Federal outsourcing takes place without IT expertise, memo reveals

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The department responsible for billions of dollars in federal outsourcing contracts prepared a candid assessment of its own shortcomings when it comes to IT work, acknowledging in a note to the minister and deputy minister that its team lacks proper training and is leery of ranking outside contractors based on performance.

The briefing note – called “back pocket info for Min-DM meeting” – was included in hundreds of pages of documents related to the growth of outsourcing obtained by The Globe and Mail through access to information.

The briefing note to Public Services and Procurement Minister Helena Jaczek and her deputy included responses by public servants to points raised in a Nov. 2 Globe and Mail story, which reported that Ottawa’s annual spending on outsourcing climbed by 24 per cent in the prior year and by 74 per cent since 2015. The note suggests the briefing was scheduled for Nov. 16.

Total spending on outsourcing – which is officially described as professional and special services – reached $14.6-billion in the 2021-22 fiscal year, the most recent data available.

The Globe’s reporting on federal outsourcing has led to numerous House of Commons committee studies into the matter. Members of Parliament have called federal ministers, senior public servants and academics to appear as witnesses to offer their assessments of why the spending has increased.

Government officials have generally said that that outsourcing allows them to quickly address their short-term needs, especially in fields such as IT where workers are in high demand. But some experts, including Parliamentary Budget Officer Yves Giroux, have said the government needs to better explain why outsourcing is increasing at the same time as the number of public servants is on the rise.

The Globe report referenced the work of a Carleton University research team, led by associate professor Amanda Clarke, that has studied the growth in federal outsourcing and made policy recommendations for how Ottawa could modernize its approach.

The researchers said Canada should follow Britain’s lead and impose spending caps on the size of outsourcing contracts. They also said Ottawa has significant data-quality issues and a pattern of dependence on some IT vendors and consultants.

The Carleton researchers said senior procurement officers should receive more in-depth training so they can be better informed when signing off on large technology projects.

The briefing note authors told the minister that “agile and other modern procurement training has yet to be developed” for IT procurement professionals in the department. It said those officials are currently “relying on lived experience.”

The note said that unlike Shared Services Canada, another department, the procurement department “has no in-house technical authority capacity to support procurement teams, and no mandate to build it.”

The comments are attributed to the department but the authors are not identified. The officials said procurement issues are a long-standing problem.

“GC [Government of Canada] has been trying to invest in the sharing of best practices and lessons learned for decades with limited success,” the note states.

In response to the suggestion by academics that the cost of contracts should be capped, the officials questioned the effectiveness of such an approach. The note said it is not clear what problem hard timelines and spending limits would fix.

“Artificially capping procurements will lead to contract splitting practices,” it said. “It is not certain that reducing the value as well as the duration of the contracts leads to a reduction in costs.”

The Carleton researchers had called on Ottawa to track comprehensively the performance of private contractors. They said companies with track records of consistent, large-scale IT failures continue to successfully win federal bids.

As an example, The Globe has reported that the federal government has repeatedly extended its contracting relationship with IBM to build and maintain the Phoenix pay system – at a cost of over $650-million since 2011 – even though the system has caused major problems for years.

During a committee appearance this year, Dr. Clarke said that in her discussions with public servants as part of her research for Carleton University, some of them have said they are worried about the government’s increasing reliance on large IT firms.

“My research suggests that in a number of ways the federal public service breaches acceptable best practices in responsible public administration when it contracts with large management consulting firms,” she told MPs in January. “Some of the big IT firms basically act like management consultant firms now, like IBM, which is another one that comes up a lot.”

The procurement officials said a plan to track performance is under development, but expressed caution about moving to a ranking system because sometimes part of the blame for a bad project belongs to the public service.

“Tracking vendor performance and not awarding to suppliers that have had bad performance carries some risk,” the officials wrote. They said that the department has found that “when something goes wrong with an IT project, blame is usually shared between the supplier and the GC [Government of Canada] technical authority.”

The note goes on to say that internal performance issues involving an outside company and a government department “are not often well appreciated by decision makers.”

Michèle LaRose, a spokesperson for the procurement department, said in a July 18 e-mail that the comments in the note are not formal policy.

“We are always looking to improve our procurement processes and regularly review various materials on the subject, including from academia,” she wrote. “Officials are sometimes asked to offer their views to senior management and inform discussion, but information notes of this type do not represent a departmental position on the materials. We are committed to achieving value for money and providing sound stewardship throughout our procurement processes.”