Public Accounts Committee on May 31st, 2018

[Chandra Arya, Liberal, Nepean, ON]

You mentioned several times the three Phoenix executives who took the decision subsequently, but coming back to this decision to not ask the Treasury Board, do you think it was limited to the three Phoenix executives, or was the decision taken by the deputy minister? There is a very significant difference in the amount that was required.

[Michael Ferguson]

Again, it's impossible to say. Of course, it's a decision they did not make. There's no documentation of something they decided not to do. That would all have been through conversations. There's no way for us to know exactly why they decided not to go back.

Our point is, even if they decided not to go back for more money, they should have gone back to say, “Now this project will not deliver the savings it was supposed to deliver.” Regardless of who made the decision, at the end of the day they had a responsibility to go back to Treasury Board.

[Chandra Arya, Liberal, Nepean, ON]

However, in my view, the decision not to ask the Treasury Board is critical here, because we are talking about close to a $120-million difference. Don't you think that a decision of this magnitude would not just be at the Phoenix executive level? It would not even be just at the level of the deputy minister. It would have to go to the ministerial level. Don't you think this decision of whether to ask or not to ask, or to proceed with this very limited budget, must have been taken in the confidence of the minister's office?

[Michael Ferguson]

Again, there's no way for us to know who would have been involved in making the decision not to go back and ask for more money.

[Chandra Arya, Liberal, Nepean, ON]

Don't you think is something worth exploring? Go to 1.32, 1.33, or 1.34. All these things were removed only due to the fact that this project was undertaken with just 55% of the amount required to build and implement it. Don't you think this is a very significant thing, and that we should go into much more depth to find out what happened and which people were involved?

[Michael Ferguson]

Again, that would be a decision for the committee, depending on what it wants to do. The audit can only go so far. This was a regular performance audit on the decisions that were made and the way the project was managed. All we can do is follow the trail of decisions. There's nothing that explains why they decided not to go back and ask for more money.

[Chandra Arya, Liberal, Nepean, ON]

Mr. Chair, we should make a note of the Auditor General's answer, that it is left to the committee to probe this further. When you look at the entire report, it all boils down to one single thing, which is that they undertook to build and implement a project of this magnitude with just 55% of the estimated cost. Naturally, major compromises had to be made, and what we are facing today is only because of those compromises that were made.

In your statement, at paragraph 31, you said the following:

When the Phoenix executives briefed the Deputy Minister of Public Services and Procurement Canada that Phoenix would launch, they did not mention significant problems that they knew about.

Yes, that is quite clear, but don't you think the deputy minister was aware of all the things that had been taken out of the original plan? For example, you state in 1.33 that they knew they had deferred or removed the ability to process requests for retroactive pay. They had deferred or removed the ability to automatically calculate certain types of pay, such as increases in pay for acting appointments. Do you think the deputy minister was not aware that this had been deferred or removed from the system?

[The Chair, Conservative, Kevin Sorenson]

Thank you, Mr. Arya.

Mr. Ferguson.

[Michael Ferguson]

I think the important thing to remember is that, over this time period, three different people served in the role of deputy minister of that department. The reference that I made in my opening statement was to the briefing that the executives made to the deputy minister who was in place at the time of the decision to launch. That would not have been the same person who was in the deputy minister's chair in these earlier decisions.

[The Chair, Conservative, Kevin Sorenson]

Thank you very much.

We'll now move to Mr. McCauley, please.

[Kelly McCauley, Conservative, Edmonton West, AB]

Great. Thanks, gentlemen and madam.

IBM sent registered letters to the deputy minister and the assistant deputy minister around December-January, advising them—as my friend here would say, as a cover-their-butts issue—not to go ahead with the launch.

Have you seen those letters? Did they come up as part of your study?

[Michael Ferguson]

I can't speak to all of the different pieces of information that we've seen. Again, the report is a synthesis of all of the evidence that we gathered. As for specific types of documents or conversations, I don't have all of those details. That's what the report is supposed to do. It's not to provide all of that level of detail but to provide you with an overview of what happened.

[Kelly McCauley, Conservative, Edmonton West, AB]

On preventing future “Phoenixes,” IBM actually sent the registered letters twice, first one and then a follow-up, again stressing that the system was not ready and recommending not to go ahead. Should we write issues like this into future contracts, almost as a duty-of-care of contractors so that they go public with such information? It would almost be a whistle-blowing type of clause to help contractors bring up this issue so that we don't have a repeat.

[Michael Ferguson]

Again, that's not something I can comment on. In this particular project, it was the three Phoenix executives who had the responsibility for making the decisions. Any external contractors didn't have any authority to say, “No, this isn't going ahead.” It was the three Phoenix executives who had that authority.

[Kelly McCauley, Conservative, Edmonton West, AB]

That's interesting because the letters did go to the deputy minister and the assistant deputy minister, outside of the Phoenix executive, advising them of the issues.

We've talked a lot about the Phoenix executives—almost rogue executives—referred to in the report. Do you have concerns that this is a systematic problem throughout other projects being managed within the government? Should we be concerned about the integrity of how the other projects are being managed by PSPC and other departments?

[Michael Ferguson]

We're not doing any audits right now of any other systems, but in my message, I did indicate that I am very concerned that there will be another “incomprehensible failure” at some point in the future. I don't think that just putting in some additional rules or policies is going to be sufficient to make sure that this type of failure is avoided in the future.

[Kelly McCauley, Conservative, Edmonton West, AB]

There's an example I'm thinking of. The Parliamentary Budget Officer put out a report on the costing of the combat ships being done in Halifax. Under the Parliament of Canada Act, he is entitled to receive information that he's asked for. DND and PSPC have refused to release the RFP, as well as the statement of requirements for the project. This is a $60-billion to $100-billion project, the largest ever handled in Canadian history. I'm just worried that we're walking down the same path, with the same issues of secrecy and working in silos to prevent accountability and transparency.

Is this something we should be greatly concerned about? The Parliamentary Budget Officer is entitled under Parliament of Canada Act to receive this information, but the bureaucracy is refusing to release documents to him.

[Michael Ferguson]

I can't speak to any specific situations outside of what we have in our audits. We do have audit information on a number of different issues. That's not something that we have audited.

Again, I would go back to the message that I indicated. It's very important, I believe, to look to the core reasons that we end up with incomprehensible failures, to make sure they don't happen on any future project.

[Kelly McCauley, Conservative, Edmonton West, AB]

Does something like this look like it's one of these incomprehensible actions? We have one division of government refusing to follow an act of Parliament, which is to release information to the PBO. In fact, he's actually had to go to the United States to get comparable data, to try to cost out our ship plan.

[Michael Ferguson]

Again, that's not something I can comment on. I don't have any information on that.

[Kelly McCauley, Conservative, Edmonton West, AB]

Okay.

I noticed your comment in your report that the decision to launch Phoenix was wrong. We've heard this repeatedly. We've heard of all the other issues.

What would the alternative have been at the time? Would it have been to delay it a bit more until these items were fixed, addressed, worked out a bit more?

[Michael Ferguson]

Again, as I think was talked about earlier on, the original decision point of cutting back on the functionality of the system really caused a lot of the problems, and things needed to be resolved at that point. It all started to build from there.

If the project had been managed the right way all along, you would have hoped that would have been identified much earlier, rather than to say at the last minute, “well I guess we'd better not launch this”. It would have been better to find a way to continue on with the old system at that point in time, but even that would have been an 11th-hour, 59th-minute decision.

Really, to have avoided this, better decisions needed to have been made all the way along.

[Kelly McCauley, Conservative, Edmonton West, AB]

[Inaudible--Editor] there was no risk to delaying it.

Anyway, I understand what you're saying.

Thanks.

[The Chair, Conservative, Kevin Sorenson]

Thank you very much.

We have been able to work with Ms. Mendès, so I'm going to defer back to Mr. Nuttall.

He will bring a motion that has been amended and worked on by both of them.

Go ahead, Mr. Nuttall.

[Alex Nuttall, Conservative, Barrie—Springwater—Oro-Medonte, ON]

Thank you, Chair.

Ms. Mendès is not here; could we pause for 30 seconds?