This isn't a scandal, and is probably required by the FDA client contract and the pharma client contracts. It is normative. The FDA is fully aware that McKinsey serves pretty much every major pharma company in the world. Pharma companies know McKinsey is likely involved with federal agencies, probably including the FDA. The contracts formed with all organizations will clearly indicate that the relationship is going to remain private. A really important part of working with a big consulting firm is that you keep it internal to the team.
For example, the partnership might be serving both sides of a vendor/procurement situation. It is a huge conflict of interest if these two teams talk to each other and risk leaking their side's position. Thus, not only are the teams allowed to talk to each other, they're not allowed to communicate to others that they're working with that client.
Nothing unique to McKinsey here. That's how consulting tends to work.
> This year ProPublica submitted a Freedom of Information Act request to the FDA seeking records showing that McKensey had disclosed possible conflicts of interest to the agency’s drug-regulation division as part of contracts spanning more than a decade and worth tens of millions of dollars. The agency responded recently that “after a diligent search of our files, we were unable to locate any records responsive to your request.”
> McKinsey’s contracts with the FDA, which ProPublica obtained after filing a FOIA lawsuit, contained a standard provision obligating the firm to disclose to agency officials any possible organizational conflicts. One passage reads: “the Contractor agrees it shall make an immediate and full disclosure, in writing, to the Contracting Officer of any potential or actual organizational conflict of interest or the existence of any facts that may cause a reasonably prudent person to question the contractor’s impartiality because of the appearance or existence of bias.”
> Over the past couple of years, for example, McKinsey’s bankruptcy-advisory practice has paid more than $30 million to the Justice Department and one client’s creditors to settle allegations that it failed to disclose potential conflicts, as required by the federal bankruptcy rules.
There is no evidence that McKinsey disclosed their conflicts in this case, and plenty of evidence that they regularly fail to do so when working with the government, in clear breach of contract. If they paid $30 million to make it go away, then by definition it is a scandal. It is also potentially criminal: https://www.nytimes.com/2019/11/08/business/mckinsey-crimina...
IMO, these things get poured over in great detail by legal teams on both sides. The firm's internal controls are strong and are probably considered sufficient to cover those bits, even if the firm is serving competitors. I'm not a lawyer. I don't look at contracts much, but that sounds like a standard clause. It seems... very unlikely to me that propublica has found anything noteworthy here. The bottom line is that all clients sign agreements forbidding them or McKinsey from sharing knowledge of the relationship. That comes with the understanding that there are similar agreements with other companies. McKinsey cannot disclose its relationships with other companies. Recall that presidential candidate who got a ton of flack because he wasn't able to disclose what he did at McKinsey? It wasn't particularly sensitive, iirc. It was just some work with a grocery chain and some other stuff. But its still hard for the firm to allow sharing that information because everything is NDA'd to hell.
Bankruptcy, as I understand it, is a different problem, that tends to arise when the firm is serving the company in bankruptcy, or one of its subsidiaries, which is problematic because you don't want to do anything that could benefit your position as a vendor for them... I think. Not particularly well informed, but I get the impression its a complicated ordeal.
> McKinsey cannot disclose its relationships with other companies.
Ok, then it can't take a job with the government. The contract is clear. I'm not a lawyer either, but I do read contracts before I sign them, and this one doesn't sound very complicated. You're right that it is a standard clause.
I don't understand why you think it's unlikely that this is noteworthy, and I don't understand your explanation of why the bankruptcy case was different. I agree it might have been worse, hence the criminal investigation, but it sounds like a breach of contract in both cases, possibly even a breach of the exact same standard clause.
> the Contractor agrees it shall make an immediate and full disclosure [...] of any facts that may cause a reasonably prudent person to question the contractor’s impartiality because of the appearance or existence of bias.
Can you genuinely say that there are no facts in this case that create even the appearance of bias?
> Can you genuinely say that there are no facts in this case that create even the appearance of bias?
I can say with some confidence that nobody involved in the agreement, on either side, would be surprised by this article's findings. And I am assuming that there is sufficient nuance around the concept of "appearance of conflict of interest" is covered by the mutual understanding of the firm's internal controls. I'll bet that the FDA has no interest in suing McKinsey over this.
I don't think your casual reading of this snippet is enough to understand how this works. You're welcome to disagree.
I am involved in the agreement, because the FDA is part of my government. I don't want my government ignoring conflicts of interest with a wink because "everybody knows". I don't want my government ignoring contracts because of an unwritten "mutual understanding". Based on my understanding of human nature and your own posts in this thread about how easy it is to move between projects at McKinsey, I don't believe "firewalls" are effective and I don't want an unethical organization with an extremely recent national corruption scandal and blatant conflicts of interest working for my government's regulators.
You're missing the point. It's not "wink wink everybody knows". It's "we explicitly understand you're working with pharma companies whose interests may differ from ours but that these teams will be isolated and thus under no conflict of interest". It's not under the table.
I'm not sure what you mean by how easy it is to move between projects. It's not. You don't just get to say "hey I wanna work for tesla, anybody doing a project on tesla?". That information is secret. But you do have the ability to say "I would like to work in energy, and I don't want to serve anyone working on oil".
I'm not entirely interested in changing your mind. Just showing some context.
edit: cannot respond to the below, but the FDA does not disclose all the details of its operations. I too would like if government entities were fully transparent. But that's another issue. You'll have a hard time getting ALL the details of every decision made with FOIA acts. And finally, there are consequences to breaking these contracts. That should be obvious.
Explicitly understood, but not documented, not disclosed to the public, and no measures taken to ensure that McKinsey is staying honest and no personnel or information was shared between teams during the 12+ year engagement. No concern that what they got caught for in South Africa might not have been a one-time deal. Just took their word for it and kept their secrets.
In writing would only be the operative term if the discussions concluded things were a conflict of interest. They're not required to provide non-issues in writing.
"the Contractor agrees it shall make an immediate and full disclosure [...] of any facts that may cause a reasonably prudent person to question the contractor’s impartiality because of the appearance or existence of bias."
You can run in this circle as long as you want. If the FDA execs and the McKinsey execs reach a mutual understanding of the circumstances, including the fact that McKinsey is going to be simultaneously serving unnamed third parties with contrary interests, and that this is ok, then the reasonably prudent person will conclude that these are not factors to cause them to question the contractor's impartiality. It would not be surprising to me at all if additional language in the contract explicitly address this point.
This isn't a scandal, and is probably required by the FDA client contract and the pharma client contracts. It is normative. The FDA is fully aware that McKinsey serves pretty much every major pharma company in the world. Pharma companies know McKinsey is likely involved with federal agencies, probably including the FDA. The contracts formed with all organizations will clearly indicate that the relationship is going to remain private. A really important part of working with a big consulting firm is that you keep it internal to the team.
For example, the partnership might be serving both sides of a vendor/procurement situation. It is a huge conflict of interest if these two teams talk to each other and risk leaking their side's position. Thus, not only are the teams allowed to talk to each other, they're not allowed to communicate to others that they're working with that client.
Nothing unique to McKinsey here. That's how consulting tends to work.