Government Operations Committee on June 17th, 2008

[Charlie Angus, NDP, Timmins—James Bay, ON]

So we're going to move from many competitive players to a world of three, maybe two. That's what we're looking at.

The Auditor General raised a number of red flags about the bundling of large IT contracts. What concerns were raised?

[Mike O'Neil]

Primarily the cost overruns, the fact that these large IT projects become unmanageable, and at the end of the day the Canadian government and its clients don't get the expected delivery from doing these large IT contracts in the first place.

We have many examples of that. Obviously the firearms registry is the classic one. Secure Channel is another recent one in the same boat. It was basically dismantled after it was decided it couldn't be accomplished in a cost-effective manner. If you realize that banks do transaction processing probably at five to ten cents a transaction, and Secure Channel was costing $4 a transaction, it pretty well tells you we spent all that money to find out that departments were not wanting to be included at that price. Therefore, it failed.

[Charlie Angus, NDP, Timmins—James Bay, ON]

You talked about how at the present time you're winning 65% to 70% of the contracts that are coming up. To me, that's a pretty dramatic marker, to go up against the big guys and still be pulling out 70% based on competition, based on ability to get the job done. I know my colleague, Mr. Kramp, said you sounded a little whiny this morning.

I'm trying to understand the mindset that would freeze out competition, limit the number of people who could bid, and then the need to bundle the hardware, the bandwidth, and the IT support over a 15- to 20-year period. I'm trying to think what kind of mindset thinks that could deliver value for money.

Do you feel this is a Conservative Party agenda or is this a new government being led around by the nose by their bureaucrats? Where do you think this is coming from?

[Mike O'Neil]

As we stated previously, we're not sure where it's coming from. What we do know is that it's not in the best interests of SMEs. What the Conservatives have been saying continually since they were elected, and before, is that they're here to support SMEs. That's not occurring.

I talked about the lack of consultation with SMEs. We can be sure that PWGSC senior bureaucrats are meeting with large integrators. We know they made a presentation to ITAC, which is one of the other associations. A lot of the large integrators are part of that association. They made no offer to come and talk to us.

We also understand a visit is scheduled in early July for PWGSC bureaucrats to visit a large integrator in the States to understand their delivery model for shared services. We have that—

[Charlie Angus, NDP, Timmins—James Bay, ON]

An American player—

[Mike O'Neil]

It's a large integrator that has offices in Canada, but they're taking them to their headquarters in the States to spend a few days and see what they can do on a shared system.

[Charlie Angus, NDP, Timmins—James Bay, ON]

We might be getting Halliburton running our—

[Mike O'Neil]

I don't know if they're located in Virginia.

[Charlie Angus, NDP, Timmins—James Bay, ON]

I'm looking at this and trying to get a sense of where we're going. We just had testimony, and I'm certainly looking forward to seeing our civil service people coming up next on the CGI TPG contract. No matter how you look at that, there was certainly a prima facie case for smell on this. We certainly got very sketchy answers as to how such a big contract was possibly interfered with, and how someone, a smaller player, was left out of the game.

You said earlier you thought this bundling was already happening. Is that your sense on the ground, that this is the direction that Public Works wants to move in and that they're well on the way?

[Mike O'Neil]

Based on what brief and little feedback we got on this, it pretty much was a fait accompli that they were going with large integrators before the RFI appeared on the street. That's when we woke up to the fact that SMEs were not going to be able to play in this game.

It's not just Ottawa-Gatineau SMEs; these are SMEs across the country, because this is a national network, and anybody who does work in any of these sectors across Canada will either have to pony up to the winner or find other business elsewhere.

[Charlie Angus, NDP, Timmins—James Bay, ON]

There's going to be a little dog-and-pony show, with the glasses of white wine served at a large U.S. integrator for our Conservative Party friends.

What are the implications for deliberately freezing out innovation and mid-sized companies in Canada? There are only a few players left, so this would leave us open to the big American players. What do you think of the agenda to freeze you out, so that we can open the door to the very large U.S. players, like Halliburton?

[Jeff Lynt]

There have been a number of points made.

I'd like to say that I take particular offence to Mr. Kramp's point about whining—in light of the fact that there are families at risk here, mine particularly.

I suggest to you that the solution you refer to is exactly what SME brings. SMEs supply the innovation to the Canadian economy. I appreciate that you said you were at one time a small innovative company.

At one time, Alexander Graham Bell invented the telephone, and if it wasn't for that great invention the world would be very different. He was a small business at the time.

I also want to note that I see some individuals around the room playing with their BlackBerrys, which came from a small company called RIM, which appears to have changed this room, if not the entire world, with mobile devices.

Innovation has driven this economy and has built Canada to what it is today. We now risk destroying that ability. Note also that this Ottawa area was built from a lot of spinoffs from companies whose innovation was responsible for growing a local IT economy.

I think that eliminating small business and not allowing us to provide our specialized services does a disservice to Canada. We offer specific solutions to our clients, and it is what they want. We don't win 70% of the business because we're not offering good solutions at good prices. We win this business because our clients are interested in our services, and they agree with our approach. We're not stymied by one model, one size fits all, trying to fit a square peg in a round hole, as the large integrators often say.

For some reason, bureaucrats have been convinced that bigger is better, and that is blatantly wrong. It's not true—it's never been true. It's always been small business that has driven our economy, and it's just as simple as that.

[The Chair, Liberal, Diane Marleau]

Thank you.

Mr. Silva.

[Mario Silva, Liberal, Davenport, ON]

Thank you, Madam Chair.

I want to thank the witnesses for coming forward before the committee. All of us have found what they've had to say very interesting and very important. I think all of us should be troubled and concerned about the actions the government is taking to limit bidding, particularly by small and medium-sized businesses and enterprises, and to prevent access to that $600 million in contracts that has been spoken about.

I think this is quite a shame, and all of us are very much concerned about it. I hear there might be a motion coming from our colleagues in the Bloc, which I think is worthy of support. The statements have already been made by members, and the witnesses have also articulated quite well their concerns. I think all of us should share their concerns, because it doesn't make any sense at all what the government is doing at the moment.

I don't really have too many further questions. Maybe they have something they want to add, because all of us are concerned about competition out there, especially when we're dealing with businesses, some located here in the Ottawa area and in Canada, that are going against large multinational and foreign companies. They're not providing local jobs, as these companies are doing. Why would we favour them at the risk of not supporting our own domestic enterprises and businesses?

It's also true, Madam Chair, that these small companies, with a bit of support and over time, become large companies. They go from 40 employees to 400 to 4,000 employees. These are the companies that most likely will have success in the future, and we definitely have to be supportive and do everything we can I think as members of this committee to make sure they're given their fair share.

This is about fairness. It's about access for everybody, and it's about not limiting these particular bids. When they're given an opportunity, they're just as effective and they do just as well. In fact, they are beating the big companies when the tender is up and they bid. They're doing extremely well. And it seems that somebody has found a creative way to in fact eliminate these very successful businesses that are providing value for our money and for taxpayers. I find it a bit shocking that now, all of a sudden, they have limited access. If anything, if we want to have value for our dollar, what needs to be done is to provide access to everybody, not to limit access. I think they've articulated very well a very good case. Members around here have also expressed their deepest concern, shock, and dismay at what's taken place.

I don't know if there are any other comments they want to put forward. We have the picture, we know the picture, and now it's a question of whether the committee should act on it.

If there's any further time, they might have a comment or two to make.

[The Chair, Liberal, Diane Marleau]

Thank you, Mr. Silva.

Was there anything you wanted to say?

That being said, we'll go to Madame Faille.

[Meili Faille, Bloc, Vaudreuil—Soulanges, QC]

Thank you, Madam Chair.

We have heard a great deal of information this morning. I'd like to come back to my colleague's question about when exactly you learned of these major technological changes. I have to say that when I first arrived at this committee, I did ask some questions about IT and the changes at PWGSC over the past 10 years. We held a similar debate several years ago, when we wanted to promote integrators. So then, we are familiar with the various arguments associated with this issue.

My colleague put a question to you. Since 2007, it appears that efforts have been made to fast-track the process to favour large integrators. There are very few of them on the market. Certainly, there are reasons for doing this, and we'll hear about them later. You mentioned that on June 6, some major changes were made to requests for information.

As for how the situation evolved between December and June, PWGSC initiated certain actions that you are aware of and demonstrated that it was cost-effective to take this approach, move forward with this plan and do some feasibility studies. I'd like to draw a parallel between this situation and what's happening at Citizenship and Immigration Canada.

Mr. Lynt, you spoke of the immigration system. I was once a member of the Standing Committee on Citizenship and Immigration and each time we reviewed budget requirements, we received repeated requests for more money. This is an example of a major project that experienced cost overruns, specification changes and major delivery delays. The system is still not operational today, even though it was supposed to be ready several years ago.

Could you tell us again about the new request for information process and how your small business learned of it?

[Mike O'Neil]

That was a long question.

As I've stated, it was when the request for information appeared on the government electronic bidding system last December that we had our first indication that the contracts for shared services were only going to be awarded to large integrators based on the contents of the draft RFP that were part of that RFI process.

We were allowed to provide feedback, but we had not been consulted prior to this RFI process as to how it should proceed or how SMEs and companies with innovative solutions could be involved in the process. Our situation right now is that there's an RFP imminent in the fall that will only be available to large integrators to bid on, and in some cases a lot of large integrators won't be able to bid on it because they won't have a telecommunications partner. This is a combination; you have a large integrator with a telecom company required to deliver the network services.

Jeff may have some other points.

[Jeff Lynt]

I just wanted to add that it does indeed appear as though there is favouritism for large integrators. The fact of the matter is that we're not being consulted enough. We're just not getting the time the large integrators are with the senior bureaucrats.

We've asked; in fact, at one meeting we did have, Mike was the only person allowed to meet with Steven Poole. If it had been anybody else, the meeting would have been cancelled. I would have loved the opportunity to look Mr. Steven Poole in the eye and ask him why he's killing us.

[Meili Faille, Bloc, Vaudreuil—Soulanges, QC]

In the space of nine months, they have managed to put the entire SME sector at risk. This is a major concern and I think the committee needs to urgently consider this matter.

You also mentioned other agencies, including small business associations. We receive a considerable amount of material at our offices. I recall that in 2006, we had some meetings with the CFIB. In a letter reporting on its meetings with Minister Fortier, the CFIB also expressed some surprise at the government's plans for a number of sectors, specifically, the IT sector, the engineering sector and the goods and services sector. Supply was one of the topics discussed. The government had a tendency to use major suppliers at the expense of regional offices and suppliers with access to federal contracts.

Have you ever laid eyes on a feasibility study of this approach or model? The Auditor General has complained repeatedly about the way in which major projects are handled. Recently, she talked about her opposition to or reservations about the contract awarding process. She also alluded to public accounts. I don't know what more to say, if only to stress the urgency of the situation.

It seems that everything will take place in the middle of the summer, when Parliament is in recess. The same thing happened last year in the case of other projects and other major government initiatives.

I'll leave it at that. Thank you.

[The Chair, Liberal, Diane Marleau]

Merci, Madame Faille.

We're going to end with Mr. Albrecht for this part of the session.

[Harold Albrecht, Conservative, Kitchener—Conestoga, ON]

Thank you, Madam Chair.

I want to thank each of you for being here today. I want to assure you that I remain, and I believe my colleagues remain, committed to SMEs. I think if you will review some of the meetings that this committee has conducted, there is a definite focus on that. But I do value this dialogue today. I think it's helpful for us as Conservative members to hear your concerns.

On the issue of consultation, I just want to confirm. I think I heard you say that you did respond to the December 2007 request for information. You did respond to that, and you were never consulted following that submission. Is that accurate?

[Mike O'Neil]

We were never consulted before the RFI process and we never had any industry consultation after the RFI was released. Our only opportunity was to provide feedback to PWGSC, and when we asked once the feedback had all been received whether there would be further industry consultation, we were told there wouldn't be.

[Harold Albrecht, Conservative, Kitchener—Conestoga, ON]

But I think you said earlier that ITAC was consulted following the RFI and you were not.

[Mike O'Neil]

We have copies of a presentation that was made directly to ITAC by Mr. Poole, and I can't remember exactly when that occurred.

[Harold Albrecht, Conservative, Kitchener—Conestoga, ON]

I want to put on record as saying that I think it would have been valuable to have your group consulted. You obviously represent a large proportion of the SMEs, and I want to go on record as saying that, and I will try to follow up with that.

I have just a quick question in terms of what percentage of contracts would your companies secure with government agencies and what percentage with private enterprises? Are you mainly in government services?