, the outsourcing of government is an international trend touching governments of many party stripes.
I don’t often say this, but this looks like a job for Canada’s Senate. The upper house’s independence from the prime minister who has now appointed most of its members is a subject for debate, but a lot of those people really do have superb experience in government. There are former deputy ministers at the federal and provincial levels, secretaries to cabinet, a former Clerk of the Privy Council, a former chief of staff to a prime minister. A lot of them can remember the days when big decisions weren’t farmed out to firms that make their founders rich and are spared the rigours of accountability for their counsel. Surely some of them would like to shine a light?
I haven't read this, but suspect it'll make fascinating reading on this general topic.
It's no coincidence that some of the most-spectacular failed projects are in I.T. : the payroll system, ArriveCAN, the original "ObamaCare" web portal. (The TIME magazine cover on the latter is illuminating, describing jaw-droppingly stupid failures that the I.T. newbie can spot at once. The first was that the database of recipients wasn't "indexed" - that's like a library card catalog being in random order, so that you have to search the whole library list for each book found.)
Custom I.T. , you see, was turned over to consultants nearly 30 years ago. Larger companies had "data processing" departments, programmers who spent a career managing the mainframe payroll system, after writing it. But, computing got more complex, and the Data Processing Department struggled to keep everybody on their beloved mainframe. Their "customer departments" that did the actual corporate function, broke out to use PCs and small servers, started calling consultants if the DP department refused to help.
So, about 1995 (in my case), our IT Department flipped to embracing the PC as more than a word-processing toy, started getting programs that ran on servers - which they didn't really understand, so more and more programming moved to consultants.
By 2010, I was begging my bosses to believe that a system I'd had done for $400K, was meeting all needs, had no complaining customers (by "customers", I mean our draftsmen and our internal map-users - it was a drafting system for city maps of water and sewer), didn't really need replacement, just some upgrades and tweaks.
But the IT consultants, very much at the behest of the IT Department that hated that Water had done its own IT, insisted that the system didn't use the coming paradigm of mapping, ESRI GIS, was based on a CAD program that was going to go obsolete, had to be replaced entirely. Budget: $10 million.
Three years later, with the project about to need an impossible amount of everybody's time for testing and transition, they cancelled it entirely, with $8M spent.
I retired two years after that, after struggling and begging to get $200K spent on those tweaks that were all that were ever needed, content that the system would be fine for a decade to come. Nearly 8 years later, my 2005 system is still the one running. Nobody speaks of the deliberately-forgotten project that was never needed.
And, no, no accountability for anybody, and certainly no "I told you so" was allowed for me.
The IT Department had gone straight up 3 levels above me, to the Director of Water, and told him, Director-to-Director, that the project was needed. After that, every objection could be batted down with "your Director has signed off". At a "Lessons Learned" meeting afterwards, where I did get to say "I told you so" to all the lower staff, and one Manager, I asked how there could be no statement that the Director had made a bad call. (He was retired by then.)
That one Manager came up to me right after everybody left, and told me how unacceptable it was that I tried to bring up the Director, how he was still around there, consulting, had many high-level friends, and naming him was a very career-limiting move. He did not appear in the final report.
A few days later, another Water employee, who dealt with a lot of Managers, told me that she'd asked the Fire Director, at his retirement, why he didn't step in to the mess that became of our 911 system, basically another IT project that collapsed. He told her that at $5M, it was "too small" for him to spend much time upon. And yet, his approval was needed for anything. That system meant that such projects were turned entirely over to consultants as soon as they'd convinced the Director it was on.
Which explained a lot about why all my protests - from the guy who'd managed the previous system - fell upon deaf ears. The Director was just waiting for me to wind down in the climactic meeting I asked two levels for, with him; he'd made his decision a year earlier, planned to spend no more time upon it. If he'd accepted my story, he'd have had to do a hundred hours of work.
Your phrase about demoralizing the staff really hit me. It was the biggest disappointment of a career that I couldn't stop the train-wreck, made me realize how little I was *really* respected, for all the praise heaped upon me.