Phoenix pay system: Committee of the Whole—May 19, 2022
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Phoenix IBM and pay stabilization procurement initiatives
In this section
Key data points
- Investments in Phoenix:
- 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 $2.134 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
- IBM contract total values:
- for the Phoenix pay system from 2011 to 2022—$545 million (taxes included)
- for the pay system support contract; including application managed services for Phoenix, stabilization activities, enhancements and optional support services to Shared Services Canada (SSC) for a next generation (NextGen) system - $108.9million (including taxes and contingency)
- McKinsey & Company contract for accelerator services has a total contract value of $27.7 million (taxes included)
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. Between June 2011 and December 2020, there were 50 amendments to this contract, for a total contract value of $545 million (taxes included)
- The last amendment in December 2020 was required to exercise the option year to extend the contract end date from April 2021 to March 2022. This ensured ongoing application managed services for critical 24/7/365 operational (functional and technical) support for pay. It included software maintenance and support services essential for pay stabilization, including the upgrade of the Phoenix PeopleSoft software to version 9.2
- In May 2019, Public Services and Procurement Canada (PSPC) launched a competitive procurement process seeking suppliers to provide ongoing operational support for the Phoenix pay system, once the original 2011 contract with IBM Canada Limited ended in March 2022
- 3 firms responded to the invitation to qualify (ITQ) but only IBM met the mandatory requirements. A new contract with IBM is in place until March 31, 2023, with a value of $108.9 million, including taxes and contingency. It will provide support for functional, technical, and payroll processing functions via an application managed services model for the Phoenix pay system and contains 11 additional 1-year options that will be exercised as needed
- An independent fairness monitor observed the procurement process and has not raised any fairness concerns
- In 2011 IBM was awarded the contract for the Phoenix pay system through an open and transparent bidding process with a fairness monitor
- Amendments are a regular part of the contract management process and support the advancement of the work
Robotic process automation: 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 in the Phoenix pay system to increase efficiency and accuracy in pay processing
- This means that our own compensation employees at the Public Service 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 has allowed PSPC to build on the RPA work completed to date and accelerate the automation of pay processing
Accelerator services contract amendment
- The objective of the accelerator services project is to streamline processes and standardize work at the Public Service Pay Centre to increase efficiency and reduce processing times for pay transactions. McKinsey & Company was awarded a contract 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 amended the contract again to complete the deployment of accelerator services across more Pay Centre teams and expand the services to a new sector. Total contract value is now to $27,699,266.00 (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
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 launched a competitive procurement process 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
- 3 firms submitted responses to the ITQ. Following a thorough evaluation of the 3 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 1-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 request for information (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
Continued investment in Phoenix and IBM and McKinsey
- We rely on the Phoenix pay system to ensure that employees continue to receive accurate and timely pay until a new human resources (HR) and pay solution is ready
- Since the launch of Phoenix in 2016, PSPC has implemented a series of measures and made consistent and significant progress towards pay stabilization
- Investments have contributed to significant improvements in Phoenix system stability, as well as increased pay service delivery capacity. They have also allowed us to provide more support to employees and undertake initial preparations to ensure a smooth transition to the next generation HR and pay solution
- Through these investments, PSPC has continued to deliver on its core mandate to administer bi-weekly pay and work to reduce the backlog
- These investments are critical to support the work underway to stabilize pay operations, reduce the backlog of outstanding transactions and ensure a smooth transition to the next generation HR and pay solution when the time comes
- This contract is a continuation of ongoing efforts and provides critical 24/7/365 technical and payroll processing support, which is essential to support our work in processing over 11 million payments every year
- Public Services and Procurement Canada launched a procurement process in 2019 for the in-service support/application managed services. Three firms submitted responses, and following a thorough evaluation of the 3 responses, it was determined that only IBM met the mandatory requirements
- Turning to private sector firms with proven track records are allowing us to improve pay processing performance more efficiently. Companies such as McKinsey are supporting aspects of stabilization through their expertise in large-scale transformation
- In addition, we have issued a limited number of contracts to further support our efforts in resolving public service pay issues as quickly as possible
- PSPC will continue to reach out to experts, federal public sector unions, and the private sector for innovative solutions to help further stabilize the pay system
Phoenix overpayments
Key data points
- Since the launch of Phoenix, approximately 338,000 employees have been identified as having received either an administrative overpayment or true overpayment, totaling $2.9 billion
- As of March 14, 2022, overpayments were repaid by approximately 222,000 of those employees, representing a total of approximately $2.3 billion in recovered funds
- As of March 14, 2022, approximately 116,000 employees have an outstanding overpayment balance. The outstanding salary overpayments stands at approximately $554 million
- Flexible measures have been put in place to help minimize financial hardships for employees for the repayment of overpayments related to Phoenix pay system issues. Current employees and pensioners facing financial hardship can have their recovery rate, traditionally set at a rate of 10% of their regular payment, lowered if requested
Support to current and former federal employees
- Our priority is to support current and former employees and resolve outstanding pay issues as quickly as possible, including recovering overpayments
- Recovering salary overpayments has always been part of the Government of Canada activities, even before the implementation of the Phoenix pay system. In its stewardship role, the government has an obligation to recover outstanding overpayments
- Thousands of current and former federal employees have already reimbursed overpayments, or have made arrangements to do so. Since the launch of Phoenix, thousands of current and former federal employees have already reimbursed overpayments, or have made arrangements to do so
- We recognize that the recovery of overpayments can be stressful for those affected, and multiple measures have been put in place to support individuals experiencing financial hardship, including flexible repayment options
- The overpayment letters sent to employees provide detailed information on the pay event that led to the overpayment, as well as the steps to follow should they have questions about the overpayment amount identified
Recovery of salary overpayments
- Salary overpayments impact current and former public service employees across departments, agencies and across the country
- Recovery of overpayments supports the Government of Canada’s mandate to eliminate the backlog of outstanding pay issues for current and former public servants as a result of the Phoenix pay system, in order to rebuild their confidence in the integrity of their pay and pensions
- The Receiver General and Pension Branch, in collaboration with the Office of the Comptroller General, and the Pay Administration Branch, has begun work to establish recovery strategies:
- for current employees: priority has been given to files with overpayments from 2016, in order to protect the Crown’s right to recover these overpayments
- for pensioners: the receiver general has put in place a strategy to recover overpayments from pension funds through the Government of Canada Pension Centre
- for former employees who left without a pension: the receiver general is providing support and guidance to departments and agencies
- On October 12, 2021, Treasury Board of Canada Secretariat released a bulletin titled Additional Information on the Recovery of Overpayments, Emergency Salary Advances, and Priority Payments
- in order to protect the Crown’s right to recover, the bulletin states that employees must, in writing, acknowledge their overpayments to gain access to the flexibilities put in place by the Office of the Chief Human Resources Officer—Employee Relations and Total Compensation
- these flexibilities allow employees to delay reimbursing the overpayment until their pay file is reconciled and they have received their correct pay for 3 consecutive pay periods
- Since 2017 the Public Service Pay Centre has been issuing overpayment letters to employees each time a transaction is manually processed on their account that leads to the creation of an overpayment. As a result, most employees have already been informed they have an overpayment on their account
- For former non-pensioned employees who were served by the Public Service Pay Centre, 2 attempts are made by the Public Service Pay Centre to recover funds upon termination of employment. If unsuccessful in recovering through these attempts, the file is transferred to the employer department or agency for further action
- Departments and agencies not served by the Public Service Pay Centre are responsible for recovery of funds from their current and former employees, though the Government of Canada Pension Centre does assist with recovery from pension recipients when requested
- We recognize that the recovery of overpayments can be a source of stress. The Client Contact Centre is the first point of contact for current and former federal public servants looking to report a pay issue, provide status updates on their files or to receive assistance with technical issues (when using the compensation web applications or the Phoenix pay system) and general enquiries
- The Client Contact Centre is available to all current and former federal public servants with pay and benefits questions
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