Phoenix: Standing Committee on Government Operations and Estimates—April 29, 2022

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Phoenix IBM and pay stabilization procurement initiatives

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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 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.

Three 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 one-year options that will be exercised as needed. An independent fairness monitor observed the procurement process and has not raised any fairness concerns.

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.

Phoenix overpayments

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Recovery of overpayments supports the Government of Canada’s mandate to resolve outstanding Phoenix pay system issues for public servants once and for all. Salary overpayments impact current and former public service employees across departments and agencies, and across the country.

In collaboration with the Office of the Comptroller General, Public Services and Procurement Canada has established recovery strategies:

In order to protect the Crown’s right to recover overpayments within the 6-year statutory restriction, active employees must first acknowledge their overpayments to access repayment flexibilities put in place by the Office of the Chief Human Resources Officer—Employee Relations and Total Compensation. These repayment flexibilities allow employees to delay recovery of their overpayments until their pay file is reconciled and they have received their correct pay for 3 consecutive pay periods.

Active employees who do not access the repayment flexibilities will be subject to recovery, as per the guidelines provided in their overpayment acknowledgement letter. Former employees are not eligible for the repayment flexibilities, and the Crown has the right to recover overpayments from first available funds.

The Receiver General and Pension Branch has resumed the collection of overpayments from pensioners previously employed by departments and agencies served by the Public Service Pay Centre.

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.

Administrative overpayments / true overpayments

Administrative overpayments were a normal part of the pay administration process and used to ensure employees were paid accurately. They would be generated when an employee’s acting assignment was entered late and were automatically recovered at the time of the acting assignment’s retroactive payment. This allowed the pay system to automatically reconcile the difference between the regular salary rate and the acting salary rate in subsequent pay periods without affecting the employee’s pay. As of October 2020, a new process was put in place and these type of overpayments are no longer created for this purpose.

True overpayments usually occur when certain pay transactions are not submitted or processed promptly. Some situations are related to late entry / late processing where timeliness of the delegated human resources (HR) manager is key. Some situations are related to unforeseen work-life events. This is a normal part of day-to-day compensation operations.

Next generation human resources and pay initiative

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Budget 2018 announced the government’s intention to move away from the current pay system and begin the development of a new one that will be better aligned with the complexity of the federal government’s human resources and pay structure.

In September 2019, the government announced a $113.1 million investment to co-design and deliver pilot projects for the next generation human resources and pay solution. These pilot projects will test potential solutions against the real complexities of the federal government’s human resources and pay systems. This investment re-affirms the Budget 2019 commitment to move away from the Phoenix pay system, toward one that is better aligned to the current and future needs of Canada’s world-class public service.

The government also announced, at that time that it had selected SAP, Workday and Ceridian as the vendors deemed qualified to deliver a NextGen HR and pay solution for the Government of Canada.

In March 2020, after extensive evaluation, and testing, it was announced that SAP had been selected to work with on a pilot for a new HR and Pay solution. SAP was selected through a rigorous evaluation process which was open and transparent and placed users at the centre. The evaluations involved elements such measuring vendors against digital, privacy and security standards as well as testing of hundreds of HR and pay scenarios, both simple and complex.

Effective April 1, 2020, leadership for NextGen HR and pay was transitioned from Treasury Board of Canada Secretariat (TBS) to SSC. The chief human resources officer at TBS remains the business owner and a key collaborator of the NextGen HR and pay initiative.

On October 14, 2020, the selection of the Department of Canadian Heritage for the exploratory phase of the next generation HR and pay initiative was announced. Canadian Heritage was selected as the pilot department for exploratory phase because their organization provides a good representation of the government’s human resources complexities, including multiple occupational groups, regional representation, overtime, and other considerations.

Following successful completion of the exploratory phase in April 2021, the Government of Canada pivoted to a new vendor. On September 14, 2021, the Government of Canada signed a contract amendment with Ceridian for the next 18 months for the design and experimentation phase of the NextGen HR and pay initiative.

On July 27, 2021, the Government of Canada announced the expansion of testing to include the Department of Fisheries and Oceans and the Canadian Coast Guard and Canada Economic Development for Quebec Regions.

All 3 vendors remain qualified to work with the government in the future for HR and pay solutions. This affords the government maximum flexibility to access the solutions of multiple, best-in-class vendors which is critical to the NextGen HR and pay approach.

Any testing undertaken will not affect employees’ actual pay. All testing for the NextGen HR and pay initiative will continue to take place in parallel with existing HR and pay systems and all testing has been designed to ensure the protection of privacy and personal information.

Throughout this process, the NextGen HR and Pay Team is engaging with public service employees, leaders, HR advisors and technical specialists, the private sector and other governments, as well as working hand-in-hand with bargaining agents in the development of a user-centric HR and pay solution.

While not within the NextGen HR and pay initiative, it is important to note that ongoing stabilization of the current Government of Canada pay system remains a top priority for the government and is being managed by Public Services and Procurement Canada.

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