Canada may have to spend millions more before new payment system can be used

After half a decade of testing and an investment of nearly $300 million, the federal government is still years away from fully implementing its next-generation pay and human resource cloud platform to replace the problem-plagued Phoenix payroll system.

Moving more than 360,000 federal workers onto a cloud-based system will require hiring more contractors and re-opening union agreements to streamline pay categories. The government is also considering building a new data hub to clean and standardize employment information from departments before it's transferred to the new Dayforce platform.

Alex Benay, the associate deputy minister at Public Service and Procurement Canada (PSPC) acknowledged to CTV News that the government may have to spend hundreds of millions of dollars more on building its NextGen-PayHR platform before it even starts operating.

PSPC says it will outline its implementation strategy and provide a final cost estimate by 2026.

The Government of Canada’s commitment to increasing accessibility in the public service and its selection of a third-place vendor may also be contributing to prolonged timelines and escalating costs.

Alex Benay, associate deputy minister of Public Service and Procurement Canada. Benay stands in front of the inspiration wall with words written by his pay transformation team.

Why did Canada choose a third-place bid?

Dayforce’s software needs to be redesigned and re-tooled to meet the complex requirements of the federal government.

The Toronto-based company, formally known as Ceridian, has dedicated 250 employees to the NextGen project. They work in collaboration with a team of 126 federal public servants. The number of people on the project is expected to grow over the next two-and-a-half years.

CTV News has learned that Dayforce had placed last out of three competing vendors when it was awarded the NextGen-PayHR contract in 2021.

The top bid was SAP, followed by Workday, then Dayforce.

Benay says the contract was awarded before he took over responsibility for NextGen PayHR, but says it’s his understanding that government selected Dayforce because it was “the most flexible.”

“After the RFP, what happened is we started throwing more things at all three of the companies (like) accessibility legislation, official languages legislation - and (Dayforce) was most willing to play,” said Benay in an interview with CTV National News.

Just over six per cent of federal public servants have disabilities, which is lower than the national average of 9.1 per cent. The government’s accessibility strategy aims to increase the number of employees with disabilities to 5,000 people by 2025.

“Accessibility is a core principle of our country. It's based in law and so is official languages. We think it’s extremely serious that suppliers that come and bid on projects for the Government of Canada can meet our basic national values. So, for us, that’s not a negotiation point,” said Benay.

Accessibility criteria

SAP was the frontrunner to win the bid because it had previously been awarded the 2019 NextGen pilot project.

According to four separate government and private sector sources, SAP withdrew in the summer of 2021 after being selected for the massive project. Sources say federal officials made additional accessibility and language demands that were not specified in the government’s original request for proposal (RFP).

In an email to CTV News, SAP said it met all the requirements of the RFP and resulting contract, and that its software and web-applications are tested against the European Union EN301 549 standard as well as the Web Content Accessibility Guidelines Level 2.2. Those are the same requirements that were outlined in the government’s RFP.

Documents seen by CTV News indicate that the federal government then offered the contract to Workday, requesting that the company confirm its willingness to honour its technical and financial bid without “any changes to the terms and conditions stipulated.”

Workday responded that it agreed to honour the terms of the original RFP and requested a meeting to discuss new caveats. Federal negotiators responded that Canada was “not in a position to negotiate any terms and conditions.” No meeting was scheduled, and less than a week later, the contract was awarded to Dayforce.

Workday is currently providing NextGen HR services to a handful of smaller and highly secure departments such as CSIS, CSE and FINTRAC.

In a statement to CTV News, a spokesperson said that this work includes “Workday agreeing to and meeting a set of accessibility and Official Language requirements which we are proud to support in line with our commitment to providing an inclusive single user experience and accessibility in design.”

Neither SAP nor Workday filed complaints about the procurement process.

Viable but not ready

Dayforce’s founder David Ossip is Canadian and its vice president of public sector revenue enablement and strategy, Gianluca Cairo, previously worked for a minister in Justin Trudeau’s government.

Cairo was the chief of staff to former innovation minister Navdeep Bains before he was hired by Dayforce in 2019.

Of the $289 million dollars the government has invested in the NextGen initiative, the bulk $171 million has been used to pay Dayforce to build a customized platform for the federal government.

According to the NextGen HR and Pay Final Findings Report released in February, after two years of analysis, the government of Canada will need to develop “critical” tools and infrastructure and “significant resource investment” before 130 departments can start using Dayforce.

According to the report, Dayforce was deemed “viable” but not ready to be rolled out. Its software solution met 85 per cent of the government's 582 requirements. But there were 90 gaps.

These technological holes were related to complex scheduling and pay brackets across roles ranging from ships’ officers to nurses to correctional officers. Factors such as 24-hour scheduling and temporary acting roles posed problems for Dayforce.

According to the report, 18 of these shortcomings were gaps that Dayforce “cannot meet now… and that planned future product development will not address.”

“These gaps exist mainly because of a lack of alignment between unique GC rules and industry best practices for some HR processes, which are critical to producing accurate and timely pay,” the report found.

Patching these critical holes will require re-opening nearly 150 labour agreements with 18 unions to simplify pay processes so they can be imputed into Dayforce.

Bargaining required

Benay says PSPC plans to meet with union representatives next week to explain what’s needed. Some fixes could be as simple as getting every department to agree to start new employees on the same day of the week, but others may involve renegotiating contracts to change terms to align with Dayforce.

Jennifer Carr, the president of the Professional Institute of Public Service of Canada (PIPSC), says PIPSC wants the government to pay its workforce on time, but it won’t agree to simplifications which will result in “rollbacks” for its 70,000 scientists, IT workers and professionals.

“We’re not interested in losing any of our rights. We have collectively bargained these rights and it is our entitlement,” says Carr.

She’s also concerned about escalating costs and stretched timelines.

“We could have helped them build something in house and the government chose to go with a contracted-out solution which in our mind is just more costly for taxpayers,” said Carr.

Benay says they’re currently at the “design and build stage” and that the Dayforce solution will not go “LIVE” until all the gaps are addressed. The government has put out a request for information from contractors for cost estimates to build a data hub to bridge the transition to the Dayforce solution.

The federal government is aiming to roll out Dayforce NextGen in 2027, one department at a time. But before that, it must test every cloud extension and run a parallel pay system to Phoenix for at least six months to ensure there are no glitches.

The Canadian Association of Professional Employees (CAPE), which represents 25,000 public servants, appreciates PSPC’s cautious approach.

“This is about restoring trust with Canadian taxpayers that you’re not going to create another boondoggle,” said Nathan Prier, CAPE’s president. Prier says CAPE’s members are still facing financial pressures stemming from the Phoenix debacle which has cost taxpayers $3.5 billion.

“We’re glad they’re taking their time to do pilots and implement things slowly here. We need to be at the table discussing every step of the way…We’re still dealing with the Phoenix disaster. Our members are still facing significant financial pressures stemming from being underpaid, overpaid and not paid at all.”