Public Accounts Committee on Dec. 14th, 2023

[The Chair, Conservative, John Williamson]

Hello everyone.

I call the meeting to order.

Welcome to meeting 92 of the Standing Committee on Public Accounts. Pursuant to Standing Order 108(3)(g), the committee is meeting today to begin its study of Government of Canada information technology systems and reports 7 and 8, 2023, of the Auditor General of Canada.

I'd now like to welcome our witnesses.

From the Office of the Auditor General, we have Andrew Hayes, deputy auditor general; Patrice Malboeuf, director; and Jocelyn Matthews, director, by video conference, I believe.

From the Department of Employment and Social Development, we have Paul Thompson, deputy minister; Cliff Groen, associate deputy minister and business lead, benefits delivery modernization; and John Ostrander, technical lead, benefits delivery modernization.

From the Department of Public Works and Government Services, we have Arianne Reza, deputy minister, and Mollie Royds, associate assistant deputy minister, procurement branch.

From Shared Services Canada, we have Scott Jones, president; Shannon Archibald, assistant deputy minister, hosting services; and Scott Davis, chief financial officer.

Hello, welcome and thank you. There might be some votes here, so you might have to be patient with the parliamentarians today.

As usual, we allow our witnesses to open with a five-minute presentation each. We'll begin with the Office of the Auditor General.

To begin, I'll turn it over to Mr. Hayes.

[Andrew Hayes, Deputy Auditor General, Office of the Auditor General]

Mr. Chair, thank you for this opportunity to discuss our reports on modernizing information technology systems and on the Benefits Delivery Modernization programme. Both reports were tabled in the House of Commons on October 19, 2023.

I would like to acknowledge that this hearing is taking place on the traditional unceded territory of the Algonquin Anishinaabe people.

Joining me today are Patrice Malboeuf and Jocelyn Matthews, who were both responsible for these audits.

These two reports are closely related. Our report on modernizing information technology systems examined the government’s overall approach to modernizing its systems, while our report on the benefits delivery modernization program focused specifically on the modernization of old age security, the Canada Pension Plan, and employment insurance. More than 10 million Canadians rely on these three benefits.

Overall, we found that the Treasury Board of Canada Secretariat and Shared Services Canada did not do enough to lead and support departments and agencies in updating their information technology systems. These lead organizations still do not have a strategy to drive modernization efforts even though the government first identified aging systems as a significant concern more than 24 years ago.

Whether it is applying for a benefit or managing the business of government, both Canadians and the public service need reliable information technology systems. We found that about two thirds of the government's 7,500 software applications were in poor health. Of those, 562 are essential to the health, safety, security, or economic well-being of Canadians. Some of the systems date back to the early 1960s. The risk that outdated systems could fail and that Canadians could lose access to essential services increases with every passing day.

While aging information technology infrastructure is a problem that the government has known about for decades, progress has been very slow. We found that in addition to the lack of centralized leadership and oversight, other factors had contributed to delays, including a shortage of skilled people to carry out the work, and an inflexible funding approach.

Our report on the benefits delivery modernization program echoes these findings. In particular, this report shows the effects of the government's inflexible funding approach. When the program was launched in 2017, Employment and Social Development Canada estimated that it would cost $1.75 billion. That number has since been revised twice, and it will probably change again as delays and challenges persist.

In April 2022 the cost estimate reached $2.5 billion. That's a 43% increase since 2017. In other words, halfway through the program's 13-year timeline, all three benefits were still running on systems that were between 20 and 60 years old. Faced with ongoing delays, cost increases and staffing challenges, Employment and Social Development Canada adjusted its approach and delayed transformation efforts to prioritize the migration of aging systems. This step was intended to mitigate the risk of system failure.

The department also moved old age security ahead of employment insurance in the migration schedule because old age security was the oldest system with the greatest risk of failing.

The department's decision to focus on migrating the systems to prioritize the continuity of benefits was the right one. However, we are concerned that if challenges and delays persist, decisions could be made to remove aspects of transformation or to take shortcuts to maintain the timelines or budget, as happened with the Phoenix pay system.

Reducing or eliminating the transformation component of the program increases the risk that the final product will not meet the needs of those who rely on these benefits, including seniors, indigenous people and refugees.

We would be pleased to answer any questions the committee may have.

[The Chair, Conservative, John Williamson]

Thank you very much.

Up next is Mr. Jones from Shared Services Canada.

You have the floor for five minutes. Go ahead, please.

[Scott Jones, President, Shared Services Canada]

Mr. Chair and members of the Committee, I am pleased to be here today to address the Auditor General’s recent reports and the progress made by Shared Services Canada, or SSC, on their recommendations.

Before I begin, I would like to acknowledge that we are gathered on the traditional unceded territory of the Algonquin Anishinaabe people.

With me today are Scott Davis, chief financial officer, and Shannon Archibald, assistant deputy minister of our hosting services branch.

SSC welcomes the findings of the audit and its recommendations. This audit will help the Government of Canada strengthen and improve its information technology or IT systems and hosting services.

Modernizing the Government of Canada's IT systems requires an enterprise-wide approach, and SSC is committed to collaborating with departments and their chief information officers to achieve this.

SSC provides the foundational IT infrastructure for departments to host their applications so that Canadians can have access to secure digital programs and services. While SSC is responsible for the Government of Canada IT infrastructure, it is important to note that departments are responsible for modernizing or decommissioning the applications that run on the infrastructure SSC provides.

SSC has a plan in place to address aging infrastructure, as the AG's report pointed out, and we are working on it. SSC continues to collaborate with the Treasury Board Secretariat and all departments to advance modernization goals and to ensure that outdated IT infrastructure is replaced with modern and stable hosting solutions. As part of that process, we are working with TBS, departments and their chief information officers to identify applications most at risk.

Investments over the last two years have allowed us to renew the base infrastructure of the government, and through that, the core network is being completely transformed into a modern, agile network.

To support the modernization of applications by departments, SSC is offering modern hosting solutions, including cloud services and the Government of Canada's own state-of-the-art enterprise data centres. These modern solutions are key to be able to offer digital solutions and programs to Canadians.

For example, SSC is working on private cloud to offer opportunities to modernize applications and working on edge solutions to address latency needs. Through our hosting services strategy, SSC will continue to support applications across departments and improve the security and the stability of those within the enterprise data centres.

This hosting services strategy will also offer solutions tailored to different workloads and applications. Focusing on innovation, sustainability and cybersecurity will ensure we serve Canadians efficiently while building stronger partnerships and inspiring confidence and trust.

For Employment and Social Development Canada's benefits delivery modernization program, SSC is providing the underlying cloud connectivity and associated procurement vehicles to that cloud connectivity. More precisely, SSC is responsible for designing and modernizing the digital infrastructure to support BDM through rigorous project planning, oversight and governance in collaboration with our colleagues. SSC continues to work closely with ESDC to provide guidance and advisory services on the various components of the digital solution.

To better communicate and collaborate with all departments across government, SSC has launched “digital together”. This plan is designed to accelerate progress in the areas of digital services, connectivity, hosting and cybersecurity.

SSC acknowledges the need for efficient and cost effective modernization. We also acknowledge the need to speed things up. Under “digital together” we identify and prioritize initiatives that respond to the government's priorities while aligning with digital modernization goals and our enterprise approach.

This is a journey that will be powered by both larger-scale modernization of legacy platforms as well as ongoing improvements in the way Canadians interact with technology to access services. Decommissioning legacy infrastructure is complex, and it requires collaborations with departments to ensure there is no disruption to critical business applications.

Working together and leveraging the strengths of partners, we can address the complex challenges facing the government and deliver innovative solutions that drive positive, secure change for Canadians.

Mr. Chair, to summarize, SSC has a plan to have a stable IT infrastructure and to ensure connectivity coast to coast. We will continue to look for ways to innovate and improve. However, to achieve this vision, continued investments will be required.

We would be happy to answer your questions.

Thank you.

[The Chair, Conservative, John Williamson]

Thank you.

The next speaker is Ms. Reza, deputy minister of Public Works and Government Services.

You have the floor for five minutes. It's nice to see you again.

[Arianne Reza, Deputy Minister, Department of Public Works and Government Services]

Thank you, Mr. Chair, for the opportunity to discuss the role of Public Services and Procurement Canada in relation to the benefits delivery modernization program.

All Canadians should expect to receive accurate and timely benefits, regardless of how those benefits are managed from an IT infrastructure perspective. They trust that the government departments responsible for old age security, employment insurance and the Canada pension plan can preserve the continuity of payments, even during large-scale IT transformation projects.

The benefits delivery modernization program is the largest IT transformation initiative ever undertaken by the Government of Canada. It will replace outdated and complicated legacy systems with a streamlined and secure software platform to access benefits for old age security, employment insurance and the Canada pension plan.

Canada requires the skill and expertise to execute transformations of this magnitude and complexity. Consequently, PSPC, on behalf of ESDC, has contracted vendors with a proven track record of success in large transformation projects.

In her fall reports, the Auditor General concluded a study as to whether the program was progressing in a way that supports the continuous delivery of critical benefits for Canadians. This includes an examination of the various processes, including procurement, that are engaged during the transition of IT systems and business processes.

The study did not result in recommendations directed at PSPC, but our role in the program is important and critical, and we will continue to support ESDC as it moves forward.

As a common service provider, PSPC provides support to Employment and Social Development Canada for major procurements related to the benefit delivery modernization program, including all professional services contracts. These contracts ensure that Canada has access to the strategic advice and specialized expertise of system integrators that are critical to the success of the Program.

In early 2021, following a competitive procurement process, PSPC awarded four contracts to qualified systems integrators to provide integration services to onboard the three large benefits onto the new technology platform, which involves hundreds of different technologies. The systems integrators also provide strategic advice and some technologies as needed. Specifically, as a result of a competitive process, contracts were awarded to Accenture, CGI Information Systems, Deloitte, and Fujitsu Consulting.

These four qualified suppliers usually compete for work packages. In some instances, and where appropriate, the work is allocated among all four suppliers, who then work collaboratively to advance the program.

The combined cumulative value of contracts awarded to the four system integrators is currently $409 million. I will note that PSPC is currently supporting ESDC in designing the procurement to replace the employment insurance system, which will result in additional work via these contracts.

The department has also awarded a contract on behalf of ESDC, as a result of a competitive process, for the core technology platform to IBM Canada, currently valued at $70 million. Each of the benefit programs will be onboarded and integrated onto this platform. PSPC also issued a large competitive contract for strategic transformation advice, as well a project management services, to PricewaterhouseCoopers, currently valued at $147 million.

Finally, work has begun with ESDC to prepare for the retendering of the strategic transformation advice contract, and it is estimated that the contract will be valued at approximately $70 million.

Mr. Chair, PSPC is integrated into all levels of benefits delivery modernization governance in order to provide guidance on the procurement elements of this transformation program. Given the size and scope of the program, we have a team of procurement specialists working full time on this file to support ESDC in ensuring that it meets the needs of Canadians across the country.

For this project, as with everything we do, PSPC is committed to ensuring that procurements are conducted in a fair, open and transparent manner. At the same time, we are ensuring that procurements are undertaken in accordance with relevant policies, guidelines, regulations, trade agreements and procedures while meeting the requirements outlined by client departments.

We will continue to provide contracting services and work with ESDC and other partners to deliver BDM with the shared goal of ensuring that the government delivers benefits for Canadians with an emphasis on efficiency, accuracy and accessibility.

Thank you, Mr. Chair.

I would be pleased to answer the committee’s questions.

[The Chair, Conservative, John Williamson]

Thank you.

We will now go to the next speaker.

Mr. Thompson is deputy minister with Employment and Social Development.

You have the floor for five minutes, please.

It's nice to see you.

[Paul Thompson, Deputy Minister, Department of Employment and Social Development]

Thank you very much, Mr. Chair.

Thanks for the opportunity to discuss the Auditor General's report, “The Benefits Delivery Modernization Programme”.

The Government of Canada welcomes the report and its recommendations. They will help us refine our project management approach, not only for this project, but also for other large IT projects.

As my colleague has noted, benefits delivery modernization is the largest IT project undertaken by the federal government. Ultimately, the project will securely and reliably deliver to millions of Canadians benefits through three key programs: employment insurance, the Canada pension plan and old age security. Over the last year alone, Service Canada delivered over $145 billion in benefits through these programs to over 10 million Canadians.

The challenge we have is that the current technology that supports these services is outdated, risking errors and payment delays. There is an increasingly urgent need to replace these aging systems with modern, reliable, digital solutions. A new platform will position us for not only a better client experience but also one that is safer and more secure than ever before.

It will also give us more agility to respond to policy and legislative changes. We'll be able to implement such changes more quickly and better enable ESDC to adapt to both client expectations and changing circumstances and events.

The recommendations from the Auditor General’s report will help us carry out this project and will contribute to its success.

We have taken action in a number of different areas based on extensive research, best practices and lessons learned from both the private and public sectors, Canadian provinces and territories, the United Kingdom, Australia, and the United States. And we learned the lessons from less successful IT enabled transformations, such as the Phoenix pay system.

In speaking to some of the improvements we've made, we now have a dedicated senior level leadership in place for both the business and technical aspects of the project, both of whom have significant combined experience in the public and private sector.

The appointment of my colleague, Cliff Groen, as associate deputy minister and business lead, and John Ostrander, as the technical lead, combine this business expertise and proven technology leadership at the most senior levels of the program.

In June 2022, the government’s chief information officer conducted a strategic assessment of the program. This is a common practice for large and complex transformations, and it positions the program for success.

The CIO’s office works in close collaboration with a dedicated ESDC internal audit team. Together, they give real-time advice and recommendations on risks and issues to senior management. They also work with a third party assurance provider to assess the effectiveness of risk management, control and governance processes of specific areas.

With regard to implementation, old age security is the first benefit that is being transitioned to the new BDM platform. It is important to note that it has already gone live.

Last June, 600,000 old age security foreign beneficiaries were successfully transitioned to the modernized system. Full onboarding of all OAS clients to the new platform is on track to be completed in 12 months' time in December 2024.

We are modernizing OAS, EI, and the CPP over three phases, with an expected completion date of 2030. This incremental and phased approach allows us to demonstrate the value of early and continuous transformation as the platform capabilities mature.

In terms of costs of the BDM program outlined in the report, I would highlight that current spending is consistent with other jurisdictions undertaking similar transformations. Since 2017, the BDM program has spent $817 million. The Treasury Board approvals to date amount to $2.2 billion over a 10-year period. While this is a very sizable investment, it is important to note that the total benefits delivered to Canadians during the lifetime of the platform will be more than $1.5 trillion.

With large IT projects like this, we know they are intricate, but we are determined to get it right.

Mr. Chair, serving Canadians is our top priority. We understand that the success of benefits delivery modernization is non-negotiable.

We will continue to work with the Treasury Board Secretariat to refine our approaches to delivering services, sharing best practices across all levels of government, and minimize system risks.

Again, thank you very much for the opportunity to appear. I look forward to taking your questions.

[The Chair, Conservative, John Williamson]

Thank you very much.

We had a late arrival.

Ms. Luelo, I understand you have an opening remark.

[Catherine Luelo, Deputy Minister and Chief Information Officer of Canada, Treasury Board Secretariat]

Yes. Good morning. The irony of the CIO having tech problems getting into the meeting is not lost on me. I hope my audio is working fine.

I'm going to just add to my colleague's comments.

The chief information officer and my office are accountable for the overall leadership of IT, and for service and digital transformations across government. My colleagues have outlined some of the challenges there. We're also accountable for oversight on high-risk and complex programs. BDM is one of those. When you take the two audit reports, the Auditor General has done a very good job of outlining the issues in front of us.

Today, I look forward to the conversation with the committee around my opinions on the fact that we are trying to do too many things, and that is part of what is slowing our progress and improvement.

With that, I'll pass it back to you.

[The Chair, Conservative, John Williamson]

Thank you very much.

Without further ado, I will turn to our opening round.

Mrs. Gray, you have the floor for six minutes, please.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

Great. Thank you, Mr. Chair.

Thank you to all the witnesses for being here today.

Through the chair, I'm just wondering who would be responsible for the development and oversight of the budget for the benefits delivery modernization program so that I can ask my questions to the appropriate person.

[Cliff Groen, Associate Deputy Minister and Business Lead, Benefits Delivery Modernization, Department of Employment and Social Development]

That would be Employment and Social Development Canada—Paul, John and me.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

Great. Thank you so much.

We know that the initial budget disclosed by the government for the benefits delivery modernization program was $1.75 billion. Can you please table for the committee this detailed budget?

[Cliff Groen]

The initial budget estimate that was put forward for the benefits delivery modernization program was $1.75 billion. We could certainly provide you with the estimates that had been developed at that time.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

Great. I'm looking for the detailed budget for that. Could we get that by January 19, 2024, just to put a timeline on it?

Thank you.

The third party review as reported on by the Auditor General was completed, showing that the program cost was now between at least $2.7 billion and $3.4 billion. I know that a couple of numbers in that range were mentioned by different departments here today. Can you confirm that this is the new budget amount?

[Paul Thompson]

As noted, we're working within a project authority of $2.2 billion. We have spent $853 million to date. At present we are responding to the AG's recommendations on improving the costing. There are some further decisions to be made on the scope of the remaining work. Some of the phases of the project remain fairly speculative at this point, too, so we don't have a full-fledged program of work costed out for the next 10 years, if that's what the question is seeking.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

The question is this: What is the new budgeted amount? You've said that the new budget amount is now $2.2 billion. Therefore, could you forward to this committee the detailed budget of that new amount of $2.2 billion? Could you also meet the timeline of January 19, 2024, please?

[Paul Thompson]

We can certainly speak to the plans with respect to the $2.2 billion, but as noted, additional work that's expected above and beyond that is currently being costed out. Some choices are being made on the project scope—what will be in, what will be out and those kinds of things. We can certainly speak to the original budget and the $2.2-billion project envelope that we're working with.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

Okay.

This was reported in the National Post on November 17:

Sources suggest ESDC is set to go back to the Treasury Board Secretariat, which controls the public purse on the [benefits delivery modernization program], with a new...estimate of almost $8 billion. That would be a 357-per-cent increase on the original estimate, if confirmed.

Can you confirm whether that is the new estimate for the program? Is that the new estimate that you're working toward?

[Paul Thompson]

That is not the estimate that we're working toward.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

Okay. Thank you very much.

Next, there are new ministers who are responsible for, or whose departments have direct lines of responsibility for, benefits delivery modernization since the ministerial appointments this summer, in July 2023. Has the employment minister requested a briefing on the benefits delivery modernization program, this IT project?

[Paul Thompson]

I can speak to the accountabilities within Employment and Social Development. The lead for the project is Minister Beech, the services delivery minister. Of the three statutory programs I mentioned, two of them are the responsibility of Minister O'Regan. Those are the Canada pension plan and old age security. One of them is the responsibility of Minister Boissonnault. That's the employment insurance program.

They are kept informed. They are not the lead ministers, but they're informed on the file.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

You're saying that the lead minister would be the citizens' services minister.

[Paul Thompson]

That is correct.