Feds underestimated complexity, ignored concerns about Phoenix pay system, review finds

Pretty damning account of senior management failures:

An independent report on the problem-plagued Phoenix pay system rollout released Thursday says the government underestimated its complexity.

Public Services and Procurement Minister Carla Qualtrough (Delta, B.C.) apologized to affected public servants in an Oct. 5 press conference, and said the review confirmed many of the thoughts she already had. She noted fixing the pay system is the first priority in her mandate letter from the prime minister, given to her after he moved her into the job in August.

“The implementation of such a complex business transformation across the entire government of Canada was a massive undertaking that I believe history will record was set up to fail,” she said, noting there was poor planning on almost every key aspect. “There’s no easy or quick fix for the problems in the pay system.”

The report’s “lessons learned” included: assigning accountability and authority to a single office, properly defining the scope of the project, fully testing the software before launch, and not expecting savings until well after implementation.

Overall, the independent consultants hired to do the review found the officials working on the project were most concerned with being on time and on budget. Briefings were usually positive and the culture of the department responsible prevented people from speaking negatively about the project. The report said bad news was usually buried, with concerns mostly ignored. Even at the pay system’s launch in February 2016, testing was incomplete, with no planned fix date and no contingency plan.

Other lessons included making sure to have sufficient employee knowledge capacity, and communicating effectively. The report noted workplace culture was also important, and that the 17 lessons it outlined “are yet to be learned” by the government.

Though work on the new pay system began under the previous Conservative government, the Liberals launched it in February 2016. It was supposed to consolidate the payroll of over 300,000 public service employees, but instead it has left many of them overpaid, underpaid, or not paid at all. Radio-Canada recently reported that as of Aug. 8 nearly half of the 313,734 federal public servants paid through Phoenix had been waiting at least a month to have their complaints dealt with. The government contracted IBM to configure the software for the government payroll system.

The program was supposed to save the government $70-million per year, but so far the Liberals have sunk in about $400-million to fix it.

Source: Feds underestimated complexity, ignored concerns about Phoenix pay system, review finds – The Hill Times – The Hill Times

And good background to some of the potential conflicts of interest with some of companies doing background studies and recommendations, and working on implementation:

Two companies that were awarded tens of millions of dollars in contracts to help create the new federal pay system played a part in recommending the Phoenix project in the first place, CBC News has learned.

This appearance of a conflict of interest in the very early days of the project is raising flags for those who monitor federal procurement and accountability.

The internal government report that recommended a new pay system in 2009 relied heavily on two studies — one from IBM and another from PricewaterhouseCoopers. These were two of the companies that went on to help develop Phoenix for a combined price tag of more than $200 million — and counting.

“That’s a cause for concern,” said Christopher Stoney, who follows procurement and accountability issues as a professor at the School of Public Policy and Administration at Carleton University. “[It’s] clearly getting into areas here of conflict of interest.”

The recommendation

In May 2009, top government bureaucrats delivered a document called Initiative to Fix the Pay System Business Plan, which convinced decision makers to bring in a new, modern pay system. That system would later be called Phoenix.

A year earlier, international professional services firm PricewaterhouseCoopers published a report called Analysis of Industry and Government of Canada Pay Administration Services Delivery Model Options. The PricewaterhouseCooper’s study has not been made public, but it is quoted liberally throughout the Phoenix business plan.

The PwC study suggested the most cost effective choice for the Government of Canada would be to create a consolidated pay centre and use customized off-the-shelf pay software. It was advice the government embraced.

PricewaterhouseCoopers also reviewed the business case as, in the government’s words, “an independent Third Party to ensure unbiased and accurate content.”

The company has earned $17.4 million through its work on the Phoenix system since 2009, according to the federal government database Buyandsell.gc.ca.

“I think anybody looking at this would be concerned that there was this possible undermining of independence,” said Stoney, who co-edits the annual publication How Ottawa Spends. “At some point it seems as though that independence was eroded and [PwC] became increasingly key players in this.”

IBM’s role

The government’s Initiative to Fix the Pay System Business Case also depended on research provided by IBM in a February 2007 report called Pay Benchmarking Study for the Government of Canada.

In September, CBC reported details about IBM Canada’s extensive responsibilities to design, implement, operate and fix the Phoenix system, for a price tag that has so far reached $185 million.

The 2007 IBM study pointed out that custom, off-the-shelf software systems are “consistently more cost effective and enable higher quality and efficiency, when implemented and sustained properly.”

This was exactly the kind of system that IBM was hired to implement for Phoenix.

IBM also noted the government’s old system was at risk of failure. Its report warned that these “payroll errors can have significant consequences for both the financial picture of the organization and talent retention.”

‘Brought into the tent’

“It’s clear that two of the contractors that played a role on the build and operations played a role in the business case,” said Kevin Page, president of the Institute of Fiscal Studies and Democracy at the University of Ottawa.

“So we literally brought them into the tent, asked them to see whether or not the business case was strong, asked them to do benchmarking, which is critical to performance of a business case.”

Page was appointed Canada’s first Parliamentary Budget Officer in 2008 and was in that role when this business plan was developed. But he had never seen the business case until CBC sent it to him recently.

About Andrew
Andrew blogs and tweets public policy issues, particularly the relationship between the political and bureaucratic levels, citizenship and multiculturalism. His latest book, Policy Arrogance or Innocent Bias, recounts his experience as a senior public servant in this area.

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