At some point over the past decade in Canada, McKinsey & Company became the North Star for how to fix things in Ottawa. The management consulting company has been called in to help digitize the Canadian navy, create a ten-year plan for a government-owned bank, modernize leadership at our border services agency, provide an international view on transforming our immigration department, and much more.
The list of their assignments begs the question: Is there anything McKinsey can’t do?
They weren’t the only major firm getting millions in these government contracts. Along with their rivals, McKinsey has formed a shadow public service—an army of analysts, many with degrees from impressive business schools, who promise to govern better than the bureaucrats.
Ottawa became increasingly reliant on McKinsey and the others, more than doubling its spending on management consultants over the Liberals’ time in office. Journalists then started asking questions about what, exactly, all this spending was getting us. Similar questions were raised across the industrialized world, where McKinsey and others have had a similar rise. Parliamentary hearings followed, interrogating the value for money of these lucrative gigs. Just as suddenly as he had ushered in this new consultocracy, Prime Minister Justin Trudeau ordered it to end—vowing, when I spoke with him in an interview for The Walrus, to “crack down.”
But the story of how McKinsey installed itself at the heart of the Canadian government ultimately ends up at the prime minister’s door.
Outside consultants have long been a fact of life in Ottawa. You can throw a rock from Parliament Hill and, if your arm is strong enough, hit the windows of several big multinational consulting firms: KPMG, Deloitte, Ernst & Young, and PricewaterhouseCoopers.
These firms, generally, began as accountants but steadily expanded to offer a broader menu of professional services. In recent decades, as corporate America became more complicated and reliant on technology, demand exploded for services to come in and untangle the mess, provide leadership, and cut costs. Today, “the big four” earn more from consulting than accounting.
As they’ve grown, these billion-dollar corporations have increasingly sought out big new clients: governments. They marketed themselves as a way for governments to save money, speed up their priorities, and deliver better services. They might serve as project managers for a complicated government-run program, provide out-of-the-box thinking for a new action plan, or even figure out layoffs to reduce costs.
The big four soon found themselves competing against “the big three”: Bain & Company, Boston Consulting Group, and McKinsey & Company—three firms founded with the sole purpose of providing strategic advice and consulting services to their corporate clients.
All told, these seven firms have earned billions by ingratiating themselves in capitals across Europe and North America. While they have done big business in Canada, McKinsey sticks out as a particular winner. It is not the biggest firm in the capital—McKinsey doesn’t even have an office in Ottawa—but it was uniquely able to secure big-ticket government contracts. Often, those contracts were awarded without any competition at all. Over the past eight years, McKinsey has entrenched itself into nearly every tier of the Liberal government.
The first: military. As the Canadian Armed Forces was being rocked by waves of revelations about a culture of sexual misconduct and harassment, the Department of National Defence hired McKinsey in 2021. Members of the forces were crying out that the complaints process was not fit for purpose. So McKinsey was tasked with reviewing the byzantine network of different systems and offices responsible for intaking these complaints and came up with a plan to reform it. The Department of National Defence should create, as McKinsey wrote in their report, a “single disclosure team”—that is, one desk to handle all manner of complaints. Over two years, they were paid nearly $15 million for this insight.
The second: immigration. Immigration, Refugees and Citizenship Canada had struggled under the load of a rising number of newcomers and asylum seekers, and in 2019, McKinsey was called in to “modernize” how the department processed their applications.
A 150-page-plus report, which ran around $3 million, confirmed an obvious fact about Canada’s immigration system—it isn’t working very well. How could Ottawa fix that? McKinsey recommended a “simple and fully digitized process” and a “3 days average processing time.” The most specific recommendations involved using automatic processing to handle immigration claims. McKinsey suggested that the department replace civil servants with AI and machine learning for some of the work, in order to “automate assessment of lower complexity files” and “eventually make decisions.” McKinsey was granted another contract from the immigration department, to help the bureaucracy in “developing and implementing transformation strategies”—this time, for $25 million.
The third: the environment. Natural Resources Canada called on McKinsey to do more than just redraw its internal structures. The department wanted the company to double-check its own analysis of the possible demand for small modular nuclear reactors (smaller, cheaper, safer nuclear power plants), to run point with a collection of oil and gas companies in the Industry Strategy Council (an advisory group of business leaders), and to directly consult on its energy transition strategy.
In each of these instances, the government defended the contracts as an important way of sourcing outside expertise. The then immigration minister told a parliamentary committee that McKinsey had helped “enhance digital services” and that there were “greater benefits to be seen in the years ahead.” The CEO of Atomic Energy of Canada bragged that McKinsey’s work with Natural Resources Canada would help the country reach net zero by 2050. One Liberal MP, trying to defend McKinsey’s many government contracts, incredulously questioned a skeptical witness at committee: “Do you have evidence, for example, that Canadians have not received value in any of those contracts in the past ten years?”
There is ample evidence, in fact, that the contracts weren’t quite as valuable as the government claims.
When retired Supreme Court justice Louise Arbour reviewed the Department of National Defence’s plans to build the new complaints process in 2022, she was less than impressed. Arbour wrote that McKinsey’s plan was “of little use,” “out of the question,” “would create the same conflict of interest that currently exists,” “not appropriate,” a “non-starter,” and that “their focus is on structure over substance.”
McKinsey’s recommendations to IRCC, meanwhile, were adopted quickly when the COVID-19 pandemic abruptly hit. The department deployed algorithmic systems to start triaging immigration applications to try and speed up processing. Things, however, didn’t get better as McKinsey had promised. A 2023 report from the auditor general found that while processing times were reduced slightly for some immigrants, IRCC failed to meet its own benchmarks for the majority of immigration applications that year.
When the audit reviewed these new automation tools, it did find a marginal benefit for some applicants—processing times were reduced by just shy of two months for some would-be Canadian residents. But the auditor general found something amiss: the automated process had a nasty habit of flagging some applications more than others. “For example,” the auditor general wrote, “almost all applications from individuals with Haitian citizenship were routed to manual processing, and applicants waited twice as long for a final decision.”
McKinsey’s work for Natural Resources Canada, meanwhile, is perplexing. Its $25,000 contract in 2018, to double-check their small modular nuclear reactor strategy—a subject on which McKinsey has no particular competence—ended in a fairly plain conclusion: that the department’s analysis was correct. McKinsey was further consulted about jobs and transition guidance for the natural energy industry and was even invited to participate in roundtables and provide written submissions to Ottawa’s plan for a “just transition” for the energy sector. While it’s not clear how much McKinsey was paid for any of this work, what seems clear is the firm was simultaneously an adviser to regulators, a mediator to solicit views from industry, and an industry source—all this while McKinsey was actively soliciting business from many of the big oil and plastics companies the government was looking to regulate.
Whatever value or insight McKinsey may provide, it always comes with a question: Who else are they working for?
In the United States, McKinsey’s work for various levels of government has come under intense scrutiny for years.
As Walt Bogdanich and Michael Forsyth describe in their book When McKinsey Comes to Town, after the company won a massive contract to overhaul Missouri’s Medicaid program, which provides medical insurance for low-income adults and children, watchdogs cried foul, accusing McKinsey of offering little more than pablum for their hefty expense. According to one consumer group, “Nearly all the major recommendations for ‘transformation’ can be found in other reports on McKinsey’s Website.” Yet the study came at a cost of $2.7 million—“three times higher than the lowest bid,” Bogdanich and Forsyth note. After McKinsey’s report, which recommended decreasing Medicaid overhead, somewhere between 50,000 and 100,000 children were removed from the Medicaid rolls.
Cutting costs is a big part of what McKinsey does—often in the name of modernization. Bogdanich and Forsyth chronicle how McKinsey’s extensive work for Disneyland sought to find “cost avoidance.” That was code for laying off maintenance staff, reducing safety checks, and shunting upkeep to the midnight shift. In the years after their transformation, a series of horrific accidents killed and maimed park guests. While Disney settled lawsuits alleging negligence, McKinsey was never sued, the authors report.
“If something bad happened, the spotlight didn’t shine on them,” the authors write. “They took no credit publicly when their clients did well, and for years they accepted no blame when their recommendations sent companies off the road into the ditch.”
They further detail how McKinsey had a nasty habit of playing both sides of the fence: consulting for companies on how to manage government regulation and, at the same time, advising governments on how to manage those regulations.
McKinsey was, for example, billing the American Food and Drug Administration for tens of millions of dollars even as it worked for a number of major pharmaceutical companies that were applying to have their drugs approved by the FDA. That included significant work for Purdue Pharma, the company behind the deadly opioid OxyContin. A 2022 congressional committee found that “McKinsey consultants leveraged their federal connections to secure even more private sector business and tried to influence key public health officials on behalf of clients like Purdue Pharma.”
Right here in Canada, McKinsey was asked in 2021 by a team inside Natural Resources Canada to produce modelling and lead discussions around “the resources of the future” and how various industries could support Canada’s “clean economic recovery.” But McKinsey also consults for all manner of energy, oil, transport, and even consumer goods packaging companies.
Despite all these problems, McKinsey has become an attractive partner to liberal governments worldwide. In France, President Emmanuel Macron turned to McKinsey in 2020 to essentially coordinate the country’s pandemic response. A study by the French senate would later determine it to be a colossal waste of money, time, and public sector talent. The study likened McKinsey to a series of tentacles taking hold of the French state.
Trudeau invited McKinsey’s tentacles into his government very early on. The prime minister recruited Dominic Barton, the firm’s global managing partner from 2009 to 2018, to chair his Advisory Council on Economic Growth, starting in 2016. Barton, who had been responsible for McKinsey’s operations in China, had ingratiated his firm with Beijing and, according to Bogdanich and Forsyth, vied to become a major Western player in China’s Belt and Road Initiative. In 2019, he was tapped to serve as Canada’s ambassador to China.
While alarms about McKinsey were raised quickly in other Western countries, scrutiny in Canada took much longer. After a series of articles in the Globe and Mail and amid pressure from opposition parties, Ottawa announced in 2023 that it would order a review of all contracts awarded to McKinsey. The internal review concluded that everything had gone well. There was “no evidence of political interference” and “no evidence of unethical behaviors or practices” in awarding the contracts, it found.
Yet that didn’t put the issue to bed. Despite Ottawa’s insistence that everything was above board, their own numbers revealed that, between 2011 and 2023, McKinsey was awarded ninety-seven contracts totalling more than $209 million—of them, 70 percent were non-competitive contracts. Even when contracts were, technically, competitive, the review found that the government sometimes tilted the process in McKinsey’s favour.
An independent procurement ombudsman reviewed those contracts in April 2024 and came to quite a different conclusion than that of the internal audits. The ombudsman found little justification to award sole-source deals to the company, a “troubling” lack of oversight, and that departments altered procurement strategies to benefit McKinsey and disqualified other bidders to help McKinsey. It all created a “strong perception of favoritism towards McKinsey,” the ombudsman found.
A parliamentary committee studying McKinsey’s work concluded, after weeks of meetings, that the auditor general ought to probe the entirety of McKinsey’s work for the federal government. The auditor general reported its findings in June. “We found frequent disregard for procurement policies and guidance and that contracting practices often did not demonstrate value for money,” the auditor general wrote.
The watchdog found that McKinsey often failed to deliver the things it was being paid to provide, or that the contracts were so vague that there was no way to assess whether it lived up to its promises.
When Trudeau first ran for prime minister, he was alarmed by Canada’s hefty $450 million expenditure on management consultants under the Harper government in 2015, a sum the Liberals deemed “irresponsible.” Eight years on, in 2023, Trudeau nearly doubled that number to $840 million. While only a fraction of that spending is on McKinsey—KPMG, Deloitte, IBM all make bank on doing this work for Canada—the company is perhaps the epitome of the problem.
Perplexingly, this surge in spending comes amid a massive hiring spree in the public sector. Just as the civil service has grown to its largest size in years, Ottawa is increasing the amount of work that gets farmed out to private companies. When we sat down in March, I asked Trudeau why, amidst a huge growth in the ranks of the civil service, so much money was going out the door to these high-price consulting firms.
“It’s not the political side that’s spending a lot of money on consultants,” the prime minister told me. “It’s the public service spending a lot of money on consultants, which is why we brought in new directives to squeeze it down.”
Civil servants who have had to work with these management consultants disagree. “No one calls in McKinsey because they don’t have staff or capacity,” one former civil servant told me. “That comes from senior leadership or the Prime Minister’s Office.”
Others have told me that these consultant firms have become a kind of go-between for the political staff and the civil servants. Another, current, civil servant told me last year that paying for a report from McKinsey is more likely to obtain the support of the political level than a report from the in-house bureaucracy, even if they say the same thing.
The functionary also told me that government processes are archaic, cumbersome, and unnecessary. “The advice we give is usually good—our services less so,” they said. “[That] doesn’t mean they should be spending millions of dollars on external services when they’re already spending millions of dollars on the public service. They should be making the current system work, not outsourcing.”
