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“Six times higher”: the Andersen Consulting scandal

In 1997, the province contracted out a Business Transformation Project in the Ministry of Community and Social Services to make major changes to the social assistance system. The ministry’s contract with Andersen Consulting (later re-named Accenture) caught the attention of the provincial auditor very early on. In his 1998 report, the auditor noted that the Ministry “had not sufficiently defined or established the project’s scope and desired business results [and] could not demonstrate that it had adequately considered either other contracting arrangements or maximizing the use of its own internal resources for any aspects of this project.”9

The Ministry “could not provide the basis for its agreement to pay Andersen Consulting a fee of up to $180 million,” the auditor noted, observing that the contract between the ministry and the company allowed the company “to charge standard published billing rates for this project, which were, on average, almost six times higher than the rates charged by the Ministry for comparable staff”10 and that the company was allowed to unilaterally increase those fees “from time to time.” 11

The Ministry did not have receipts for most of the $1.4 million in out-of-pocket expenses the company billed the government for; those charges “averaged approximately $26,000 for each full-time-equivalent position assigned to the project during the first year.” 12 Chastened by the provincial auditor’s report and an investigation by a committee of the legislature, Andersen Consulting was forced to renegotiate its arrangement. But in a special report two years later, the auditor still found that “our concern remains that under the renegotiated agreement Andersen Consulting is still receiving a disproportionate amount of the benefit pool in relation to its work effort.”

Indeed, Andersen’s rate for a consultant was still $280 an hour for work that cost the Ministry between $45 and $115 an hour when performed by its own staff.13 The rollout of the Business Transformation Project was originally planned for completion by June 1999; as of 2000 that date had been changed to January 2002, a full two-and-a-half years behind schedule.
Credit Opseu.org