Madam Chair, thank you for this opportunity to present the results of our audits of building and implementing the Phoenix pay system and of Phoenix pay problems. Joining me at the table is Jean Goulet, the principal who was responsible for both audits.
In 2009, Public Services and Procurement Canada started its transformation of pay administration initiative to transform the way it processed pay for its 290,000 employees. There were two projects: one to centralize pay services for 46 departments and agencies that employed 70% of all federal employees, and the other to replace the 40-year-old pay system used by 101 departments and agencies.
In our audits, we reviewed Public Services and Procurement Canada's development and implementation of the Phoenix pay system and how the department managed the pay problems that the implementation of Phoenix caused.
In our audit of building and implementing the Phoenix pay system, we examined whether the decision to launch the new pay system included considerations of whether the system was fully tested, functional and secure and whether it would protect employees' personal information.
We concluded that the Phoenix project was an incomprehensible failure of project management and project oversight which led to the decision to implement a system that was not ready.
In order to meet budgets and timelines, Public Services and Procurement Canada decided to remove critical pay functions, curtail system tests and forego a pilot implementation of the system.
Phoenix executives ignored obvious signs that the Miramichi pay centre was not ready to handle the volume of pay transactions, that departments and agencies were not ready to migrate to the new system, and that Phoenix itself was not ready to correctly pay federal government employees. When the Phoenix executives briefed the deputy minister of Public Services and Procurement Canada that Phoenix was ready to launch, they did not mention significant problems that they knew about. Finally, the decision to launch Phoenix was not documented.
In our audit of Phoenix pay problems, we examined whether Public Services and Procurement Canada worked with selected departments and agencies to fix Phoenix pay problems so that government employees would receive their correct pay on time. After Phoenix went live in February 2016, the government frequently could not pay public servants accurately or on time. We found that pay problems continued to grow throughout the period of our audit.
A year and a half after the government launched the Phoenix pay system, the number of public servants waiting for a pay request to be processed had reached more than 150,000 in the 46 departments and agencies whose pay services were centralized. Those 150,000 employees were waiting for about 500,000 pay requests to be processed. Those numbers did not include the outstanding pay requests in the 55 departments and agencies whose pay services were not centralized, and also did not include the outstanding requests required by the collective agreements with federal public service unions that were signed in the fall of 2017.
Problems grew to the point that the value of outstanding pay errors totalled more than half a billion dollars at the end of June 2017. This amount consisted of money owed to employees who had been underpaid as well as money owed back to the government by other employees who had been overpaid.
Departments and agencies struggled with Phoenix pay problems from the time the system went live. However, it took Public Services and Procurement Canada four months to recognize that the problems went beyond normal processing levels.
We concluded that Public Services and Procurement Canada did not identify and resolve pay problems in a sustainable way to ensure that public service employees would receive their correct pay on time. In fact, according to the department, a backlog of unresolved pay requests continued to grow after the date of our audit conclusion.
In my opinion, there were three issues that were common to both the Phoenix implementation project and the department's immediate response to the post-implementation problems.
Those were a lack of oversight or governance to guide management activities, a lack of engagement with affected departments, and an underappreciation of the seriousness of the problems.
Before I close, I want to mention that in addition to the two audits I referred to, included in our spring 2018 report of the Auditor General was a message from the Auditor General in which I indicated that I believe that the culture of the federal government enabled Phoenix to become an incomprehensible failure, and I believe the committee should consider how that culture contributed to the failure.
Madam Chair, this concludes my opening remarks. We'd be pleased to answer any questions the committee may have.
Thank you, Madam Chair.
I'm joined today by our associate deputy minister, Les Linklater. We appreciate the opportunity to appear before you to discuss the Auditor General's studies of Phoenix. Public Services and Procurement Canada accepts the Auditor General's recommendations and has taken measures to respond to them.
I want to begin by acknowledging that this issue is fundamentally about people. This situation has put a strain on many public servants, for which I am deeply sorry. I know we've said it, but we're sincerely sorry.
This issue is also about those working hard to fix the pay system. I can assure you that we have extraordinarily dedicated teams that are working very hard to address their colleagues' pay issues. Without question, this situation has taken a heavy toll on too many employees.
The Auditor General's spring report examines the planning and development of Phoenix from April 2008 to April 2016. This period predates the senior leaders now working on pay at Public Services and Procurement Canada, but while the decision-makers have changed, the lessons of past actions cannot be forgotten.
There were serious flaws in the planning and implementation of Phoenix and in the broader transformation of the Pay Administration Initiative. We know that cost and timelines were prioritized. As result, poor decisions were made. Critical elements of the project, including some system functionality, testing, change management and training were removed or deferred. These decisions, coupled with the elimination of 700 compensation positions—and the resulting loss of critical capacity and expertise—led to a government-wide transformation that couldn't perform as planned and users who weren't prepared for this significant change.
Within the senior levels of PSPC, and I would say across government, the project's scope and implications were vastly underestimated. The Goss Gilroy Inc. report also cited this fundamental gap as a central failing of the project. When the deadline for implementation came, it was thought that the system was ready to go. Clearly, it was not.
I don't believe anyone acted with ill intent, but the two senior executives responsible for the project who reported to the deputy minister did not properly assess the complexity of the undertaking, the cumulative impact of their decision, or the seriousness of the early warnings.
The performance of these senior executives has been evaluated and appropriate measures have been taken. They are no longer involved in pay administration, and they did not receive performance pay for their work on Phoenix during 2015-16 when the system was finalized and launched.
As I mentioned, this situation has caused significant stress for many employees. Understandably, people want someone to blame. What has happened is unacceptable. The Auditor General has identified that senior executives at PSPC made significant mistakes, but he has also acknowledged that there were oversight and governance issues. I believe that there were multiple points of failure. We have to learn from all of them.
Accountability needs to be coupled with authority for projects like pay transformation to succeed. Public Services and Procurement Canada officials had full authority on Phoenix, but not over the government-wide human resources processes. For example, we should have had an integrated HR and pay approach all along.
We need to do better. We need to give our people the tools and the environment needed to succeed.
Madam Chair, we can't rewrite history, but we can benefit from it. The Auditor General's report provides invaluable advice that is helping us to move forward.
I'd like to turn now to the specific recommendations offered by the Auditor General in his spring report, which focus on future planning of IT projects. PSPC has a long history of managing many large-scale, complex, multi-faceted projects on behalf of clients, such as pension modernization and the Long-Term Vision and Plan for the Parliamentary Precinct. We currently manage over 430 projects with a budget of over $13 billion.
PSPC has rigorous and effective processes in place to manage large-scale projects. Our experience with Phoenix has highlighted the need for an enhanced approach for the management of complex enterprise-wide IT projects.
To fill this gap, PSPC will work with partners to develop a gating tool. This tool will determine if a specific project under our responsibility should be managed through departmental project management practices and processes, or through an enhanced government-wide IT project management approach.
We will also develop an enhanced project management playbook detailing how our government-wide IT projects are to be managed, clearly laying out the roadmap of what has to be done and by whom. It will address governance, and oversight project management principles, roles and responsibilities, and the audit function, among other elements.
These actions will allow us to respond to the Auditor General's recommendation, by ensuring that we have robust governance and oversight for all government-wide IT projects under our responsibility. This approach will also ensure that enterprise-wide IT projects include a stakeholder engagement plan to ensure active collaboration with departments and agencies. This engagement will allow us to better define system requirements and, importantly, validate system performance. These IT projects will also include a formal software upgrade plan and a comprehensive contingency plan.
Finally, PSPC will ensure that internal audits provide the deputy minister with the appropriate assurances regarding project governance, oversight, and management.
Madam Chair, work is under way to develop and formalize both the gating process and the playbook, but I want to assure members that the lessons drawn from Phoenix are already being applied within PSPC. For the here and now, our priority remains helping employees facing pay issues.
In November, we announced a suite of measures to stabilize the pay system and reduce wait times and late transactions for missing pay. These activities were based on the findings of the Goss Gilroy report and aligned with the Auditor General's fall recommendations. Oversight has been strengthened. Departments and agencies can now monitor and act on the quality of their data. Submission of timely and accurate HR information into Phoenix has a major impact on the timeliness and accuracy of pay.
In May, visited the public service pay centre in Miramichi and announced the expanded rollout of a new pay pod approach, an idea that originated with the staff. Pay pods are teams of pay specialists who are assigned to exclusively serve a specific department or agency. A pilot of this approach reduced the case backlog of three pilot departments by 30% overall and their backlog older than 30 days has gone down by 41%.
We are very optimistic about the positive impact of the pay pod approach and we are looking forward to the impact, as it is rolled out across more departments over the next year.
Finally, we have increased capacity and service to employees.
As I mentioned, a critical gap was created when more than 700 compensation positions were cut in 2014. This meant that we implemented Phoenix with only 550 compensation staff. We have since almost tripled this amount.
Recognizing the need to provide more useful support to employees, we have also enhanced our Client Contact Centre and they have direct access to Phoenix as well as other systems. This allows employees to get detailed information about their pay files directly from public servants working at the centre.
We continue to refine and implement improvements and are beginning to see slow but steady progress.
Our most recent dashboard shows that our backlog is down 25,000 transactions from last month and, with minor fluctuations, has steadily declined since January 2018. As pay pods are expanded, we expect this decline in backlogged transactions to pick up speed.
Madam Chair, the ongoing public service pay problems are completely unacceptable and addressing them remains our department's top priority. We are working relentlessly to ensure that public servants are paid correctly and on time.
There were serious flaws in the planning and implementation of the pay transformation. It is clear that there were multiple points of failure. Our responsibility moving forward is to ensure that we learn from all of the mistakes made, so that something like this never happens again.
We look forward to your questions.
Thank you so much for the invitation to appear before your committee and help with your important work in reviewing the Auditor General's report on building and implementing Phoenix.
Joining me today is Sandra Hassan from Treasury Board Secretariat, assistant deputy minister of the compensation and labour relations sector.
As Secretary of the Treasury Board, I support the board in its role as the employer of the core public service.
In that capacity, I want to start by saying that the government takes very seriously its responsibility to pay its employees accurately and promptly.
Without question, the pay issues affecting employees and their families are unacceptable, and we are deeply sorry for that. I echo the sentiments expressed by Madam Lemay. We are taking action not only to resolve these issues, but of course to also support those employees who have been affected.
The government has put in place several measures for those affected employees. These measures of course include ensuring that advances are made and paid on a priority basis, providing flexibility in the recovery of overpayments, and establishing effective claims processes to compensate employees for expenses and financial losses occurred because of the unacceptable challenges associated with Phoenix.
In tandem with these support efforts, a huge push is under way, led by Public Services and Procurement Canada, to stabilize the pay system. At the same time—and this of course touches on the key themes raised by the Auditor General last week—we are equally determined to mitigate the risks associated with Phoenix and ensure that we are never confronted by a project failure of this magnitude.
Last year, Treasury Board Secretariat commissioned Goss Gilroy to look at some of the very issues raised by the Auditor General. We see the recommendations of this report, along with those of the Auditor General, as foundational guidance. In its October 2017 response to Goss Gilroy the government said that it is committed to building capacity in such key areas as project management, information and technology management, revamping its approach and policies for project management and procurement, and of course excelling in service delivery for the benefits of Canadians.
On pay transformation specifically, the government has already put in place new interdepartmental governance, both within the senior ranks of the public service and of course through the ministerial working group.
I'll now turn to the Auditor General recommendation for the Treasury Board in this most recent report.
It states that we should, for all information technology projects: carry out independent reviews of the projects' key decisions to proceed or not, and inform the projects' responsible deputy minister and senior executives of the reviews' conclusions.
Without reservation we concur with this vitally important recommendation. We will conduct independent reviews of government-wide projects to identify corrective actions and we will communicate the conclusions and remedial actions required. In the meantime, we are of course strengthening our policies as well as improving governance, changing the role of the chief information officer to further ensure that government-wide IT initiatives are well planned and executed. I echo the sentiments expressed by my colleague moments ago.
Now I will turn to budget 2018 and Phoenix.
In budget 2018, the government made a number of commitments to address the ongoing challenges in the Phoenix pay system. One of these of direct relevance to Treasury Board Secretariat is the provision of $16 million, to be led by Treasury Board Secretariat experts along with our colleagues in public sector unions and technology providers, on a way forward for a new pay system.
In looking at all options, we will have a relentless focus on the user and on a system that links HR actions with pay transactions. This will not happen overnight, nor should it happen overnight, being mindful of the lessons we have learned from Phoenix. We will diligently apply those lessons and ensure that all projects move forward on a constructive, timely, and thoughtful basis.
In closing, let me reiterate that my department, along with senior management throughout the public service, is fully engaged in this file.
Thank you. We look forward to your questions.
Thank you, Madam Chair.
Thank you to the witnesses.
Before I start my questioning, I'd like to table the following document, in both official languages. It was acquired through the access to information project. I'd like to hand it over to the clerk to distribute to all the members. This has to do with the briefing that was provided to the minister on February 18 vis-à-vis the status of the Phoenix implementation.
To the witnesses, thank you very much for your testimonies. A large business transformation enabled by technology, such as the Phoenix implementation, usually has a very structured implementation approach when it's being led by one of the five large implementation organizations. There have been a number of discussions around the challenges, such as oversight and culture, but I really want to focus on the activities that happened prior to that, what in the terminology of large business transformations is called, “go live”.
By way of background and transparency, I was a management consultant for 25 years. I've implemented a lot of large business transformations enabled by technology, so I'm very familiar with the process that Phoenix went through.
As part of the go/no-go or go-live decisions, traditionally there is a call, or there is a sequence of go/no-go decisions being made. During that process, the readiness assessments of the project from various aspects are reviewed, such as project management, the ability to see the “go live,” as well as the transition and stabilization.
Policies such as security, access to the information, processes—whether the processes are being redesigned—technology such as the functionality of the system working properly, and people, training, and whether the organization restructuring was completed..... There are two other elements that I haven't heard much of. One of them is the implementation of a rollout strategy, and the other one is the contingency plan.
As far as implementation of a rollout strategy is concerned, traditionally, either we have a phased approach, or we have what's called a “big bang” approach.
During a phased approach, a pilot project is launched for a specific department to make sure all the functionality works. From your testimony, it looks like that pilot was skipped, or that it was decided not to proceed with it. Therefore, as an implementation strategy, it was decided that all functionality, all sides, or what's called a “big bang” approach would be taken.
When an organization chooses to go with a big bang strategy or an implementation strategy, the huge risk as far as system implementation is concerned is if something goes wrong. Hence, the concept of a contingency plan, which is basically, “How do we roll back?” and in the case something goes wrong, “What is our recovery strategy?” plays a huge role in that.
During the readiness assessment review that was done, was there ever a recovery strategy or a contingency plan discussed? If it was discussed, what was it?
The reason for presenting this motion is to try to create some more time to study the estimates. I respect our witnesses here and I don't want to take up all of the time that we have to ask questions of them on an important issue, but the fact is that these estimates are not like other estimates. The new central vote under Treasury Board pretty seriously and significantly alters the nature of parliamentary oversight over government spending. It's a case I've been trying to make in many forums. I've tried to make that case here at committee, but I've also tried to make that case in the House.
When making that case in the House, I've been told by the Speaker that the appropriate place to discuss the estimates is at committee, and we have heard from some witnesses. We've had a couple of different motions in various forms and in various stages of consideration to call other ministers to this committee to hear more about the initiatives proposed under vote 40. My motion to that effect was voted down. Other motions are extant, but we haven't had any time to consider the estimates proper either, even though we have over 200 amendments proposed to vote 40 alone.
If we're going to be told by the Speaker of the House that the place to deal with issues on the estimates is at committee, I think it's incumbent upon the committee to make some time for that. I would very much like to see that happen, and just haven't been able to make it happen so far.
With respect to the general issue of oversight that I think this raises with Treasury Board vote 40, I think it's interesting that this motion comes in our last meeting before the estimates are deemed reported and that we're discussing Phoenix, because the Phoenix issue is really about a failure of accountability. It's about people, whose job it was to ask the right questions at the right time, either not asking those questions or not having the information that they needed in order to be able to ask those questions.
I would put to the committee that something similar is happening here. This committee hasn't heard from the people it needs to hear from in order to be able to ask the right questions about the proposed spending in vote 40, and if we're not going to make time in order to deal with the estimates, then we're not going to be asking those questions.
I think it would be unfortunate. We had a meeting last week where we ended 40 minutes early, after twice deciding not to deal with the estimates. It was a scheduled meeting. I think everybody normally sets aside the normal committee time in order to be there. The room was available. The translators were there. We had everything we needed in order to be able to deal with the estimates at that time, and we decided not to and to leave those 40 minutes on the table.
That's why I'm in the unfortunate position of having to take some of the time away from the Phoenix study today in order to try to make more time for what I think is a very appropriate item of business for the committee. I won't take any further time, but those are the reasons that I think we ought to adopt this motion.
Thank you very much for that.
What I would note is that this motion actually provides for a substantial amount of time in order to try to coordinate meetings, and if there are negotiations about a potential Monday meeting, I have not been approached either directly or through the government whip's office to the NDP whip's office about any negotiations for a Monday meeting. There may be some rumours circulating but there has been no formal discussion with me or with my party about that.
What I would say is that the mechanism that has been used by the leader of the official opposition only allows for an extension of the study—I'm sure Mr. Peterson will know—up to the third day preceding the last supply day. At the moment, our understanding, given the projected calendar of government business, is that the last supply day may very well be on Thursday, which means that the last possible day for consideration would be Monday, which is June 11, nine days before June 20, which is the date in my motion.
Notwithstanding any legitimate procedural efforts by the official opposition to extend the study, I think that the motion before us provides a lot more latitude in order to have a bit of extra time to study the estimates, to do it in a way that's more planned, rather than a rushed meeting on a Monday, not knowing whether Monday is going to be the last day or whether we'll have subsequent days.
This motion provides both more time and more certainty with respect to the committee planning its business.
Thank you, Madam Chair, and I want to thank the witnesses for being here.
Madam Lemay, I want to put on the record that we have access to.... Somebody did an ATIP request on a presentation. You were probably not there yet, but this was a presentation given to the DM and the minister's office.
The curious thing that I'm looking at is on page 3, “Where are we on Technology?” I have the following bullets:
|| —Automated 80,000 business rules
|| —Completed 16,000 test scripts
|| —Completed performance testing
|| —Some outstanding issues for which manual processes have been developed until fixes are introduced in May and September 2016.
At the bottom of the page is written, in bold letters, “Ready to go!” There's the same thing on page 4: “Ready to go!” There's the same thing on page 5: “Ready to go!”
We now know, today, that it was not ready to go, but had you been there, how would you have reacted to this information? Obviously the information given to your office at the time and to the minister's office was essentially that this system was ready to go.
I don't see any alternatives here. Was there an alternative to the Phoenix pay system, had it not gone forward at that time? With the information that we have today, do we know that?
Certainly. Thank you for the question.
We have been working very closely with the Treasury Board Secretariat and with departments and agencies across the government to follow up on the recommendations from the fall report. We have been looking at key root causes. We did set up a group last summer that had representation across government with IBM and others to do a deep dive with regard to root cause issues, whether they were technology, training, or change management.
We're now rolling out a suite of measures, which announced last November, as a first pass of key early priorities for the interdepartmental community to work on with the leadership of my team. We have gone forward with governance improvements, as recommended. We have the interdepartmental committee, the oversight committee of deputies to which I report, which is chaired by the deputy clerk. We have structures at the ADM and DG levels that replicate that so that we can systematically bring through issues that will have an impact on addressing the queue and providing improved pay outcomes to public servants.
We have also been looking at the capacity building issues that Madam Lemay has alluded to. We have, in effect, almost tripled the staff complement across the country, in Miramichi and in satellite offices, to be able to really address the outstanding pay requests and facilitate the transition to our pod processing model, where we will now be looking at employees' files completely as opposed to transaction by transaction. Once they're clean and we're dealing with things in real time, they should not have any further issues with backlogs.
We've also been looking at a number of issues around the go-forward strategy that was announced in budget 2018 under Treasury Board's leadership. That work is progressing.
We've also been dealing with the technical issues that continue to occur, looking primarily at those change requests for the system that will have the biggest impact on system improvements and interface issues between the 32 HR systems and Phoenix, to make sure that, to the extent possible, we're getting better data alignment and allowing departments and agencies with new tools around timeliness and accuracy of data to look at their own internal processes—as Madam Lemay was saying—from employee to HR, before HR sends things to the pay centre in Miramichi.
Thank you, Madam Chair.
I thank all of the witnesses for being here.
Mr. Ferguson, your report is very clear. We had been waiting for it for a long time, particularly with regard to Phoenix and the way in which it was implemented. You spoke about culture, and on my side, I'd like to talk about philosophy. You can tell me if there can be a link between those two aspects.
One of my sources is the Office of the Information Commissioner of Canada, which commented on budget preparation around 2010 and 2011. The Minister of Finance was Mr. Flaherty. The government watchword at the time was very clear: cut, cut, cut and reduce budgets in order to eventually be able to control the deficit and have a balanced budget. This was called the Deficit Reduction Action Plan of the Office of the Information Commissioner of Canada. This goes back to the time when Phoenix was being developed. Seven hundred positions were cut, and everything was done to reduce costs by 5% to 10% everywhere.
In your report, in point 1.62, as an overall message, you say that:
||[...] there was no oversight of the Phoenix project, which allowed Phoenix executives to implement the system even though they knew it had significant problems. [...] Phoenix executives were more focused on meeting the project budget and timeline than on what the system needed to do.
This is where philosophy and culture meet. I feel the report has identified a culture of fear. No one wanted to point out the problems because they did not want to be singled out. People knew they were headed for a wall but they moved forward anyway. They were so scared that they did not say so.
Now there are new public servants and a new government and they are being criticized. There are also employees involved who have not been named and whom no one wants to name. Honestly, it would not serve any purpose to do so. The culture is what needs to be changed, and that is what is happening. We have to adopt a new way of doing things and rehire resource persons. That is what is being done and that is what Ms. Lemay always tells us. We are trying to rehire the right people who know the proper practices and have experience.
Finally, it is the culture of fear and the philosophy of avoiding deficits at all costs that led to this situation. The Liberals are criticized daily about the deficit. This does not mean that there have to be deficits, but there are times when we must make philosophical and economic choices.
How can we reconcile this culture of reaching objectives at any cost and the mess we are still trying to clean up? Although we see some improvement, we still can't see the end of it.
Thank you, Madam Chair.
I think I'm the last intervenor here, so I'm going to thank the department, frankly, for working from a difficult situation toward some progress, towards the outcome that we all want, and that is to make sure that all the federal public servants are paid properly and on time. Kudos for that, for the work you've done to recover from what, frankly, I think we all agree was a very difficult situation. It came about for a plethora of reasons, as iterated in the reports that we've seen and testimony here before our committee. There was the forced savings of $70 million, the removal of 800 personnel, the lack of oversight, which we see in the most recent report. Some of these behaviours were actually rewarded as innovative, which I don't think is appropriate.
Then, we're moving forward now and trying to get to some resolution, which I think is important, and I commend all of you who played a role in helping us all, as public servants ourselves, to improve lives and the situation. We all empathize and sympathize with employees who are in a precarious situation for pay reasons, if they're not being paid on time or have tax liabilities that put them in a situation in which they're not able to pay their own bills.
On behalf of everyone on the committee, I think it's fair to say that we thank you for the efforts you're making. There's much work to be done, but progress is always good to see. Thank you for that.
I want to go back to the word we've talked about a lot: culture. I don't want to call the culture a scapegoat culture, because when you say “scapegoat”, there is the implication that it's not deserved. The culture, however, is I think blameworthy at least and responsible for some of the shortcomings.
Mr. Ferguson, you're the one who put this word or concept into our committee's deliberations with your second report. How would you characterize the culture that was in place during the eight-year frame of your second report, from 2008 to 2016—if you could characterize it, even?