Question Period Note: Phoenix IBM and Pay Stabilization Procurement Initiatives

This note focuses on vendor support on the Phoenix file (IBM / Innovation Challenge) as well as other pay stabilization procurement initiatives.

Note: All questions related to Next Generation Human Resources and Pay solution are in a separate question period card developed by Shared Services Canada

• The Government of Canada is committed to supporting employees and resolving public service pay issues as quickly as possible
  • Public Services and Procurement Canada has put in place over 3,000 systems enhancements and fixes, which have helped move the pay system to a much steadier environment
  • As a result, we have increased the overall system stability and improved performance in payroll processing
  • We continue to reach out to experts, federal public sector unions, and the private sector for innovative solutions to help further stabilize the pay system

If pressed on the IBM contract and amendments:

• In 2011 IBM was awarded the contract for the Phoenix pay system through an open and transparent bidding process with a fairness monitor
• Between 2011 and 2022, there were 50 amendments to this contract, for a total contract value of $545 million (taxes included)
• Amendments are a regular part of the contract management process
• When managing a complex system, this approach provides the flexibility to adapt to meet program requirements
• This contract ensured ongoing critical Application Managed Services for 24/7 operational support for pay. This included software maintenance and support services essential for pay stabilization, including the upgrade of the Phoenix PeopleSoft software to version 9.2

If pressed on the re-procurement of the pay system in-service support / Application Managed Services Contract:

• In May 2019 Public Services and Procurement Canada launched a competitive procurement process seeking qualified suppliers interested in providing ongoing operational support for the Phoenix pay system, once the original 2011 contract with IBM Canada Limited ended in March 2022
• After a thorough evaluation, it was determined that only IBM met the mandatory requirements of the procurement process
• A contract with IBM is in place until March 2023, with a value of $108.9 million (including taxes and contingency). The contract contains 11 additional one-year options that can be exercised on an as-needed basis
• This contract will provide ongoing services to stabilize the pay system, eliminate the backlog of outstanding pay issues and ensure a smooth transition to the Next Generation HR and Pay System
• An independent fairness monitor observed the procurement process and has not raised any fairness concerns

If pressed on the McKinsey contract amendment award for Accelerator Services:

• McKinsey & Company was awarded this contract through an open, fair, transparent and competitive procurement process
• In total, two bids were submitted and evaluated prior to issuing this contract
• McKinsey & Company has provided expertise required to streamline processes and standardize work at the Pay Centre, so as to increase efficiency and reduce processing times for pay transactions, as well as to build greater capacity through new ways of working
• The work to date has resulted in substantial increases in the productivity and accuracy of work across the teams at the Pay Centre

IBM contract and amendments

In June 2011, IBM was awarded the contract for the new pay system through an open and transparent bidding process with a fairness monitor. The initial investment to develop Phoenix was $309 million. This included the IBM contract, other professional services contracts and program costs (example: delivery costs for the Transformation of Pay Administration Initiative). Additional investments to ensure that public servants are paid accurately and on time total $2.19 billion. These investments are critical to ensuring adequate resources are available to continue efforts to eliminate the backlog, maintain pay delivery, support employees and stabilize pay. Moreover, these investments have resulted in greater capacity, enhanced technology and support for the workforce dedicated to processing pay transactions to eliminate the backlog.

Since then, there have been 50 amendments to the original contract, for a total contract value of $545 million (taxes included). Amendments are a regular part of the contract management process and were anticipated at the time of contract award.

An amendment was issued in December 2020 and was required to exercise the option year to extend the contract end date from April 2021 to March 2022. Exercising the option period was required to ensure ongoing Application Managed Services for 24/7 operational (functional and technical) support for pay. This included software maintenance and support services essential for pay stabilization, including the recent upgrade of the Phoenix PeopleSoft software to version 9.2.

In-service support – Re-procurement

Application Managed Services is an outcomes-based agreement where the contractor is responsible for delivering services based on our requirements and ensuring the Government of Canada receives what it needs for a fixed price.

In May 2019, Public Services and Procurement Canada (PSPC) launched a competitive procurement process (ITQ) seeking qualified suppliers interested in providing ongoing operational support for the Phoenix pay system, once the contract with IBM Canada Limited ended in March 2022.

Three firms submitted responses to the ITQ. Following a thorough evaluation of the three responses, it was determined that only IBM met the mandatory requirements published in the ITQ.

PSPC negotiated a contract with IBM for the period until March 31, 2023, with a value of $108.9 million, including taxes and contingency. The contract contains 11 additional one-year options, that will be exercised on an as-needed basis.

This contract aims to provide support for functional, technical and payroll processing functions via an Application Managed Services model for the Phoenix Pay System.

An independent fairness monitor observed the procurement process and has not raised any fairness concerns. The report on the RFI has been published, and the report on the ITQ is forthcoming.

We will need to rely on Phoenix until we are ready to transition to a new pay system. The backlog of existing pay issues must also be addressed to allow for a smooth transition to any new pay system. This is the main reason why the Government of Canada is still investing in Phoenix— so that employees continue to be supported and to ensure that we are well prepared to transition to a new pay system when the time comes.

Innovation Challenge – Pay Stabilization Procurement Initiatives

As part of its efforts to accelerate pay stabilization, PSPC has engaged the private sector in innovative solutions to help stabilize the pay system. This iterative approach includes Robotic Process Automation (RPA) and Accelerator Services.

Robotic Process Automation (RPA) – Request for Proposal

Robotic Process Automation (RPA) is one of several ongoing initiatives to help reduce the backlog and stabilize the pay system. PSPC is using RPA services to automate highly repetitive manual transactions to increase efficiency and accuracy in pay processing. This means that compensation employees at the Pay Centre can focus their expertise on more complex cases and address even more transactions in the backlog.

Following a competitive process, a contract was awarded to IBM on January 19, 2021, which allowed PSPC to build on the RPA work completed to date and accelerate the automation of pay processing. PSPC is now leveraging additional Crown resources with expertise in innovative technologies to support all ongoing Robotic Process Automation activities. This includes knowledge transfer from vendor to public servants thus reducing sole reliance on professional services and increasing internal capacity.

Accelerator Services contract amendment

The objective of the Accelerator Services project is to streamline processes and standardize work at the Pay Centre to increase efficiency and reduce processing times for pay transactions. McKinsey & Company was awarded a contract for Accelerator Services in February 2020 as a result of a competitive procurement process.

On May 31, 2021, PSPC amended this contract to improve process and performance across more Pay Centre teams. On December 10, 2021, PSPC issued an amended to the contract to complete the deployment of Accelerator Services across more Pay Centre teams.

On November 1, 2022, PSPC extended the contract until the end of March 2023, to support the Pay Centre in updating their training and onboarding program for new employees. The work will include a review of onboarding practices and a redesign of training based on adult learning best practices.

The initial contract and amendments bring the total contract value to $29.6 (taxes included):

• 2020-2021: $5,572,926.94 (taxes included)
• 2021-2022: $15,458,209.31 (taxes included)
• 2022-2023: $8,589,130.00 (taxes included)

Under this contract, McKinsey & Company is providing consulting services to transform ways of working, including management practices and tools, to improve both productivity and the experience of our clients and client organizations. They are also implementing strategies to increase efficiency and reduce errors, which will lead to decreased wait time for employees’ pay issues to be processed.

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