Province orders review of MPI operations External third party to examine Crown corporation amid concerns over management, massive technology cost overruns By: Danielle Da Silva Posted: 2:21 PM CDT Monday, Apr. 3, 2023

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This article was published 03/04/2023 (889 days ago), so information in it may no longer be current.

The province has ordered an organization review of Manitoba Public Insurance after a pileup of management issues, including massive cost overruns related to its project to move Autopac services online.

Justice Minister Kelvin Goertzen said an external third party will be hired to conduct an organizational review of the Crown corporation. The review will be conducted under the authority of the Crown Corporations Governance and Accountability Act.

“This organizational review would be important and would give us an opportunity to make sure that we’re doing the best that we can for Manitobans when it comes to both their value for money but also the quality of services that they get from MPI,” Goertzen, the minister responsible for the corporation, said Monday.

Tory MLA Ron Schuler (Springfield-Ritchot) was also appointed to MPI’s board of directors.

“There’s been enough concerns raised by the (Public Utilities Board) through some of the submissions (and) there’s been enough concerns that have come to my desk as minister,” Goertzen said when asked if he has confidence in the corporation’s leadership.

“So there needed to be a response.”

The review follows a series of controversies for MPI and its chief executive officer, Eric Herbelin.

Project Nova is now expected to cost the corporation $290 million to complete, nearly tripling its original $100 million price tag. The overhaul of MPI’s information technology systems will eventually allow customers to make collision claims, renew driver’s licences and access other basic services online. It’s now scheduled for completion sometime in the 2025-26 fiscal year.

The PUB, Manitoba’s consumer watchdog, raised significant concerns over the expense and management of the project in its 2023-24 general rate application decision and ordered additional oversight and financial reporting for the corporation.

The independent, rate-setting authority described Nova as “somewhat undefined and lacking in management control.” It also expressed concern with “an apparent lack of management control over (information technology) expenses.”

“There’s been enough concerns raised by the (Public Utilities Board) through some of the submissions (and) there’s been enough concerns that have come to my desk as minister… So there needed to be a response.”–Justice Minister Kelvin Goertzen

Despite the cost overruns and delays, Project Nova “in and of itself wouldn’t have been a reason to have an organizational review,” Goertzen said, noting the project is back on track.

“There were other considerations and concerns,” he said.

MPI has also faced criticisms for diverting $113 million from Autopac revenues to cover the cost overruns and increased costs for driver and vehicle licensing. To deliver Nova, the corporation also awarded $12 million in untendered contracts to external consultants.

In response, Goertzen issued a ministerial directive to ensure MPI uses a competitive process to source goods and services, and to require approval for direct awards and sole-source contracts worth more than $50,000.

MPI’s proposal to boost its full-time payroll by 14.6 per cent in 2023-24 also earned a rebuke from the minister and instructions to revise its hiring plan under threat that its budget would not receive government approval.

Goertzen said the financial basis for MPI’s rate application also raised red flags.

The review will look at the executive structure of the corporation to determine whether there are “challenges at that level,” he said.

The corporation will not be permitted to propose any changes to rates for service or “materially change its operations” while the review — which is expected to be completed by Dec. 31 — is underway, he said.

However, the corporation will be expected to work with the PUB to address issues identified by the board.

MPI communications manager Kristy Rydz said the corporation had not received an official directive from government as of Monday afternoon and could not comment on the details of the review. Herbelin was not made available for an interview.

“MPI will fully co-operate with the review and commits to providing information in a forthcoming manner as needed,” Rydz said in an emailed statement.

Goertzen said MPI cannot apply for any increase or decrease to rates while the review is underway. The corporation was scheduled to file a general rate application in June.

“They need to pause, essentially, any substantive changes to the organization,” Goertzen said. “But they have to, of course, report in the way that the (PUB) has directed them to report in their previous orders.”

“They need to pause, essentially, any substantive changes to the organization… But they have to, of course, report in the way that the (PUB) has directed them to report in their previous orders.”–Justice Minister Kelvin Goertzen

Consumers’ Association of Canada-Manitoba board member Peggy Barker said its clients are worried the directive may give MPI the opportunity to avoid a general rate application hearing in the fall.

“The PUB rate hearing process should not be sidetracked because of the operational review,” Barker said.

CAC-Manitoba was an intervener in the last general rate application and requested the PUB vary its rate decision after learning MPI would change its hiring projections for this year.

The PUB had approved a 1.54 per cent rate increase for the average driver based on increased operating expenses, driven in part by staff increases.

The request was to be considered during general rate application.

“There has been a dramatic rise in staffing levels despite a drop in the accident rate and Project Nova’s costs have more than doubled in just one year,” Barker said. “Basic insurance rates are being put under significant pressure by imprudent MPI decisions.”

The PUB declined to comment Monday.

NDP critic Matt Wiebe said the governing Progressive Conservatives must call a meeting of the Standing Committee on Crown Corporations to allow MLAs to question Herbelin and MPI board chair Michael Sullivan in a public forum.

“We don’t even know, at this point, the scope of the problem. We don’t know what the organizational issues may be,” Wiebe said. “Having an opportunity to sit down with the CEO, with senior leadership and ask those questions… could be one way that we could get to the bottom of this.”

— With files from Carol Sanders and Kevin Rollason

danielle.dasilva@freepress.mb.ca