Ballooning costs require provincial oversight
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Few would object to a plan by Manitoba Public Insurance to upgrade its information technology system, including new internet options to improve customer service. What is unacceptable is the budget to do so has nearly tripled in less than three years and is now $184 million higher than originally projected.
MPI identified the need several years ago to upgrade its IT system, which is outdated and was deemed unable to meet the future needs of the corporation. That evolved over time to include plans to provide customers with more online services, such as self-serve insurance renewals.
Project Nova, as it’s called, had an original budget in 2020 of $106.8 million, which included a $21.4-million contingency. That grew to $128.5 million the following year once contracts were tendered and MPI heard back from vendors. Since then, it has ballooned to a staggering $290 million as costs, including higher staffing expenditures and consulting fees, soared.
According to the province’s Public Utilities Board, which has put the project under the microscope as part of MPI’s most recent rate application, the latest budget update for Project Nova is only a “best estimate” and the final budget “is currently unknown.” The IT upgrade has expanded in scope and is more complex than originally envisioned, the PUB found.
The Crown corporation also doesn’t have the in-house expertise to properly manage the project and has assigned an inordinate number of staff to work on it.
“The board is concerned with the rate at which the corporation plans to increase its staffing complement,” the PUB wrote in its Jan. 11 rate-application report. “In particular, the board is not persuaded that the mobilization of staff devoted to delivering on Project Nova will ultimately prove to be a prudent decision on the part of the corporation, when the project appears to remain somewhat undefined and lacking in management control.”
Clearly, MPI has lost control of this project. Which is why the PUB has ordered the Crown corporation to provide it with a detailed spending plan, including a five-year budget, and a more defined scope of what the IT overhaul is expected to achieve.
According to the PUB, it remains unclear what part of the upgrade is designed to modernize outdated technology and where it has expanded into areas that are beyond the original scope of the project.
“The corporation should be proceeding with prudence and focusing on critical business needs, while avoiding cost overruns associated with increasing the scope of Project Nova beyond the core need to modernize technologies to run the business,” the PUB wrote.
Manitoba ratepayers, who will ultimately pick up the tab for this poor financial stewardship, deserve answers from MPI, its board of directors and, ultimately, the minister responsible for MPI, Kelvin Goertzen. Where was the oversight for this project?
Once MPI had a better idea of costs after vendors responded to tenders, how did spending estimates jump from $128.5 million to $290 million? What methodology is MPI using to project costs on large capital projects? These are questions that need to be answered.
Mark Giesbrecht, vice-president and chief financial officer of MPI, says the Crown corporation has “multiple layers of oversight” in the management of Project Nova.
“There’s still more diligence to go through, but based on everything we know today, based on all the advice from our experts, we do feel that we have a good handle on things,” he said.
That’s a startling comment, given what appears to be an almost complete lack of oversight of this project. This deserves the full and immediate attention of the provincial government.