Western Standard - September 29, 2024


The Phoenix payroll system scandal.


Episode Stats


Length

15 minutes

Words per minute

180.7408

Word count

2,796

Sentence count

212

Harmful content

Misogyny

1

sentences flagged


Summary

Summaries generated with gmurro/bart-large-finetuned-filtered-spotify-podcast-summ .

Corey and David talk about the Phoenix Pay System and how it blew up in 2016 and how the government is still trying to fix it, even though it cost the taxpayer billions of dollars in lost revenue and millions in wasted money.

Transcript

Transcript generated with Whisper (turbo).
Misogyny classifications generated with MilaNLProc/bert-base-uncased-ear-misogyny .
00:00:00.000 Thanks for joining me today, Mr. David.
00:00:03.820 Hello, Corey. Thanks for having me.
00:00:06.260 So, you know, I guess just to give some background, people have heard of the Phoenix system.
00:00:11.120 I read most of the book. I didn't get all the way through it quite yet.
00:00:14.040 But part of it was, I mean, it wasn't even originally called the Phoenix system.
00:00:17.420 But there was a big change that was happening kind of a little bit before Stephen Harper.
00:00:21.060 And then it came in during Stephen Harper's time.
00:00:23.440 This is one I don't even want to point at specific parties because it's had multiple parties in charge.
00:00:27.320 And this disaster has kept rolling along. Give a bit of background, though.
00:00:31.580 What happened? How did we get into this mess?
00:00:34.800 It's a great question. We should talk about how the mess began.
00:00:38.120 And then let's talk about when it blew up. And so let me explain first the word Phoenix.
00:00:43.460 The mythical Phoenix is reborn from its ashes.
00:00:46.640 So we need to ask from which ashes was this Phoenix project supposed to rise?
00:00:52.140 And here's a quick history. A core operation of our federal government is to pay the public servants.
00:00:57.320 And you would think that having to issue paychecks every two weeks, that they would be good at it by now.
00:01:02.840 They're not. And so by Mulroney's term in office, it was apparent that our government had cobbled together a bunch of IT systems.
00:01:09.440 It was difficult to maintain, difficult to keep up to date.
00:01:12.380 And so in the last weeks of his term and when power was transitioning over to Kim Campbell, his government signed a $45 million contract with Accenture.
00:01:22.780 The goal of that contract was to modernize the pension systems and the pay systems of the federal government.
00:01:28.660 Now, of course, we know Kim Campbell didn't win that election.
00:01:31.480 John Kretchen won that election and immediately he terminated the contract.
00:01:35.160 And so nothing but ashes, you know, Accenture took us to court or took the federal government to court.
00:01:42.460 There was a settlement. The Canadian public doesn't know the details of that settlement.
00:01:46.800 But litigation took a decade. And so 10 years later, now we're talking 2004, 5, 6, the senior bureaucrats had renewed interest in the project.
00:01:55.200 They estimated it would cost about $6 million, but the scope of it continued to increase.
00:01:59.820 Stephen Harper's government then was persuaded to spend about $300 million to replace the payroll systems and to centralize the payroll staff into one single office.
00:02:10.860 That's how the mess began.
00:02:12.800 So, I mean, kind of, we'll cover some more of the details in between, but fast forward to today.
00:02:17.200 Some of the estimates on what this has cost is getting into $4 billion.
00:02:21.440 I mean, when you started at $6 million, you got up to a few hundred million, and now we're up to $4 billion.
00:02:26.140 And that's just the taxpayer's cost.
00:02:27.780 And then hundreds of thousands of payments over the years have been messed up.
00:02:33.440 Some people have been overpaid. Some have been underpaid. Some have been paid at all.
00:02:37.480 That's a cost that we can't even begin to measure.
00:02:41.500 Is the bleeding stemming at all yet?
00:02:44.880 Not at all. And so let's go back to 2016 for a minute.
00:02:48.560 Justin Trudeau's government green-lighted the launch of the project.
00:02:53.780 Phoenix had been delayed a number of times under Stephen Harper's government.
00:02:57.280 Everyone knew it wasn't ready, and no one was ready to launch it.
00:03:01.740 Justin Trudeau was elected, and MP Judy Foote was given this file.
00:03:07.440 And then her and her senior advisors agreed to launch the system in March 9 of 2016.
00:03:13.040 So the system at that time was used to calculate the paychecks of about 120,000 of the roughly 200,000 public servants at the time.
00:03:25.260 40,000 of those paychecks in that first pay run were incorrect.
00:03:29.800 And so your question is, are we still hemorrhaging money?
00:03:34.620 And yes, we are. We're throwing money at this ever since.
00:03:37.420 The error rate today, the backlog of corrections that need to be made today, is as large as it was in 2016.
00:03:45.860 So as of today, 408,000 payroll errors await resolution.
00:03:50.780 And every two weeks, there are more errors.
00:03:52.480 They fix some.
00:03:53.520 There are more errors.
00:03:54.380 They fix some.
00:03:55.520 There are more errors.
00:03:56.260 It's been a disaster ever since 2016.
00:03:58.500 Yeah, and, you know, we saw it was frustrating to read it.
00:04:02.380 For people familiar with Yes Minister, you know, it's an English sitcom about, you know, a minister getting snowed by his bureaucrats who were talking to him when things would fail and so on, and they would double speak.
00:04:13.480 But some of those committee meetings, when they would talk to some of the, you know, asking about this, they just couldn't get any straight answers out of the senior bureaucrats on it.
00:04:21.600 And I believe it was Foote who said at one point that she called it a success in the first little bit of a run.
00:04:26.540 How could you have such a massive error rate and call it a success?
00:04:30.080 Yeah, it's amazing the double think that you can read into the committee minutes.
00:04:35.660 So I wrote the book.
00:04:37.080 Your question earlier was about costs.
00:04:39.240 You know, I wrote the book just over a year ago.
00:04:41.360 I calculated that the taxpayer had already spent $4.2 billion.
00:04:45.620 And I should qualify that number.
00:04:47.020 And I actually think journalists should really dig in and debate these numbers more deliberately.
00:04:53.020 So first, most journalists go with the government's own estimates, $3.2 or $3.5 billion.
00:04:59.980 But those numbers include the direct costs and the large settlement that was paid out to the union members.
00:05:07.380 But they exclude the costs associated with replacing the Phoenix system.
00:05:12.000 And there's a huge number of projects underway in that regard.
00:05:16.560 And they exclude.
00:05:18.720 And this is where my unique expertise was helpful.
00:05:23.760 I looked at the full list of ongoing large IT projects.
00:05:26.860 And I found numerous integration projects.
00:05:29.800 And so, for example, $33 million was spent to integrate the systems at CBSA, CRA, Parks Canada, RCMP.
00:05:37.320 This money is spent only because Phoenix exists and only because its capabilities are so incompatible with the needs of those departments.
00:05:46.800 And so, if we include all of those integration projects, as of a year ago, I calculated $4.2 billion had gone through this inferno.
00:05:55.400 Yeah.
00:05:56.020 And, I mean, it sounds like there's work being done.
00:05:59.480 You know, I started looking and digging because we do hear about it periodically erupts, but it never seems to get solved.
00:06:04.380 But they're going to replace it with something called day force or they're easing into that system now.
00:06:11.080 Do you think they're going to be more careful?
00:06:12.880 It sounds like they're going to phase it in rather than try it.
00:06:15.200 Because, I mean, something that large, you can't just flick a switch and change systems.
00:06:18.060 You do have to try to integrate it.
00:06:21.040 But at the same time, they're trying to fix 500,000 other errors that they still have built up.
00:06:25.840 Yeah, good point.
00:06:26.500 I mean, so they are taking a more incremental approach, I think, with this new initiative.
00:06:32.540 However, Corey, you know, where there's smoke, there's fire.
00:06:37.420 Dayforce, it used to be called Ceridian.
00:06:40.340 They won the contract to replace Phoenix.
00:06:42.480 And there's virtually nothing known about their involvement or McKinsey's.
00:06:46.660 So we can see those two companies show up in some committee minutes.
00:06:51.320 But you go to the website, you find for projects or RFPs or line items in the annual budget.
00:06:58.660 And there's very little to discover there.
00:07:00.540 I think there are many questions.
00:07:02.320 For example, why did Navdeep Bains step down?
00:07:06.360 Why did Navdeep Bains' chief of staff suddenly become an executive at Dayforce?
00:07:12.020 And why did the CEO of Dayforce tell reporters after the 2021 election, he told reporters that Justin Trudeau's cabinet had requested that Dayforce not publicize the fact that they had won the contract until after the election?
00:07:30.840 It appears Justin Trudeau or one of his cabinet members specifically asked to keep that a secret during the campaign until after the election.
00:07:42.520 Why was that?
00:07:43.300 I think there's a lot of questions to be asked about their involvement and what's going on.
00:07:46.400 There always are.
00:07:47.640 And, you know, people always have to be careful.
00:07:49.120 But when you get a government contract with that large amount of money and their history of bad controls on it, you know the opportunists are going to come out of the woodworks.
00:07:57.540 I mean, it just happens.
00:07:58.780 It's the way it goes.
00:07:59.580 So, I mean, whether Dayforce is right or wrong, it's not unprecedented for an organization to have a payroll this large in modern times.
00:08:09.260 I mean, Canada, we've got a workforce of about 420,000, which is really huge for civil service.
00:08:15.040 But still, there are a lot of companies and governments and others who have payrolls as large or larger than this.
00:08:21.660 And are they operating more successfully than us?
00:08:24.120 Well, if I could take a moment here, like we need to do this differently.
00:08:30.940 Issuing paychecks every two weeks to public servants is a core operation of the government, as you said.
00:08:35.800 And we're talking about basic math and well-known accounting techniques.
00:08:40.480 Like this kind of software is not magic.
00:08:43.700 The business rules, while complicated, and there are 80 plus collective bargaining agreements, and that certainly makes things more difficult.
00:08:50.760 But the requirements are known and programmable.
00:08:52.840 So, I believe, and so your question is, are others doing this better than the federal government of Canada?
00:08:58.660 Well, some are.
00:08:59.980 Some governments also have their own boondoggles.
00:09:02.280 But I think it comes down to a simple question between lesser evils.
00:09:06.240 The government could do this in-house.
00:09:08.440 Certainly, the taxpayer employs an army of IT professionals and software developers.
00:09:13.720 And they could build a purpose-built tool to operate this core operation of the government.
00:09:22.100 Or the government could continue to outsource this stuff to giant multinationals who supposedly have the expertise, but they continue to fail.
00:09:30.180 And they repeatedly fail to deliver.
00:09:32.060 So, both of these options are ripe for waste and corruption.
00:09:38.860 But we need to think back to 2005 and 6 and 7.
00:09:43.180 What were the conditions of that time before Stephen Harper was persuaded to sign the approval of that first $300 million?
00:09:50.460 Let's think back to that time.
00:09:52.600 Many bureaucrats and MPs complained about the existing payroll systems.
00:09:56.140 They were 40 years old.
00:09:57.240 They were hard to maintain.
00:09:58.480 And I don't doubt that.
00:09:59.420 But let's remember that those systems were successfully conducting paychecks every two weeks for 190,000 employees.
00:10:07.780 The error rate was very, very low.
00:10:09.820 Much lower than today's error rate with Phoenix.
00:10:11.860 But the MPs latched on to this Phoenix myth.
00:10:16.720 You know, they were absolutely taken on faith and with no empirical evidence that the old systems just needed to be replaced.
00:10:23.160 And that a commercial system, you know, purchased from some multinational company was the way to replace them.
00:10:31.120 Now, both of those ideas were the result of, I think, just a bandwagon effect.
00:10:35.960 To your question, lots of other jurisdictions, they've tried the same.
00:10:40.000 They've bought systems off the shelf.
00:10:42.960 They call them COTS products or commercial off-the-shelf products.
00:10:46.940 And their mileage may vary, you might say.
00:10:50.940 But our government is absolutely addicted to these giant IT replacement projects.
00:10:56.780 Is the taxpayer just on the hook every five years to throw billions of dollars at the cronies of the day to replace these IT systems?
00:11:03.900 I think we need to start asking these kinds of questions.
00:11:06.560 Absolutely.
00:11:07.320 I mean, yeah, you know, kind of a funny comment out of Mr. Stanley, but he's probably dead right.
00:11:11.980 He says, I bet the Phoenix employees still receive their pay on time.
00:11:15.240 Yeah, when you're inside, you can make sure that your check comes through.
00:11:19.180 But, you know, and I'm kind of bouncing around, but I'll bounce back.
00:11:23.060 I mean, something you mentioned in the book, and it's interesting.
00:11:24.560 When politics gets mixed into things, that's usually when the trouble comes about.
00:11:27.940 So one of the things Prime Minister Stephen Harper did in his time was getting rid of the old boondoggle of the liberal gun registry.
00:11:34.840 And part of that was they bought themselves love and mirror machine New Brunswick by setting up the administration offices there.
00:11:40.100 So now they had to lay off loads and loads of civil servants who were running this terribly inept gun registry.
00:11:46.680 Harper thought he could kill two birds with one stone and said, well, we will re-employ them with this new payroll system. 0.97
00:11:53.460 So they took those bureaucrats and just kind of shuffled them into something they weren't necessarily qualified to embrace.
00:11:59.120 But it was a way to patch a hole and try and maintain a seat.
00:12:01.480 And it's, you know, this is just typical of governments, unfortunately.
00:12:07.100 Well, I think any other Prime Minister might have made the same calculation Stephen Harper did.
00:12:11.720 If the goal was to centralize this operation into one office, there were just a few offices across the country that were suitable for this with available staff.
00:12:21.800 So I don't begrudge his decision on that point.
00:12:24.380 But it also is interesting to note that it takes about two years for the payroll staff to be properly trained so that they can conduct this work.
00:12:34.500 Why does it take two years?
00:12:36.100 Well, part of that is because the regulations are so complex.
00:12:42.160 There are 80 and more collective bargaining agreements.
00:12:46.960 The systems are difficult to use.
00:12:49.960 And then they burn out.
00:12:51.900 So of all the people that start the process to learn how to become a payroll advisor in our government, only about 40% of them continue the training.
00:13:00.580 Two years later, 60% of them have quit and left.
00:13:03.400 And so that speaks to the difficulty of the job, but also the nightmare that is this work environment.
00:13:11.040 Well, yeah.
00:13:11.660 And plus just the competency.
00:13:13.380 I mean, if you have a high turnover, then you're not going to have offices with long-term experienced people to apply themselves to issues.
00:13:20.680 But I guess if you're applying yourself and you can't fix anything, that's how you end up burnt out.
00:13:24.440 What's interesting, if I could add, Corey, to that point, the solutions, the best.
00:13:30.660 So if we look at how the government has burned through the errors that have occurred, and we look at how have they done that most effectively, it's usually that a small group of experienced people have come together.
00:13:43.200 They work together as a pod, and they burn through a backlog of errors, and they fix them.
00:13:48.920 The solution here is people, not some belief in some magical system that we can buy from a multinational corporation.
00:13:58.980 Well, there's not going to be any quick magic bullet, that's for sure.
00:14:02.220 And, I mean, that's part of why you've written a book on it.
00:14:05.040 The time has run out quickly because it's such a big issue here.
00:14:07.760 But I'm certain you're going to continue to watch this and be speaking on it.
00:14:11.560 So where can people find your book, and where can they find you to keep up on what's going on as, hopefully, this government or the next government gets on to solving this issue so they can move on to solving many others?
00:14:22.700 Thanks, Corey, for that.
00:14:23.880 They can find me at davidsabine.ca.
00:14:28.340 And davidsabine.ca slash phoenix, that'll take you right to a page where you can look at the book.
00:14:33.220 You can buy it at Amazon on paperback or Kindle version, or you can buy it at LeanPub as well.
00:14:40.480 Find me on LinkedIn, I'm active there.
00:14:42.580 And on X, I'd be happy to connect with people.
00:14:45.560 Great.
00:14:46.060 Well, thank you for taking the time to join us today and for watching this issue and digging into it.
00:14:50.560 Like I said, you know, some of these things seem kind of dry, and they're bookkeeping sort of things and stuff like that.
00:14:56.180 But, boy, it's not so dry and unimportant when you're the one whose check hasn't shown up on time or, you know, when you're working in a department that's spinning its wheels and burning you out.
00:15:07.560 It's true.
00:15:08.120 You know, some people have lost their savings.
00:15:10.280 They've lost their homes.
00:15:11.540 It's been a disaster all around.
00:15:13.100 Really, I appreciate that you brought me on to talk about it.
00:15:16.280 Great.
00:15:16.540 Well, we'll keep bringing it up and can't let them forget it.
00:15:19.220 And hopefully, as I said, hopefully that problem gets solved because there's many others for them to work on.
00:15:23.740 So perhaps we'll talk again soon, and we'll be talking about a solution at that time.
00:15:27.720 Thank you, Corey.