Strengthening agile procurement for a national pay system

Summary

The challenge

The rollout of the Phoenix pay system became one of Canada’s most prominent public-sector technology failures, affecting hundreds of thousands of federal civil servants through underpayments, overpayments, and missed payments. The system — intended to modernize payroll for the entire federal workforce — instead created widespread financial hardship and eroded trust in the government’s ability to deliver large technology programs.

Beyond the immediate operational damage, Phoenix exposed a deeper problem: the Government of Canada needed a fundamentally better way to procure and implement complex technology systems. Previous approaches had relied on traditional, large-scale contracting methods that concentrated risk, limited flexibility, and left little room for course correction once a vendor was selected. In response, the government 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 NextGen team chose to pursue an agile procurement approach, but needed outside expertise to assess whether that approach was robust enough to support a successful enterprise-scale acquisition — one that wouldn’t repeat the mistakes of Phoenix.

The solution

Prior work with the Agile Acquisition Framework gave us a foundation to build on. Rather than starting from scratch, we adapted proven principles from complex software acquisitions into a structured evaluation tool the NextGen team could use immediately and reuse over time.

The framework organized around 13 criteria areas representing leading practices for complex software acquisitions, covering the full procurement life cycle from sourcing strategy through implementation readiness:

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 life cycle, 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.

Documentation review and stakeholder interviews revealed where the team’s practices aligned with leading agile procurement principles and where gaps remained. We assessed the NextGen team’s approach against all 13 criteria areas to build a detailed picture of strengths, risks, and the highest-leverage opportunities for improvement.

The resulting scorecard wasn’t designed as a one-time compliance exercise. We positioned it as a tool for continuous improvement — something the team could revisit as its approach matured. This helped the team identify targeted changes, challenge the status quo, and build the procurement discipline needed to support a successful replacement for Phoenix.

The results

• Established a 13-criteria agile procurement framework applicable to major software acquisitions, covering both build and buy approaches across the full acquisition life cycle
• Delivered 15 concrete recommendations to strengthen the NextGen HR and Pay team’s procurement approach, prioritized by impact and implementation feasibility
• Created a reusable scorecard and assessment model the team could apply repeatedly to evaluate and improve its procurement practices over time
• Provided a stronger procurement foundation for acquiring a modern, integrated replacement for the Phoenix pay system — an effort that has since advanced through vendor selection and pilot phases