New passport processing system $75M over budget

Another government IT project is going off the rails, this one intended to issue Canadian passports faster and cheaper than the current system.

The so-called Passport Program Modernization Initiative, launched in 2014, is at least $75 million over budget and well behind schedule.

"From its outset, the complexity … was underestimated," says an internal document, explaining a series of setbacks to the ambitious plan.

"The project management capacity and expertise was insufficient for the complexity and scale of the initiative."

The January 2017 document, obtained by CBC News under the Access to Information Act, says that in initial tests the new system actually increased processing times, rather than decreased them as planned, and allowed breaches to Canadians' confidential information.

The passport mess joins the botched Phoenix payroll system, the struggling email transformation initiative and the Canada.ca project as IT schemes inherited by the Liberal government that have bogged down in delays and cost over-runs.

But unlike the other three, the fees Canadians pay directly for their passports are going to bail out the modernization project rather than general tax revenues.

That's because passport fees are much higher than the actual cost of producing the document, and surpluses can be used for improvements in passport processing, including the modernization project and its budget overruns.

Online renewals

The passport project was first approved in December 2013 with a five-year, $101.2-million budget, and was intended among other things to let Canadians apply online for renewals. The project was to be complete by June next year.

But Immigration, Refugees and Citizenship Canada — which has run the passport office since July 2013 — now says modernization will cost at least $176 million, a 75 per cent increase so far, and will not meet next year's deadline because of delays.

"The project schedule is under review and planned activities are being resequenced to occur at a later date," says a report on the project.

CBC News has previously reported on the first flubbed test of the new system, starting on May 9, 2015, in which at least 1,500 passports were produced that were vulnerable to fraud and tampering.

The test was carried out despite warnings of some officials that it posed significant security risks. In the summer of 2015 the department suspended its use of the new system, which was plagued with hundreds of glitches. Officials said none of the 1,500 problematic passports was issued to any citizen.

An internal audit of the initiative's first stages found a raft of problems, including lack of cost control.

"The reporting did not track project spending against budgeted activities," says the February 2016 audit report, adding the project "did not include a plan for security requirements."

In 2013, the new fee for a five-year passport was set at $120 compared with $87 previously, and the department introduced a new 10-year passport for a $160 fee.

Revenues currently far exceed expenses; the passport program generated a surplus of $253 million for 2015-2016, the most recent year reported.

Revenue to drop

But because more Canadians are holding 10-year passports, the department expects revenues to drop significantly starting next year as fewer people need renewals.

The program will start drawing on its accumulated surpluses after next year to avoid deficits — but the modernization program's cost overruns will add to the fiscal pressures.

That's the opposite of the original plan, which was for the passport modernization project to dramatically cut the cost of issuing passports, and help IRCC get through the lean years from 2018 to 2023 as revenues decline because of the effect of 10-year passports issued in 2013 and after.

"It was believed that subsequent business and system modernization … would quickly lead to efficiencies, and financial savings could be achieved during the forecasted decline of application volumes resulting from the new 10-year passport," according to a heavily censored Dec. 23, 2016, status report, also obtained by CBC News under access to information.

That report says the department is using the new system to issue two other document types (Certificates of Identity, and Refugee Travel Documents), as well as a "small volume of regular passports" for testing purposes only. The report also notes the existing "legacy IT system is nearing the end of its lifecycle."

A spokesperson for Immigration, Refugees and Citizenship Canada, Beatrice Fenelon, said the next phase of the modernization project is expected to be complete in December 2018, though Canadians won't be able to do online passport renewals until sometime after that date.

The original plan called for a full launch of online renewals in March 2016.

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