Fixing federal payroll IT system could almost double its cost, says memo

Another federal payroll system needs an overhaul after it was put together quickly and on the cheap – and the repair is expected to cost almost as much as the system itself.

The system, which converts paper documents into electronic versions, is used to store payroll information needed for the dysfunctional Phoenix program at the Miramichi, N.B., federal pay centre.

The imaging system was created in 2013 at a cost of $409,456 in Matane, Que., where a federal office verifies individual pay requests received in paper form, then converts them to digital images. Employees in Miramichi then access those electronic documents to generate payroll amounts.

The Matane imaging facility was custom-built by IT staff at Public Services and Procurement Canada (PSPC), which is responsible for the federal government's problematic pay services.

On the cheap

The "project team decided to have the pay imaging solution developed quickly and inexpensively … using internal resources," says a Sept. 27, 2018, internal PSPC memorandum, obtained by CBC News under the Access to Information Act.

The heavily censored document refers twice to "shortcomings" in the imaging system, though details have been removed under sections of the Act that protect security and solicitor-client privilege.

The memo cites a flurry of existing lawsuits connected to the accident-prone Phoenix payroll system – which has overpaid, underpaid or withheld the salaries of tens of thousands of public servants. It also warns that "more litigation may well follow," suggesting at least part of the reason for fixing the imaging system is a desire to respond to lawsuits.

"Given the criticality of this [imaging system] issue, work is set to begin in the coming weeks," says the memo.

A spokesperson for Public Services and Procurement Canada, Rania Haddad, said the imaging facility "functions well" but needs "enhancements" to meet certification standards and match a parallel system used for federal pension payments.

The cost of the upgrades is estimated at about $390,000 – which is almost as much as the original project itself cost – and is expected to be complete by April 30, 2020.

The department is hiring outside contractors to do the work this time, Haddad said. Once they inspect the imaging system in detail, "we will have a better sense of required enhancements ... to our internal processes or system components," she said.

The executive director of an organization representing technology firms, the Council of Canadian Innovators, said Ottawa needs to include the private sector when considering new IT systems.

'It's troubling'

"It's troubling to learn of yet another inefficient use of resources when Canada has a deep pool of technology companies that would gladly work with the government to supply the services it needs," said Ben Bergen.

"That's why our members continue to advocate for the development of procurement strategies that both respect the taxpayers and advance Canadian vendors."

The Phoenix payroll system was launched in early 2016, and soon began to corrupt tens of thousands of salary calculations. The recent federal budget promised $523.3 million over five years to continue to fix the problems.

Some estimates indicate it will take more than $1 billion — and 10 years — to get Phoenix working reliably.

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