Canadian government outsourcing soars in 2024 despite promised cuts
OTTAWA, CANADA — The Canadian federal government’s external contracting has reached unprecedented levels, with expenditures climbing to CA$17.8 billion (US$13.2 billion) in fiscal year 2023-24, marking a substantial 13.5% increase over the previous period. This expansion contradicts the Liberal administration’s earlier pledges to curtail external consulting services.
Consulting giants’ dominance
In the current landscape, Deloitte leads the pack with CA$308 million (US$228 million) in federal contracts, including CA$166 million (US$123 million) dedicated to management consulting.
The tech and consulting sector shows significant representation, with IBM securing CA$190 million (US$141 million), while Accenture, CGI, and KPMG have obtained contracts worth CA$43 million (US$32 million), CA$36 million (US$27 million), and CA$28 million (US$21 million) respectively.
Fiscal oversight challenges
The ArriveCan application development stands as a striking example of expenditure oversight issues. What began as an CA$80,000 (US$59,000) initiative escalated dramatically to exceed CA$54 million (US$40 million), primarily due to extensive reliance on private contractors. While certain consultancies like McKinsey have seen reduced engagement, dropping to CA$1.4 million (US$1 million) from CA$19.6 million (US$14.5 million), the overall trajectory of external spending maintains its upward trend.
Government position
Treasury Board spokesperson Rola Salem defended the practice, stating that “contracted services have always been an important part of how the government delivers programs and services to Canadians.”
The administration argues that professional services provide essential specialized expertise and help manage fluctuating workload demands.
Sustainable outsourcing strategies
Organizations can implement several key approaches to minimize negative impacts on Canada’s economy and workforce. Businesses can focus on strategic outsourcing that combines both local and international talent, helping Canadian companies innovate while maintaining domestic employment.
Business process outsourcing (BPO) doesn’t just benefit organizations. It also gives an advantage to the Canadian economy, whether through nearshoring or offshoring. It allows businesses to contribute to the country’s economy, even when a calamity occurs. As a result, they help create more jobs for their local citizens and contribute to the growth of the country.
BPO firms from offshore countries work on the latest technology and innovation in various industries. Local companies can tap into some of the top BPO firms in different countries through outsourcing. This way, they can bring this technology to Canadian operations.
Outsourcing is also about tapping global networks. When a local business contracts with a business process outsourcing company, it gets to increase its network and market. This benefits both Canada and the foreign economy.
Examples of outsourcing services that Canadian companies have been leveraging from global BPO companies are call center services, web development, software development, back office services, digital marketing, quality assurance, data entry, lead generation, and email marketing.
Political horizon
With Parliament prorogued until March 2025 and opposition parties considering a non-confidence vote, the trajectory of federal outsourcing policies remains in flux. The Treasury Board has committed to enhancing procurement oversight while ensuring service delivery standards.
This evolving situation underscores the complex balance between operational efficiency, fiscal responsibility, and public service delivery in Canada’s federal administration.
