A judge-led commission in Quebec has found that the state agency responsible for driver’s licenses and license plates misled the Canadian government about a troubled SAP ERP project that ran more than C$245 million ($179 million/ £132.6 million) over budget.
The report into the disastrous nine-year project – which went live three years later than first predicted – also reveals that Société de l’Assurance Automobile du Québec (SAAQ) did not know whether ERP was the appropriate technology for its digital transformation program and the launch of an online processing service called SAAQclic.
During the early planning process in late 2014, the project’s management relied heavily on SAP to understand if it needed an ERP suite to achieve its goals in digital transformation, the report said. SAP at the time was preparing to bet its future on S/4HANA – its flagship ERP product – which SAAQ ended up adopting.
The report, tabled by Judge Denis Gallant, said the level of ties between project planners and SAP during the pre-tendering stage was surprising. It found evidence that SAP had a privileged place with SAAQ’s staff and provided information on the operation of its systems before the launch of competition, in which Microsoft, Infor, and Oracle would participate.
A spokesperson for SAP said: “SAP has cooperated fully with Quebec’s Gallant Commission in its investigation of the 2017 procurement and implementation project run by the Société de l’Assurance Automobile du Québec (SAAQ).
“SAP is committed to the highest standards of ethics and compliance in all the markets in which it operates, and maintains a robust compliance management system to ensure that the company is compliant with all laws and regulations, providing assurance of integrity in all engagements with customers, partners and all stakeholders across the world.”
The report says the internal project team carried out a matching process for ERP against SAAQ’s needs across a range of project areas, and then combined the scores to reach a conclusion. The commission criticized the process for failing to consider how widely matching scores varied. For some areas, such as insurance, ERP scored highly – SAP has a tailored product in this industry. In other areas critical to SAAQ’s main business – the public-facing issuing of driver’s licenses and license plates – ERP did not score as well.
The project’s directors approved the decision to buy an ERP product for the main technical solution for its digital transformation in February 2015. They said they made the decision after considering in-house custom development, a best-of-breed plus integration approach, and an ERP suite.
However, the commission said it could not find evidence of the project team’s separate in-depth analysis of the three approaches. Following a competitive tender, SAP was selected as the main software supplier and LGS, a local IBM-owned company, together with Big Blue, was appointed the systems integrator.
The first phase of the project went reasonably smoothly, but during the second phase, the project ran into trouble, the report states. It dealt with processes at the heart of SAAQ’s mission, including issuing driver’s licences and vehicle registration certificates, and was expected to take two and a half years, from October 2017 to April 2020. It planned to go live with a front-end SAAQclic online system in January 2020.
The second phase was different from earlier work in that it required a high degree of customization to the ERP suite. The commission said this was the beginning of the project’s financial troubles. The requirement for a highly customized solution was compounded by a number of other factors. In September 2019 – more than two years into the overall program – the project leaders decided to change the scope and include processes to support roadside enforcement and checking driver licenses. This work was awarded to the IBM/SAP alliance without outside competition.
The tech teams also found business rules they hoped to define in the ERP suite were more complex than expected, and poorly documented. From the outset, the team decided to adopt an agile methodology, in which the implementation begins before the design is finished. But because of the lack of documentation and unforeseen complexity, the approach led to a massive increase in the number of iterative sprints needed to get to a solution.
Lastly, the project was plagued by a shortage of skills and a high vacancy rate. The commission criticized SAAQ for its lack of preparation and SAP/IBM for underestimating the complexity of the work.
An IBM spokesperson said: “We acknowledge the work undertaken by the Gallant Commission and are reviewing their findings carefully. Our engagement followed a thorough and rigorous procurement process, and we acted in good faith in accordance with the law, our contract, and applicable professional standards.”
The program’s budget for the build phase was C$375 million ($274 million/ £202 mllion) in July 2017. By September 2020, that had nearly doubled to C$682 million. Including support until 2027, the total cost was set to be C$968 million. The go-live of phase two was also pushed back to the spring of 2023. It did not go smoothly.
In November 2022, several witnesses working on the project said they had found the solution was not ready for deployment, the commission said. But instead of delaying the launch, the project’s leadership sanctioned an additional payment to the SAP/IBM alliance, one it was only supposed to receive once the work was complete.
At the end of January, most of SAAQ’s services and transactions were closed to the public until the system went live on February 16, 2023. It had prepared the publicity to introduce the new online system, SAAQclic.
On February 20, 2023, the SAAQclic portal opened for all customers. It was either unavailable or slow, the report states. Unable to process some transactions, independent merchants directed customers to the SAAQ offices. As the public tried to use the portal, they struggled to get it to work, and they also turned up in person. SAAQ’s offices were left grappling with a new system and a deluge of people demanding services. A TV report showed large queues forming, and with other reports including angry customers venting their frustration by raising voices against staff, some of whom called the police. The police themselves were unable to access the system to perform roadside checks of vehicles and drivers’ licenses, resulting in unjustified arrests and detentions.
In March, the government intervened, with Minister of Transport Geneviève Guilbault signing three orders, including one temporarily suspending police tickets and fines for driving without a valid licence. In April 2023, auditors from PwC were brought in. They later concluded phase 2 did not meet its specifications. Two further payments of around $100 million were sanctioned to the alliance. The implementation program was ended in September 2023 as phase 2 was completed. In 2025, SAAQ formally decided to put an end to subsequent phases 2.5 and 3, even though they were included in the original budget.
In its early, pre-tender estimates, SAP said SAAQ’s ERP system might cost a total of between C$141 million and C$163 million, including both internal and supplier costs. The project ended up costing around C$620 million, and delivered less than the original scope. Including ongoing support, it was C$1.1 billion.
The commission is highly critical of the project’s leadership. Its report says they misled government officials about escalating costs and delays. Judge Gallant called for honesty in public projects, not least because even when they are failing, there is an opportunity to learn.
SAAQ may reflect on its decision to put an ERP system at the heart of its digital transformation. For now, it has a highly customized implementation of SAP S/4HANA, which future tech teams may need to maintain and one day upgrade or move away from. ®
