Privatization of the Public Sector: The Curious Link Between the McKinsey Contracts and Ontario’s Healthcare Reform

After France’s “McKinsey affair” made headlines last summer, the ties between the consulting firm McKinsey & Company and Justin Trudeau‘s and François Legault‘s governments have garnered more and more attention. This topic has made noise in Canadian politics for two main reasons — the former somewhat more loudly than the other. First, both governments have been accused of corruption, with the federal Conservatives going as far as to blame the rising deficit and inflation on McKinsey spending. (As of now, many details regarding McKinsey’s federal contracts are unavailable, though an investigation will likely ensue.) Secondly, it has sparked a debate about the role of the public and private sectors in accomplishing the government’s responsibilities.

A number of pundits and analysts have pointed to another, possibly more important, question about what the outsourcing of public service analytical tasks to private contractors says about the future of the country’s public service. The Public Service of Canada has been the civilian workforce of the Canadian government since 1908, and employed 340,000 Canadians in 2022. If the Canadian government has such a large body with 115 years of experience at its disposal, it is fair to ask why it needs the advice and services of private consultants like those from McKinsey. This question is especially relevant today because, in recent years, government spending on consulting has skyrocketed, even while the public service workforce has continued to grow.

Contracting private firms to fulfill government jobs is nothing new. Many public services are run through the private sector while the government continues to foot the bill. The McKinsey case is contentious because it is a massive introduction of the private sector into a role that the public sector has traditionally accomplished alone or with limited assistance. Spending money to train public servants only to execute tasks through the private sector can seem like a waste of public funds and therefore warrants a serious conversation.

There are some apparent advantages to outsourcing these jobs. Rigidities such as specific spending limits and archaic bureaucratic systems can slow down government employees, causing many to doubt the efficacy of the public sector in such fields — especially when there is a need for a quick response, such as during a pandemic. While for-profit private companies seek to be as efficient as possible, they may have a better capacity to adapt their strategies on a case-by-case basis and may also provide easier financial planning, as their costs are tied to the contracts. Additionally, these firms work for a wide range of governments worldwide and can therefore bring in knowledge and expertise from abroad.

However, several arguments warrant skepticism about governments’ growing use of private consultants. Private consultants rarely work for just one government, and consultants’ ability to shape policy to specific local needs may be inferior to that of more skilled, domestically-trained public servants. Furthermore, there are also security and accountability concerns. While the rigidities of the Public Service do bring some disadvantages, they also bring protocols that ensure reliability and accountability. Public servants also work solely for one government, so there are arguably fewer concerns of leaks and collusion. In addition, the market for government consultants is fairly small, with only a handful of providers and even fewer potential clients, thus distorting the capitalist profit incentive. If governments abandon the upkeep of their public service, private service providers could raise their prices and force governments to reach deeper into their pockets.

This debate is unlikely to be resolved any time soon; compelling arguments can be made by both sides. However, this discussion is important beyond the domain of consulting. Most recently, Doug Ford’s Progressive Conservative government of Ontario has dared to touch the ‘third rail’ of Canadian politics: they are planning to increase the role of the private sector in healthcare.

The PC proposal aims to resolve some of the problems faced by Ontario Health — primarily the backlogs — but has met intense rhetorical backlash in mainstream Canadian discourse. Doug Ford has been accused of transforming Ontario’s healthcare into an “American-style” system. If true, this could mean political suicide in a country whose national pride heavily relies upon the perception of its healthcare system as better than that of its southern neighbour, the United States. The fear of strong opposing rhetoric was evident in Ford’s press conference announcing the changes to the Ontario Health Insurance Plan (OHIP); he persistently repeated that Ontarians will always be able to access the system with their “OHIP card, never with their credit card.”

Similar to the government contracting out consulting to private companies, Ford’s health plan seeks to increase healthcare capacity by contracting private providers for certain services. Though accusing the Ontario government of creating a private insurance-based system is — at least at this point — quite far-fetched, some skepticism is warranted. In the same way as consulting, the question of the private sector’s greater efficiency is not completely answered. The money will not be spent expanding and improving government-run services, but instead on making OHIP reliant on the private sector’s services. Similarly to the previous scenario, that could lead to OHIP having no choice but to contract certain private services, thus making it vulnerable to these private companies’ price increases. Furthermore, the private sector could slowly attract health professionals away from public service. Whether this outsourcing of health services will help or harm Ontarians is yet to be seen.

The relationship between the public and private sectors has been a contentious issue in Canadian politics for many years. While the public sector has traditionally provided essential services to the citizens, the increasing demand for efficiency and quick responses has led to some outsourcing. This has sparked a debate about the private sector’s role in accomplishing the government’s duties and the public sector’s future. On the one hand, proponents of outsourcing argue that private companies are more efficient, adaptive and bring in outside knowledge and expertise. On the other hand, skeptics raise concerns about the security and accountability of private contractors, as well as the potential for price gouging in small markets.

In recent years, this debate has become particularly relevant in the context of government spending on consulting and the private sector’s growing role in healthcare. While the potential advantages and drawbacks of outsourcing are still a matter of debate, it is clear that this issue raises important questions about the role of the private sector in providing essential services and the future of the public sector.

Edited by Zach Brousseau.

Featured image: Featured images: “McKinsey & Company in Shanghai _3417” by Philip McMaster is licensed under CC BY 2.0.