Private contractors make up a costly ‘shadow public service’


A SHADOW HAUNTS OUR FEDERAL PUBLIC SERVICE. And it costs us big time says the Professional Institute of the Public Service of Canada (PIPSC).

A recent study by the union details how federal policy has created a vast “shadow public service” made up of private contractors, consultants, IT specialists and managers. Paying private contractors to do public service work costs us more—as much as 10 times more—and always gets us less, says the report.

PIPSC calculates the federal government spent a staggering $11.9 billion on work it “outsourced” to private contractors between 2011 and 2018.

Nobody does it better

“The government is choosing to pay more for lower quality services for Canadians,” says PIPSC president Debi Daviau. “Instead of relying on the best public service professionals in the world, the government is wasting Canadians’ money on overpriced contractors.”

“This shadow public service plays by an entirely different set of rules: they are not hired based on merit, representation, fairness or transparency; they are not subject to budget restraints or hiring freezes; and they are not accountable to the Canadian public,” wrote the PIPSC in its report.

The worst offenders

Contracting out has infected the whole federal public service. Government departments spent a whopping $8.5 billion on IT consultants alone between 2011 and 2018. That means the money spent on IT outsourcing rose 5.5 times faster than department payrolls and an incredible 10 times faster than departmental budgets.

The five biggest federal department spenders on contracting out include:

  • Canada Revenue Agency, $1.4 billion
  • Employment and Social Development Canada, $800 million
  • Canada Border Services Agency, $737 million
  • Immigration, Refugees and Citizenship Canada, $652 million
  • National Defence, $540 million.

The Phoenix debacle

The basic “pay more/get less” reality of contracting out goes from bad to worse during the duration of the contracts because the costs generally increase.

On average, a private IT consultant ends up costing twice as much than the original contract, while spending on management consultants and temporary contractors goes up on average by two thirds.

The Phoenix pay system is one of the most outrageous examples of skyrocketing contract costs. Phoenix was supposed to cost $309 million. It didn’t. It was supposed save us pots of money by lowering the cost of managing our federal payroll. It didn’t. It was supposed to increase efficiency in paying public service workers. It didn’t.

It wound up costing $2.2 billion—over seven times more than it was supposed to. It didn’t save us any money. It turned pay day into an endless nightmare of worry, stress, and turmoil for thousands, upon tens of thousands, of workers who had to endure one foul-up after another while the private contractors who created the mess fumbled around trying to fix it.

Last year, the government rewarded IBM with another $137 million contract to ostensibly manage the system’s day-to-day operation. IBM was the company responsible for Phoenix’s disastrous implementation in the first place.

Brain drain

The impact of the federal government’s billion dollar boondoggle runs deep. PIPSC noted that the increased reliance on the private sector to carry out specialist tasks is leading to a deskilling of the public sector.

“Staff report that they do not get enough training to do their job and the knowledge needed to maintain projects often follows contractors out the door when a contract ends,” wrote the PIPSC in its report. As a result, the reliance on private contractors increases due to the erosion of “institutional knowledge, skills and expertise from the public service.”

Government should be insourcing

PIPSC’s report is the first in a series they plan to release during 2020. The reports are part of a campaign against outsourcing and for better staffing in the public sector. Among other things, the union is calling for “insourcing,” that is, more training opportunities for its members.

“Insourcing  should be a no brainer,” says labour studies researcher Steve Kuzyk. “The value to the workers, and the people of Canada, of spending billions to develop our wholly-owned public service, rather than on private contracts, is something even the most myopic manager should be able to grasp.”

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