This open letter from President O'Reilly was originally published in the National Newswatch last month.

As Canada navigates a 30 day delay on a potential trade war with retaliatory tariffs, we find ourselves in a position of stunning contradiction. After threatening to impose tariffs on $155 billion worth of American goods, we continue to send billions of Canadian tax dollars south through federal outsourcing contracts to the very nation challenging our economic sovereignty.

The scale of this contradiction is staggering. In the midst of developing emergency support programs for Canadian industries affected by these tariffs, we're simultaneously paying premium rates to American consulting giants for work that could be done by Canadian public servants. Major U.S. firms like IBM consistently rank among the top five recipients of government IT contracts. At the same time, McKinsey & Company has been awarded hundreds of million of contracts over the last two decades – 70% of which were never put to tender. Data from the Parliamentary Budget Officer shows these outsourced contracts typically cost Canadian taxpayers 25% more than if the same work were performed by public service professionals – a premium that becomes even more questionable as we brace for economic turbulence.

The timing of this trade dispute brings into sharp focus the critical role of public service expertise. As the Department of Finance opens its remissions process for businesses affected by the trade war, it will be public servants who design and implement these crucial support programs. Yet paradoxically, we continue to hollow out our internal capacity by outsourcing core government functions to foreign companies.

The pandemic response demonstrated the irreplaceable value of our public service. When crises struck, it was public service professionals who developed testing protocols, managed vaccine procurement, and created and delivered the CERB program that supported millions of Canadians. Now, as we face potential economic disruption from tariffs that could shrink GDP by up to 5.6% and increase unemployment by 3%, we need these same professionals to analyze impacts, design mitigation strategies, and protect Canadian interests.

Consider the current situation: while provincial governments moved to remove American products from liquor stores and modify procurement practices with U.S. companies, federal procurement continues to favor American consulting giants. This creates a dangerous dependency at precisely the moment when we need to maximize our economic sovereignty and response capability.

Most troubling is how this outsourcing steadily drains Canadian knowledge and expertise southward to American firms. When we outsource government functions, we don't just lose money – we lose vital expertise and institutional memory. Critical information about government operations, security protocols, and strategic planning flows south alongside Canadian tax dollars. This creates vulnerabilities that extend far beyond immediate financial costs, potentially hampering our ability to respond to future crises independently.

The Fall Economic Statement announced $1.3 billion for enhanced border security, recognizing the need for stronger Canadian capabilities. That border package was further bolstered this month to meet Trump's latest demands – delaying the tariffs. Yet we continue to undermine these investments by outsourcing critical IT and operational functions to foreign firms. This isn't just about software development or system maintenance – it's about maintaining control over the digital infrastructure that powers our government's ability to respond to crises.

Canada needs a fundamental shift in how we approach government procurement and capacity building. We must  repatriate essential government functions to our public service, particularly in areas critical to national security and economic sovereignty. This isn't about protectionism – it's about peace, order, and good government. A strong, professional public service isn't just an administrative necessity; it's a strategic asset in maintaining Canadian independence and resilience.

The current trade tensions offer an opportunity to reassess our procurement strategies and investment in public service capacity. As we prepare to weather economic headwinds, we must ensure we're not undermining ourselves from within. It's time to invest in our public service, build Canadian capability, and ensure our nation's foundation remains strong, regardless of what economic storms may come.

It defies logic to fight a trade war with one hand while writing cheques to American consultants with the other. Canada needs a public service that answers to Canadians, not US shareholders. In this moment of economic uncertainty, the latter isn't just preferable – it's essential for our national resilience.

Sean O'Reilly 

President

The Professional Institute of the Public Service of Canada (PIPSC) 

Ottawa, January 29, 2024 – The Government of Canada is improving the way it recruits, develops, and deploys digital talent across the public service so it can better deliver modern, effective digital services to Canadians.

Today, at the 2024 Digital Government Leaders Summit, the Honourable Anita Anand, President of the Treasury Board, announced the launch of the Government of Canada (GC) Digital Talent Platform—an online recruitment site for digital and IT professionals.

The Platform simplifies the application process for individuals who specialize in digital and IT who are looking to apply for jobs within the government. As well, it will provide federal institutions with lists of pre-qualified individuals that match their digital talent needs.

The Platform is a key component of the Directive on Digital Talent, which supports the development and growth of the digital community through data collection and analysis for planning, talent sourcing, talent management and guidance across the government. The directive was developed with engagement and input from the Professional Institute of the Public Service of Canada (PIPSC).

The Directive on Digital Talent and the GC Digital Talent Platform, work together to provide the government with the access to the talent and resources it needs to deliver modern, effective digital services to Canadians.

Quotes

"Canada's public service is one of the best in the world — and we must improve the way we attract and retain new talent, especially for digital and IT. The GC Digital Talent Platform will improve the way we recruit digital and IT professionals as we work to better deliver services to Canadians in this digital age."

- The Honourable Anita Anand, President of the Treasury Board

"We are pleased to see the launch of the Government of Canada's Digital Talent Platform, developed in consultation with PIPSC. We favour any effort to leverage the skill sets of government employees and streamline the hiring process – ideally reducing the need to hire contractors while full-time permanent jobs sit vacant. This initiative has the potential to deliver on both efficiency and financial prudence, benefiting the government and Canadians alike. This aligns well with our union's goal of consistent and cost-effective delivery of services."

- Jennifer Carr, President of the Professional Institute of the Public Service of Canada (PIPSC)

Quick Facts

• The Government of Canada's Digital Ambition outlines the approach the government is taking to support the delivery of digital government services and talent is one of the key enablers to deliver on this Ambition.
• The Directive on Digital Talent, issued in April 2023, is designed to deliver improvements in data collection, interdepartmental collaboration, planning, talent sourcing and talent management for the GC digital community.
• The GC Digital Talent Platform will improve the application process for individuals who specialize in digital and IT, and who are looking to join the government.

Associated Links

• The Government of Canada's Digital Ambition
• Directive on Digital Talent
• GC Digital Talent Platform

Government outsourcing, especially outsourcing of IT personnel, is costing Canadians billions of dollars each year. From time to time, outsourcing may be necessary to augment staff compliments or bring in external skills and expertise¹. But years of unchecked spending on outsourcing has created a shadow public service of consultants operating alongside the government workforce. 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 public². It’s time for a major shift in outsourcing policy in the federal public service.

Over the course of 2021, PIPSC will release a series of investigative reports unpacking the government’s growing reliance on outsourcing and its true costs.

Part two: Outsourcing and gender equity

Government outsourcing deepens gender inequity across Canada's public service. In IT, lucrative contracts are doled out to a male-dominant industry that has notoriously struggled with gender equity. While at the same time, lower paid and precarious temporary service contracts are disproportionately filled by women. The majority of temporary workers become trapped in a cycle of persistent temporary work, defined by low pay, few if any fringe benefits, and high risk of unemployment and labour force exit³.

Part one: The real cost of outsourcing demonstrates that the government’s reliance on external consultants and contractors to provide services to Canadians has more than doubled since 2011. Years of unchecked outsourcing has created a shadow public service of consultants and contractors working alongside the public service. But who works in the shadow public service? This report examines the consultants and temporary workers who fill the ranks of the shadow public service. It highlights the vastly different experiences of IT consultants compared with temporary workers. It shows that outsourcing bypasses important staffing values, which in turn, drives precarious work and undermines gender equity in the public service. It explores the connections between government staffing and outsourcing while identifying ways to make staffing faster and more flexible without undermining core staffing values.

Government outsourcing isn’t only expensive and wasteful, but also fuels gender inequity in the public service.

Staffing values in Canada’s public service

The public sector is subject to legislation that actively works to build equity, diversity, and inclusion into hiring and recruitment. The Employment Equity Act (EEA) promotes equal opportunities for marginalized groups – women, Indigenous people, persons with disabilities and racialized people. The Public Service Employment Act (PSEA) promotes merit, accountability, transparency and representation based on language, region, and gender. Together this legislation aims to create a public service that represents the population it serves.

When managers rely on outsourcing as a backchannel to staffing, they bypass the values protected by the EEA and PSEA, fueling gender inequity and making the public service less representative of the Canadian public.

Who works in the shadow public service?

IT consultants, management consultants and temporary workers are the majority of the shadow public service. IT consultants make up the largest share of the shadow public service, accounting for more than 7 in 10 dollars spent on personnel outsourcing⁴. Similar to management consultants, IT consultants are drawn from a male-dominated industry and paid generously for their services. On the other end of the spectrum, temporary workers are often women, strung along on multiple short-term contracts and paid less than permanent staff. While temporary workers occupy a relatively small share of the shadow public service, this work has grown at a rate nearly 4 times greater than permanent staff since 2011⁵. This demonstrates a fast growing preference for precarious work in the public service.

Who are the IT consultants?

The IT consultants working in the shadow public service are drawn mainly from the male-dominant tech workforce of the Ottawa-Gatineau region, working for tech giants like IBM, Veritaaq, or Randstad. Only about 2 out of 10 tech workers in the Ottawa-Gatineau region are women and are paid about $13,000 less per year than men. On average, members of equity-seeking groups are paid about $9,700 less⁶.

The pay gap between men and women in the tech sector is actually larger for workers with a bachelor’s degree or higher. The larger pay gap at higher levels of education means that women in tech with an education above a bachelor’s degree actually make less relative to their male counterparts than women with less education⁷.

IT consultants working with the Canadian government are likely among the top earners in Canada. While the federal government does not publish what individual IT consultants are paid on lucrative federal government contracts, IT consultants working for the government of Ontario cost about 30% more per year than a similar full-time IT worker, even after accounting for benefits⁸.

The largest and fastest-growing segment of the shadow public service is in a male-dominated field where women and members of equity seeking groups are paid less. Most of the work done by the IT consultants would be better done by the public service, for significantly less cost and where pay is guaranteed to be equitable⁹.

Who are the temporary workers?

The government’s increasing reliance on temporary workers has meant that many of these “good jobs” aren’t so good after all. Growing temporary work in the federal government has dire long-term implications for these workers.

Unlike an IT consultant, temporary workers are usually women and are paid less than comparable permanent employees. According to Statistics Canada, 56% of temporary workers in public administration are women and are paid about 21% less than permanent employees¹⁰. Women temporary workers not only have lower starting pay than men, but they also have a larger and more persistent pay gap with permanent employees over a five year period¹¹.

Managers are increasingly turning to temporary workers as a cheap option to fill resource needs. Temporary work is cheaper because the workers do not have the same safeguards – like pay, benefits and job security – that permanent employees are guaranteed in their collective agreements. Temporary work provides additional cost savings for the government because managers are not required to invest in the career development of temporary workers as they are with permanent employees. These savings have led managers to increasingly balance their budgets on the backs of temporary workers¹².

The permanence of temporary work

A common misconception about temporary workers is that they are only hired for short-term assignments. While temporary contracts are tempting for workers who see them as a foot-in-the-door to the public service, many temporary workers get trapped in ongoing precarious work within the government. For instance, the Public Service Commission of Canada found that 1 in 5 temporary work contracts were for long-term and continuous work. Only about 1 in 10 temporary workers obtained permanent positions in the public service within 180 days of their contract ending¹³.

A broken staffing system drives outsourcing and perpetuates inequality

The staffing system in public service is deeply connected with outsourcing. Staffing in the public service is costly, time-intensive and particularly bad at matching skills to the requirements of increasingly project-based work. Numerous hiring rules, security clearances and other bottlenecks push the average time it takes to hire a new full-time employee to 198 days (over 6 months)¹⁴.

It is no wonder that managers have little faith in the staffing system to deliver resources. Nearly 9 in 10 managers surveyed in the 2018 Staffing and Non-partisanship survey believe that staffing is burdensome while more than 6 in 10 believe it is not quick enough¹⁵. Conversely, managers interviewed by the Public Service Commission (PSC) cited “speed” and “flexibility” as the main advantages of outsourcing¹⁶.

The mismatch between fast and flexible contracting mechanisms on the one hand, and a slow and cumbersome staffing system on the other, incentivize managers to bypass staffing in favour of outsourcing.

Rethinking staffing

The federal government recognizes that its staffing system is broken. In 2018, the House of Commons Standing Committee on Government Operations and Estimates began a study to improve the federal public service hiring process¹⁷. The President of the Public Service Commission, Patrick Borbey, admitted in a hearing of the committee that the time it takes to hire new employees is “unacceptably long” which frustrates applicants, hiring managers and HR advisors. Adding, “[…] many strong candidates decide to work elsewhere and positions are not filled for long periods of time.”¹⁸

The government’s attempts to fix the staffing system to date have been mixed. In 2016, the PSC delegated much of the authority for staffing decisions to deputy heads of departments as a part of the New Direction in Staffing (NDS)¹⁹. Described by the PSC as “the most significant change to the staffing system we have seen in over ten years,” the NDS did not have the effect on staffing that the PSC had hoped. Incidentally, the most notable effect since the implementation of the NDS has been a marked increase in non-advertised appointments²⁰. This can result in favouritism in hiring rather than recruitment based on qualifications alone.

The government also began testing a new way to deliver existing skills within the public service, in part to reduce the reliance on consultants. In 2016, the government launched the Free Agents pilot as a proof of concept for the larger, GC Talent cloud. The Free Agent pilot gives managers access to a pool of pre-vetted public servants with in-demand skills for short-term projects. The early results have been positive, with high levels of satisfaction from both workers and managers who participated in the pilot.

Learn more about the New Direction in Staffing and the GC Talent Cloud.

Despite the government recognizing that the staffing system is woefully inadequate, they have yet to connect the dots between staffing and outsourcing. The government needs to take drastic action to fix the staffing system – far beyond the 10% reduction in staffing times committed by the PSC – to begin reducing their reliance on outsourcing²¹. Fixing staffing in the public service is an essential part of the solution to reducing outsourcing.

Read PIPSC’s policy recommendations to ensure staffing in the public service is equal and equitable.

There is work to be done to ensure that Canada’s public service represents the diversity of Canadians and is a fair and equitable employer. Hiring more women into precarious government work is not a triumph for equity, diversity and inclusion. It is a subversion of equity, often abused as a way to cut costs. Outsourcing doesn’t just cost Canadians billions of dollars each year, it is undermining the government’s own goals of creating a fair, equitable and representative public service.

[1] According to the Treasury Board’s Outsourcing Policy (16.1.5) Managers can outsource for personnel if they need to fill in for a public servant during a temporary absence, to meet an unexpected fluctuation in workload, or to acquire special expertise not available within the public service. However, in the case of outsourcing IT work, managers,working with PIPSC CS members, must first make every reasonable effort to use existing employees or hire new indeterminate employees before outsourcing (Article 30.1 of the PIPSC CS Group collective agreement).

[2] David, McDonald. The Shadow Public Service. The Canadian Centre for Policy Alternatives. 2011.

[3] Stecy-Hildebrandt, N., Fuller, S., & Burns, A. (2019). “Bad” Jobs in a “Good” Sector: Examining the Employment Outcomes of Temporary Work in the Canadian Public Sector. Work, Employment and Society, 33(4). P. 564.

[4] The federal government spent $11.9 billion on personnel outsourcing between 2011 and 2018, $8.5 billion or about 71% was spent on IT consultants.

[5] Spending on temporary help services grew by 78% between 2011 and 2018 while payroll spending on permanent staff grew by 21%.

[6] Brookfield Institute. Canada’s tech Dashboard: Diversity Compass. 2019. See: Visible Minority Pay Gap in Tech Occupations: Ottawa-Gatineau.

[7] Brookfield Institute. Who are Canada’s Tech Workers? January 2019. P. 22.

[8] Auditor General of Ontario. 2018 Annual Report. 3.14 Use of Consultants and Senior Advisors in Government. P. 619.

[9] Canadian Union of Public Employees (2011). Battle of the Wages. P. 1.

[10] Temps earned $21.8 an hour on average, compared with $27.71 an hour for permanent staff. Statistics Canada. Temporary Employment in Canada, 2018. May 14, 2019.

[11] Stecy-Hildebrandt, N., Fuller, S., & Burns, A. (2019). “Bad” Jobs in a “Good” Sector: Examining the Employment Outcomes of Temporary Work in the Canadian Public Sector. Work, Employment and Society, 33(4). p. 564.

[12] Ibid. p. 565.

[13] The Public Service Commission of Canada. Use of Temporary Help Services in Public Services Organizations: A Study by the Public Service Commission of Canada, October 2010. P. 28.

[14] House of Commons. Improving the Federal Public Hiring Process. 2019. P. 25.

[15] Public Service Commission of Canada. Staffing and Non-partisanship survey: Report on the Results for the Federal Public Service. 2018. P.6.

[16] Public Service Commission of Canada. Use of Temporary Help Services in Public Services Organizations. October 2010. P. 26.

[17] House of Commons. 2019. Improving the Federal Public Service Staffing Process.

[18] House of Commons. Standing Committee on Government Operations and Estimates. Evidence. 2018. P. 1.

[19] Government of Canada. New Direction in Staffing – Message from the Public Service Commission to all Public Servants. 2017.

[20] Ottawa Citizen. Non-advertised appointments on the rise in the public service, PSC data show. February 2019.

[21] House of Commons. Improving The Federal Public Service Hiring Process. 2019. P. 25.

On February 19, 2021, President Debi Daviau wrote to Canada Revenue Agency (CRA) Commissioner Bob Hamilton regarding its recent decision to hire a third-party contractor to answer questions from taxpayers about emergency benefits and their impact on 2020 tax returns.

While the various programs introduced to help Canadians during the pandemic may well result in a substantial increase in the number and complexity of questions fielded by the CRA during the upcoming tax season, it is incomprehensible why public service professionals have not been asked to perform this work. CRA had many options to provide these services internally, including the hiring of term employees, and there is no good reason why it chose to look to an external provider to do so.

Private call centre staff are much likelier to provide incomplete or inaccurate information to taxpayers than CRA personnel. Their training is not of the same calibre and they are not held to the same standard of confidentiality as public service employees. Worse, many Canadians may not realize they are not speaking to a CRA professional and may inadvertently provide confidential information to these private-sector call centre agents.

This brings to mind the fiasco that ensued when hundreds of hastily prepared call centre agents were hired to provide assistance to federal employees experiencing complex pay problems caused by Phoenix.

We support our CRA colleagues represented by the Union of Taxation Employees and we call upon the Commissioner to immediately reverse this decision. Canadian taxpayers deserve the best service possible. Contracting out this critical work will once again prove more expensive and less effective than if it were performed by knowledgeable and experienced public service professionals.

According to our 2019 membership survey, career development and training (CDT) is a top priority for seventy percent of PIPSC members – in particular, younger members.

That’s why we’re launching a research project to better understand all aspects of career development and training in the federal public service, such as qualifying for a promotion, attending conferences and staying current with new technology. Learn more about career development and training.

The research project will consist of:

• a membership-wide survey
• telephone interviews
• focus groups
• analysis and recommendations
• ongoing member-led solutions development

What will PIPSC research focus on?

In order to effect sustainable change, it is important that PIPSC fully understands the varying issues associated with career development, professional development, and training.

This research will seek to:

• develop a common understanding of the issues related to career development, professional development and training that PIPSC members are experiencing
• enhance our understanding of how members experience issues differently
• develop evidence-based solutions and policy recommendations for our members

About the CDT Task Force

The CDT Task Force will play a key role in consulting members and will help develop the membership survey and other research tools.

Who: A collective of members with unique insight, keen to improve career development and training

Where: Ongoing virtual communication with the possibility of an in-person meeting

When: Active from February to June 2020, with the possibility of the project extending into the fall

Why: To support and advise on the planning, development and implementation of the project

What to expect as a CDT Task Force member

Task force members will review and revise all project components. They will contribute their time on a rotating basis from February to June 2020, with the possibility of the timeframe extending into the fall.

Most task force work will be conducted through email and videoconferencing. Task force members must be available at least once per month to meet virtually. There is also the possibility of an in-person meeting during the project.

The operation of the CDT Task Force is an iterative process – task force members will lead its development. We are eager to accommodate members who may experience barriers to participation.

If you are interested in joining the CDT Task Force, please complete and submit the following application form by February 18, 2020. Members will be chosen and contacted by March 3, 2020.

OTTAWA, January 27 2020 – The federal government spent over $11.9 billion on management consultants, temporary help contractors and IT consultants between 2011 and 2018 to do the work that could have been done by Canada’s own public service professionals. The contracts ended up costing the public twice their original price.

Shockingly, spending on IT consultants more than doubled – from $605 million in 2011 to over $1.3 billion in 2018 – totalling $8.5 billion in that time period. Seven out of every ten dollars spent on outsourcing is spent on IT consultants. 

“These figures are staggering. The government is choosing to pay more for lower quality services for Canadians,” said PIPSC President, Debi Daviau. “The highest quality, most efficient and least expensive expertise already exists within the public service. Instead of relying on the best public service professionals in the world, the government is wasting Canadians’ money on overpriced contractors.”

Over the years, IT consultants have shifted from serving as a temporary replacement or offering specialized skills to delivering a large share of fundamental IT functions. Outsourcing has eroded institutional knowledge, skills and expertise from the public service.

“Enough is enough. It should be easier to hire and train public servants than to pay a shadow public service that ends up costing twice as much originally expected,” said Daviau. “It’s time for the federal government to reduce outsourcing, as promised by the Liberal government in 2015, and to increase requirements for outsourcing.”

The Phoenix pay system best illustrates how fast costs can spiral out of control when an outsourced IT project goes wrong.

“Canadians cannot afford one more failed outsourced IT project like Phoenix. Billions of dollars can be saved if we invest in public servants. Those savings can be spent on projects that will make lives better for Canadians,” added President Daviau.

PIPSC will expand its fight against outsourcing by advocating for changes to staffing in the public service, reviewing the new direction on staffing, expanding the pilots designed to expedite staffing and finding new training opportunities for its members.

“The public services we rely on every single day are at risk of cuts and privatization. Each one of us has a stake in this fight against outsourcing,” said Daviau.

The full report, The real cost of outsourcing, is available here: https://pipsc.ca/news-issues/outsourcing/part-one-real-cost-outsourcing

The Professional Institute of the Public Service of Canada represents 60,000 public service professionals across Canada. Follow us on Facebook and on Twitter.

-30-

For further information: Johanne Fillion, 613-228-6310, ext 4953 or 613-883-4900 (cell), jfillion@pipsc.ca

Government outsourcing, especially outsourcing IT personnel, is costing Canadians billions of dollars each year. From time to time, outsourcing may be necessary to augment staff compliments or bring in external skills and expertise.^[1] But years of unchecked spending on outsourcing has created a shadow public service of consultants operating alongside the government workforce. 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.^[2] It’s time for a major shift in outsourcing policy in the federal public service.

Over the course of 2020, PIPSC will release a series of investigative reports unpacking the government’s growing reliance on outsourcing and its true costs. 

Part one: The real cost of outsourcing

Government work, traditionally done by public servants, is increasingly being done by external consultants and contractors at a cost that should shock Canadians. Rather than investing in public servants, government budgets are earmarked for hiring outsourced personnel. Not only are these consultants expensive, the contracts are awarded to corporations that underbid while the actual cost skyrockets. Yet, year over year, the Government continues to make the costly decision to outsource. The majority of IT outsourcing funds are spent by the top ten worst offender departments and agencies in government, raising concerns that departments and agencies are losing the knowledge and skills required to deliver key services. But the problem is pervasive and is growing rapidly across all other government departments and agencies. When you follow where all this money is going – you find a paper trail leading to multinational corporations. Canadians should be aware of how their money is being spent and the true costs of such short-sightedness. 

Reliance on personnel outsourcing has more than doubled

Between 2011 and 2018, the federal government outsourced over $11.9 billion in work to IT consultants, management consultants and temporary help contractors. During that same time period, the annual price tag for personnel outsourcing doubled – from just $1 billion in 2011 to nearly $2.2 billion in 2018. 

Spending on IT consultants has more than doubled – from $605 million in 2011 to over $1.3 billion in 2018 – totalling more than $8.5 billion. 

IT consultants are intended to augment staff or to provide specialized skills under certain circumstances. However, a twofold increase in IT outsourcing in just seven years suggests that managers are inappropriately using consultants to deliver a larger share of fundamental IT functions required by the government to deliver services.

Reliance on IT outsourcing is concentrated in 10 departments and agencies 

Just 10 of 78 federal government organizations account for nearly 73 percent of the $8.5 billion spent on IT consultants. Five departments and agencies account for nearly half, 49 percent, of the total spent on IT consultants.

Outsourcing in the top departments and agencies is a serious barrier to developing internal capacity. As more and more IT functions are outsourced to consultants, expertise and knowledge of government IT systems are moved outside of the public service. Since there are no mechanisms to transfer knowledge and expertise back to the departments and agencies after a project is finished, the public service is starved of the ability to provide a growing number of IT functions internally. This reliance on IT consultants is a cause for concern for the public service and the Canadians who rely on public services.

Learn more about the symptoms of IT outsourcing including knowledge loss and the transfer of skills.

Outsourcing has grown rapidly across the government

Despite the concentration of IT outsourcing spending in the top ten departments and agencies, IT outsourcing is growing at an even faster pace in the rest of the government. In 2011, the top ten outsourcing departments accounted for 96 percent of all IT outsourcing in the government. In 2018, the top ten share of all IT outsourcing fell to about 71 percent. In other words, where government outsourcing was once almost completely concentrated in a handful of government departments and agencies, it is now spreading across the entire government.

IT outsourcing increased 5.5 times faster than department payrolls 

Government departments showed a clear preference for outsourcing over investing in staff. IT outsourcing budgets more than doubled while payrolls and operating budgets barely kept pace with inflation.^[3] IT outsourcing increased 5.5 times faster than payrolls and nearly 10 times faster than the total departmental spending. 

The disproportionate growth in IT outsourcing illustrates a shift in how the government delivers services. Traditionally, the government relied on its internal employees with a small complement of consultants to deliver services. As the need for services increased, the government would hire more internal staff. Now, the departments are increasingly turning to consultants to do a growing share of the ever-expanding work required of the public service. In other words, instead of hiring more internal staff, more-and-more of the relatively constant budgets of departments and agencies are being used to outsource IT consultants. 

Sticker shock

IT consultants end up costing the federal government, and in turn Canadians, more than twice as much as expected. On average, the final cost of an IT consultant is more than double the cost of the original contract – far higher than the average mark-up of two-thirds for a management consultant or temporary help contractor. 

The reason these contracts cost significantly more than their initial value is twofold:

• Government managers have significant flexibility to modify contracts after they have been signed. The value of contracts can be increased by as much as 50 percent without having to be re-tendered.^[4]

   

• The discretion to modify contracts pushes contractors to become ‘loss-leaders.’ Corporations win contracts with low bids that do not cover the cost to deliver a service – also known as “suicide bidding.” The loss-leader can then squeeze out profits through revisions once the contract is signed. 

It is no surprise that contractors under-estimate costs and that as a project develops the scope and budget swells. However, year over year the decision-makers seem to ignore these ballooning costs and allow budgets to overrun. 

Learn which corporations Canadians overpay.

Better digital capacity and services for Canadians

There is a real-world cost to outsourcing – look at the human cost of Phoenix. A project doomed from the start that is costing taxpayers billions of dollars. The government continues to throw good money after bad while the livelihoods of public servants are at stake. Prime Minister Trudeau, in his 2019 ministerial mandate letters, directed cabinet to “raise the bar on openness, effectiveness and transparency in government” and build “better digital capacity and services for Canadians.”^[5] To succeed in this, the government needs to invest in a highly trained, cutting-edge public service to deliver the next generation of digital services rather than further entrench itself in an unhealthy reliance on IT consultants. 

Read PIPSC’s policy recommendations to stop outsourcing and build an open, effective and transparent public service.

Stay tuned as we release our series of reports outlining the real costs and symptoms of government outsourcing. Our second report will focus on how outsourcing is not only made convenient for management but erodes government staffing values including transparency, accountability, merit and representation (gender, region, ethnicity and bilingualism) by bypassing the staffing system.

[2] David, McDonald. The Shadow Public Service. The Canadian Centre for Policy Alternatives. 2011.
[3] According to Statistics Canada, CPI inflation between 2011 and 2018 was 11.3%. Table: 18-10-0005-01 (formerly CANSIM 326-0021).
[4] David McDonald, The Shadow Public Service The Canadian Centre for Policy Alternatives. P.12. 2011.  
[5] Office of the Prime Minister. Minister of Digital Government Mandate Letter. December 2019. Retrieved from: https://pm.gc.ca/en/mandate-letters/minister-digital-government-mandate-letter