Issues notes: Standing Committee on Government Operations and Estimates—Study on the Federal Government Consulting Contracts Awarded to McKinsey & Company (March 6, 2023)
Contract summary sheet
| Purpose | Business Consulting/Change Management Services contract that resulted in Business Case for CARM |
|---|---|
| Contract period | Award date: End date: |
| $ Value / Spent (dollars) | Contract value: $1.99 million Amount spent: $1.8 million |
| Notes | CBSA received a benefits framework to measure the effectiveness and efficiency of adopting digital processes to improve Revenue Management of Duties and Taxes on imported goods. |
| Additional information | 1) What advice did the CBSA follow from McKinsey as a result of this contract? 2) Why were external resources required to accomplish this work? |
| Purpose | Contract for Executive Transformation Services |
|---|---|
| Contract period | Award date: End date: |
| $ Value / Spent (dollars) | Initial contract value: $791,000 Amended contract value: $1.8 million Amount spent: $1.6 million |
| Notes | Executive Transformation Services to maximize the potential benefits of multiple transformation initiatives underway at the CBSA as well as to provide guidance toward the development of a Renewal Strategy and potential implementation. |
| Additional information | 1) What advice did the CBSA follow from McKinsey as a result of this contract? 2) Why were external resources required to accomplish this work? |
| Purpose | Contract for value (vendor) management work plan |
|---|---|
| Contract period | Award date: End date: |
| $ Value / Spent (dollars) | Contract value: $1.33 million Amount spent: $978,000 |
| Notes | Establishment of a Value Management Office strategy and work plan to support the CARM project. |
| Additional information | 1) What advice did the CBSA follow from McKinsey as a result of this contract? 2) Why were external resources required to accomplish this work? |
| Purpose | Benchmarking contract that was canceled before any work completed |
|---|---|
| Contract period | Award date: Initial end date: Amended date: Contract ended with no expenditures |
| $ Value / Spent (dollars) | Contract value: $1.98 million Amount spent: $0 |
| Notes | Establishment of benchmarking services for the CARM project. This contract was canceled without expenditures after it was determined that the work would be completed with in-house resources. |
| Additional information | 1) What advice did the CBSA follow from McKinsey as a result of this contract? 2) Why were external resources required to accomplish this work? |
CBSA procurement process (General overview)
Speaking points
For every contracting request, the Canada Border Services Agency's (CBSA) Procurement Division assists client managers and project authorities in defining: their procurement requirements, security requirements, and contracting approach (including sourcing strategy).
The responsibility of awarding a contract can vary depending of the value of the request and the type of service or good required; a contract can either be awarded by the CBSA, Public Services and Procurement Canada (PSPC) or Shared Services Canada (SSC).
If a contract remains with the CBSA, CBSA Procurement is responsible for preparation of tendering documents, contractual risk management, supply evaluation or selection, contract award, and contract management activities.
Background information
The Agency purchases a wide range of goods and services to secure Canada's borders and to deliver services in specific fields such as infrastructure, security and information technology (IT). The responsibility of awarding a contract can vary depending of the value of the request and the commodity required. These contracts can either be awarded by CBSA itself, Public Services and Procurement Canada (PSPC) or Shared Services Canada (SSC).
Pursuant to the Treasury Board Contracting Policy, Government contracting activities are conducted in a manner that will stand the test of public scrutiny in matters of prudence and probity, facilitate access, encourage competition, and reflect fairness in the spending of public funds.
No matter the route a contract request needs to take, the CBSA Procurement Division provides advice as well as timely processing for clients requesting contracting services. Contracting Officers provide a vital service in supporting clients (for example, managers, project authorities), sharing responsibilities for effective program delivery by providing advice in preparation of the initial documentation, which includes:
- definition of procurement requirement
- definition of security requirements
- contracting approach (including sourcing strategy)
Once a client, in collaboration with CBSA contracting officers, has finalized the initial documentation, their subsequent contract will be prepared by either the CBSA, SSC or PSPC.
If a contract remains with CBSA, CBSA Procurement is responsible for:
- preparation of tendering documents
- contractual risk management
- supply evaluation or selection
- bid evaluation
- contract award
- contract management activities (shared responsibility with project authority)
Risk mitigation and compliance with laws, regulations and policies are ensured by:
- approvals based on a clear separation of roles and responsibilities as mandated by the Financial Administration Act (FAA)
- assurance from reviews of procurement contracting files, horizontally through peer review and vertically through Contract Planning and Advance Approval (CPAA) forms
- in certain cases, approval is sought at a Contract Review Board chaired by the Director General of the Agency Comptroller Directorate
- performing verification reviews of data integrity in the financial system
- developing and maintaining quality assurance and monitoring procedures
CBSA procurement process with PSPC/SSC support
Speaking points
Whenever CBSA identifies a need for a good or service the respective Branch or region, with support from CBSA procurement experts, will develop a comprehensive and unbiased statement of work (services) or list of deliverables (goods) that is based off the business requirements.
In cases where a sole-source contract is awarded, due diligence by CBSA and Public Services and Procurement Canada (PSPC) / Shared Services Canada (SSC) is done to ensure that the requirement fits one of the four Treasury Board Secretariat exceptions for sole sourcing as per the Directive on the Management of Procurement ().
In instances where PSPC or SSC is the contracting authority (where the value is above the Agency's s.41 delegated procurement authorities), CBSA Procurement reviews and assesses the procurement requirement and forwards the requirement to PSPC or SSC to process.
PSPC or SSC will create a request for proposal, place the tender on CanadaBuys, collect bids and perform a bid evaluation, and then award the contract to the winning bidder.
In this process, the client (CBSA Project Authority) of CBSA Procurement is involved in the technical bid review. CBSA Procurement and the CBSA project authority do not receive nor have access to the financial bids. CBSA is only given the resulting contract.
Anticipated questions and answers (Committee)
How do you manage emergency procurement at CBSA?
CBSA uses specially delegated procurement authority from PSPC/Treasury Board according to the two conditions identified: 1) Imminent death or injury; or, 2) Not in the public's interest.
Emergency procurement authorities are crucial to operationally focused departments such as CBSA, as it permits rapid reaction to unforeseen events and allows the Agency to support its officers on the front line.
Background information
In instances where PSPC or SSC is the contracting authority
Services: When the Agency procures services it typically uses a 60-40 rating scale of technical points and cost (60% total technical score and 40% based on cost). In certain instances, a 70-30 split is requested. These splits are normally adopted because for services "lowest cost compliant" does not usually equal "best value". In all instances where PSPC/SSC are the contracting authority the CBSA does not receive financial bids, as this information is held by PSPC/SSC to ensure that the technical scoring is not skewed. The CBSA project authority (not CBSA Procurement) conducts the review of the technical bid(s) and provides the score(s) to PSPC/SSC. PSPC/SSC will then apply the technical bid score and the financial score of each bidder and assess each bidders' score according to the evaluation methodology that was published in the request for proposal and assign a ranking to each bidder. The bidder with the best overall score of highest technical merit and lowest cost is awarded the contract by PSPC/SSC.
Goods: The Agency normally procures goods using a "lowest cost compliant" approach in instances where technical performance is needed a split method may be applied. In this case CBSA Procurement will send the requirement to PSPC/SSC to process. PSPC/SSC will work with CBSA Procurement and the CBSA Project Authority to develop a request for proposal (RFP). Once the RFP is ready to be published, PSPC/SSC will publish it on the CanadaBuys tendering site and will collect all resulting bid(s). The CBSA Project Authority will conduct a technical bid review (if applicable as not all goods requirements require a technical review) and PSPC/SSC will review all financial bid(s). All financial bids are retained by PSPC/SSC. The bidder with the lowest cost is then awarded a contract by PSPC/SSC.
No matter the route a contract request needs to take, the CBSA Procurement Division provides advice as well as reliable and timely processing to clients requesting contracting services.
Contracting Officers provide a vital service in supporting clients (for example, managers, project authorities) thus sharing responsibilities for effective program delivery by providing advice in preparation of the initial documentation, which includes:
- definition of procurement requirement
- definition of security requirements
- assemble and forward the requirement to PSPC/SSC
For more information on the roles and responsibilities of client departments when working with PSPC, please consult the PSPC Supply Manual, Matrix of Responsibilities.
Overview of services received
Speaking points
The CBSA entered into four contracts with McKinsey & Company. CBSA was the Contracting Authority for two of these contracts and Public Services and Procurement Canada (PSPC) was the Contracting Authority for the other two.
The CBSA has contracted services with McKinsey & Company from 2016 to 2022. The total amount spent, without tax, in this period amounts to $4.3 million dollars.
The solicitation for Contract number 2017000230, which was issued under the framework of the Task and Solutions Professional Services (TSPS) method of supply (E60ZN-15TSSB) was for the provision of, "Change Management for the review and validate options, risks and impacts associated with the benefits realization work streams of the Canada Border Services Agency (CBSA) Assessment and Revenue Management (CARM) Project, the Canada Border Services Agency (CBSA) received a supporting business case for the CBSA Assessment and Revenue Management (CARM) project".
CBSA entered into this contract in , the contract value (without tax) was $1.99 million. The total spend on the contract was $1.8 million (without tax).
The solicitation for Contract number 2018001129 was for the provision of, "The CBSA requires expert advice and recommendations that will enable the agency to maximize the potential benefits of the transformational initiatives underway at the CBSA and provide guidance towards the development of the Renewal Strategy plan and potential implementation".
McKinsey & Company was awarded a contract by the CBSA in to provide executive support services (advice and recommendations). The value of the contract, without tax, was $791,000 and was amended in to $1.8 million. The total spend on the contract was $1.6 million (without tax).
Under solicitation process number 47064-165038 (contract 47419-87760/001/EL) the CBSA contracted for a Value Management Office (VMO) Work Plan for the CARM project.
- This contract had a value of up to $1.33 million, of which $978,000 was expended. Work occurred between and to establish a Value Management Office strategy and work plan to support the CARM project. A Public Services and Procurement Canada contract was used to carry out this work.
- Due to the high dollar value associated with implementing the work plan, the CBSA did not pursue the work with the vendor and no further services were rendered.
Under solicitation, using the National Master Standing Offer EN578-211925/001/ZM (contract number 47419-2367550) the CBSA contracted for the provision of benchmarking services for a 5-year CARM product roadmap and prioritization framework for future enhancements.
The CBSA entered into this contract – with a value, without tax, of $1.98 million – beginning on . The contract's end-date was amended from to after it was determined that work could be performed in-house and the contract was terminated without additional costs incurred.
Contract for business consulting / change management services (Contract 2017000230)
Speaking points
This was a competitive contract awarded through Public Services and Procurement Canada's (PSPC) supply arrangement.
This contract had an original value of $1,999,998.30 against which the CBSA spent $1,769,910.00. It was valid from , to .
Under this contract McKinsey & Company provided research and analysis on how the Canada Border Services Agency (CBSA) Assessment and Revenue Management (CARM) project could meet and measure planned benefits including: increased Government of Canada revenues; reduced burden on Supply Chain Partners; and, increased efficiencies for the CBSA.
The CBSA received the deliverables outlined in the contract including a benefits framework to measure the effectiveness and efficiency of adopting digital processes to improve Revenue Management of Duties and Taxes on imported goods.
The Contractor worked closely with CBSA employees, enhancing the work of the CBSA. The CBSA chose to pursue a contract for this service as it sought expertise on international standards and facilitation for transformative thinking.
Following the above noted contract, in 2018, McKinsey & Company was awarded a contract to establish a Value Management Office strategy and work plan to support the CARM project. A Public Services and Procurement Canada contract was used to carry out this work and was awarded through a competitive process.
Value added: The CBSA used McKinsey & Company to provide independent research and analysis (including global trends) on managing digital transformation, establishing criteria for the measurement of benefits to efficiency and effectiveness of border management.
Anticipated questions and answers (Committee)
Did the CBSA direct this contract to McKinsey & Company?
No, this was not a directed (sole source) contract. The CBSA used a supply arrangement established by PSPC to select from prequalified companies.
Contract for executive transformation services (Contract 2018001129)
Speaking points
This contract was a competitive contract awarded through Public Services and Procurement Canada's (PSPC) supply arrangement. Fifteen companies were invited to submit bids, and the only bid received was from McKinsey & Company.
This contract had an original value of $791,000, which was later amended to $1,796,700, against which the Canada Border Services Agency (CBSA) spent $1,590,000. The contract was valid from , to .
Under this contract McKinsey & Company provided international comparisons and support analysis relating to border modernization between and .
The Analytical Services sought in this contract were to help maximize the potential benefits of the improvements underway at the CBSA as well as to provide guidance toward the development of the Border of the Future Strategy.
The CBSA received the deliverables outlined in the contract including a baseline assessment with international comparatives and a business case to assist the Agency's work on its comprehensive review in 2018 and its Program Integrity, Sustainability and Transformation plan.
The Contractor worked closely with CBSA employees to help develop the work of its new Chief Transformation Office.
If pressed - why the contract was amended less than 3 months after award
A business readiness assessment was added to the scope (new requirement).
Based on feedback received during consultations, the Contractor was asked to do additional international research / analysis (new requirement).
Key statistics
The CBSA implemented a competitive process for Executive Transformation Services through Public Services and Procurement Canada's (PSPC) Solution-Based TSPS process (Supply Arrangement), with the solicitation open for 15 calendar days plus a 5-day extension.
The contract supported the developmental work for the Sustainability and Modernization Initiative, which supported the Agency's funding requests in Budget 2021.
Contract for VMO (Value Management Office) work plan (Contract 4741987760)
Speaking points
A Public Services and Procurement Canada (PSPC) contract was used to carry out this work.
Work under this contract, awarded in through a (open bidding) competitive process, occurred between and .
This contract had an original value of $1,332,000 against which the Canada Border Services Agency (CBSA) spent $977,700. It was valid from , to .
Under this contract, McKinsey & Company was required to provide a framework for the establishment of a Value Management Office (VMO) for the Canada Border Services Agency Assessment and Revenue Management (CARM) project.
The contractor was to provide methodologies, processes, strategic advice and a team of qualified resources to manage elements of the CARM project.
Based on the operating cost presented in the vendor's framework to have a third party establish a VMO for the CBSA, the decision was taken to perform this work with in-house resources and not to pursue any additional contracts for this work.
Key statistics
This contract had a value of up to $1.3 million and was awarded . Work occurred through a technical assistance between and to establish a Value Management Office strategy and work plan to support the CARM project. A Public Services and Procurement Canada contract was used to carry out this work.
Contract for benchmarking services (Contract 47419236755)
Speaking points
The Canada Border Services Agency (CBSA) engaged Public Services and Procurement Canada (PSPC) to access their existing contract instrument for benchmarking services, for which McKinsey had been pre-qualified.
This contract had an original value of $1,975,270.50 against which the CBSA, ultimately, made no expenditures. It was valid from , to .
Timelines for completion of the project were extended at which point the Agency determined it would do the work in-house in the time available. The contract was ended without any costs incurred.
In addition to McKinsey & Company, two companies were identified that could provide the benchmarking services requested. All three companies submitted proposals to the CBSA. McKinsey & Company was selected for this contract, out of the three proposals, because they offered a shorter completion timeframe.
CARM overview
Speaking points
The Canada Border Services Agency (CBSA) Assessment and Revenue Management (CARM) project is a multi-year initiative that will transform the collection of duties and taxes for goods imported into Canada. Through CARM, the CBSA will modernize and streamline the process for assessing and managing duties and taxed on the importation of commercial goods.
CARM will modernize the Agency's accounting practices and systems, producing fully auditable financial statements, increasing accountability, and improving asset stewardship controls.
Ultimately CARM will increase Government revenue, reduce the burden on Supply Chain partners, and increase CBSA efficiency.
CARM will reduce barriers for our trading partners by simplifying the existing business processes.
CARM will allow the CBSA to become a leader in the global trade environment by equipping the CBSA to respond to evolving client and marketplace needs.
Background information
The CARM Project is a large, multi-year project to transform how the CBSA assesses, collects, manages and reports on import revenue and trade information.
CBSA is the second-largest revenue collector for the Government of Canada, next to the Canada Revenue Agency (CRA). CARM will replace aging and non-integrated revenue and cash management systems and will improve service delivery by simplifying processes and expanding opportunities for the commercial trade community to interact electronically with CBSA.
Due to obsolete and non-integrated accounting systems, there is an overwhelming need for the CBSA to account for and manage its revenues more efficiently and effectively, as well as to modernize its systems and processes to meet the financial processing needs of its clients and stakeholders, as well as to improve its reporting responsibilities.
As documented in several Office of the Auditor General (OAG) reports, CBSA has material capability gaps preventing it from fully meeting the responsibilities of its mandate:
- Complex business model
- Untimely and inaccurate reporting
- Sub-optimal IT systems
- Defects in both revenue collection and reimbursement transactions
CBSA renewal
Speaking points
The CBSA Renewal initiative began in 2018 as a result of a Comprehensive Review exercise.
At the time, CBSA's operating model was determined to be unsustainable by multiple stakeholders, including TBS, and it would increasingly challenge the Agency's ability to fulfill its mandate due to a static budget combined with operational pressures including increasing volumes both in the commercial and traveller stream, a variance of other issues, challenges and threats.
CBSA Renewal set a framework for new methods of working to ensure sustainability of its operations and to update the CBSA operating model.
This was achieved through a focus on facilitating reduced wait times for low-risk goods and travellers while strengthening border security over high-risk individual and goods.
CBSA Renewal set the foundation for the Border of the Future vision, on which CBSA's transformative projects, including Traveller Modernization, continue to be supported.
Background information
Starting with Budget 2008 repeatedly through at least Budget 2018, the CBSA needed to request temporary funding sources to manage in-year operational pressures. Some examples of resulting pressures include: aging asset portfolio, growing financial pressures, sub-optimal performances in the fair collection of taxes and duties over imported goods and addressing formal grievances by border services officers given the often poor quality of the working environment.
These repeated requests for annual integrity funding undermined the Government's fiscal planning and constrained the CBSA to short term operational and investment planning.
Moreover, the Agency was unable to invest comprehensively in the modernization of its business model.
Consequently, CBSA's operating model was determined to be unsustainable by multiple stakeholders including TBS and it would increasingly challenge the Agency's ability to fulfill its mandate due to a static budget combined with operational pressures including increasing volumes, and a variance of issues, challenges and threats.
Upon the Secretariat's advice, the Treasury Board (TB) directed that the CBSA undertake a Comprehensive Review exercise. The overall objectives were twofold:
- Sustainability: Conduct a resource alignment review of 100 percent of the Agency's resource allocations with the support of a CBSA/Central Agencies Steering Committee co-chaired by TBS, allowing for milestone guidance from Central Agencies and an assessment of all CBSA programs.
The Agency subsequently identified and launched 15 sustainability initiatives as part of the medium-term sustainability plan, intended to deliver efficiencies, improve effectiveness, or align resources
- Modernization: Capitalize on the broader strategic opportunity to evolve the CBSA's operating model to facilitate reduced wait times for low-risk goods and travellers while strengthening border security over high-risk passages.
- CBSA Renewal was the precursor name to CBSA's Modernization in response to a shift of focus and efforts. McKinsey & Company Canada assisted the Agency in developing a business case to implement an increasingly risk-based approach to compliance and admissibility.
- This new business model allows CBSA to keep up with increasing -volumes and focus on higher threats while improving the Agency's effectiveness, service, and management.
The 15 Sustainability initiatives were separated into 4 themes.
- Theme 1: Building new Results-Based Organization and Decision-making Structures
-
- Organizational/ Functional Alignment
- Nationalization of Internal Services
- Transformation Plan and Management Change
- Governance Review
- Theme 2: Maximizing our Talent and Working Smarter
-
- Variable Shift Scheduling Arrangements
- Classification Renewal
- Changing our Culture
- Duty to Accommodate
- Workforce and Management Capacity
- Overtime Reduction
- Theme 3: Strengthening and Stabilizing our Financial Management
-
- Financial Management Improvements
- IST Workforce Management Strategy
- Theme 4: Modernizing our Technology, Infrastructure and Facilities
-
- Technology Stabilization and Modernization
- Infrastructure Rationalization
- Buildings and Equipment Investments
Page details
- Date modified: