How the same perverse government policies led to both the convention centre disaster and the breach of information

News

1. The Unisys contract

The contract between the province and the contractor hired to support the software used in provincial databases — including the Freedom of Information site that was “breached” last week — was the subject of a blistering auditor general’s report in November 2016.

In the early 2000s, the province adopted the AMANDA software package to replace eight different databases that had been used previously. AMANDA is a product of CDSC, an Ontario firm, and is widely used by governments. In 2012, the province extended AMANDA to manage business licenses and permits.

At the time, the system was overseen by Service Nova Scotia, but in 2015, responsibility was shifted to the Department of Internal Services’ Information Communications and Telecom Services division. At some point — the auditor general’s point doesn’t say when, and I can’t find the award this morning — support for the system was contracted out to Unisys Canada, another Ontario firm, which set up offices in the CIBC building on Barrington Street.

The province pays Unisys a lot of money. The auditor general’s report includes this chart:

But that’s merely the cost of maintaining the AMANDA system; along with other contracts, the province paid Unisys a total of $7.7 million in 2016/17 alone.

Auditor General Michael Pickup’s office audited the system in the summer of 2016. “The purpose of the audit,” he wrote, “was to determine whether Internal Services has controls over the information stored in AMANDA to protect the privacy, reliability, and availability of the data and if AMANDA supports the operational and strategic needs of its users.”

Neither was the case.

“AMANDA and its supporting systems have settings that do not fully meet the Province’s IT security standards,” wrote Pickup:

We found weak passwords, weak failed login settings, and other settings, which should be improved. We also found that Departments are not properly managing employees’ AMANDA access permissions.

The contract seemed to be on autopilot. Pickup continued:

Internal Services is not properly monitoring its contract with Unisys.

…

Lack of oversight – There is a lack of management oversight of the Province’s contract with Unisys. The steering committee, consisting of Unisys and department management, is responsible for the overall management of the contract and is contractually required to meet quarterly to review Unisys performance. We found the steering committee did not meet as required, but staff meetings at an operational level were held monthly to discuss performance issues.

Returning to the security issue, Pickup noted that:

… provincial contracts with service providers are supposed to include terms to meet the Province’s IT security policies and standards. However, the contract with Unisys does not include such terms. Unisys staff must sign off indicating they have read Nova Scotia’s security policy; however, there is no indication that they have also read and agreed to the Province’s IT standards.

The Province has a long relationship with Unisys and management believes less oversight is needed than what was defined in the contract. Without proper oversight, the Department cannot ensure contract terms are fulfilled to the level required. [emphasis added]

Back when the system was overseen by Service Nova Scotia, an independent consultant was hired to look at future arrangements for technical support for AMANDA. Pickup outlines three options that were considered:

Pickup wrote:

The analysis concluded that it would take seven years for the Province to have savings if it selected option 1. The Province decided to continue with option 3 and maintain existing services with Unisys. However, there were other options which could have been considered. For example, processing credit card payments was not assessed separately from providing the day-to-day technical services Unisys provides. Similarly, the analysis did not assess if there would be savings if the Province completed system changes and provided day-to-day technical support for AMANDA while contracting with Unisys for other services.

The consultant report also noted the Province is highly dependent on Unisys for AMANDA and recommended contracting with more than one service provider. The Province did not implement that recommendation and all services supporting AMANDA are still provided by Unisys. If Unisys were no longer able to provide technical support services for AMANDA, it could take time to find a replacement; this could impact the Province’s ability to use the application.

Costs of operating AMANDA – The Province has paid Unisys over $50 million for AMANDA since 2004-05 (licensing fees – $8 million, technical support fees – $45 million). Unisys services include the daily maintenance and administration of the application and changes requested by departments. Annual spending is approximately $4 million per year. The current contract expires in June 2018.

The continuous yearly costs for technically supporting and maintaining AMANDA warrant an analysis to determine if the Province is receiving value for money from AMANDA. This should be completed before the current contract ends in 2018. A value-for-money assessment would help identify whether the Province is receiving economy, efficiency, and effectiveness for the funds spent on AMANDA.

Internal Services’ response to the audit was simply to say that “A review of the AMANDA service and how to deliver it as a corporate service is underway and will necessitate a review of the support model options going forward. This work will be completed prior to issuing an RFP for a new AMANDA support contract.”

The auditor general’s report was issued in November 2016; and the contract is up for renewal in June of this year.

But just before Pickup conducted his audit — on March 31, 2016 — “Nova Scotia launched a new cloud based, province wide, Freedom of Information Case Management Solution built on CSDC’s AMANDA 7 platform system,” reads a press release from CDSC. “This new solution was implemented by CSDC Partner, Unisys, in under 9 weeks. Unisys is also hosting and supporting the solution within the Unisys Canadian Government Cloud.”

Among other things, the press release promised that the software would:

Reduce liability risks including unintentional information disclosure.

The system became live in January 2017.

Then, apparently in response to Pickup’s report and in anticipation of the approaching contract renewal date, Internal Services issued a “Request for Information for AMANDA Software Platform for the Internal Services Department.”

The obvious question is, Why does the province has such a cosy relationship with Unisys?

I can’t say for sure, but my gut tells me this is the result of two parallel mentalities that define modern governance: First, the desire to contract out services, and second, using contracting out as a “job creation” tool.

We’ve seen much the same thought process in the contracting out of SAP services in 2012 by the then-NDP government: the government got to claim to bring the “efficiencies” of the marketplace, while giving the company kickbacks in the form of payroll rebates in order to create an employment centre. But it’s anyone’s guess if the market is actually performing as efficiently as promised.

In Unisys’s case, there have been no payroll rebates extended to the company, but the whopping AMANDA contract — which has cost the public over $50 million since 2004, according to Pickup — is incentive enough to maintain its downtown Halifax office.

It’s a weird calculus that says we can outsource services and celebrate the jobs that are created, as the jobs would’ve been in-house if the services weren’t contracted out. As I’ll get to below, however, there’s a larger political purpose behind that calculus.

2. The convention centre failure is a social justice issue

It’s easy to get overwhelmed by the numbers and boring bureaucratic reports related to the convention centre. My own eyes glaze over sometimes when I’m reporting on it. But at its heart, this story is a social justice issue, and so we need to pay attention and slog through the details.

See, the convention centre deal was premised on the entire Nova Centre package. It’s one whole piece — you can’t separate out the convention centre from the office tower or the hotel.

I explored this in a 2010 article I wrote for The Coast, “The Convention Centre Tower Play“:

By 2006, the wealthiest Americans were depositing their unprecedented profits in banks and hedge funds headquartered in the island nations of the Atlantic, where Americans were sheltered from US taxes. Nova Scotia, in turn, offered big tax rebates to some of those firms to put their back offices in Halifax.

Pursuing the financial industry made sense in 2006 and still makes sense today, says NSBI’s Stephen Lund. “We need to raise the bar for everybody. We need to take university grads that are working in Tim Hortons and Wendy’s and get them better-paying jobs, and have everybody move up the food chain. The reason I’m saying financial services is, if we had new jobs that are below a certain level, then we’re not really growing the economy. We have to grow the top line of the economy — we really do. We’ve got to create more tax revenues, we’ve got to create more high-paying jobs, and we’ve got to be able to move everybody up the chain.”

This is, in a nutshell, the trickle-down theory of economics: Get enough high-income people, and the rest of the economy benefits. Whether this actually ever happens in the real world is an open question.

…

At the same time, Lund was publicly underscoring the need for more high-end office space downtown to accommodate more financial firms.

“International companies like to go to Class A space, they like to be clustered in the same area in a downtown, with a city where young people are living and working downtown,” said Lund last week. “Citco could not find two consecutive floors of Class A office space downtown today.”

Lund acknowledges that Ramia’s Nova Centre proposal is attractive because it includes a financial tower with Class A office space. “I’m a proponent of the convention centre,” he says. “I’m excited for more development downtown. I support that project, but I’d also like to see some of the other projects go up, too. I don’t care who does it; I just want to see it done.”

The people who run this province were so committed to the prospect of a giant new office building in downtown Halifax that could lure a gigantic financial firm to set up offices here that they steamrolled the Nova Centre/convention centre project right over citizen resistance, city budget concerns, and a competing plan to place a new convention centre on the Cogswell Interchange land.

A committee formed to judge competing convention centre pitches scored the Hardman Group’s Cogswell plan higher than the Nova Centre plan, but that scoring was quietly sidelined after Halifax city council decided not to tear down the Cogswell in a secret meeting orchestrated by then-planning manager, now-MP Andy Filmore.

When the convention centre deal was approved, I asked then-premier Darrel Dexter if the plan was to issue payroll rebates to a firm that could fill the Nova Centre tower:

On that note, I asked, is there any promise of future payroll rebates for a tenant in the financial centre?

“No,” said Dexter.

There’s been no conversation about that?

“No.”

So we’ll never hear about conversation —

“No, I’m not saying that,” interrupted Dexter. “You asked me if there has been any and I’m saying there’s not. But you know something, if we can use payroll rebates to attract good, solid financial services companies to this province, I’m more than happy to talk about it.”

How much would you be willing to pay in payroll rebates? I asked.

“That’s a ridiculous question,” replied Dexter. “It’s a ridiculous question because companies that come here come with a business plan in order to be able to fit within the province’s program. You’re trying to speculate about something that currently doesn’t exist.”

He was right about that: the deal for a financial firm to fill the Nova Centre didn’t exist, and still doesn’t. For a variety of reasons, the only financial firms the province has been able to lure with payroll rebates are relatively small, and even those firms aren’t producing the jobs promised in press releases announcing the rebates.

Yesterday, I interviewed Heywood Sanders for the Examineradio podcast (which will be published later today). Sanders is the urban studies prof who studies convention centres, and who came to Halifax to tell city councillors why the new convention centre was a horrible idea.

In our conversation yesterday, Sanders argued that the two-year delay on completion of the Nova Centre wasn’t because “Nova Scotians don’t know how to build buildings,” but rather reflected the frustrated but ongoing search for a financial firm to be a tenant in the brand new building. Evidently, they’ve given up, and so here we are with a gigantic, Borg-like monstrosity in the middle of downtown with only 30 per cent occupancy.

To be sure, developer Joe Ramia will be able to fill the thing eventually by offering discount rents to other companies now housed elsewhere downtown, but the Nova Centre has by itself perverted the entire office economy downtown: because it is so large, vacancy rates in downtown as a whole will soar, which means the assessments for office towers will tumble, and so the tax revenue generated in even a fully occupied Nova Centre won’t cover the convention centre costs.

I’m doing some reporting on this now, and it will take a while to get the full picture, but the tax situation is even more dire than we’ve been told. Much more dire.

And that’s just on the tax revenue side. We haven’t even gotten to the operational costs of the convention centre. Those will certainly — inevitably — increase far, far beyond what was planned.

I hesitate to throw out numbers for events that will happen in the future, but I can say with confidence that the convention centre deal will be a financial nightmare. City councils present and future will find themselves hamstrung at every turn, as city services are cut and taxes raised to cover the revenue shortfalls. You ain’t seen nothing yet.

So, as I put it to Sanders: I see this as a social justice issue. When budgets get consumed by crazy schemes to lure financial firms and with forecasts for an ever-more-successful convention centre that were clearly and obviously based on flat-out lies, that means the money can’t be spent on other city needs like recreation and transit, and on the provincial side (oh, just wait, we’ll see the financial hit to the province as well) for health care and education.

Sanders’ response, paraphrased: That was the point.

The decision to “invest” in convention centres, especially when that decision is knowingly based on lies, is a decision to lock in budgets for decades. It’s a political and economic decision to take money away from social programs and other needed government services, and instead use it for debt service, for subsides for the developer, as “incentive” payments to large corporations to hold events in Halifax, and for the managerial class that is associated with the convention centre.

In the U.S., Republicans who signed on to the tax cut plan and the associated increase in military spending flat out said that the resulting budget deficits will be used as an excuse to undermine Social Security and other social benefits. Give them points for honesty, I guess. The details and political parties are different here, but the effect is the same: the convention centre was signed on to precisely because it would constrain government expenditures on social programs.

It is, in short, a transfer of wealth. And that’s why we should care.

So what to do about it? Obviously, the city and province are committed to leasing the convention centre space for the next 25 years. There’s no easy way to get around those lease payments unless Ramia defaults on the entire project (which is possible). But actually operating the convention centre is going to be a far bigger money hole. We’ll start to learn the depth of that hole in coming months, but my sense is it’s going to be an order of magnitude bigger than the lease payments.

While we’re going to lose a lot of money on leasing the convention centre, we’re going to lose a lot more if we insist on operating it. So let’s shut it down. Just close it. Don’t hold conventions. Don’t further continue the upward transfer of wealth. Recommit government to work for the people and not against them.

Close the convention centre.

Government

City

Community Design Advisory Committee (Friday, 11:30am, City Hall) — here’s the agenda.

Province

No public meetings today.

On campus

No public events today.

In the harbour

5:30am: NYK Terra, container ship, arrives at Fairview Cove from Norfolk
7am: Atlantic Sail, ro-ro container, sails from Fairview Cove for New York
1pm: Nolhanava, ro-ro cargo, sails from Pier 36 for Saint-Pierre
1pm: CSL Tacoma, bulker, arrives at National Gypsum from Baltimore
4pm: Morning Clara, car carrier, sails from Autoport for sea
5:30pm: NYK Terra, container ship, sails from Fairview Cove for Dubai

Footnotes

I’ve got nothing.