MPI questioned for rising project cost

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This article was published 12/01/2023 (613 days ago), so information in it may no longer be current.

WINNIPEG — Manitoba’s consumer watchdog has ordered a closer look at spending by Manitoba Public Insurance, citing concerns the Crown corporation has lost control of its $290-million budget to overhaul its IT systems.

The Public Utilities Board has directed additional oversight for Project Nova, the Crown corporation’s plan to modernize its operations and offer basic customer services, such as licence renewals and collision claims, online.

Project Nova was initially estimated to cost the public auto insurer $106 million (including contingencies) and take three years to complete. However, timelines and expenses ballooned to just under $290 million, with completion now expected in the 2025-26 fiscal year.

The PUB said it is concerned expenses will continue to rise as Project Nova is rolled out.

“The Project Nova budget has now more than doubled from the initial business case and significant uncertainty remains,” the PUB wrote in its order to MPI as it approved a 1.54 per cent rate increase for the average driver in 2023-24.

Significant increases to operating expenses at MPI, driven in part by staff increases related to Project Nova, factored into the PUB’s rate decision.

The PUB has directed MPI to provide a revised project scope by April with clear objectives and costs; provide regular updates on budget changes; meet with the PUB to review all project aspects; and include a five-year budget and report on Project Nova in its 2024 general rate application.

The independent, rate-setting authority said Project Nova “appears to remain somewhat undefined and lacking in management control.” It also expressed concern with “an apparent lack of management control over [information technology] expenses.”

“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.

“If MPI cannot demonstrate that it has made prudent choices in its plans for Project Nova and is making efforts to contain costs, there is a significant risk that MPI’s next rate request will be found to be not just and reasonable.”

Consumers’ Association of Canada-Manitoba board member Peggy Barker said MPI failed to manage staffing levels and Project Nova adequately, which is putting more pressure on insurance rates. The CAC-Manitoba was an intervenor in the general rate application hearing.

“As compared to pre-COVID levels, MPI is experiencing a declining rate of collisions driven in part by improved vehicle safety technology as well as many Manitobans working more at home,” Baker said. “The failure of MPI to prudently manage its staffing levels has been compounded by its struggles in controlling major capital programs.”

The order says MPI plans to increase the number of full-time equivalent positions on its payroll by 14.6 per cent in 2023-24, to 2,348 from 2,048.

Additional staff requirements are needed to fill competency gaps, service levels and to deliver the IT project, MPI said. As many as 120 consultants are working for the corporation, with 44 dedicated to Project Nova.

The PUB said it is not convinced mobilization of dedicated Project Nova employees will prove to be a prudent decision. It also flagged the potential for the project’s scope to expand.

Mark Giesbrecht, vice-president and chief financial officer of MPI, insisted the Crown corporation has control over Project Nova, though concerns raised by the PUB are fair given changes to the budget and timeline, he said.

“As it pertains to Project Nova, we have multiple layers of oversight, multiple layers of governance. We do have a significant layer of management, we have a significant layer of our staff that are involved in the program to ensure that it is successful,” he said.

MPI has gone through a number of levels of due diligence to arrive at the forecast budget for Project Nova, the CFO noted.

“We have confidence that those are the figures we can deliver to and that’s exactly what we’re striving to achieve,” Giesbrecht said, while cautioning significant components of Project Nova are still being fine-tuned.

“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.”

Giesbrecht does not anticipate the corporation will dispute requests for enhanced reporting.

NDP MLA Mintu Sandhu, who is the party’s MPI critic, said additional oversight of Project Nova is necessary.

“Now it’s up to $289 million. We don’t know exactly where it is going and delayed by a couple of years. Every year it’s delayed, it’s costing Manitobans more money,” Sandhu said.

Kelvin Goertzen, the minister responsible for MPI, did not respond to a request for comment on Thursday.

Instead, in an email, a government spokesperson said Project Nova will strengthen public insurance for years to come. The staffing levels for Project Nova in 2023-24, cited in the PUB’s decision, have not yet been approved, the spokesperson noted.

» Winnipeg Free Press