Helping recover from a failed national pay system through agile procurement

Summary

The challenge

The rollout of the Phoenix pay system became a national public-sector technology failure, affecting hundreds of thousands of Canadian civil servants through underpayments, overpayments, and missed payments.

Beyond the immediate operational damage, Phoenix exposed a deeper problem: the federal government needed a better way to procure large, complex technology systems. In response, the Government of Canada established the Next Generation Human Resources and Pay team to move away from Phoenix and toward a more modern, integrated HR and pay solution.

The team chose to pursue an agile procurement approach, but needed outside expertise to assess whether that approach was strong enough to support a successful enterprise-scale acquisition.

The solution

We drew on our prior work with the Agile Acquisition Framework to create a practical assessment model for agile procurement.

We established 13 criteria areas representing leading practices for complex software acquisitions:

Key focus area	Criteria
Sourcing strategy	Validated through user research and technical experiments.
Procurement team	Dedicated, diverse, multidisciplinary, collaborative, and manageable in size.
Leadership	Single leader who is dedicated, empowered, and fully accountable.
Evaluation approach	Prioritizes verifiable proof of vendor capability and uses evaluation criteria that can be assessed reliably.
Evaluation team	Possesses strong technical expertise in the areas being evaluated and is small enough to reach consensus effectively.
Industry engagement	Meaningfully engages vendors and keeps them well informed throughout the process about timeline, problem space, and solution space.
Rapid continuous improvement	Builds in fast learning cycles so the procurement approach can be improved continuously, including producing a minimum viable product as quickly as possible.
Vendor lock-in mitigation	Mitigates vendor lock-in risks across the full acquisition lifecycle, including data and operational risks.
Healthy competition	Encourages best-value offers, sustained vendor performance, and productive collaboration across vendors.
Requirements	Maintains enough flexibility for requirements to emerge and evolve over time.
Modular contracting	Breaks the procurement into smaller, shorter-duration segments to reduce risk through incremental and iterative delivery.
Pay for results	Ties payment and continued investment to demonstrated value and working solutions.
Implementation readiness	Prepares the operating model and implementation team needed for successful execution after award.

Using this framework, we conducted an in-depth assessment of the NextGen HR and Pay team’s procurement approach. This included:

• Reviewing documentation and interviewing stakeholders to understand current practices
• Evaluating those practices against the 13 criteria areas
• Producing a scorecard that highlighted strengths, gaps, and improvement opportunities
• Recommending concrete actions to strengthen the procurement approach

Rather than using the scorecard as a compliance exercise, we positioned it as a tool for continuous improvement. This helped the team identify targeted changes, challenge the status quo, and strengthen its ability to run an agile procurement capable of supporting a successful replacement for Phoenix.

The results

• Established a 13-part agile procurement framework applicable to major software acquisitions, including both build and buy approaches
• Delivered 15 concrete recommendations to strengthen the NextGen HR and Pay team’s procurement approach
• Created a scorecard and assessment model the team could reuse to evaluate and improve its practices over time
• Helped establish a stronger path forward for procuring a modern, integrated replacement for the Phoenix pay system