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2021 to 2022 Main Estimates information: Standing Committee on Government Operations and Estimates—June 2, 2021

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2021 to 2022 Main Estimates

Overview

The 2021 to 2022 Main Estimates were tabled in Parliament on February 25, 2021.

Public Services and Procurement Canada’s (PSPC) opening net budget is $4,491 million. Compared to the 2020 to 2021 opening net budget of $4,048 million this is a net increase of $443.0 million which is attributable to the combination of items outlined below.

Increases of funding totalling $531.1 million are mainly due to the following

Real Property repairs and maintenance

Increase of $285 million for real property repairs and maintenance to support the operations, repairs and maintenance of the real property portfolio by addressing historical program pressures and deferred maintenance in PSPC’s Crown assets, and ensuring the long term strategic management and operations of its real property portfolio.

Purpose of funding:

Government of Canada’s pay system

Increase of $200.3 million (excluding the electronic procurement solution) for the government of Canada to address the backlog of pay issues for public servants and stabilize the pay system.

Purpose of funding:

Investment plan

Increase of $45.8 million in capital vote 5 reflects PSPC’s current funding approval to deliver on its capital funding plan. This increase in funding will ensure that PSPC maintains the quality of Canada’s infrastructure for the benefits of all Canadians.

Purpose of funding:

Decreases of funding totalling $87.2 million are mainly due to the following

Ministers’ Regional Office Program

Decrease of $8.8 million due to the transfer of control and supervision of the Ministers’ Regional Office (MRO) program to the Privy Council Office (PCO). This transfer was approved by the Governor in Council pursuant to the Public Service Rearrangement and Transfer of Duties Act.

Purpose of funding:

Pre-planning for capital and fit-up

Decrease of $32.7 million in pre-planning and fit-up aligns to PSPC’s current funding approvals. PSPC will seek updated approval as required to ensure sound investments within the departmental Investment Plan.

Purpose of funding:

Electronic procurement solution

The funding decrease of $45.7 million is due to completion of major project milestones and subsequent ramp down of project activities within PSPC.

Purpose of funding:

Main Estimates narratives

Real Property repairs and maintenance

Project summary

Public Services and Procurement Canada’s Federal Accommodation and Infrastructure Program (FAI) manages and maintains one of the largest and most diverse portfolios of real estate in the country and is the Government of Canada's real property expert.

The real property repairs and maintenance project is to address PSPC’s Real Property Program integrity issues, which includes growing health and safety risks, and a substantial need for urgent repairs stemming from years of underinvestment.

In the 2020 Economic and Fiscal Snapshot, the Government of Canada announced $285.0 million funding per year and ongoing to support PSPC in maintaining current office accommodation and related real property service levels to federal departments and agencies.

Mains over mains variance

Table 1: 2020 to 2021 and 2021 to 2022 year-over-year variance (in millions of dollars)
Exercise 2020 to 2021 2021 to 2022 Year-over-year variance
Total Main Estimates budgetary expenditures 0 285.0table 1 note 1 285.0

Table 1 Note

Table 1 Note 1

The funding of $285.0 million was approved in the 2020 to 2021 Supplementary Estimates (B) exercise.

Return to table 1 note 1 referrer

This funding increase of $285.0 million is to support the operations, repairs and maintenance of the real property portfolio by addressing historical program pressures and deferred maintenance in PSPC’s Crown assets, and ensuring the long term strategic management and operations of its real property portfolio.

In addition, the funding increase will also enable PSPC to:

Background

PSPC provides a work environment for approximately 262,000 public servants from 102 federal departments and agencies in 355 Crown-owned facilities and 1,188 leased and lease-purchased facilities across Canada. By providing safe, secure and stable work environments to federal departments and agencies, it allows them to focus on delivering their programs and services and support government priorities.

The vast majority of the activities in the Real Property operating budget cover expenses over which PSPC has no or very little control such as rent, electricity, contractual obligations (representing approximately 84% of the total program funding) and other non-discretionary expenditures.

In addition, due to program integrity funding pressures, PSPC managed its real property portfolio in the past at a sub-optimal level. For instance, PSPC increasingly redirected funding away from needed repairs and some types of expenditures were reduced temporarily in the areas of cleaning and maintenance, building investigations reports and repairs. PSPC recognized that such short-term expenditure reductions would cause additional costs in the future since the accumulated backlog of deferred repair and maintenance work will result in a faster degradation of the value of the Crown-owned assets.

During the past 5 years, PSPC received the following amounts for program integrity: $248.3 million in 2016 to 2017, $336.6 million in 2017 to 2018, $275.0 million in 2018 to 2019 and 2019 to 2020 and $285.0 million in 2020 to 2021.

Table 2: Gross building special purpose allotment: Budget breakdown for fiscal year 2020 to 2021 (in millions of dollars)
Types of expenditures Budget % of envelope Cumulative Contractual obligations
Rent and operating and utilities 1,801.1 77% 77% Yes
Payments in lieu of taxes 154.6 7% 84% Yes
Repairs and studies 210.3 9% 93% No
Accommodation services 58.2 3% 96% No
Others 102.3 4% 100% No
Total 2,326.5 100% Non applicable Non applicable
Note

The table above displays the budget distribution as of January 2021 for the amounts received in fiscal year 2020 to 2021. A similar budget allocation can be expected for fiscal year 2021 to 2022 as the distribution methodology will remain consistent.

As demonstrated in the table above, amounts received in fiscal year 2020 to 2021 are being spent based on the following priorities:

Government of Canada’s pay system

Project summary

The Government of Canada is committed to supporting employees and resolving public service pay issues as quickly as possible. This is a top priority, as employees deserve to be paid accurately and on time.

As stated in the December 2019 mandate letter, the Minister of Public Services and Procurement is committed to “eliminate the backlog of outstanding pay issues for public servants as a result of the Phoenix pay system to rebuild their confidence in the integrity of their pay and pensions.” The desired expected results from this commitment include that:

Mains over mains variance

Table 3: 2020 to 2021 and 2021 to 2022 year-over-year variance (in millions of dollars)
Exercises 2020 to 2021 2021 to 2022 Year-over-year variance
Off-cycle request 0 203.5table 3 note 1 203.5
Budget 2018 4.3 0 (4.3)
Budget 2019 88.3 89.4 1.1
Total Main Estimates Budgetary Expenditurestable 3 note 2 92.6 292.9 200.3

Table 3 Notes

Table 3 Note 1

The funding of $203.5 million was approved in the 2020 to 2021 Supplementary Estimates (A) exercise.

Return to table 3 note 1 referrer

Table 3 Note 2

Excluding Employee Benefit Plans (EBP)

Return to table 3 note 2 referrer

Since Phoenix was implemented in 2016, ongoing resourcing levels have been insufficient to address pay issues and Public Services and Procurement Canada has requested additional funding every year in order to administer pay to public servants.

Resources are needed to:

The funding increase of $200.3 million (excluding EBP of $41.6 million) is mainly the result of an off-cycle decision to grant funding over 3 fiscal years. The decision was based on PSPC’s 3-year plan targeting elimination of the backlog by the end of 2022, at which point it is expected that cases in the queue will be mostly new intake and that resources will then be available to focus on data quality improvements and positioning the system for the next generation HR and pay solution. In support of this plan, the Government of Canada announced funding over 3 years (2020 to 2021 to 2022 to 2023) in the 2020 economic and fiscal snapshot, for PSPC to eliminate the backlog of outstanding pay transactions by accelerating the implementation of system enhancements and fixes, increasing pay processing productivity and reducing case intake volume.

Current status

Funding provided to date has allowed PSPC to improve its capacity, productivity, and efficiency in pay administration. For example, following a successful pilot project to reduce backlog in individual departments, PSPC launched an initiative called the Backlog Reduction Strategy, which involves processing backlog cases department by department. In October 2020, PSPC successfully implemented the retro redesign solution. This solution reduces the need for manual work as it further automates processing of late HR transactions and mass retroactive payments for collective agreement implementation. The retro redesign solution is expected to keep manual work related to the implementation of 2018 collective agreements to an overall average of approximately 10%, which would result in a reduction of hundreds of thousands of manual transactions. By comparison, the implementation of 2014 collective agreements resulted in upwards of 200,000 cases requiring manual revisions.

Moving forward, PSPC will continue to increase case processing productivity through a number of initiatives including:

PSPC will also continue to work with experts to accelerate technological enhancements in the pay system through agile development, system enhancements, and program upgrades.

In order to reduce intake, PSPC will keep providing targeted analysis, reporting, and sustained collaboration to support departments and agencies in improving timeliness and accuracy in HR data entry into the pay system. PSPC will also continue implementing a change management pilot project to assist large departments in improving HR data entry practices.

Finally, PSPC will continue to develop dedicated employee capacity and work closely with the Treasury Board of Canada Secretariat’s Office of the Chief Human Resources Officer (TBS-OCHRO), as well as departments and agencies, to meet priorities while navigating new developments in HR management, including future rounds of collective agreement negotiation.

Background

Under section 12 of the Department of Public Works and Government Services Act and order in council P.C. 2011-1550, the Minister of Public Services and Procurement is mandated to administer the disbursement of pay to employees of the federal public administration. PSPC administers the Phoenix pay processing system on behalf of the Government of Canada, generating payroll for nearly 400,000 active and inactive (that is on leave or retired) employees.

In 2009, Cabinet approved the initiative to fix the pay system, also known as the transformation of pay administration (TPA) initiative. The TPA initiative consisted of 2 components: the consolidation of pay services project (total cost of $118.5 million by project close), which merged the compensation workforce administering employee pay accounts from 46 organizations in a single Public Service Pay Centre in Miramichi, New Brunswick; and the pay modernization project (total cost of $190.7 million by project close), which replaced the government’s 40-year-old payroll system and processes with a commercial-off-the-shelf pay (COTS) and benefits solution (such as PeopleSoft). The system, known as Phoenix, was rolled out in 2016 with limited functionalities.

To date, several audits and reviews have demonstrated that there were serious flaws in the planning and implementation of the TPA initiative. The Government of Canada failed to adequately test the system before it went live; underestimated the complexity of pay operations and the system capacity required to process transactions; and underestimated the time and effort that users across the Government of Canada would require to process HR transactions and adapt to the new integrated HR-to-Pay systems environment. There were also issues with inadequate functionality and system performance. These issues, along with an inherited backlog of unresolved cases from the previous system, have resulted in a large volume of outstanding HR and pay transactions.

In addition, PSPC was not adequately resourced on an ongoing basis to deliver and stabilize pay. The department initially expected that starting in 2016 to 2017, the TPA initiative would generate annual savings of approximately $70 million that would then be harvested from Pay Centre client departments. After Phoenix was implemented, the government decided not to proceed with recouping these funds, as additional support was required for departments to support employees experiencing pay issues. The department has ongoing funding of around $80 million a year to manage systems and to process pay from the Pay Centre. This is equivalent to approximately 550 full-time equivalents (FTEs) in the Pay Centre and approximately 150 FTEs working to maintain and fix the information technology (IT) system. However, in the current context, more than 2,300 additional FTEs across multiple functions are needed to deliver and stabilize the pay system.

Investment plan

Summary

Budget 2019 announced predictable capital funding to enable Public Services and Procurement Canada’s long-term capital funding management strategy in support of a better planning and delivery of its capital projects.

PSPC is provided with secured funding on an ongoing 20-year period, to be used in the acquisition of, and betterments to capital assets such as buildings, bridges and federal labs. The transition to predictable capital funding will help ensure a more effective and efficient delivery of PSPC’s infrastructure programs, and produce a more timely and strategic fund allocation process needed to ensure a healthy portfolio of assets.

Mains over mains variance

Table 4: 2020 to 2021 and 2021 to 2022 year-over-year variance (in millions of dollars)
Exercise 2020 to 2021 2021 to 2022 Year-over-year variance
Total Main Estimates budgetary expenditures 1,587.1 1,633.0 45.8
Table 4 Notes
  • Total may not add up due to rounding
  • PSPC’s total vote 5 includes Special Purpose Allotments (SPA) and excludes employee benefit plans

The net increase of $45.8 million in capital vote 5 reflects PSPC’s current funding approval to deliver on its capital funding plan. This increase in funding will ensure that PSPC maintains the quality of Canada’s infrastructure for the benefits of all Canadians.

The strategy of PSPC’s Investment Plan aims to transform the perception of real property assets from cost drivers and sources of risks into strategic enablers that can advance objectives and derive public value for Canada. The strategy goes beyond the traditional way of managing capital assets and leverages portfolios to achieve broader government objectives and becomes a platform to fight climate change, build a stronger and sustainable economy, build communities and partnerships and support modern digital government.

The Investment Plan is grouped into 2 broad categories of investments based on their primary purpose: infrastructure and enabling services.

Infrastructure investments

Investments are made in assets that enable the delivery of government programs and services administered by various client organizations and assets that are used by the general public. The 4 groups of assets are:

Enabling services investments

PSPC is investing in enabling services that comprise assets that enable the department to deliver its programs and services and other government operations through digital systems. The 2 groups of assets are:

Background

Accrual budgeting

Since 2003, the Government of Canada’s annual financial statements (the Public Accounts) have been produced on an accrual accounting basis which uses the accrual costs of programs, instead of their cash profiles, to calculate the fiscal balance.

The federal budget is also prepared on an accrual basis.

Budget 2019 announced PSPC’s transition towards accrual budgeting with the goal to have a stable capital funding to be used for department’s existing and planned capital projects over the long run. PSPC is the second department to implement accrual budgeting (after the Department of National Defence in 2005).

Management of capital budgets under a cash based budget approach has historically limited PSPC’s financial flexibility. Uncertainties as to the amount of funds available each year have led to short term planning and delays of large capital projects required to maintain an acceptable level of performance across all assets.

Accrual budgeting focuses on enabling proactive, long-term and strategic planning for PSPC's capital assets portfolio through access to stable capital funds. It increases the department’s financial flexibility and maximises the use of its resources for the maintenance and reinvestments in its assets.

To realize the full benefits of accrual budgeting (that is stable capital funding, better planning, increased flexibility, etc.), changes are required relating to how the department plans, records, approves, and controls project financial information throughout the asset lifecycle (which begins by identifying the asset as capital investment and ends with its disposal). These changes will introduce new capabilities, policies and processes that depend on reliable access to accurate budget and cost data throughout this lifecycle.

Purposes and benefits

The accrual budgeting:

Ministers’ Regional Offices

Project summary

On June 29, 2020, the Governor in Council approved an order in council, pursuant to the Public Service Rearrangement and Transfer of Duties Act, to transfer the control and supervision of the federal public administration at Public Services and Procurement Canada, known as the Ministers’ Regional Offices Program, to the Privy Council Office.

Mains over mains variance

Table 5: 2020 to 2021 and 2021 to 2022 year-over-year variance (in millions of dollars)
Exercise 2020 to 2021 2021 to 2022 Year-over-year variance
Total Main Estimates budgetary expenditures 8.8 0 (8.8)table 5 note 1

Table 5 Note

Table 5 Note 1

Total may not add up due to rounding.

Return to table 5 note 1 referrer

This funding decrease of $8.8 million is the result of the transfer of the MRO Program budget, including employees’ salary, operating and space envelope, to PCO:

Background

Since the late 1980s, MROs offer secure office space and administrative services to the Prime Minister, Federal Cabinet ministers and exempt staff through 16 offices located across Canada, enabling them to serve Canadians and conduct official Government of Canada business outside the National Capital Region.

Until the transfer of the program to PCO, PSPC was responsible for the operations and maintenance of the MRO offices. The MROs are staffed with public servants (non-exempt staff) to provide administrative support for events and ministerial visits.

Prior to 2016 to 2017, various Cabinet ministers were assigned responsibilities for different regions. The MRO budgets included resources to support the salaries and operational requirements of regional exempt staff appointed to work in their respective region’s MROs.

In late 2016 to 2017, the government centralized the responsibilities for MROs exempt staff under the Minister of PSPC. Treasury Board provided PSPC with separate budget authorities from the Minister’s Office budget to fully support operational MROs exempt staff requirements.

Exempt staff were transferred to PCO in January 2020. PSPC continued to pay for exempt staff salaries and costs were recovered from PCO until all pay files were transferred to PCO. In June 2020, an Order in Council was approved to transfer the responsibility of the MRO Program from PSPC to PCO.

Pre-planning for capital, fit-up and non-capital specific projects

Project summary

Public Services and Procurement Canada manages a wide range of capital projects on behalf of the Government of Canada. To successfully deliver on capital infrastructure projects, such as revitalizing federal laboratories and modernizing the Parliamentary Precinct, pre-planning activities are important to ensure adequate and efficient use of resources, as well as meeting project timelines.

The pre-planning funding received will enable PSPC to support pre-planning and non-capital specific expenditures of projects from the departmental Investment Plan, and to pursue the planning and implementation for capital projects.

Mains over mains variance

Table 6: 2020 to 2021 and 2021 to 2022 year-over-year variance (in millions of dollars)
Exercise 2020 to 2021 2021 to 2022 Year-over-year variance
Total Main Estimates budgetary expenditures 169.5 136.8 (32.7)

The funding decrease of $32.7 million (including employee benefit plans of $34.6 thousand) in pre-planning and fit-up aligns to PSPC’s current funding approvals. PSPC will seek updated approval as required to ensure sound investments within the departmental Investment Plan.

Background

In 2017 to 2018, PSPC implemented the new capital vote definition which stipulates that all expenditures of a capital nature are to be incurred from within the capital vote. Other activities that do not meet the capitalization criteria should be recorded under the operating vote. Since pre-planning activities fall in the latter group, a new vote 1—Special purpose allotment was created to record non-capital activities related to projects.

Since its creation, the SPA has evolved to include the non-capitalizable expenditures related to project inception, identification and delivery activities consistent with PSPC's National Project Management System, non-capitalizable expenditures related to refit and fit-up activities (for example, swing space) and non-capital specific projects.

Budget 2019 announced PSPC’s transition towards accrual budgeting with the goal to have stable capital funding to be used for PSPC’s existing and planned tangible capital assets over the long term. One of the key elements for ensuring successful delivery of capital projects is the pre-planning, planning and implementation phases, which supports the effective financial and risk management of the capital management plan.

Pre-planning includes activities such as:

Electronic Procurement Solution

Project summary

As part of the Minister of Public Services and Procurement’s mandate, Public Services and Procurement Canada is deploying a modern, cloud-based electronic procurement solution to allow more accessible and less administratively burdensome procurement practices, while also encouraging greater competition and including practices that support the government’s economic policy goals. The EPS will make it easier for suppliers, including small and medium-sized enterprises, to do business with the Government of Canada and for government departments and agencies to procure the goods and services they need to deliver their programs to Canadians.

Mains over mains variance

Table 7: 2020 to 2021 and 2021 to 2022 year-over-year variance (in millions of dollars)
Exercise 2020 to 2021 2021 to 2022 Year over year variance
Total Main Estimates budgetary expenditures 81.4 35.6 (45.7)table 7 note 1

Table 7 Note

Table 7 Note 1

Total may not add up due to rounding.

Return to table 7 note 1 referrer

The funding decrease of $45.7 million is due to completion of major project milestones and subsequent ramp down of project activities within PSPC.

Background

PSPC is the largest buyer of goods and services in Canada, it manages more than 75% of all GC procurement spending, supporting federal government operations by ensuring the timely acquisition and delivery of approximately $23 billion worth of goods (31%), services (55%), and construction (14%) annually.

As a critical enabler of government’s delivery of services to Canadians, the efficiency and effectiveness of the government’s procurement operations are paramount. However, government procurement continues to rely on outdated business processes and obsolete technology, creating inefficiency and complicating tasks that underpin how federal departments function to serve Canadians.

Building on lessons from around the globe and here in Canada, PSPC’s objective is to leverage industry leading business processes, enabled by state-of-the-art technologies, to establish a viable and modern procurement program that supports government’s service delivery to Canadians.

EPS is a key initiative that will modernize the government’s procurement function and improve efficiency and electronic access to users. Budget 2018 announced $196.8M for the EPS project to replace existing outdated IT systems with a modern web-based e-procurement solution.

Project timeline

Phase 1: to support the definition stage of the EPS project and to include the implementation of the EPS within PSPC and the establishment of a baseline for a GC-wide implementation over 5 years (target date: June 2023):

Following the successful implementation of a fully operational system for the EPS within PSPC through phase 1, the Treasury Board of Canada Secretariat will consider a strategy, subject to approval and funding, to implement EPS broadly across government (phase 2).

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