Public Accounts Committee on June 19th, 2018

[The Chair, Conservative, Kevin Sorenson]

Thank you very much, Mr. Ferguson. We're going into a summer break and I can see members of the committee sitting around a campfire reading such reports. It might be good reading or a cure for insomnia, but we'll take you up on that.

We'll now turn to Mr. Lefebvre, please, for seven minutes.

[Paul Lefebvre, Liberal, Sudbury, ON]

Thank you, Mr. Chair.

Thank you, again, Mr. Ferguson, for being here.

I'm a bit like Mr. Christopherson. When I saw the report and heard the Clerk of the Privy Council and then the panel we had last week, I went back home and thought hard about this thing. We're talking about an incomprehensible failure here. I go back and look at the facts. In your report on the Phoenix, in paragraph 1.32, we see that the contractors said that the budget for this would be around $274 million. Back in 2009, PSPC had budgeted $155 million, and nothing changed. That budget of $155 million still remained even though IBM said it was going to cost $275 million. There was a gap of over $100 million. When we say there's an incomprehensible failure, to me it's very clear; the answer is very direct.

When we talk about culture, the fact that nobody—or maybe somebody did; we're not sure—asked for more money, or did not get more money, to me that's the gap that exists. If our bureaucrats, our public servants, do not have the ability or don't want to ask for the budget they require to do a proper job to serve Canadians—in this case, their own colleagues—that is a culture of fear that exists, that existed, or may still exist today. That, to me, is where the system fails.

For me, when I look at all the facts and see there's a gap, I find we're missing that fact. If I were to say, today, that we'll embark upon a new project and it's is going to cost $275 million but we're only going to give you $150 million and expect a different result, no matter what reports we get, what timelines we get, and what structure we put in, we're going to get a failure, period. To me, when I really take a step back and look at it from 10,000 feet up, if a project of this magnitude or of any magnitude is not on budget.... At the many meetings you've had with us, you've obviously told us about that: it's project management, right? You basically have timelines, a budget, and results. If one of these three elements does not really happen, it can lead to a result that may not be a positive one. In this case, clearly, that is what happened. From what we've heard in the past three weeks and the recommendations you've given, even if today we have a similar project, I don't think we're going to expect a different result.

How do we, as a committee, or even as Parliament, go back and ensure that this doesn't happen again? Again, it's numbers that we're talking about. We've reduced this to numbers, not to the result. You said we should be focused on results. This was focused on budget, clearly, and these are the facts.

How do we change that, Mr. Ferguson?

[Michael Ferguson]

Again, if you go back to that particular example of the budget compared to what IBM said it would cost to build the system, at that point in time, as I have said a number of times before, it was not just a question of needing to respect the budget; it was also saying that if they were going to reduce the functionality in the system by that much, enough to get the budget back from $274 million to $155 million, then they should have gone back and they should have recalculated the business case as well. Remember, when the project was approved, yes, it was approved at a certain budget level, but it was also approved with an expectation that it was going to return $70 million a year in savings. As soon as they decided to reduce it from $274 million to $155 million, to me, that was a decision point at which the department needed to go back to Treasury Board and say one of two things, either that “We need more money in order to deliver all of the functionality and get the $70 million a year in savings”, or “We will do it for less. We will cut back on some functionality and we will not deliver the $70 million a year in savings.” Hopefully in the course of that conversation there would have been some questions about what was being cut back, and whether they were cutting back pilot projects and things like that, which wouldn't have sounded like a good idea.

Regardless, I think there should have been a realization—and, again, I don't know where that failure happened—that this wasn't just a question of the budget; this was also a question of the benefits that were supposed to come out of this system. That's why I use the word “incomprehensible” in this.

At the last hearing, people were talking about the Gartner report. Members were asking about the Gartner report and how it went to only the project executives, and not to other people. I could just see heads shaking when that question was asked. People were asking how they had decided to cut out a pilot project, which is a fundamental piece, and again heads were shaking about how they could have made that decision. So maybe I should have said that it was a “head-shaking” failure rather than an “incomprehensible” failure because, yes, you can understand all the decision points—and you mentioned one, which was the budget—but I'm using the word “incomprehensible” in the terms of people not being able to understand how those decisions were made. When you talk your way through it, all you see is people shaking their heads because they can't understand how those decisions were made.

[Paul Lefebvre, Liberal, Sudbury, ON]

Thank you.

[The Chair, Conservative, Kevin Sorenson]

Thank you, Mr. Lefebvre.

Mr. Deltell.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Thank you, Mr. Chair.

Mr. Ferguson, it's always a pleasure to see you. Before asking you two or three questions, I just want to pay my respects for the way you are doing things. Your reports are very directive. We know where you are going. We know where you stand. We know what you fight for. We deeply appreciate that.

As a former journalist, I deeply appreciate that number each and every paragraph of your statement. It is very easy to refer to.

I would like to point out one thing with respect to that.

Two themes emerge from your testimony today. First, you talked about the government's culture that led to the problems with Phoenix and a necessary change in culture. Second, you talked about the root causes, which, in your opinion, led to those problems. In my view, those are the two arguments you made in your statement today.

Now I want to go back to your statement from last week, especially paragraph 7. You said that, when Phoenix officials informed the deputy minister of Public Services and Procurement of the system's launch, they did not mention some serious problems of which they were aware, and that the decision to launch Phoenix had not been documented.

They did not mention some serious problems.

Mr. Chair, I will keep coming back to this: we cannot make good decisions if we do not have the right information. Worse still, if vital information is withheld, it leads to serious decisions and the disaster we have experienced.

You said that people did not mention some serious problems. In your opinion, is this part of the government's culture or the root causes of Phoenix-related problems?

[The Chair, Conservative, Kevin Sorenson]

Mr. Ferguson.

[Michael Ferguson]

Of course, that was one of the causes. The managers responsible for Phoenix were aware that there were problems and that the project posed great risks.

However, we must also take into account why they decided not to mention those risks. Did the culture play a role in the decision? That was one of the reasons, because the deputy minister did not have all the information necessary to understand the seriousness of the situation and the risks posed by the system. As I mentioned, we also have to ask whether the culture played a role in the decision.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

As far as you are concerned, based on all of the interrogation that you did to come to this conclusion, do you think it is part of the culture of the government to hide important information?

[Michael Ferguson]

I certainly would not say that that happens every time. Obviously, though, in the case of Phoenix, in this situation, there was a decision not to bring that information forward, and as we said in the audit, there were very clear signals that Phoenix was not ready to launch, whether you look at what happened in Miramichi or at other clear signals that it was not ready to launch. For some reason, they decided not to bring that information forward.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Did you ask about the reason?

[Michael Ferguson]

I'd have to go back to the auditors to figure out exactly who we asked which questions. We certainly were trying to find out what information went forward, and again, we were only able to find that the information that went forward to the deputy minister was very high level, didn't talk about all of the risks, and essentially said the system was ready to go.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Last week, you heard testimony from the current deputy minister, who was not there at the time, but who has all her predecessor's responsibility. According to her, the three people involved—two of whom are still employed by the federal government, in the same department and in the same place—say that this is not quite how they see things.

Would you like to know more about the views of those three people, who seem to disagree with your conclusion?

[Michael Ferguson]

During our audit, we were able, on many occasions, to obtain all the information we needed to provide an opinion on our objective. We discussed all the factors, all the decisions and all the available information with those people. Our practice is to gather all the information and present all our findings in our audits.

This is not about one conversation or another. The purpose of an audit is to gather all the information and ascertain the message in it.

[The Chair, Conservative, Kevin Sorenson]

Thank you, Mr. Ferguson. We'll come back. We'll be back and forth.

Madam Mendès.

[Alexandra Mendes, Liberal, Brossard—Saint-Lambert, QC]

Thank you very much, Mr. Chair, and thank you, Mr. Ferguson. I second the chair's initial words in thanking your for the enormous contribution you have brought to this committee in all of your reports. You've made us, as a committee, perhaps the most interesting committee in the House. I want to say that to my other colleagues, to tell them they don't know how much fun we're having here.

I also would like to go back to the line of questioning by my colleague Mr. Deltell, and to what my colleague Mr. Lefebvre was saying too.

Maybe I'm wrong, but I've had some public servants approach me, through Facebook of all things, to say that one of the big problems people in the public sector have or have had for a few years now is a total fear of going up to their superiors and telling them when things are not working exactly as planned. It seems to me that they are terrified of going up the hierarchy and announcing to their superiors that something is not going as planned.

Did your team of auditors find this? Were they told about this, or were impressions shared about this?

[Michael Ferguson]

Again, in the course of an audit we have to follow the evidence and the trail. We found that the information about the seriousness of the situation didn't get past the people who were responsible for the project. That's why we also called it a failure of oversight. There was no second check of the information they were providing, no way for the deputy minister or anybody else to know whether the information those people were providing reflected the situation or not.

I can't get to why they may have decided not to bring that information forward. I believe it reflects something about the culture, and that's why I felt I had to write the message that there was more to this than their not making the right decision at this decision point or that there wasn't enough oversight at this decision point. Again, it still comes back to the fundamental question of with all the controls that exist within the federal government, how was Phoenix able to happen?

Why that information didn't go forward, I don't know, but we saw very clearly that the risks were known, that the information about the fact that the system was not ready should have been known, that departments could have told—albeit they did a certain extent—that the system was not ready. Somehow it still went forward.

[Alexandra Mendes, Liberal, Brossard—Saint-Lambert, QC]

I'm guessing again from messages I've received that a lot of this has to do with the very important fact that public servants are human beings, with ambitions and professional aspirations. If they are told they have an objective to reach and they have to deliver on that objective, and that if they don't, their promotion or bonus won't come forward, or whatever the compensation would be, their natural instinct is to try to hide problems in attaining whatever objective is given to them.

I'm trying to get at whether this is a possible explanation. As I've told you, I have at least three messages from public servants directly on my Facebook messenger of all places about these issues, about fear, of staff not being comfortable or feeling that their careers would be threatened if they went forward with alerts about things not going well or according to plan.

Is this part of something we will have to address as a committee in the report that we're going to make? Should we explore this? I'm throwing it out there and seeing if you heard the same complaints.

[Michael Ferguson]

I think it's consistent at least with my observation that in some cases, policy seems to be applied as a way to just say that the policy has been applied; so if the policy's been applied, then they have plausible deniability. If something goes wrong, they can say they followed the policy.

I don't know to what extent it is fear—or, if there is any fear, how widespread that might be. I've come across probably too many instances, and in the case of Phoenix, it was how the SI system report was used essentially to say that they followed the policy of making sure there was an external evaluation of the project, when it didn't have the independence it needed to reflect the substance of that policy.

I think we see situations where the system becomes very focused on checking boxes and using policies as cover for making certain decisions.

[Alexandra Mendes, Liberal, Brossard—Saint-Lambert, QC]

We're not making certain decisions.

[The Chair, Conservative, Kevin Sorenson]

Thank you, Ms. Mendès.

Mr. Nuttall, please.

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

Thank you, Mr. Chair.

Thank you again, Mr. Auditor General.

I have a couple of follow-up questions. Quickly, because I'm trying to cram a lot into this five minutes, how did the Gartner report come to be? Who communicated to the Treasury Board that this needed to be looked at because of some failures, concerns, or risks that were...?

[Michael Ferguson]

I'm not sure if there was one person who communicated it, but certainly they were getting enough messages and hearing enough issues that they felt they needed to have the report done.

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

From who, from where?

[Michael Ferguson]

I don't know the specifics of that. I don't know whether we had that in the course of the audit. It wouldn't have been something that we needed to know. All we needed to know was that the Gartner report was commissioned.