The News Rundown

The federal government has signed an open contract until the year 2100 with McKinsey for computer services

On our first episode of the year, 301, we discussed how the Trudeau Liberal government decided to base their extremely high immigration targets on work done for them by McKinsey and Co., an American based consultancy firm that was awarded over $66m in mostly sole-sourced contracts since 2015. We also discussed how the former head of McKinsey, Dominic Barton, is a co-founder of The Century Initiative, an advocacy group pushing for Canada’s population to surpass 100 million by 2100.
Now, as a result of the parliamentary committee's investigation into just how much sway McKinsey has over the Canadian government, it has been found that the government in 2019 had given McKinsey an open contract until 2100, that's right, for a duration of 81 years. For those keeping track, we still have another 77 years to go until 2100, which is just a couple years under the average lifespan of a Canadian.
According to the most updated tally from the Procurement Department, McKinsey has been awarded at least $116.8 million in federal contracts since 2015. McKinsey says its contracts with the federal government make up as much as 10% of its gross revenue in Canada.
The spotlight on McKinsey shows that there should be a broader discussion on why the government is awarding so many outsourced contracts, especially to foreign based firms, that could be done by Canada's public service. As Bloc Quebecois MP Julie Vignola said during the committee: "This idea of having open contracts over 81 years seems outrageous. I think that's where you have to ask yourself what's the point of having a public service."
Amanda Clarke, an associate professor of public administration at Carleton University, said the study should focus on the public service's reliance on consulting firms overall. Clarke said the reliance on management consulting firms within the public service "betrays" the principles of responsible public administration. She said: "My research suggested in a number of ways the federal public service breaches acceptable best practice in responsible public administration when it contracts with large management consulting firms."
Clarke also said transparency around contracting information is weak and should be improved. She also said public servants have told her that internal red tape around hiring new staff, or around making decisions in general, sometimes leads departments to outsource in the interest of speed. Cutting bureaucratic red tape has notably been part of Conservative Leader Pierre Poilievre's campaign for Prime Minister.
The MP for Beauport–Limoilou tried to find out how much this 81-year contract was going to cost taxpayers. Senior Treasury Board policy adviser Sean Boots was cut off by the committee chair before he could respond and will have to send his response in writing. The contract, available online, was awarded on August 31, 2019 and is due to end on January 31, 2100. The sheet does not specify how much the government must pay. Instead, it says it's a $0 contract for IT professional services.
The consulting giant is embroiled in many international scandals. In 2021, it reached a settlement over its role in promoting opioid sales. It is being investigated by France’s financial prosecutor over tax fraud allegations, and it was recently charged in South Africa for its role in an alleged corruption scandal. The many different companies around the world that the consulting firm also deals with leads to obvious conflict of interest scenarios, which is another problem the Trudeau government has had trouble recognizing in the past.
In Monday’s Question Period, Poilievre pressed Prime Minister Justin Trudeau about the total value of federal contracts to McKinsey. He said: “His friends at McKinsey are rolling in cash … where his personal friend Dominic Barton was the boss. Will the Prime Minister finally answer the question? How much did he give McKinsey?”
NDP MP Gord Johns argued that McKinsey has been given “massive amounts of public money,” when their work could have been handled by public servants. He said: “Justin Trudeau would rather fund his wealthy consultant friends as though they’re a government department.”
Barton, as we said, was the head of McKinsey until 2018. A year later, he was appointed Canadian ambassador to China, a position he held until 2021 during the time of the Meng Wanzhou crisis. Barton also served as the chair of an advisory council on economic growth for former finance minister Bill Morneau. He must testify in the parliamentary committee on Wednesday.
Conservative MP Garnett Genuis posted a video clip Tuesday of the Prime Minister praising Barton during a 2017 gala dinner hosted by the Public Policy Forum. Trudeau said: “When I went to the World Economic Forum in Davos, just a few months after having been elected, I had the privilege of meeting a number of world business leaders. Who set that up? Dominic Barton … They all knew Dominic. I came to appreciate, maybe even envy, Dominic’s contact list. So we recruited him.”
Mr. Trudeau told the 2017 audience that he and his then-finance minister Bill Morneau offered Mr. Barton $1 a year to lead an advisory council on economic growth. Trudeau described Barton as modest, accessible, accomplished and “ridiculously humble.” In the clip he says: “I don’t think anyone can argue that we’re not getting our money’s worth from Dominic. In fact, it’s probably the best dollar that the Government of Canada has ever spent.”
When we originally discussed this story in January, at the time, we only saw the tip of the iceberg. It's clear that McKinsey has had a huge impact on Canadian public policy, and that the Trudeau government has relied heavily on this foreign firm to shape Canada for years to come. It's time we had a government that not only serves Canadians instead of outside interests, but also gets proper value for the money they spend. Clearly we have not had that for some time now.
Supplementals:

On Friday the provincial and territorial Finance Ministers met with Federal Finance Minister Chrystia Freeland.
The meeting and surrounding narrative that has permeated the dialogue this weekend is one of a focus on health care and the “global transition to a clean economy” in the words of Finance Minister Chrystia Freeland.
The topic of discussion also shifted to the US and the message that came out was one of continent based cooperation between Canada, the US, and Mexico.
The Finance Minister said, "I cannot emphasize too strongly how much I believe that we need to seize the moment and build the clean economy of the 21st century.”
This is the narrative that came out of the meeting but it leaves out a huge portion of what’s actually happening between our countries.
Earlier in the week, senior federal officials, within the Department of Finance were sounding the alarm regarding Biden’s tax credits as passed per the Biden Inflation Reduction Act.
The department of finance said, “this is not a space where the federal government can act alone.”
The Inflation Reduction Act has tax credits that are uncapped, specifically focused around a transition to a cleaner economy.
What this means is that Canada risks falling further behind in economic competitiveness against the US.
Now it’s not immediately clear who made these comments regarding these tax credits and the federal government needing to act.
The story once again comes from the CBC with an anonymous source. What we do know - in this case - is that these tax credits do exist.
The finance department has reportedly called them a “game-changer.”
It’s looking like the 2023 budget will include further Canadian tax credits but the real head-scratcher comes from two points in this story.
First, why was this not in the media reporting of the Finance Minister’s meeting?
This underscores a major failing of the Canadian media but also of the federal government who for years at this point has been out maneuvered by the US on matters of economic competitiveness.
From the lack of a softwood lumber deal to concessions on the new NAFTA replacement and in general, our government letting the US be more competitive on a tax and investment basis.
Second, provinces in Canada have been undertaking just this for years.
The UCP in Alberta, the Saskatchewan Party in Saskatchewan, the Manitoba PCs, and the Ontario PCs have been leveraging the power of the provincial economies to lower inter-provincial barriers while looking for opportunities to compete with the United States in a more productive manner.
For a long time provincial Premier’s led this file and asked for a more favourable tax and investment climate from the federal government but it was not delivered.
This week if the comments out of the department of Finance are to be believed when combined with the Bill Morneau revelations that the Department of Finance was side-lined for political reasons paint a picture of financial policy by politics rather than economics.
This again conflates politics and economics where some see economics as inherently political and because of actions like we see here, this might explain why some think this way.
With this revelation we’re left to the conclusion that until the political angle changes, we won’t be competitive with the US.
Chrystia Freeland might start moving to make Canada more competitive but if political needs arise, that could quickly change.
We’ll be keeping our eye on the upcoming budget to see whether this is just talk or if the Trudeau government is serious about competing economically with the US.
Supplementals:

New hotel expense makes Trudeau’s $6000 night in London seem like little potatoes

As we put the pandemic further and further into the rear mirror, a lot of scrutiny has been put on the spending that the Trudeau government had done during the crisis, which had ballooned by hundreds of millions of dollars, to a total of over $1.3 trillion for the fiscal year of 2021/22.
As we all know, just as households pay interest on mortgages and credit cards, Canadians must pay interest on federal government debt. Higher debt means more tax dollars go to paying interest, which leaves less money for health care, social services and/or tax relief in the future. In 2021/22 alone, Canadians paid $24.5 billion in federal debt interest—and that’s with very low interest rates.
A recent analysis found that using fairly optimistic assumptions—such as no recession for the next 50 years—Canadians between the ages of 16 and 80 will incur $10,498 in additional taxes (on average, over their lifetimes) due to higher interest costs from the projected debt Ottawa will accumulate between 2019 and 2025. Clearly, federal finances would be in much better shape today had the Trudeau government exercised greater restraint in spending before the pandemic hit.
Of course, since then, the government has also not curtailed their spending either. But a new report from Conservative MP Michelle Rempel Garner shows just how out of hand the spending was during the pandemic. Rempel Garner is raising concerns over the federal government’s spending on so-called COVID-19 quarantine hotels, calling the total spent on a Calgary-area hotel in 2022 “legitimately flabbergasting.”
According to the response of an order paper question put forth by Rempel Garner in November, in the fiscal year 2022, the federal government spent almost $6.8m to use the Westin Calgary Airport hotel as a quarantine facility. In the 2022 calendar year, the hotel housed 15 people for the duration of their quarantines, coming out to over $450k per person.
Rempel Garner wrote in a post on Substack that “Government waste is always a problem, but waste of this magnitude when deficit spending needs to be reined in due to inflationary pressures shows that Trudeau doesn't have the capacity or willingness to get things under control.”
The Westin Calgary Airport hotel was designated a quarantine facility from June 22, 2020, to Oct. 30, 2022, according to the Public Health Agency of Canada (PHAC). Over the course of the two and a half years, the hotel housed 1,490 people to the tune of nearly $27 million, about $18,000 per person. And this is just one quarantine hotel facility. How many more stories like this are there across the country?
In addition to the amount paid to the hotel, the federal government also paid the Canadian Corps of Commissionaires $1.7 million for security, $41,000 for medical transportation services, another $4,600 for bus services, nearly $1.5 million to the Canadian Red Cross for traveller support services and $1.1 million for cleaning services. Add on the $35,000 the government paid for repairs, and we get a grand total of $31.3 million or an average of about $21,000 for each of the 1,490 people who stayed there over the past three years.
The federal government’s hotel quarantine requirements largely ended in August 2021. Rempel Garner says: “The fact that these contracts were continued even after quarantine restrictions were eased really shows the lack of capacity the government has to manage spending. Since we’re in an inflationary crisis that’s driven by this type of spending, it raises a lot of questions about what else is being mismanaged.”
Were this spending at the beginning of the pandemic when we still really didn’t know what was going on — when it was panic mode for every level of government — it would be understandable, but this was happening just a few short months ago. Who keeps booking an entire hotel to quarantine air travellers when you are getting zero passengers in a month, or two at most?
PHAC spokesperson Tammy Jarbeau said the federal government spent $388.7 million in total on 38 designated quarantine facilities across 14 cities from April 2020 to December 2022. The total cost included lodging, meals, security, traveller support and transportation.
Rempel Garner asked Health Minister Jean-Yves Duclos about the spending in question period in the House of Commons on Tuesday. Duclos replied:
“We were all very mindful of the terrible pain and the large number of deaths, and an even larger number of hospitalizations that we have seen in Canada over COVID-19. That's why our primary responsibility has been, and remains, to protect the safety and the health of Canadians, including the tens of thousands of people who had to access the designated quarantine facilities. Because of these measures and vaccinations, we have saved, Mr. Speaker, tens of thousands of lives and tens of billions of dollars in economic costs.”
The amount of money spent on quarantine hotels is beyond head scratching, and for that amount of money, it should be a given that the people forced to stay there for their quarantines were given top notch service. However, we know from past stories that this was not the case.
One traveller who was forced to stay at a quarantine hotel with his family, would have preferred the cash value of what the government spent per person at the Westin Calgary Airport hotel for his own family’s hotel stay in Toronto so he could have made his own arrangements. He said it was a challenge to get basic amenities, such as milk for coffee, or laundry service, and their room had no hot water. He said: “That’s a lot of money for cold food and no hot water.”
In December 2021, Auditor General Karen Hogan reported she’d identified “significant gaps” in PHAC’s administration of emergency travel measures that came into effect in early 2021. Her report covered quarantine orders from July 1, 2020, to June 30, 2021.
According to Hogan’s report, for 75 per cent of travellers who flew into Canada, PHAC didn’t know whether those who were required to quarantine in hotels actually did so. She also reported PHAC did not reliably track whether air travellers who had been notified of positive COVID-19 tests had stayed at a government-authorized hotel as required.
The Trudeau government used the pandemic to increase spending dramatically, in areas like this where there was obvious waste, and in areas where the spending wasn’t related to COVID at all. They can’t keep claiming that all of this spending had to happen, or people would have died. That is their current defence, and it is insulting to Canadians.
For much of the pandemic, international air travel was restricted to Calgary, Vancouver, Montreal and Toronto. That means there were more hotels like this and more waste. The government needs to stop lying to Canadians, stop pretending this was about saving lives, and be honest regarding their waste and incompetence.
Supplementals:

Firing Line

US fighter jets shoot down Chinese spy balloon off East Coast

On Thursday civilians in North America became aware of a Chinese surveillance balloon (as the media called it) floating through North American airspace.
The object crossed over Alaskan airspace, transited through Canada, flew over Montana and crossed south-east before being shot down Saturday afternoon off the coast of South Carolina.
Various statements were issued by the Minister of National Defence, Anita Anand here in Canada citing close contact with the National Security and Intelligence Advisor, Chief of the Defence Staff and Prime Minister.
All of the above were also in contact with NORAD partners in the United States.
Initial chatter from the government agencies in both countries was quiet but we now know that the US became aware of the incursion on Wednesday and Biden ordered the object to be shot down but defence officials suggested waiting until it was over water to prevent anyone from getting hurt on the ground.
Using the term “balloon” is underselling what this was for a number of reasons but most of all the size.
Normal weather balloons are about a metre or two across. This one was about 30m, the size of three buses or so. Very clearly not a weather balloon.
Chinese officials claim that it was a civilian airship that went off course.
An airship that just happened to cross over the bulk of the most sensitive defence areas of the United States representing the bulk of the country’s ICBM (inter-continental ballistic missile) launch silos.
At this point only the truly naive would believe China when the trajectory and payload of the object are accounted for.
In addition to a white spherical object, there was also a payload that could be seen in the videos and photos taken from the ground.
As of yet, we don’t know what was up there but the hope is that the debris will be able to be retrieved as it was shot down in water that is only about 45 feet deep.
The debris will then be analyzed at an FBI lab in Quantico, Virginia.
The true purpose of the object is not known but theories have ranged from surveillance, to electronic monitoring, to at the worst, a trial for delivery of an EMP.
An EMP at its worst would triple the electrical grid plunging the continent into darkness for weeks if not months.
There is also said to be a second object now over Latin America. Less is known about this one and to what it extent it pushed into NORAD controlled airspace.
US Secretary of State Anthony Blinken was supposed to visit China but that visit has now been scrapped.
China is now saying that the US, in particular, is using the incident to discredit China.
Meteorologist Dan Satterfield used the NOAA HYSPLIT model (a model that models wind currents) to track the path back of the object.
On February 2nd second he posted that it was over central Montana and following it back, gives a launch point of central China.
High level winds are modelled and with some luck they can be predicted quite accurately.
The backtrack of the object arriving from central China is likely correct.
US officials says they started tracking the object on January 28th when it was seen over Alaska. With Biden being briefed on Wednesday, this raises an interesting question: why was it not shot down sooner?
On the whole this entire incursion poses a big problem for us given the current situation in eastern Europe but also the coming problems with China that so many are blind to.
This incident needs to be a wake-up call that more people outside of the intel agencies need to be asking questions of what the end goals and motivations are of the Chinese Communist Party.
Another big problem with this situation is that the diplomatic arm of the Chinese Communist Party is expressing regret and apology, other Chinese government officials are laughing at us.
Zhang Meifang the Consul General of China in Belfast tweeted earlier on Saturday, “Perhaps China was simply giving the US a balloon. Much like one would give a child to make them feel better.”
This speaks volumes and is likely what the internal messaging of the CCP looks like today and why using the term balloon plays into their hand.
The west and in particular Canada and the US through NORAD Need to get serious about arctic defence and China sooner rather than later.
Supplementals:

Quote of the Week

“Government waste is always a problem, but waste of this magnitude when deficit spending needs to be reined in due to inflationary pressures shows that Trudeau doesn't have the capacity or willingness to get things under control.” - Conservative MP Michelle Rempel Garner on Trudeau’s wasteful pandemic spending.

Word of the Week

Airship - aircraft that can navigate through the air using lighter than air gases

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Show Data

Episode Title: Tip of the Iceberg

Teaser: The Trudeau government contracts with McKinsey until 2100, Freeland tries to maintain competitiveness with the US, and millions were spent on unused quarantine hotels. Also, a Chinese aircraft drifting over North America shows gaps in our defences.

Recorded Date: February 4, 2023

Release Date: February 5, 2023

Duration: 54:01

Edit Notes: None

Podcast Summary Notes

Duration: XX:XX