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The Professional Institute of the Public Service of Canada > News & Events > Communications Magazine > Vol. 36, No. 2, Spring 2010 > Contracting out...the Real Picture! - Vol. 36, No. 2, Spring 2010
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Contracting out...the Real Picture!

CS Group

Shown in this picture are the members of the CS Group who are preparing to resume collective bargaining. Contracting out is an important issue which will need to be brought to the table in the next round.

The Conservative Government has engaged in a sweeping series of public service privatization and outsourcing exercises. While the government purports to re-establish a balanced budget, it spent $8 billion dollars for professional and special services in support of program delivery in 2009. This amount represents one-quarter of the total operating budget for salaries and benefits.

Risks with outsourcing

  • Loss of internal expertise
  • Loss of control over activities
  • Long-term dependence on consultants
  • Cost overruns
  • Decline in quality of services

The level of information technology (IT) outsourcing in the federal public service is particularly alarming. The value of contracts signed for IT outsourcing has risen dramatically from $250 million a year in 2005-06 up 93% to $482 million only three years later.

Issues with outsourcing

There are numerous issues created by awarding IT contracts to the private sector. One problem is the loss of internal expertise. Under the cover of outsourcing, the government is funding the development of the private sector’s expertise to the detriment of its own internal capacity. The Auditor General has already pointed out that one of the risks of dependency upon contractors is the substantial loss of institutional memory.

“With government having several very old and complex systems and contractors who have worked on them for many years, the only people who may actually really know how those systems work are the contractors. You can create, I think, an undue reliance and, in fact, at times be held hostage by professionals in that regard, so it's important to establish what is an appropriate level of contracting.”

Another issue is the circumvention of the government’s legislative obligations with respect to official languages, employment equity and fair hiring practices based on merit, and their contractual obligations to provide fair salaries, benefits and pensions.

It is well known that staffing in the public service is a lengthy, time-consuming and complex process. The House of Commons Standing Committee on Public Accounts noted how the lack of sustainable departmental funding lengthens the hiring process: [TRANSLATION]

In view of financing uncertainties, it is difficult to fill full-time positions because managers are required to certify a guaranteed source of funds before commencing the staffing process.

Managers often turn to outsourcing which provides greater labour ‘flexibility’. While this quick fix provides a body without delay, the Institute questions the justice of the government ‘employing’ people without providing fair compensation.

According to the Contracting Policy of the Treasury Board Secretariat, contracts for services are only to be used:

  • As a means of meeting unexpected fluctuations in workload,
  • Acquiring special expertise not otherwise available, and
  • To fill in for staff during temporary absences.

Service contracts must not be used to establish employer/employee-like relationships. The Institute would argue that the government’s use of contractors has gone far beyond the unexpected and the temporary.

In December 2008, the Office of the Auditor General was particularly concerned by the use of contracts at Public Works and Government Services Canada (PWGSC) and the lack of oversight policy. In particular PWGSC does not monitor enough to determine if consecutive contracts were signed with a specific contractor. Thus, the actual work situation of the independent contractors is not so independent and more akin to a public service employee.

Some contracts make provision for

  • precise work schedules,
  • supervisory duties,
  • use of the government logo,
  • use of government premises,
  • use of government computers, and
  • name of consultant appears in the Government Electronic Directory Services.

All of these are elements of employer/employee-type relationships. It is important to remember when a contractor uses government offices and a computer, the taxpayer is paying twice for the service since these costs are already included in the terms of the contract.

PIPSC Surveys CS Members

In October 2009, the Institute conducted a survey to ascertain the extent of IT outsourcing in the federal government. While the contracting-out phenomenon is complex, and information is not readily accessible, we know that outsourcing has significant repercussions on the size of the Computer Systems (CS) workforce, on access to training, on career advancement opportunities, and working conditions.

Disturbing results!

Survey results indicate that close to 20% of respondents work alongside subcontractors who perform identical duties to those performed by the CSs. In more than one in five cases, the services outsourced are activities that used to be handled internally. Surprisingly, nearly one in ten people stated they had already been supervised by subcontractors. Eighty-three percent (83%) of respondents affirmed that the IT consultants had a government e-mail address. These results point to the degree of integration of contractors within the public service. It is obvious that contractors are not only there to meet short term needs.

Working Conditions

The survey results highlighted some concerns relating to CS members’ working conditions. For example, 69% of CSs saw their workload increase over the last three years (23% reported a substantial increase and 46% reported an increase). In this same period, 61% of CSs stated that work satisfaction dropped, and half the employees said the opportunity for professional development declined. The use of subcontractors reduced the department’s investment in internal professional development. Inadequate or inaccessible internal professional development is often the forerunner of outsourcing.

The government appears to have no long-term plan to deal with the outsourcing phenomenon. It is clear that the government pays a steep price for services that could be provided internally by federal public employees. For example, the report of the Auditor General stated that one single day of work of a subcontractor for PWGSC cost between $800 and $1,100. Outsourcing may be a flexible alternative but it is more costly and has many risks associated with it. The Institute maintains that the departments should first ascertain whether they already have the internal expertise and capacity before contracting out projects and should not skirt proper staffing procedures.

From the Institute’s perspective, rationalization measures mapped out in the 2010 federal budget will have a detrimental effect on CS members and their work. At the time of the deep rationalization of the 1990s, outsourcing was often used to circumvent workforce and budget reductions. Before any outsourcing, it is imperative for departments to review the work and to ensure that it is beyond doubt unexpected and temporary work and there is a true lack of internal expertise. The departments should also do a thorough accounting of all of the costs and risks associated with a contract before deciding to move work out of the public sector.

To read more on the subject see Increasing Cost of CS Outsourcing in the Federal Government, by David MacDonald, for PIPSC, September 2009, found under Issues at www.pipsc.ca

Contributor: Émilie Gagné, PIPSC Research Officer

Top three federal departments with highest spending on Information Technology Services (IT) contracts between 2004-2005 and 2008-2009

Federal Department or Agency Value of IT contracts signed Number of IT contracts Average IT contract
Canada Revenue Agency $276,426,282 1,662 $166,321
Public Works and Government Services Canada $259,617,388 3,407 $76,201
Public Safety Canada $212,830,129 1,812 $117,456

Source: Based on all contracts signed by PWGSC under the Proactive Disclosure policy between 2004-05 and 2008-09 in the category of Information Technology Consulting and other similar categories.