Cost of Phoenix federal payroll debacle surpasses $1B

The department in charge of the federal government's Phoenix pay system now says the combined cost of implementing and fixing the ailing program has exceeded $1 billion.

Millions in costs related to troubled pay system weren't included in 2018 budget

A protest marking the two-year anniversary of the Phoenix pay system's launch was held in downtown Ottawa Feb. 28, 2018. (CBC)

The department in charge of the federal government's Phoenix pay system now says the combined cost of implementing and fixing the ailing program has exceeded $1 billion.

Several weeks ago, CBC News requested an accurate and up-to-date tally of Phoenix costs from Public Services and Procurement Canada (PSPC).

Seems like right from the start, they've painted a much rosier picture than there was.- Debi Daviau, PIPSC

The department provided a graph explaining all the "investments" it has made in the pay system, but not all the expenditures were included in the federal government's 2018 budget.

They now total $1.192 billion.

The new tally, and the way the government handled its dissemination, has come as a disappointment to some Phoenix watchers.

"Seems like right from the start, they've painted a much rosier picture than there was, and [have been] playing a bit of a shell game with the numbers to make it look better, and I don't think it's helpful," said Debi Daviau, president of the Professional Institute of the Public Service of Canada.

"Sinking good money after bad is not a solution that works for public servants, and it doesn't work for Canadians."

Debi Daviau, president of the Professional Institute of the Public Service of Canada, says it's shocking the government has sunk so much money into Phoenix. (CBC)

Long list of costs

The government now confirms the initial investment to develop Phoenix was $309 million.

This "includes the IBM contract, other professional services contracts and program costs," as well as the new pay centre in Miramichi, N.B.

Phoenix was initially brought in on a promise to save the government $70 million a year, but due to the staggering number of problems with the pay system, those savings have not been realized and are now adding to the department's list of costs.

"The government has decided not to harvest savings of $70 million a year in 2016/2017, 2017/2018 and 2018/2019 to provide departments with additional resources to support employees," said a news release from Public Services and Procurement Canada.

Departmental costs

The amount that individual departments have had to spend to support Phoenix is yet to be determined. According to PSPC, the comptroller general is figuring that out and a report is expected later this year.

According to Sahir Khan, executive vice-president of the Institute of Fiscal Studies and Democracy at the University of Ottawa, that additional sum could cause the Phoenix tally to balloon further.

Sahir Khan is executive vice-president of the Institute of Fiscal Studies and Democracy at the University of Ottawa, and a former assistant parliamentary budget officer. (CBC)

"As significant as this amount is already, a full accounting of departmental costs will be important to fully understand the lessons to be learned from this," Khan said.

One of the additional costs is $28 million paid out in "advances to unions" which are owed unpaid dues as a result of the pay system's failure.

Growing annual costs

Public Services and Procurement Canada invested $50 million in 2016, then another $142 million in 2017 to improve the technology and hire more workers, including 1,500 compensation specialists at 14 offices.

The federal budget delivered in February promised to invest another $431.1 million to continue "building capacity, enhancing technology and supporting employees," which includes an enhanced client contact centre, and improved training and communication.

The budget also set aside $5.5 million for the Canada Revenue Agency to process income tax reassessments related to Phoenix, and another $16 million will go toward finding a new pay system.

Tallying the Phoenix toll

  • $309 million: IBM contract, professional services contracts, program costs, 2009.
  • $210 million: $70 million per year of unrealized savings from 2016 to 2019.
  • $28 million: Advances to unions from 2017 to 2019.
  • $50 million: Building capacity, enhancing technology, supporting employees, 2016.
  • $142 million: Building capacity, enhancing technology, supporting employees, 2017.
  • $431.4 million: Building capacity, enhancing technology, supporting employees, Budget 2018.
  • $5.5 million: For CRA to process income tax reassessments related to Phoenix, Budget 2018.
  • $16 million: Researching a new pay system, Budget 2018.

Total: $1.192 billion.

About the Author

Julie Ireton

Senior Reporter

Julie Ireton is with CBC Ottawa. She’s a critical thinker who has produced hundreds of original pieces of impact journalism. You can reach her at julie.ireton@cbc.ca