Confusion, delays in email merger
Email Transformation Initiative is 18 months late, Bell faces huge fines
A $400-million effort to consolidate 63 federal government email systems into one is not only running at least 18 months late, but was plagued by early confusion over what was to be included and questions about how the winner was selected.
The Email Transformation Initiative run by Shared Services Canada was meant to showcase the Conservative government’s ability to manage complex projects and help it streamline the bureaucracy. Instead, it quickly ran into problems.
“Most of the firms told the government the timeline was unreasonable,” said an industry executive familiar with the procurement. “Everyone bid knowing no one could meet the March 31, 2015, deadline.”
It wasn’t just the logistical difficulty of consolidating more than 600,000 email boxes and multiple technology platforms into a single system. Much of the delay reflected requirements not clearly outlined in the bid documents — the government’s increasing emphasis on security, for instance, and the need to move more email attachments than expected to the new system.
Many federal departments are using email to archive key documents that have to be shifted to the new system in a separate timeconsuming step. Complicating matters, individual departments also employ vastly different rules for retaining such data — from 30 days to seven years.
Much of this was known when the government launched the project, one of several information technology consolidation programs currently underway. But Shared Services Canada has been under enormous political pressure from its inception to deliver significant savings and to do so quickly. The Conservative government promised that consolidating email systems would save $50 million annually.
But the Email Transformation Initiative has proven more difficult than expected.
First, Shared Service Canada was created only four years ago by stripping 43 separate departments and agencies of their computer services personnel, more than 6,400 in total. While many of these workers were experienced in buying information technology, they had no history of working together.
Then, when SSC invited dozens of high-tech firms to bid for the right to develop and run the single email system, it ran the competition in a novel and confusing way. Instead of the usual top-down exercise, in which federal departments set out exactly what they want, SSC held industry conferences and workshops, and one-on-one meetings with potential key suppliers.
While it sounded good in theory — the companies floated lots of ideas and more flexible ways of building the email system — the result was a competition whose requirements were interpreted quite differently by the four tech giants that made it to the final round: Bell Canada, IBM Canada, HP Canada and Dell Canada.
When Shared Services revealed on June 25, 2013 that Bell and partner CGI Group had won the seven-year deal (there’s a one-year option as well) the also-rans were stunned by the discrepancies in overall price bids.
Bell estimated it could develop and run the government’s single email system for $245 million. The next-lowest bidder was IBM ($282 million), followed by HP ($368 million), and Dell ($571 million).
Dell had the best technical proposal, but lost in part because SSC gave the financial component of the bid a 70-per-cent weighting. The finalists were uniformly skeptical that Bell would be able to deliver the new system for the promised price.
This much was clear during debriefing sessions held with SSC procurement manager Michelle Beaton a few days after the winner was announced. According to notes prepared by SSC, officials from HP said their company’s “governance does not allow for under-bidding but rather expects realistic bids that represent what the true costs will be at the end of the contract.” The bids from HP and Dell likely included significant amounts to cover risks and contingencies, in line with corporate policies dictated by head offices in the United States.
HP did not reply to queries from the Citizen.
SSC evaluated costs associated with 63 email services and related items. In one of them, base email service, Bell bid zero dollars while HP submitted a price of nearly $148 million. Bell had stuffed most of its costs — nearly $137 million — into a messaging category called “identity credential access management.” HP’s bid for this metric was 41 cents.
Yves Genest, a senior SSC executive, highlighted the stunning discrepancies a few weeks ago. “Notable disparities in pricing for each assessment item point to a lack of consensus and/or understanding in the definition of these items between bidders and SSC,” he said in a presentation to SSC management.
This wasn’t the only area of misunderstanding. The bidders had some discretion in deciding which parts of the email job were optional, and which were mandatory. It seems costs could be included in the bid or deferred. For instance, SSC’s total budget for managing the program over the next seven or eight years is nearly $400 million — an amount that includes paying Bell Canada $245 million for what it promised to deliver and another $150-million-plus for options that may or may not be exercised, along with project management costs incurred by SSC.
In its debriefing session with Shared Services Canada, IBM complained that Bell had unfairly lowered its total project cost by manipulating its numbers.
“Moving costs between the options and mandatory line items to play pricing games does not follow the general accounting rules,” IBM officials told SSC’s Beaton. “IBM cannot bid by playing these types of games.” Bell, IBM and Dell declined requests for interviews.
Shared Services Canada spokesman Ted Francis said, “Bell’s bid across a number of components met the technical requirements at the lowest cost to the Government of Canada.”
Since many of the cost items were loosely defined, it’s possible that Bell was simply more adept than its competitors at crafting its proposal.
One area in which Bell notably underbid its rivals was anti-virus, anti-spam and secret mail services. It estimated it would spend some $15 million to run these services, compared to nearly $35 million for IBM and considerably more for the other two contenders.
But even this is somewhat misleading: the numbers included in the price cells seem arbitrary in many cases. The bidders concentrated instead on the total price charged for running all the email services.
Indeed, there’s often a disconnect in federal procurement between how bidders respond to detailed questions in a request for proposals, and the company’s strategy for turning a profit on the overall contract.
Shared Services still expects to book savings this year by consolidating at least some government email systems. Just how much isn’t clear; only SSC itself is using the new system at the moment. One thing in the department’s favour is a shrinking government. There were nearly 380,000 federal employees when SSC opened the competition for the new email system. There are now just 314,000, a decline of roughly 17 per cent.
SSC will pay Bell only for the email boxes in use on the system. Francis added Bell won’t be paid until “the system is in place and working.” In fact, Bell is accumulating fines of $10,000 per day for missing the March 31, 2015, deadline. It thus has every incentive to meet the new deadline: September, 2016.
Whether it will still make a profit on the project will depend heavily on how it manages costs during the final years of the contract. Its three rivals will be watching closely. If there is a deficit, they’ve made it clear they want Bell to eat it.