Cost of Phoenix payroll system debacle hits CAN$1.2bn

13 Apr 2018

A Canadian public authority has revealed that the combined cost of implementing and fixing the ailing Phoenix payroll system has already topped CAN$1.192 billion (US$0.93 billion).

The department in charge of the software has put the cost at more like CAN$1 billion (US$0.78 billion), however.

Debi Daviau, president of the Professional Institute of the Public Service of Canada, said: "Seems like right from the start, they've painted a much rosier picture than there was, and [have been] playing a bit of a shell game with the numbers to make it look better, and I don't think it's helpful."

The government now confirms that its initial investment to develop Phoenix was CAN$309 million (US$242 million). The figure includes the cost of the IBM contract, other professional services contracts and programme costs and a new pay centre in Miramichi, New Brunswick, according to CBC News.

Phoenix was initially promised to save the government CAN$70 million (US$55 million) a year, but a long list of problems has meant that those savings have not been realised and are now adding to the department's growing list of costs.

The amount that individual departments have had to spend to support Phoenix has yet to be determined. According to Public Services and Procurement Canada (PSPC), which provides a range of services to the federal government, the comptroller general is expected to report on this situation later this year.

Sahir Khan, executive vice-president of the Institute of Fiscal Studies and Democracy at the University of Ottawa, said that doing so would likely cause the Phoenix tally to rise still further.

"As significant as this amount is already, a full accounting of departmental costs will be important to fully understand the lessons to be learned from this," he said.

One of these additional costs is the CAN$28 million (US$22 million) paid out in “advances to unions”,which are owed unpaid dues as a result of the payoll system's failure.

PSPC invested $50 million in 2016 and another CAN$142 million (US$111 million) in 2017 to enhance the technology and hire more workers, which included 1,500 compensation specialists at 14 offices.

The federal budget, which was delivered in February, promised an investment of another CAN$431.1 million (US$337 million) to continue “building capacity, enhancing technology and supporting employees”. It also pledged to create an enhanced client contact centre and ensure training and communications were improved.

In the budget, CAN$5.5 million (US$4.3 million) was likewise set aside for the Canada Revenue Agency to process income tax reassessments related to Phoenix. Another CAN$16 million (US$12.5 million) will go towards identifying a new payroll system.

Tallying the Phoenix toll:

CAN$309 million (US$242 million): IBM contract, professional services contracts, programme costs, 2009;
CAN$210 million (US$164 million): CAN$70 million (US$55 million) per year of unrealised savings from 2016 to 2019;
CAN$28 million (US$22 million): Advances to unions from 2017 to 2019;
CAN$50 million (US$39 million): Building capacity, enhancing technology, supporting employees, 2016;
CAN$142 million (US$111 million): Building capacity, enhancing technology, supporting employees, 2017;
CAN$431.4 million (US$337 million): Building capacity, enhancing technology, supporting employees, Budget 2018;
CAN$5.5 million (US$4.3 million): For Canada Revenue Agency to process income tax reassessments related to Phoenix, Budget 2018;
CAN$16 million (US$12.5 million): Researching a new payroll system, Budget 2018.

Total: CAN$1.192 billion (US$0.93 billion).

Emma

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.