Rush order for 31,000 smartphones signals return of 'March Madness' budget rush

It's a well-known practice in government circles: 'March Madness' - public servants rushing to spend every last dollar in their budgets before the fiscal year ends. A massive order for 31,000 smartphones last month suggests the spending tactic has returned, after the previous Conservative government banned it.

Liberal government took huge delivery of smartphones last month to spend cash before year-end

The federal government ordered a rush delivery of 31,000 smartphones last month to ensure payment came out of the 2017-2018 budget - an apparent example of 'March Madness' bureaucratic spending. (Ryan Remiorz/Canadian Press)

Federal bureaucrats scrambled to take delivery of a massive order of smartphones by March 31 of this year in an apparent eruption of 'March Madness' – the practice of shovelling unspent departmental funds out the door before the end of a fiscal year.

On Feb. 20, Shared Services Canada sent an urgent order to Bell Mobility for about 31,000 smartphones, with delivery required within five weeks in order to qualify as 2017-2018 expenditures.

"Bell will bill partners [departments] directly for these orders, and will ship to partners by March 31, 2018," says an internal memo on the rush order.

Normally, Shared Services Canada – the government's IT agency – would order the equipment and pay the bill itself, charging back the amounts to individual departments.

Power Panel on government's 'March Madness' smartphone rush 7:30

But the rush order and its large size overwhelmed the agency, which required each department to pay its own bills for the delivered hardware.

CBC News obtained the memo and other information about the bulk purchase through the Access to Information Act.

March Madness is a long-observed phenomenon in Ottawa which sees federal departments quickly spend all of their remaining annual budgets in the last month of the fiscal year to avoid losing the cash altogether in the following budget – a use-it-or-lose-it strategy.

The bonuses paid to some executives in government are also partly dependent on how close to budget they are at year-end, since they're expected to spend all of their budgets in order to fully enact programs and services approved by Parliament.

Conservative MP Tony Clement banned 'March Madness' spending in 2012, when he was Treasury Board president in the government of Stephen Harper. He says the smartphone order shows the practice has returned. (Sean Kilpatrick/Canadian Press)

The previous Conservative government issued a stern public edict against the practice.

"This type of expenditure — dictated by the fiscal calendar rather than real departmental needs — is something that our government strongly opposes," then-Treasury Board president Tony Clement said in a February 2012 letter that year to his cabinet colleagues.

There is some evidence the warning had an impact: no March spikes in spending were observed in 2013 and 2014.

Twenty-seven departments and agencies participated in the bulk order last month, which was valued at $21.5 million, taking into account a $6 million volume discount from Bell Mobility.

Android devices, such as the Samsung S7 and S8 smartphones, made up about 80 per cent of the order. About 20 per cent was for iOS devices — Apple iPhones. Three departments — Privy Council Office, Industry and SSC — together ordered 1,800 iPhone 8 models.

This thing spreads like wildfire through the whole bureaucracy- Conservative MP and former Treasury Board president Tony Clement, on the phenomenon of March Madness spending by federal departments

The largest departmental order by far was from Global Affairs Canada, with 5,500 devices split evenly between the iPhone7 and the Samsung S7.

Absent from the order were BlackBerrys, once ubiquitous in Ottawa but now disappearing. BlackBerry announced in 2016 the firm would no longer manufacture mobile devices, and Shared Services Canada has been managing the gradual transition to Android and iOS devices, while still supporting the dwindling number of BlackBerrys still in use.

The agency defends the rush order as simply a response to demand.

"In winter 2018, given the shortage of BlackBerry devices and their anticipated user requirement, more than a dozen federal organizations expressed interest in purchasing new devices to ensure service continuity and to replace broken devices," spokesman Charles Anido said in response to questions from CBC News.

Anido said the final order was larger than the memo indicated: 34,000 devices and accessories, at a final cost of about $23 million.

"This bulk purchase, leveraging Shared Service Canada's enterprise approach to meeting customer needs, resulted in savings of $6.6 million for the Government of Canada," he said in an email.

Shared Services Canada says the bulk order was partly intended to replace BlackBerrys, which are being phased out across government. (Manu Fernandez/Associated Press)

Many of the devices were so-called "open boxes" — the packaging had been opened but the product was new and unused. These items normally can't be sold in retail stores, and so sell at a discounted price.

Clement, Conservative MP for Parry Sound-Muskoka, said the rushed purchase is evidence that March Madness has returned, often to the delight of local Ottawa retailers.

A 'bonanza' for retailers

"This is an ongoing cultural issue in Ottawa where, when March 31 occurs, people use it as an opportunity to access the taxpayers' piggy bank and initiate a bonanza," he said in an interview.

"This thing spreads like wildfire through the whole bureaucracy … They just spend the money because they can."

A Bell spokesman declined to comment on the bulk purchase. "We don't discuss details about any of our government or business contracts," said Nathan Gibson.

Shared Services Canada supports about 230,000 cellular devices, so the March order represents almost 15 per cent of inventory.

It's not clear how widespread March Madness may be in the current Liberal government, which has run a series of deficits since taking office in November 2015.

Finance Minister Bill Morneau's February budget projected an $18.1 billion deficit in the current fiscal year, but the parliamentary budget officer this week estimated the real number would be $22.1 billion.

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About the Author

Dean Beeby

Senior reporter, Parliamentary Bureau

Dean Beeby is a CBC journalist, author and specialist in freedom-of-information laws. Follow him on Twitter: @DeanBeeby

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