OTTAWA—Computer systems giant IBM says the company is not to blame for the disastrous rollout of the Phoenix pay system because it was not responsible for key elements of the scheme that has left tens of thousands of public servants shortchanged across Canada.
Speaking publicly for the first time prior to Senate testimony Wednesday night, IBM executives say the company flagged concerns nearly three years ago to top federal bureaucrats and urged Ottawa to delay the launch of Phoenix.
In interviews with the Toronto Star and Global News, IBM said the company’s warnings were communicated verbally and in writing to senior officials within the public services department from July and August 2015, and continued until January 2016, a period that spanned the federal election that saw the Conservative government replaced by the Liberals.
Neither government hit the pause button. Since then, the Liberals and the Conservatives have pointed the finger of blame across the aisle. But to hear IBM tell it, there is plenty of blame to go around.
IBM said it told senior federal project managers the Conservative decision to start rolling out a new pay system in October 2015, which was slated to be fully in place in December 2015, was “not realistic.” The company says it advised the federal government should delay the 2015 launch for at least six to eight months, until July or August 2016.
But IBM’s advice was rejected, senior executives said.
Federal officials told IBM the project start could be delayed only until February 2016, and the second phase that would see all departments using the new software had to “go live” by April 2016 because the government had already sent out notifications to the hundreds of clerks who processed paycheques in the federal government that their jobs were being eliminated by April. IBM dealt with senior officials at the assistant deputy minister level, and did not directly deal with ministers, the company said.
“IBM’s responsibility was the technology component. The software is working as it was designed,” said IBM senior executive Regan Watts. “The responsibility for change management, for training, for business processes, those are outside of our scope. Those are the responsibility of the government of Canada.”
Now, two years later and after allocating about $ 1 billion on past and planned spending to fix Phoenix, the Liberal government said it will spend another $ 16 million looking at options to replace it. But IBM says the federal government does not need to replace the technology.
“Phoenix can be fixed, the software does not need to be replaced and it’s not the issue,” said Watts. IBM’s message to the Senate is that there is “no silver bullet.”
Rather, Ottawa needs to address the problems that originally plagued the system and remain: training for federal employees, and adjusting “business processes” that guide the federal government’s pay practices.
“If Phoenix is a car and the technology is the engine, the engine still runs, the engine still works, however you can’t drive a car if all the other elements of the vehicle aren’t working and in place,” said Watts.
IBM said the biggest cause of pay headaches for federal employees is incorrect and late data entry by workers responsible for keying in employees’ information into the new computer system.
“We share the urgency of the government of Canada in getting this resolved as quickly as we can,” said Watts.
IBM says it is spending more than $ 10 million of its own money to aid Ottawa in adjusting for technological issues that continue to arise, and provides two project executives and brought in a third senior adviser to Public Works Minister Carla Qualtrough, who is charged with trying to fix Phoenix. The adviser is a U.K.-based executive who runs Britain’s national health-insurer pay system for more than a million people.
By late summer 2015, IBM said the company’s executives were concerned about levels of training, about whether federal employees were ready for the new ways in which their paycheques would be processed, and about the extraordinarily high number of software changes Ottawa was demanding.
Ottawa was unwilling to adapt its pay rules or “business processes” to the technology, IBM said. For example, a federal worker is eligible for bilingual bonus pay only after five days on the job, not on the first day he or she is hired. Instead of changing that practice, federal managers insisted the software be rewritten.
In fact, IBM said the government demanded more than 1,500 changes to the software program. That number is “huge,” IBM said, and required not just a simple or occasional patch but meant breaking into the program and rewriting code to implement the hundreds of change orders.
The Phoenix project was the largest of its kind in Canada. The federal payroll runs under 80,000 distinct rules that describe pay rates. It reflects payment contracts with 100 bargaining units. Still, even in a project this big, IBM says it would expect no more than a couple of hundred change orders to the technology.
IBM warned the government that not all the requested software changes could be made on time for the 2016 rollout, and asked the government to prioritize the changes it wanted.
By the time the system went “live,” many functions, such as how to account for and process retroactive pay, were not in place, the Senate committee has heard. Since then, backlogs have grown and compounded what IBM said are human errors. IBM said responsibility for training — originally part of its contract — was removed in 2014 when the federal project managers said the government would take over that aspect of the transformation in-house.
IBM said it successfully rolled out the PeopleSoft software for Alberta, and did not encounter the same kinds of problems.
But federal auditor general Michael Ferguson flagged last fall that IBM had encountered problems when rolling out a new payroll processing plan in Queensland, Australia.
IBM defended itself Wednesday, saying Ferguson did not speak to the company before issuing his report. An inquiry in Australia said IBM wasn’t to blame, and IBM said the Queensland government bought a different software program, rushed all its changes because it thought its old system was on the brink of collapse, and underestimated the complexity of its project.
In contrast, IBM said the Canadian government can still rescue Phoenix.