Report of the
Provincial Auditor on the Andersen Agreement
Mr Kevin Costante, deputy minister, Ministry of Community and
Social Services
Ms Bonnie Ewart, assistant deputy minister, business
transformation project
Ms Anne Szyptur, director, business technology integration,
business transformation project
Mr Ray Hession, third-party reviewer
STANDING COMMITTEE ON
PUBLIC ACCOUNTS
Chair /
Président
Mr John Gerretsen (Kingston and the Islands / Kingston et les
îles L)
Vice-Chair / Vice-Président
Mr John C. Cleary (Stormont-Dundas-Charlottenburgh L)
Mr John C. Cleary (Stormont-Dundas-Charlottenburgh L)
Mr John Gerretsen (Kingston and the Islands / Kingston et les
îles L)
Mr John Hastings (Etobicoke North / -Nord PC)
Ms Shelley Martel (Nickel Belt ND)
Mr Bart Maves (Niagara Falls PC)
Mrs Julia Munro (York North / -Nord PC)
Ms Marilyn Mushinski (Scarborough Centre / -Centre PC)
Mr Richard Patten (Ottawa Centre / -Centre L)
Also taking part / Autres participants et
participantes
Mr Peter Kormos (Niagara Centre / -Centre ND)
Mr Erik Peters, Provincial Auditor
Clerk pro tem / Greffier par intérim
Mr Douglas Arnott
Staff / Personnel
Mr Ray McLellan, research officer, Research and Information
Services
The committee met at 1040 in committee room
1.
REPORT OF THE PROVINCIAL AUDITOR ON THE ANDERSEN
AGREEMENT
The Chair (Mr John
Gerretsen): Good morning. We have with us today the
staff of the Ministry of Community and Social Services to deal
specifically with the auditor's follow-up report on the Andersen
agreement. If you'd like to identify yourself as you speak, and
it's easier for Hansard. We've had specific instructions to ask
that, so that there won't be any confusion. I understand you have
a short presentation, and then we will open it up to members of
the committee.
Mr Kevin
Costante: My name is Kevin Costante. I'm the Deputy
Minister of Community and Social Services. I'll let the people at
the table introduce themselves.
Ms Bonnie
Ewart: Good morning. I'm Bonnie Ewart. I'm the assistant
deputy minister for the business transformation project.
Ms Ann
Szyptur: I'm Ann Szyptur, the project director.
Mr Ray
Hession: My name is Ray Hession. I'm the third-party
reviewer referenced in the Provincial Auditor's report.
The Chair:
Thank you very much. Would you go ahead then, please.
Mr Costante:
Thank you very much for inviting us here today. I'm pleased to be
here to respond to the Provincial Auditor's special interim
follow-up report on our agreement with Andersen Consulting.
Before I begin, I'd like to
acknowledge the role the Provincial Auditor has had in terms of
providing advice to us on the business transformation project.
The Ministry of Community and Social Services was one of the
first ministries to use this kind of approach in working with the
private sector, and the auditor has made valuable recommendations
to us to improve what we've been doing. Obviously we continue to
learn from our experience, and we are taking action to address
some of the auditor's concerns.
Before I get into directly
talking about some of the issues, I'd like to set some of the
context for our discussion today by reviewing what the ministry
has been doing in the area of welfare reform and the events that
led up to creation of the business transformation project and our
agreement with Andersen Consulting.
As you know, the whole area
of welfare and social assistance is one of the key businesses of
the ministry. We provide income and employment support for
hundreds of thousands of Ontarians in need, and since 1995 the
ministry has been engaged in a major overhaul of the welfare
system in the province. The catalyst for this reform was the
government's promise to restore welfare to its original purpose,
that being a transitional program that helps people get back to
work. Some of the fundamental elements of that reform include
designing a new welfare program of last resort geared to those
most in need, a mandatory work-for-welfare program that provides
people with opportunities to become self-sufficient, a separate
program for people with disabilities to provide greater
opportunities for them for independence that also includes an
employment component and, lastly, a system that we hope is built
on strong accountability, effectiveness and fairness to the
taxpayers and the clients we serve through the system.
Last year, the government
passed new legislation creating Ontario Works and the Ontario
disability support program, which provide for the policy
framework in this area. Integral to the whole welfare reform
initiative was the absolute need to modernize the technology and
business practices that we have in use. That need was recognized
well into the early 1990s. I think our long-term success is
really dependent on transformation of the delivery system,
because I don't think the existing system adequately supports
where we're going and what we need to do. It's outdated,
ineffective and unwieldy.
I think the lack of a modern
computer system and the business practices to go along with it
has led to a lot of error, overpayment and fraud in the past, and
we hope to resolve that through the implementation of our new
processes and system.
I should also say that we
think-
The Chair:
If I might just interrupt you for a moment, how long is your
presentation this morning?
Mr Costante:
I understood I had about 20 minutes.
The Chair: I
would like it to be as short as possible since we only have about
an hour and 15 minutes at most, and there may be a lot of
questions from members of the committee. So if you could perhaps
just address the issues that have been raised in the Andersen
report, I'd appreciate it.
Mr Costante:
I'll try to shorten it then.
If I can say one more thing in terms of context, a
major need was identified to change the way we deliver social
assistance. We knew when we got into this that we needed a
common, province-wide technology and database to reduce fraud and
administrative errors. We knew we needed automated, electronic
information sharing to confirm that people were truly eligible.
We knew we needed to redesign the business processes and
practices to make our intake more effective and to have fewer
administrative tasks for our caseworkers so that they could spend
more time with clients, helping them get jobs. We also knew that
we needed a better adjudication process and all the procedures,
manuals and training to support that. We believe the business
transformation project is needed and that it will provide a more
efficient, effective and employment-focused system for the
taxpayers of Ontario.
I think we also knew-and I
will start addressing some of the auditor's specific
concerns-that we couldn't do this alone. We didn't have the
expertise or the resources within the ministry to address the
task ahead of us. We knew we needed to work with a private sector
organization that had extensive experience providing technical
and business advice around a major change such as this. We also
wanted a partner who would share the risks and the investments
and ultimately the rewards that would come from making the
changes we knew we had to do.
That's why we entered into a
common-purpose procurement arrangement with Andersen Consulting.
They do share the risks. They are also a major investor, and
there is a benefit to them if we're successful-and only if we're
successful. This is a risk-based arrangement. They only recover
their costs if savings are achieved. I'd also like to state that
there is a maximum cap on remuneration to Andersen Consulting,
and it's $180 million. I won't go through the history-I think
that's been covered previously-of the major steps that went into
that.
I would also like to say that
the ministry and Andersen jointly manage this project. However,
the ministry is solely responsible for interpreting social
assistance legislation, creating policies and regulations. That
is not part of what Andersen is doing.
In terms of the financial
arrangement, each partner receives benefits based on their costs.
The ministry has expected that Andersen would receive a larger
portion of the savings during the life of the project because
they're incurring higher costs during the life of the project.
However, once the project is complete, the ongoing savings accrue
solely to the government and the taxpayers of the province.
I would also like to say
that, yes, there were some initial delays in the project.
However, the project is now on target and has momentum. We have
been making major improvements and, as the auditor's report
shows, we have $66 million in savings to the end of July, based
on the work this partnership has done.
One of the major pieces of
work has been to create a new process for determining eligibility
and checking whether clients are eligible, as well as reporting
client income from employment. Both of these are long-term
improvements to the system that were done initially to generate
some savings and some momentum, but they're also going to be part
of the ultimate system that we hope to have in place in the year
2002.
1050
One of the key findings of
the 1998 audit was that the ministry could not demonstrate an
auditable business case that assured the auditor there was value
for money from this arrangement. The ministry agreed it was
important to do that. We subsequently initiated a third-party
review which I think did demonstrate that. Mr Hession, who
conducted the third-party review, was asked to provide advice to
ensure that this project ensures and measures value, that the
auditor's findings were being looked at, and to provide advice on
additional actions to be taken and to assess the ministry's
strategy to manage this arrangement with Andersen.
Mr Hession's report was
submitted last February. I think it shows that this project can
demonstrate value for money. The business case analysis indicated
that the project has the potential to produce a return on
investment of 222% through this modernization and that the
modernization itself was long overdue given the magnitude of
those savings. He also concluded that the ministry and Andersen
have an innovative, performance-based, public-private business
arrangement that can produce good quality results. Lastly, he
indicated that when he undertook his review, the ministry and
Andersen Consulting were both focused on getting this project
moving forward and producing the success that is potentially
there.
The other thing I would like
to say about the auditor's 1998 report is that the ministry did
take substantial action in respect to some of his
recommendations. Specifically we strengthened project governance
in the management, which was one of the issues. We brought in
tighter financial management and controls. We made improvements
as to how we maintain and document issues. There are tighter
controls on attribution of costs and benefits and on the
management of procurement. As well, we've made significant
organizational changes and have an ADM, who's with me today, who
is directly responsible for the BTP project.
We've also made sure that
we're doing due diligence on a constant basis and that we have
assigned internal audit staff from the ministry to work closely
with BTP and be on site and check the various aspects of that. I
understand the auditor will be doing a follow-up on it early in
the new year.
From our independent review
we also identified risks, as the auditor noted, but we also have
taken action to manage those risks and make sure we have
appropriate provincial and municipal involvement, in both the
design and the management of this project, and that we get
front-line input from provincial and municipal staff in what is
needed to make this system run more effectively.
I'm having to skip through because my remarks
were-the next item I'd like to talk about is the timetable. The
auditor remarked about the delay in the timetable. The contract
provided for a one-year extension. We do need to use that. There
were some delays initially. We set in place a tight, rigorous
schedule early in the year that we've been refining as we further
developed the project. We've been adhering to that. The project
has good momentum to move forward.
I'd also like to add that our
partner, Andersen Consulting, is very motivated to get this
project done. They don't get paid unless they produce results. We
think we are producing results.
Can I just say a few more
words? I've got about 10 more minutes' worth, but I'll stop.
Another major issue that the auditor raised was the issue of
early opportunities. I think any project of this nature needs to
show early successes. That's certainly what we did here. The
things we've been working on, as I said, have ultimate value and
will be part of the ultimate system that goes out. We think they
lay a solid foundation for the future.
Maybe I can leave it at that
point. I think I've covered some of the major pieces, if there
are questions.
The Chair:
We have about 20 minutes for each caucus, and we'll start with
the official opposition.
Mr Richard Patten
(Ottawa Centre): Deputy, I think everyone agrees that,
as you've said, the context was important, that there was a need
to develop a system that was far more accountable. But, you know,
the education ministry has a situation where they can call
jeopardy. If their "clients"-I don't like to use that term; if
the children's education is jeopardized by virtue of a strike or
something, they can call jeopardy.
It seems to me that this is
quite embarrassing. In the financial community this is a major
embarrassment. To enter into a contract like that, fine; let's
not ascribe or impugn motives. But they have you under
control-I'm talking about Andersen-in terms of their costs, in
terms of raising their costs, in terms of the schedule etc. You
say you're not supposed to pay out anything until the benefits
are there. My understanding is, as of July you've paid out $55
million and, according to the auditor, the value for work at that
particular point was about $14 million. How can you say you're
not paying out until the benefits accrue to you?
Mr Costante:
First of all, I disagree with the last statement. I think we have
had real benefits, and we've demonstrated real benefits through
reviews of, I believe it's $66 million. Andersen's share of that
was $55 million and the rest accrued to the province.
Mr Patten:
This was after July.
Mr Costante:
This is from the beginning of the project until the July 31
numbers that we provided to the auditor. We did show real
benefits, and I think we can demonstrate that. When the auditor
comes back in to do a field audit, I think he will find that and
he'll see our proof, that we can demonstrate real benefits from
making changes on how we do eligibility determination, how we do
income reporting by clients. I think it's there and we've gained
them. They're not bogus. We can show them on the bottom line.
Mr Patten:
If you wanted to change the agreement you have with Andersen,
what would you do?
Mr Costante:
Given the rush to get it over, the one thing I didn't say in my
statement is that we have started discussions with Andersen
around making some changes. We are looking at their costs going
down. Discussions are in progress, so I'm not really wanting to
get into, if you will, giving away my cards in a public forum
while those discussions are going on.
Mr Patten:
The public is paying for it though.
Mr Costante:
And we're going to do our absolute best to protect the public
interest.
Mr Patten:
We discussed this last year. In the context, the sole-sourcing
arrangement was done because there was no one else ready to enter
into a relationship with you?
Mr Costante:
That's not correct. It was not sole-source.
Mr Patten:
Oh, it wasn't?
Mr Costante:
No, there was a competitive process that was conducted in the
fall. I believe the RFP went out in the fall of 1995. Andersen
was the successful proponent, negotiations started with them for
a contract in May 1996, and that contract was signed in 1997. I
believe there were eight other firms or consortiums who bid on
this.
Mr Patten:
The extension to the year 2002 now for the technology that's
developed, what's your comment on that?
1100
Mr Costante:
First of all, I think both the Provincial Auditor and our
third-party reviewer did acknowledge that we had start-up
problems in getting going, getting enough resources onto the
project and proceeding at a rapid enough rate. I think the
ministry was concentrating on its priority, which was to get
legislation done and policy changes done, and we did lose some
time.
The extension is needed to
complete it. The contract itself contemplated that in a project
this size, there could be some delays, and allowed for a one-year
extension and that's what we're looking at.
Mr Patten:
Are you telling me you're satisfied that everything is just fine,
that you're in control of the whole process?
Mr Costante:
I'm saying we've taken a lot of steps in the last year to improve
what we're doing. Nothing is ever perfect. That's why we have the
internal auditors on site now. The auditor will come back; I'm
sure there will be more recommendations on further improvements,
and we welcome them. We want to make this project a success and
we think our partner wants to make this project a success. We
have taken a lot of steps and we'll take a lot more. In my
remarks I think I outlined that entire list of things that we've
been doing to make sure that we adhere to a rigid schedule, get
staff involved, make sure that we have a good product. I think we
can do it.
Mr Patten: It seems to me that,
given this particular case, the ministry could recommend to the
minister or to the government, "Look, we've entered into an
arrangement which is not truly in the public interest. We would
like to renegotiate the terms of the agreement," even though
you've signed an agreement. Fair enough. Given the size, given
the publicity around this whole arrangement, I would think
Andersen probably would accept a renegotiated arrangement. Would
you entertain such an idea?
Mr Costante:
We are in those discussions.
Mr Patten:
In other words, you want to renegotiate the terms of the
contract.
Mr Costante:
We are looking at some changes, and I don't want to specify
exactly the terms of what that will be. It's obviously going to
require mutual agreement.
Mr Patten:
What I'm trying to do is support you to be able to recommend what
you believe is truly in the best interests of doing the job that
you have to do and also for the general public.
Mr Costante:
I appreciate that. I'm saying we have started that
discussion.
Mr John C. Cleary
(Stormont-Dundas-Charlottenburgh): I would just like to
mention something you said. You said you don't get paid unless
you produce results. I would like you to explain that.
Mr Costante:
I think we can demonstrate that the number of the projects that
we've worked on with Andersen as part of this larger change that
we're making have produced solid results.
For example, they have
developed for us a new eligibility system where we have gone back
and looked at clients on the social assistance system and
reviewed their eligibility. They've designed new software, new
processes, helped us train staff. Through that process, we have
found a lot of areas where people were not eligible and they were
removed from the system. We found areas where there was
overpayment and were able to collect that back. We can
demonstrate solid savings from those activities. I think the
auditor's report shows that. I believe it was $66 million in
savings. Andersen obviously shared some of the benefit from that,
as did the ministry.
Mr Cleary:
The head office of Andersen Consulting, where is it located?
Mr Costante:
I think you're going to have to ask them. It is an international
consultancy. We are dealing with the Andersen Consulting
partnership that's here in Canada. Their head office is in
Ottawa, I believe.
Mr Cleary:
The other thing I would like to ask you is, this $575 an hour for
the project director, do you think you're getting value for your
money at $575 an hour, with people on the streets having to work
three jobs for a whole week to make less than that?
Mr Costante:
I would say two things: First of all, for the expertise that
we're looking for, it's very expensive in today's market. I think
you will all appreciate that with the rapid pace of change in
terms of technology, the demand out there is immense. We have,
coupled with that, the issue around Y2K where everyone in the
world is trying to fix their systems. I think they bring
international and national expertise to this, and we think we're
getting value for our money.
Mr Cleary:
Were you part of the initial agreement? Did you help negotiate it
in 1995?
Mr Costante:
I was not part of the negotiating team. I was the assistant
deputy minister of social assistance at the time, and the project
director reported to me.
Mr Cleary:
I've heard lots about this problem with Andersen Consulting. I
was hoping I would hear something that would put my mind at ease
today, but up till now, unless someone else has something that
will put my mind at ease, I haven't heard it. I'm disappointed.
Anyway, I'll move on to someone else.
The Chair:
It's at the 10-minute mark. What I propose to do is have two
10-minute sessions for each caucus, if that's all right. We'll
now turn to the NDP.
Mr Peter Kormos
(Niagara Centre): Look, this is a very complex contract.
It is a complex, multi-page sort of thing, and I can't begin to
understand it.
Mr Costante:
I would agree.
Mr Kormos:
But I understand that the whole idea was to motivate Andersen by
ensuring that it only receives monies when it produces
results.
Mr Costante:
That's correct.
Mr Kormos: I
don't have a good handle on the contract, but I also
understand-well, the government expected to abide by the terms of
the contract, didn't it?
Mr Costante:
Yes.
Mr Kormos:
And surely Andersen expected to abide by the terms of the
contract.
Mr Costante:
That's correct.
Mr Kormos: I
understand that this contract was such that there was no
requirement for the ministry to make any payments to Andersen
until "the amounts in the benefits pool exceed the amounts in the
cost pool," page 9, paragraph 3 in the auditor's report. Is the
auditor right or is he wrong in that regard?
Mr Costante:
It did not require it. It did provide for it.
Mr Kormos: I
understand that. But please help me; I've got to understand this
contract. If there was no requirement to pay-
Mr Costante:
The-
Mr Kormos:
Please. There was no requirement-
Mr Costante:
I was going to try to give you some-
Mr Kormos:
-no requirement to pay any money unless those conditions were
met. Is that correct?
Mr Costante:
That's correct. The reason it was done is because we wanted to
make payments early to reduce the interest costs that would have
been charged had we not. Having generated benefits, why would we
not pay out those benefits, as opposed to having our
partner-which is again allowed. Both parties can charge, into the
cost pool, interest charges. We made a conscious decision to pay
so that we could reduce those interest charges. I don't see that
there's anything wrong with that.
Mr Kormos:
The auditor, when commenting on interest, indicates that the cost
of getting that money to pay them out is more than the interest that
would have been paid, if I understand that correctly.
Mr Costante:
You'd have to check with them.
Mr Kormos:
I'm telling you that's what I understand the auditor to say.
Mr Costante:
I understand that's not the case.
Mr Kormos:
Fair enough. As of July 1999, Andersen had been paid $55 million
as an incentive, not based on any requirement of the government
but based on the mere wishes of the government. Is that
correct?
Mr
Costante: Basically, the intention was to reduce the
interest costs, as I indicated earlier. We had produced benefits.
We decided that we would pay out both sides. Both the government
and Andersen benefited from the $66 million in savings that we
found.
Mr Kormos:
I'm sure people are going to ask you about whether those savings
flowed directly from Andersen or whether they flowed from any
number of things that happened in terms of the number of people
on social assistance, the social assistance rate.
Mr
Costante: And the answer's no.
Mr Kormos:
I've got to tell you, Deputy Minister, my clear impression here
is that Andersen's robbing the public bank and you're driving the
getaway car.
Mr
Costante: If I can answer your last question in terms
of-Andersen does not get paid out of any monies that accrue from
natural caseload decline or from policy changes. We go through a
very rigorous process of making sure that the benefits are
attributable to the actions of the project.
Mr Kormos:
If it's as rigorous as the rest of your relationship with
Andersen, then it's very much in doubt.
Mr
Costante: Well, we welcome the auditor to have a look at
what we put in place.
1110
Ms Shelley Martel
(Nickel Belt): If I might, I think the auditor already
did, and the auditor made it clear in his report that "the
benefits attributed to the project to date are from `early
opportunities initiatives,' which entailed changes to the
existing social assistance systems ... and not the project's
primary objective of developing new technology." In fact, he said
to us this morning that most of the money that's been paid out to
Andersen in terms of savings had absolutely nothing to do with
the business transformation project. You might be using that as a
cover, but that's not where the savings came from, and you're
making payments to them that shouldn't be made.
Mr
Costante: I absolutely disagree.
Ms Martel:
So is the auditor wrong?
Mr
Costante: I think we have a disagreement.
Ms Martel:
All right, Deputy. Let me tell you what else the auditor said and
you can comment on this.
Mr
Costante: Can I finish my answer, please?
Ms Martel:
OK. You think the auditor's wrong. Go ahead.
Mr
Costante: Eligibility is a core requirement of any
social assistance system. I think you would agree with that.
Andersen has designed for us a new process for determining that
eligibility, and that is going to be built into the ultimate
system, so why can't that count? I don't understand.
Ms Martel:
Deputy, the government makes changes on it with respect to
provisions of eligibility. Let me tell you what else the-
Mr
Costante: Not with respect to the processes and the
systems that support it.
Ms Martel:
We've got a difference of opinion. He says you shouldn't have
made a $55-million payout. The public's being ripped off, hosed
down. That's what's happening. Let me tell you what else he
said.
Mr
Costante: I disagree.
Ms Martel:
You're trying to tell this committee that things are OK. I was
here a year ago, and you know what? Nothing's changed since you
folks were here last year. Two of the same people are here. The
auditor said, "In light of the significant payments already made
to Andersen Consulting at rates which the ministry cannot
control, the delays of the completion of the deliverables, and
our concerns about the working of the cost and benefit pools, we
continue to question the achievement of value for money for the
taxpayers from this agreement." Nothing has changed from when you
were here a year ago.
Mr
Costante: I think a lot has changed. I put on the record
the things that we've changed to make sure this project gets on
track. We have finished the design for this. We have a schedule
that we've been adhering to. We've put in a lot of new controls
since then. I think a lot has changed. I would also point out
that this is an interim report of the auditor. He did not come
back in and do another full field audit.
Ms Martel:
I look forward to when he goes back in. I look forward to
that.
Mr
Costante: Fine, but I don't think you can charge that
nothing has changed on absolutely no proof. I think we can show
and demonstrate, and we haven't been given the opportunity to
demonstrate, the changes we did make.
Ms Martel:
Let's look at the delays, then. The auditor reported that phase 1
is delayed by two and a half years and phase 2 is now delayed by
one and a quarter years. Is that true?
Mr
Costante: I think what the auditor is doing-there have
been delays. I acknowledge that. That's why we had to extend the
thing. The phase 1 and phase 2 terminology was something that was
talked about very early on in the project. Once we got the
blueprint for the project in February 1998 and, more recently,
the design, we've changed the entire structure of the project.
It's apples and oranges. We do think we're going to need that
additional year. I don't think those numbers of two and a half
and one and a half bear any relevance any more.
Ms Martel:
Would the auditor like to comment?
Mr Erik
Peters: I would like to raise two comments.
The one on the interest:
What we did was relate the borrowing rate of the government,
which is close to 9% still, to the 5% that Andersen would be
entitled to under the
agreement. The second point we raised is that in other agreements
Andersen has actually been paid based on their actual cash flow
rather than at the full charge rates they were entitled to. These
were the two concerns we raised about the interest, and those
concerns remain concerns of ours.
The second part is the
sentence that has been quoted on page 9, which relates to the
benefits attributed to the process being attributed to the early
opportunity initiatives. Those were identified as three areas.
The consolidated verification process is a verification process
that the ministry had agreed with us for almost a decade required
changes that needed to be done. In fact, the ministry had, in
virtually every recommendation at the time we made the
recommendations, agreed that something would have to be done. We
raised the question whether this was attributable actually to
Andersen or whether this was not attributable already to
initiatives taken by the ministry as they went along.
The tax table-that's the
relationship between Revenue Canada and the benefits-also
initiatives by the ministry. Change reporting-also initiatives
already taken by the ministry.
The problem we have with
the benefits and that we will continue to have is that they were
simply not benchmarked at the beginning. There was no appropriate
allocation of how much of the benefit was actually attributable
to initiatives already taken by the ministry and those
initiatives that resulted from advice received from Andersen
Consulting. Those were our concerns and that's why we made those
statements.
Mr
Costante: Can I respond?
The Chair:
You have thirty seconds left.
Ms Martel:
I want to ask about billing rates. Is it true that Anderson
continues to bill at rates that were in place at the time of the
last audit when the ministry was last here, which is between $40
and $575 an hour, for an average charge of $257. Is that true?
Are they still billing at those rates?
Mr
Costante: I'm not sure that they're billing at the
existing rates. Their billing rates change, I believe, every
September. They may be somewhat different than that.
Ms Martel:
Are they higher?
Mr
Costante: They may be higher.
Ms Martel:
Can you table those with the committee?
Mr
Costante: I'm not sure if we have them here today, but
we will get them for the committee.
Ms Martel:
Deputy, if I can point out, last year when your ministry was here
we were told that you were under negotiations to change those
outrageous billing rates. It seems that they are still in effect
a year later.
Mr
Costante: I don't think you were told that they were
under negotiation.
Ms Martel:
We sure were, and the minister said it in Hansard in November,
and I can quote you her comments too.
Mr
Costante: I thought she said we were going to
negotiate.
The Chair:
Thank you. Now we'll turn it to the government side. Mr
Maves.
Mr Bart Maves
(Niagara Falls): What's coming out of this here,
clearly, from Peter's line of questioning and the auditor's
response, is a debate about benefits and whether or not benefits
actually have accrued as a result of the relationship with
Andersen. Now, I've heard you talk about a change of process.
You've talked about them actually designing a software program,
which has worked to attribute benefits.
My understanding is that Mr
Hession and the Hickling Lewis Brod company he worked with had
done some work on this benefit pool and justifying whether or not
those benefits should have been in that pool. I wonder if the
deputy and then perhaps Mr Hession might be able to explain again
where we see these benefits coming and why we attribute them to
the work that Andersen's been doing with the government.
Mr
Costante: A couple of things, and then I'll pass it over
to Ray. First of all, we do make sure, in determining which
benefits accrue to the project, that a baseline is in effect set,
that it's only the incremental benefits that are achieved by the
project that actually go into the benefit pool. So I would
disagree with something the auditor said. We don't let base
benefits-if not, all eligibility costs we have would go into the
pool. We do what's called metrics, where we try to go through and
pick out exactly what is attributable to our efforts with
Andersen, and only those go into the benefit pool.
As I've said, things like
policy changes or decline in caseload do not get attributed here.
We also tried to factor out the impact of the eligibility tools
that we had in place previously.
The auditor is right. He
did in past audits ask us to address some of these issues. We use
the opportunity with Andersen to do that. He criticized us that
we hadn't done it, so this was the opportunity. Why would we
design a new eligibility system just to have to do it again,
ultimately, for the final project? We've used Anderson to make
that eligibility change so that it would get imbedded in the
final system. That's exactly what we've done.
I'll leave it at that and
let Mr Hession talk about his findings.
Mr
Hession: May I, Mr Chairman? As part of my terms of
reference from the former minister, I was asked to ensure for her
that the methodology that was being used to determine benefit
attribution was valid. We took what were the two most significant
so-called early opportunity projects, one being the consolidated
verification process, the other the change reporting, and
applied-you'll have to forgive me, Mr Chairman; there's a bit of
a technology involved here called multi-variant statistical
analysis. What that does is take all the data from the universe
of recipients of the benefits of these programs historically and
then look forward, following an event. The event in this case was
the introduction of these two changes, the so-called CVP and
change reporting.
In the case of change reporting, we saw robust
evidence of benefit arising from those changes, again based on
the data that was provided to us.
1120
In the case of consolidated
verification process, we determined that there was inadequate
data at that stage; the change having recently been introduced,
there being insufficient evidence from the data to say yea or nay
to the benefits. Subsequently, I believe in September of this
year, with more data available, that review on consolidated
verification process was redone, and again a robust outcome
saying that the benefits were indeed valid.
Mr Maves:
Everyone here is concerned and we want to make sure that under
the terms of agreement someone can't get paid unless benefits
accrue. The auditor seems to think, in his second audit that he's
come in and done, that those benefits haven't accrued and you
haven't been able to show that those benefits have accrued as a
result of Andersen's work. The ministry has said they've done a
process and they can show that they are attributable to the
Andersen contract. Mr Hession has brought in a firm, Hickling
Lewis Brod, which says, yes, they can be attributable to this
project. I don't understand why the auditor, when he has come in
to do the second audit and work with both of you to try to verify
whether these things should be in the benefit pool-I don't
understand why there is such a discrepancy between the two.
Mr
Costante: If I could clarify it, I don't think the
auditor has come in and done a second audit. There have been some
very limited discussions. We had one two-and-a-half-hour meeting
with the auditor. There have been a number of phone conversations
and exchanging of paper, but there was not a full field audit
where his team actually came in and looked at what we are doing
and tiptoed through all our documentation. You may want to have
the auditor comment on that. I don't mean to put words in his
mouth.
Mr Maves:
So this most recent report, Auditor, is not based on an
audit?
The Chair:
I'll give him an opportunity to comment in a moment after you're
finished.
Mr Maves:
I was under the impression that there was something more broad
done.
Mr Hession, you also said
in your business case analysis done by Hickling Lewis Brod-I
would also like to ask a question about them-that there were $300
million in savings over the life of this contract, between 1997
and 2002, and then beyond that your models predicted annual
savings of $200 million. Or is this just the $300 million? Can
you explain that?
Mr
Hession: In doing this work, in order to provide valid
information to the legislators, by practice in this business we
limit the benefits outcome to the period of the project itself.
So it's seven years from the beginning of the project in early
1997 to its completion in 2002, and then there is a two-year
period for benefit attribution thereafter. So it's seven years.
The point that the member is raising is what happens after the
seven years. Indeed, the benefits continue to accrue at whatever
is the then current pace. It's what we call the eighth and
on-year benefit.
Insofar as the benefit
within the seven years of the project itself-and you will note
that I am using seven years, because at the time of our review it
was reasonably clear to us that there was a very high probability
that this project would have to be extended by one year and
that's why we went to seven years-net of all costs, including
those accumulated by the ministry and by Andersen, we determined
that there was an expected outcome, which is a term I should
define for members, of close to $300 million of direct benefits
to the Ontario taxpayer and there was some $46 million of
so-called social benefit to Ontario.
Insofar as that expected
outcome is concerned, that takes account of all the uncertainty,
and there's lots of uncertainty in projects of this duration,
this complexity and this magnitude. Thousands of people are going
to be affected in terms of the way they deliver programs, the way
the constituents interact with those programs and so on. It's a
very complex undertaking, so the uncertainties are significant. I
noted the word "ominous" in the use of language by the auditor. I
wouldn't use that word but I can understand why he might.
We took account, as best we
could humanly do, of the uncertainties arising with schedule,
with the future size of the universe of recipients, with any
number of what I would call technical risks and so on, and tried
very hard to balance our assessment, taking account of those
uncertainties.
With all of that in our
hands, we said, "It looks like $300 million expected outcome."
That's the average probability. If you ask me, "What's the
outcome at, say, the 80% probability?" it's a lesser number
because you're asking me to commit to a higher order of
probability, and expected outcome and 80% aren't the same thing.
But it's still, as we could best judge at that time, an
extraordinarily robust business case.
As I reported-and concurred
with the auditor, for sure, that his findings, as far as I could
tell, were highly meritorious-one of the outcomes that was
particularly so in my mind was that the agreement didn't specify
what those outcomes would be. It was after the fact, in a sense,
that we discovered they're very large. As the deputy has said,
the ministry has organized itself to deliver those benefits.
I hope that helps the
member on the point.
Mr Maves:
It does.
The Chair:
You have 30 seconds left.
Mr Maves:
The auditor has said that you substantially agree with what his
initial recommendations were, but it sounds to me that now you
think there's a very solid business case for this, that the
taxpayers are going to profit quite nicely out of this at the end
of the day. Have the recommendations you made been followed
through and do you still believe there's a positive business
case, or do you think the government should get out of this
contract?
Mr Hession: There's a number of
questions there. I did agree with the auditor. I don't want to
sound presumptuous in saying that, but I observed very much what
he reported on. I say again, what he reported on most profoundly,
in my opinion, was the absence in that contract of an end result
for the monies being spent by the government and by Andersen. So
my purposeful approach was, let's find out what those results
will look like, so we did, and that's the $300 million of net
benefit.
The question you're then
left with is, what's the risk? I want to repeat for the members
present, there was an exhaustive risk analysis done to arrive at
that $300 million. The two most sensitive variables are delay, of
which there had been some, so we had to project possible future
delay; and, what's the size of the universe of program
recipients? I don't have to tell you that the economic
performance of Ontario is such that thankfully there are more
people working and fewer people therefore on welfare. That's a
good thing, if you're looking at it from that perspective. From
the perspective of, what does that do to the benefits of this
program, it brings them down a tad. It's still a robust business
case. The big risk now is delay.
The Chair:
OK, thank you very much. I let you go on a little bit longer
there-
Mr
Hession: My apologies, Mr Chairman.
The Chair:
That's quite all right, sir. Now, the auditor had a comment to
make.
Mr Peters:
Yes, I have two, actually, to make. I would like to refer the
members to the report given to them that was done by Mr Hession,
by the firm Hickling Lewis Brod. That may put some of the
appearance of a difference somewhat at rest.
We had recommended in our
1998 report the application of something called a value index,
some sort of other way of determining the benefits and the cost
to the pool. Mr Hession, in his report, agreed. He said: "The
ministry, in comparing the value of its contribution to a
BTP-like project with that of consultants when both parties are
contributing to project costs in anticipation of proportionate
benefits-sharing, should develop and apply a `value index' for
its personnel reflecting their relative value to the project.
Should the current agreement be amended, it should reflect such a
`value index' with its concomitant effect on
benefits-sharing."
That's what I'm referring
to, because what we are referring to is the fact that we are
charging full rates by Andersen, we are charging our rates into
it, and there is no value index set on this one.
The second one, Mr Maves: I
said in my in camera session, and I repeat, that this was an
interim report and not a full-blown audit. The deputy is
definitely right on that one.
1130
Mr Maves:
Can you tell us the difference between what you do when you do an
interim and what you do when you do full blown?
Mr Peters:
You'll find in this report a number of tables which are ascribed
to the ministry as the source. We have not verified the figures.
When we said there that Andersen was actually paid $55 million,
we haven't gone into the cash system and seen that cheque that
you were written in that amount. We have accepted the ministry's
statement that that was what was paid and we have not gone into
any of the calculations that led to the determination of the
$66-million benefit. We have accepted the ministry's word for
that.
The Chair:
Thank you. You have about eight minutes for each caucus at this
stage.
Mr Patten:
In the 1998 report, the auditor laid out quite clearly-and it's
in this particular document. Just running through some of these,
Deputy, you have said you've addressed most of these and that the
auditor has not been back, and if he were to go back, he'd find a
much improved situation, which I guess is what your case is at
the moment. Although I will ask you, if you had your druthers,
would you want to renegotiate a new arrangement now with Andersen
Consulting?
Mr
Costante: As I said previously, we are in discussions
with Andersen Consulting and part of the purpose of those
discussions is to lower their cost.
Again, I don't want to get
into great detail. I don't think it's proper to do that before we
have finalized the detail. Obviously, I am driven to, first of
all, have a successful project, a well-managed project and also
protect the public and taxpayers' interests.
So, yes, we are in those
discussions and we have to wait for the outcome because, as I
said, we do have a contract, things that we may agree to are
going to require mutual agreement and I don't have that mutual
agreement yet.
Mr Patten:
Deputy, you know as well as I do that, first of all, it's already
out in the public. We know what some of the rates are. We know
the conditions of an existing contract. You're at the public
accounts committee today. You have directors who, presumably,
would know in more detail than you, rightfully so, because you
have to manage the whole ministry.
I'm asking you whether you
now have control because in the original agreement you did not.
You did not have control over the rates. You did not have control
over the schedule. You did not have control over increases, it
would appear, at the whim of Andersen to set new rates as they
saw fit.
Can you demonstrate or tell
me, or one of your directors, today that in fact you now do have
control and you've renegotiated at least those principles?
Mr
Costante: The contract that we signed back in 1997 is
still in place. We have not renegotiated that contract. That
contract has a number of controls. Andersen gets paid according
to their rates and that's what they've been paid at. What we do
have control of is schedule. This is a joint project. We've
worked very hard to develop a detailed schedule and put processes
in place to make sure that we adhere to that schedule. I'll give
you some examples.
The schedule is brought to
our management committee table on a monthly basis for full
review. We go through
every component of the schedule to see if we're ahead or behind
on individual components. We are, obviously, driven by schedule.
I think one of the things that both the auditor and Mr Hession's
report pointed out is that time lost is money. We want to adhere
to that schedule. We think we've put a lot of controls in
place.
I guess going back, it's a
joint project and we do have a lot of control and we exercise
that control.
Mr Patten:
The auditor pointed out that in terms of the concept of shared
savings Andersen's savings were totally disproportionate;
"totally" is my term. The auditor said, "disproportionately high
rates to the disadvantage of the ministry," because the
charge-out rates used for staff were, on average, almost six
times higher than the rates charged by the ministry for
comparable staff work.
You are telling me that
you're still accepting the original terms of the agreement. That
was the original arrangement. Is that not being reviewed or do
you not want to renegotiate that kind of arrangement?
Mr
Costante: That is part of the ongoing discussion that
we're having around Andersen's cost. What I'm confirming is that
the 1997 contract is still in place until our current discussions
are concluded, and I can't report here today that those
discussions have concluded.
Mr Patten:
When do you expect them to be concluded?
Mr
Costante: I think that is a mug's game, to be committing
to a date. It requires mutual agreement. I also need support,
obviously, for whatever changes we're going to make.
Mr Patten:
I can appreciate your position. It must be very uncomfortable.
You can appreciate ours. A year ago we were assured that this was
going to be renegotiated, and now you're here today saying you
are renegotiating it, with no sense of whether this is in the
year 2000 or what, with a continual extension of the contract
with essentially the same conditions that were there before, that
we all agree are to the disadvantage of the ministry, to the
disadvantage of the public.
Mr
Costante: Sir, if you are trying to get me to commit to
a date, I won't do that.
Mr Patten:
No, I'm not saying a date.
Mr
Costante: We're trying to move as quickly as possible.
We think we've done our analysis. We think we know-I not only
think, I know what we want, and we've started that
discussion.
Mr Patten:
I'm not asking for the details. I'm asking the principles on
which you are negotiating, which surely you can share.
The auditor reported that
Andersen has exceeded the rates quoted in their proposal by an
average of 63%.
Mr
Costante: I don't want to get into, at the table here,
unveiling either my negotiating strategy or that. I don't think
that's possible, that anyone would negotiate that in a public
forum. I think that would be irresponsible.
Mr Patten:
Well, I'm disappointed, frankly.
I would say to you, given
the context and the situation, that you should call jeopardy. I
think you should say: "We have entered into an arrangement, made
some mistakes. Here is how we can rectify it. We want to start
over with a new deal, because this one binds us to an
unfavourable position in being able to manage something in the
interest of the general public." Is that a possibility?
Mr
Costante: We are trying to make changes that are
favourable, as I said. We are trying to negotiate, discuss a
lowering of Andersen's costs. I think that is beneficial to the
province, to the taxpayers, and that's what I would hope you
would hold me accountable for. Again, I don't want to get into
the details of that. It is a commercial deal. I don't think any
commercial deal in the world is discussed in an open forum.
Mr Patten:
Based on what I've heard, it is my opinion to this point that you
are negotiating with both hands tied behind your back.
Mr
Costante: If I were to put my strategy out on the table
here today, sir, indeed I would be negotiating with all my cards
exposed when the opposition does not, and I think that would be a
mistake. I am trying to negotiate from a balanced perspective.
Both partners have things to win and lose, and that's how you
have to go into that. We want to do the best for the taxpayers of
Ontario. That is my objective.
The Chair:
Thank you.
Mr Kormos:
Sir, you speak of a mug's game, and indeed it's the taxpayer
who's getting mugged.
On page 45 of the 1998
auditor's report, he notes that the hourly rates being charged by
Andersen are on average 63% more than the rate that they proposed
in their original RFP. Is the auditor wrong in that
observation?
Mr
Costante: No, the auditor is correct.
Mr Kormos:
So Andersen, when it provided the RFP, indeed quoted or cited
much lower hourly rates?
Mr
Costante: The agreement that was struck with Andersen is
that we would allow them to charge into the cost pool their
standard published rates, and that's what they've been doing.
They've adhered to the contract.
Mr Kormos:
I have no doubt. They cited much lower hourly rates in their RFP
than ended up actually being paid out. Isn't that correct?
Mr
Costante: That's correct.
1140
Mr Kormos:
OK. Auditor's report: I refer to, in today's report from 1998,
page 6, "In 1998 Andersen Consulting rates ranged from $85 to
$575 per hour ..." Is that correct?
Mr
Costante: Sorry, I don't have it in front of me. I
agree, if you're reading from the report.
Mr Kormos:
"... compared to $28 to $70 per hour for comparable ministry
staff." I take the auditor to mean comparable when he says
comparable. Do you?
Mr
Costante: I don't know. I think that would be open to
discussion. I don't think the ministry, at those rates that we
pay for government staff, can get the expertise. I think the
entire IT community and I believe the auditor would agree with me
that we can't hire the types of people at the government rates,
the government pay, in the quantity we need to, to do some of
those tasks. And the
government role and the Andersen role are somewhat different.
Mr Kormos:
Let me tell you, Andersen bills the province $85 an hour for a
clerk to enter data into computers when provincial employees do
it for $28 an hour.
On page 2 of today's
report, the third bulleted item: You know the auditor raised
concerns about the disproportionately high rates being billed on
an hourly basis to the government in its 1998 report, obviously.
It indicates here that as of July 1999, we're still talking about
no significant reduction in those rates. Is that fair to say?
Mr
Costante: I think we are talking about a significant
reduction in Andersen's costs.
Mr Kormos:
In its hourly charges per employee?
Mr
Costante: I think the effort that comes out of that will
have to wait until we finish the negotiations, sir.
Mr Kormos:
You indicate that that's a subject matter for negotiations, but I
refer you to the third-party review report, page 3, item 1.6.3,
which says: "The current average hourly billing rate for Andersen
Consulting's professional services is expected to fall by more
than 25% by year-end 1999 based on assumptions regarding the mix
of partner, manager, consultant and analyst personnel that
Anderson plans to deploy." That has never happened, has it?
Mr
Costante: Yes, it has.
Mr Kormos:
Then where do we see the 25% reduction in hourly rates charged by
Andersen?
Mr
Costante: Sorry. There's a difference between rates and
the average mix of costs, and I'll let Mr Hession speak for
himself.
Mr Kormos:
I just want to point out that the third-party review says "the
current average hourly billing rate." It doesn't talk about gross
charges back; it says the average billing rate is expected to
drop by 25%. We're at the end of December, at the end of 1999. It
hasn't happened, has it?
Mr
Costante: I think it has. I think we can-
Mr Kormos:
Then what are you negotiating?
Mr
Costante: Sorry, sir, if you'd let me explain. There are
rates and then there are the average hourly rates. Early on in
the project, Andersen, given that we were in the planning stage,
had a lot of their more senior people on the project. The average
billing rate was quite high. As we move into implementation, as
we move into building the actual system, we have more people, a
larger number of people, onsite from Andersen Consulting who are
at the analyst-programmer level. Their average rate is a lot
lower, so the overall average rate has declined. I would need to
verify the 25%, but I believe this year there has been, as the
third-party reviewers talked about, a significant decline in the
average hourly rate.
Mr Kormos:
We want a tabling of the rates being charged by Andersen or being
billed by Andersen. I'd like to know if, in view of what you
said, Andersen is still billing $85 an hour for a data entry
clerk when the province pays that same clerk $28 an hour. Ms
Martel, go ahead.
Ms Martel:
Deputy, you said when you started that income support is one of
the key businesses of the ministry. Is that correct?
Mr
Costante: That's correct.
Ms Martel:
And that the ministry recognizes an absolute need to modernize
business practices and technology. Is that correct?
Mr
Costante: Correct.
Ms Martel:
So it seems to me that the minister would be aware of a project
as significant as this one. Is that correct?
Mr
Costante: Yes, ma'am.
Ms Martel:
Is the minister aware of the details of the contract with
Andersen?
Mr
Costante: Are you talking the current minister?
Ms Martel:
Yes.
Mr
Costante: We've briefed him about the overall pieces.
When you say "details," you may have to define that for me.
Likely even I am not as knowledgeable about the individual
subsections of the contract. I don't think any minister is, on
those sorts of things. But he has been briefed about the project;
he's been briefed about the issues; he's been briefed about the
Provincial Auditor's findings.
Ms Martel:
When was he briefed about the Provincial Auditor's findings?
Mr
Costante: There were some initial briefings early on
when Minister Baird first came on-
Ms Martel:
"Early" as in June, July?
Mr
Costante: Likely in July, about the auditor's findings
from 1998. And then he was briefed about the special report.
Ms Martel:
And when was he briefed on the special report?
Mr
Costante: I think there were several briefings, because
we were exchanging drafts back and forth between the auditor and
myself.
Ms Martel:
So he was briefed several times about this recent report.
Mr
Costante: They would have been earlier drafts.
Ms Martel:
And when was he briefed about the earlier drafts?
Mr
Costante: I'm sorry, I don't have the exact dates with
me.
Ms Martel:
And were there significant changes to the earlier drafts and this
final draft?
Mr
Costante: You'd have to ask the auditor that. There have
been some changes to it, but I think a large part of the content
is the same.
Ms Martel:
And what about the ministry's replies? Has there been any change
in content in the ministry's replies from the earlier briefings
until this final document?
Mr
Costante: I think the auditor did accept some of the
comments we made.
Ms Martel:
Can you tell me, was the minister aware that you'd paid out $55
million and that the auditor didn't think that was a payout that
should have been made?
Mr Costante: I believe he was
briefed on that, and he would have looked at the earlier
drafts.
Ms Martel:
Did he approve the payment of the $55 million up to the end of
July?
Mr
Costante: The $55 million are payments that have been
going on since this project started back in 1997. Those payments,
I believe, are approved by the director, if I'm not mistaken.
Ms Martel:
So since July until this time, how much more has Andersen
received above the $55 million?
Mr
Costante: I think we can tell you that, actually.
Ms Ewart:
The savings you have to July 31 are $66.8 million. The savings, a
comparable number, to the end of September are $70.9 million.
Ms Martel:
No, what's the payout to Andersen?
Ms Ewart:
The payout to Andersen?
Ms Martel:
Yes, till right now.
Mr Kormos:
If it's less than $10, don't bother.
Ms Ewart:
It's $55.3 million to July 31, and $58.8 million.
Ms Martel:
OK, but what I want to know: Was the minister aware that the
ministry was continuing to pay Andersen money in spite of the
fact that the auditor had made it very clear that this money
should not be paid out? Is that true? Was the minister aware?
Mr
Costante: The minister is aware that the project is
ongoing and that we've been making payments all along.
Ms Martel:
Did the minister express any concerns to the ministry staff about
continuing to pay Andersen?
Mr
Costante: This is a major project. The minister is
obviously concerned, and he wants the best thing for this project
too. He obviously wants to make sure that we get the best value
for taxpayers' dollars.
Ms Martel:
He wasn't concerned enough to stop the payments in light of the
auditor's comments, which were serious comments.
Mr
Costante: Sorry, the government has not made a decision
to cancel this contract, which is exactly what you're talking
about.
Ms Martel:
That's clear. Let me say, was the minister responsible for
agreeing that the contract should continue for another year? Was
he aware of that decision? Did he agree to it?
Mr
Costante: Was the minister aware of that decision? I
think the minister would have understood that; I'm not sure
whether he would have agreed to it.
Ms Martel:
So you don't know if the minister agreed to the extension of the
contract by a year?
Mr
Costante: If we want to talk in legal terms, the
contract is not formally extended. We know that as we get into
these discussions, our timetable is going to require it to be
formally extended by one year. That has not-
1150
Ms Martel:
Does the minister agree that-
Mr
Costante: Sorry, that has not been formally documented
between the two. I will acknowledge-
Ms Martel:
But we've got it documented in this report.
Mr
Costante: I would acknowledge that at a staff level, we
and Andersen acknowledge that in order to complete the project we
are going to need the one-year extension. We have not formally
done it yet.
Ms Martel:
Is the minister aware of the extension?
Mr
Constante: He is aware it's being discussed.
The Chair:
That's the eight minutes. We'll now go to the government
side.
Mrs Marilyn
Mushinski: I'm looking at today's clippings, the Toronto
Star: "A senior government source said last night that current
social services minister, John Baird, `hit the roof' when he read
Peters's latest update. The minister is adamant that talks with
Andersen be initiated, and he's made it clear that the project
must be completed on time and on budget,' the source said."
Could you account for that,
in light of the comments you just made to Ms Martel?
Mr
Constante: I'm not sure what you're asking. Discussions
I've had with the minister-
Ms
Mushinski: You indicated that he's been briefed all
along on the content of Mr Peters's interim follow-up review.
Mr
Constante: The minister is quite adamant that this
project be on budget and on time. I think he'll be very
interested in knowing, being somewhat directing the nature of the
discussions we're having with Andersen Consulting.
Ms
Mushinski: OK. That sort of answers that question. You
have to forgive me, because I'm a little new on this committee. I
guess my next question should probably be directed to the program
director.
I'm really interested in
where we're going, and I'd like some picture of where we're going
to be at the end of this whole process. Could you explain to me
where we are at this point in time and where you intend us to be
at the end of the process, please.
Ms
Szyptur: As the deputy minister mentioned, the system we
had in place and continue to have in place is very outdated-lots
of paperwork. The staff essentially spent all their time filling
out forms in duplicate and triplicate, and did not have enough
time to actually spend with applicants and help them find
jobs.
As we know, one of the
reforms is to ensure that people can get jobs and get off social
assistance. This project has tried to support that through
changes in technology and business processes.
What we're doing is several
components and several functions. I think that one of the key
changes is focusing on how people apply for social assistance.
Right now, people have to come into the office, fill out a form
that can take a couple of hours, and at the end of that, they're
told they're not eligible. What we're trying to do is develop a
process through a telephone screening system where people can
call and go through an application process and actually be told
that they're either ineligible or that they have a potential for
eligibility for social assistance. They would then come into the
office and verify that information.
We would be doing third-party checks, which we are
not consistently doing now. So they can tell us on the phone that
this is the rent they pay or that they have no other income, etc.
etc. We will be checking with other sources such as credit
bureaus, Revenue Canada, employment insurance, to make sure all
the information is correct. We'll verify that information and
then focus on helping people get jobs, and that is a big change.
So the work of the workers will shift and change to employment
assistance.
We'll also have more
performance management reports and more management reporting to
ensure that the Ontario Works program and ODSP are doing the best
job they can. So more information will be available to all levels
of staff, both in municipalities and in government. There's
really a focus on improving client service, reducing fraud and
helping workers in terms of helping applicants get jobs. I think
that's the essence of the changes.
Mrs Julia Munro
(York North): We've heard from Mr Hession this morning
and I just wondered whether we could have a little bit of
information with regard to the-obviously you've told us a bit
about the project-credibility of this firm in being able to be
here as a third party.
Mr
Hession: It's important to realize that there are two
elements to the third party. There's myself as an individual, and
there's Hickling Lewis Brod, who are the business, case and risk
analysis experts. In my own case, I've spent about 20 years in
the information technology business both with IBM and as CEO of a
large service provider called Kinburn Corp. We were the owners of
Systemhouse in Ottawa.
I'm also a former deputy
minister of supply and services and spent a good part of my
public sector career doing contracting on behalf of the federal
government. On my way there, I've been heavily involved as deputy
receiver general at the federal level in the performance of audit
services within the federal government, particularly
comprehensive audit services or the audit of effectiveness, which
is essentially what this is about. That's why I was involved, I
believe.
As to Hickling Lewis Brod,
that company has existed for about 10 years. Their entire
business is focussed on risk analysis, primarily public sector,
large-scale investments in various forms of infrastructure. For
example, they did the business case for Highway 407. They've done
a number of business case studies for Pearson airport. They were
called in by the General Accounting Office in the United States,
which is essentially the Auditor General of the United States, to
do the Denver airport when it ran afoul of its baggage system.
They did the same thing in a $4-billion project involving IBM on
the Federal Aviation Administration's air traffic control
system.
The basic purpose of what
that company does is to give confidence to the public
policy-makers that there is or there is not a public benefit to
whatever is being undertaken. The uniqueness, if I could say, of
what they do, evidenced by their being called forward on some of
the larger projects, is they do a particularly throughgoing job
of risk analysis.
When I listen to the
questions of the members, therein lies most of the meat of the
issues: Do you or do you not understand what the risks are? Do
you or do you not understand what impact they may have on the
outcome, if the outcome, is as the director has said, "Better
service, write cheques to the right people at the right time in
Ontario." We say, as at the date of the business case analysis,
based on the size of the universe then, the schedules as we
understood them then, the risks associated with those factors,
there's close to a $300-million net benefit to the taxpayers of
Ontario.
The assumptions are all
there. I might say that I demanded of Hickling Lewis Brod that
the business case they did would be auditable. I very much wanted
the auditor, members of the Legislature, anybody who wanted to go
inside that business case and examine what was considered and
what were the effects of that, that that's doable and it's doable
as of now.
Mrs Munro:
Is there time for one more?
The Chair:
Thirty seconds.
Mrs Munro:
I just wanted to ask: With all the discussion with regard to
renegotiating and so forth with regard to Andersen, it seems to
me that much of that discussion centres on the issue of the
possibility of their ability to agree to a change in fee. I
wondered also if, in commenting on that, you would also include
something about an explanation of the difference in rates and the
question of the ratio of ministry staff to Andersen staff.
Mr
Costante: I can confirm that we are in those discussions
with Andersen around their costs and fees. In terms of the
difference in ratio, I would say that is true. The ministry rates
are charged at ministry salaries and we also add to that
expenses, vacation time and all sorts of things. So they're fully
billed up, if you will.
One of the things the
auditor pointed out-I think he mentioned it earlier-is that there
is a difference in the value between the two. That's something
I'm sure will be looked at in future common-purpose procurements
and something that is likely a valuable thing to do.
The Chair:
That finishes that eight minutes. It's 12 o'clock and I
understand that there may be a recorded vote in the House. We can
either have a subcommittee meeting or the committee can agree
right now as to what it wants to do next Thursday.
Ms Martel:
If I might, Mr Chair, I would move to have the ministry back
because we didn't finish with our questions with respect to this
issue. I would like to see the ministry come back next week to
answer some more questions.
