Phoenix fix approaching $1B as feds look at scrapping system

After pouring more than $900 million in taxpayer money into the beleaguered Phoenix pay system, the federal government is looking at eventually scrapping the software altogether.

Federal budget commits additional $430M to address problems, $16M toward eventual replacement

Public servants protest problems with the Phoenix pay system outside the Office of the Prime Minister and Privy Council in Ottawa on Thursday, Oct. 12, 2017. The federal budget announced Tuesday says the government is looking at eventually scrapping the software altogether. (Justin Tang/The Canadian Press)

After pouring more than $900 million in taxpayer money into the beleaguered Phoenix pay system, the federal government is looking at eventually scrapping the software altogether.

The 2018-19 budget calls for an additional $431 million to address problems created by Phoenix, a system that has underpaid, overpaid — or not paid at all — thousands of federal public servants.

That's in addition to the $460 million already committed to both implement the pay system and resolve subsequent problems, according to the federal budget released Tuesday. A CBC investigation last fall found evidence the government has already spent much more.

The budget also earmarks $16 million to begin the process of replacing the troubled system.

Most of the new funding is to be spent over six years. It's for hiring additional staff to work on pay issues at the central pay centre and its satellite offices, as well as for more staff within departments to better assist employees with pay problems.

Government to 'eventually move away from Phoenix'

The new investment will bring the total number of pay centre employees working on pay issues to more than 1,500, compared with the 550 employees that were originally intended to handle all pay issues when the new pay system was launched, according to the budget.

Still, the government suggested it does not expect to fix Phoenix in the long term, even with its nearly billion dollar investment.

It announced in the budget that it intends "to eventually move away from Phoenix and begin development of the next generation of the federal government's pay system, one that is better aligned with the complexity of the federal government pay structure."

The government says it will spend $16 million over the next two years to work with experts, public sector unions and technology providers on planning toward a new system.

Unions have called for Phoenix replacement

Public sector unions have previously called on the government to abandon Phoenix.

Last week, the Professional Institute of the Public Service decried the lack of progress on its problems and recommended the government "nix Phoenix and start building an alternative system — one built by our own government IT professionals."

The federal budget does not clarify whether any new system would be built by public servants, or the timeline for its implementation. But speaking with reporters in the media lockup, Finance Minister Bill Morneau said the government "will be considering every alternative," calling the current situation with Phoenix unacceptable.

At the same time, he said, the government must be cautious.

"You've got to be careful making changes because you can make it worse," Morneau said. "You're changing an airplane engine in flight. It's complex to get it right."

Finance Minister Bill Morneau gets an ovation as he arrives in the House of Commons prior to tabling the federal budget in Ottawa on Tuesday, Feb. 27, 2018. (Sean Kilpatrick/Canadian Press)

Problems with the Phoenix pay system have also created tax headaches for public servants. In the budget, the government is promising $5.5 million over two years to the Canada Revenue Agency to cover the cost of income tax reassessments for public servants and telephone inquiries.

The government is also looking at changes to how Phoenix overpayments are handled. Current law requires employees to pay back the gross amount of their overpayment and recover excess withholdings from the Canada Revenue Agency.

In the budget, the government says it will look at changing the legislation to permit employees to repay the net amount instead of the gross amount starting in the 2018 tax year.

The NDP has called on the government to compensate public servants for hardship they've endured as a result of Phoenix, but the federal government's budget does not commit to financial compensation for such hardships.

Phoenix, Shared Services could be 'albatrosses' for Liberals

With an election coming in 2019, the pressure to fix Phoenix will only build, according to Sahir Khan, executive vice-president of the Institute of Fiscal Studies and Democracy at the University of Ottawa.

Such files "tend to be proxies for overall fiscal performance and competence by the public," Khan said. "In some cases, more so than even deficits and surpluses."

The government is under similar pressure to address problems at Shared Services Canada (SSC), which is getting an additional $2 billion in 2018 — one of the largest line items in the budget, Khan said.

With an election coming in 2019, the pressure to fix Phoenix will only build, according to Sahir Khan, executive vice-president of the Institute of Fiscal Studies and Democracy at the University of Ottawa. (CBC)

That department was created to combine IT services for dozens of government departments, but has been plagued by problems since its inception, including outages in access to key databases and Blackberry service.

In August 2016, the chief statistician at Statistics Canada resigned to protest the negative effects of transferring IT services to SSC.

The $2 billion in Tuesday's budget is in addition to $400 million of emergency money injected into SSC in the 2016 budget.

"I certainly don't think the Liberal government is going to want to have two large IT projects, Shared Services and Phoenix, as albatrosses around their necks heading into the next election," Khan said.