Government Operations Committee on April 30th, 2009

[Jean-Yves Roy, Bloc, Haute-Gaspésie—La Mitis—Matane—Matapédia, QC]

When you talk about a gateway, you are not talking only about Public Works and Government Services Canada. You are talking about all departments. Using the Internet, a small and medium enterprise could find all available information regarding all the other departments.

[Shereen Miller]

We will be building it for Public Works and Government Services Canada. At that point, the departments that want to incorporate their own specific procurement projects will be in a position to do so. It will be open to them as well.

[Jean-Yves Roy, Bloc, Haute-Gaspésie—La Mitis—Matane—Matapédia, QC]

That does not answer…

[Shereen Miller]

We are the ones building it. The first step is to develop it, and when the single gateway is in place, people will be able to enter.

[Jean-Yves Roy, Bloc, Haute-Gaspésie—La Mitis—Matane—Matapédia, QC]

If the other departments have a choice, ultimately that will not resolve the problem. When we talk about a single gateway, we are talking about an access portal to all information relating to small business. If you say that the other departments have a choice in this, then some will decide not to participate and we will have the same problem as before.

[Shereen Miller]

Those are precisely the obstacles we are currently reviewing. We are working with our partners and looking at all the areas where there have been complaints, because the difficulties they are encountering relate to just about everything—from registration, to obtaining a number allowing you to deal with the federal government, to receiving information about tenders on MERX. The mandate of the Office of Small and Medium Enterprises is to facilitate access to the government. I cannot speak for the other departments, but I can tell you that our role is to facilitate access for small and medium enterprises.

[The Chair, Liberal, Derek Lee]

Thank you.

Mr. Warkentin.

[Chris Warkentin, Conservative, Peace River, AB]

Thank you, Mr. Chair. Thank you, witnesses, this morning—turning into this afternoon. We appreciate your testimony to us.

I want some clarification of the numbers. We had the opportunity to speak to our American friends with regard to their efforts to include small businesses in their government procurement numbers. My understanding is that the United States is seeking to suggest to their departments and agencies that they reach a number in the mid-20s; I think it was 23%.

Just to clarify the numbers again, my understanding from your testimony is that for contracting with the federal government in Canada, the percentage is in the high 40s, is it?

[Shereen Miller]

For Public Works, as related to total value of contracts given to companies located in Canada, 49% has gone to small and medium enterprises in the recent year; previously it was 46%, and the year before that 43%.

[Chris Warkentin, Conservative, Peace River, AB]

So the numbers are continuing to go up.

[Shereen Miller]

That is the trend.

[Chris Warkentin, Conservative, Peace River, AB]

That I think gets to the bottom of what we as a committee are trying to consider and get to the bottom of. Obviously, in any contract there are always people who don't receive the contract and people who are disappointed as a result of that.

There are also folks who are concerned every time there is a change by government, because government by its nature is big. It has a lot of large moving parts. When there's talk of changing the way the procurement exercises are undertaken, people get nervous. We understand that and we appreciate the concerns people have brought to our attention. I hope we as a committee come forward with some suggestions that might help resolve some of the concerns.

What came up in some of the most recent meetings—Ms. saint pierre, maybe I can just put you on the spot for a moment—is the whole issue of government by its nature not being prone to be interested in taking large risks. There was a sense that possibly--and I understand where the suggestion comes from--small companies by their nature sometimes, especially when it's a new technology or some type of innovation involved, present a risk to the purchaser.

I'd be happy to hear about this issue from any witnesses who have any input on it. Is there a plan to encourage government agencies and departments to take a risk? Government by its nature is risk-averse. Is there any type of initiative that will allow people within departments to take a risk, especially with some of the newer technologies or innovations that are being presented by new and small businesses? By their nature, small businesses are usually the ones who are the innovators.

[Liliane saint pierre]

This is quite a big question. It's twofold, because we could spend hours on risk and what it is. If you compare with a major crown project to build some frigates and all that's involved in that, the notion of risk is different from when you're talking about risk related to the government using new technology in that sense.

On the first point in those questions, about risk inherent in the performance of a contractor, a lot of discussions are taking place. The department is committed with key other departments to look at the risk-sharing in some of our major contracts and the cost of our always wanting to take as little risk as possible. By doing so, we put the burden on the contractor for the delivery of large projects, and there is a cost to that.

The fundamental question is how we determine the minimum acceptable risk related to those large projects, and there is work being done on that. The topic today is SMEs, but we have large firms that keep coming back, and we do benchmarking with other countries to see.

Now, related to innovation and technologies tied to SMEs, I keep reading and hearing and finding examples of our Canadian SMEs being leaders in developing innovative technologies, mainly in the area of environment and greening. As such, it's very important for them to have the government. If the government buys those innovations, that is very good marketing for them, to either export or to sell to other businesses that might require them.

My understanding is that as of now there is a whole group, a committee being led by Industry Canada, that is looking at innovative technologies and how we could help advance and promote them within the government and within the country. Unfortunately, I don't have much additional information on this.

[Chris Warkentin, Conservative, Peace River, AB]

I really appreciate this. We've heard testimony of people who were concerned about these folks, Canadians who are building some very innovative and leading-edge technologies. The difficulty was that many times the RFPs coming out weren't asking for what their new technology was; they were asking for what the old technology was. There was possibly some disconnect there. We appreciate that this is something the government is working to address, because it is a concern we have heard around the table. I think we as a committee have been concerned to ensure that we as government were on the leading edge.

My sense is that we sometimes purchase in a reduced-risk atmosphere or in an effort to reduce the risk, because a flop of a technology or a flop of a project is obviously big news, whereas we never talk about and there's never a headline about the major success and the savings of dollars we incur as a result of adopting a new technology. There is the relationship with the taxpayers, the people who entrust us with their money to get the job done. I know there's a challenge, and I'm not sure how we get entirely around that whole issue of the fact that in some cases projects will fail, if in fact we are an early adopter of new projects.

I appreciate your answer.

[The Chair, Liberal, Derek Lee]

Thank you for soft-landing those issues for us, Mr. Warkentin.

I go to Ms. Hall Findlay for five minutes.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Thank you, Mr. Chair.

I wasn't sure if indeed I had any time left.

I have a question about the portal. I appreciate the value of it, but when you talk about a portal—and this is following on my colleague's earlier question—all well and good, in the description that you want a portal to come, one door to get into the room. It's all well and good, but if the room doesn't actually have all of the furniture you need, then the portal is not going to do you a whole lot of good.

I really would like to ask Mr. Connell--and I recognize that you might have a bit of a difficulty politically, but I don't want an answer that it's actually all okay. I've certainly heard the same complaint from small businesses, that there are different things in different places. What I would really like to hear from you, to the extent that you have the responsibility for helping small and medium-sized businesses, are any suggestions that you might have for how OSMI can work more effectively with you.

It's great to pick up the phone and talk to each other, but business isn't getting that sense. Can you provide some ideas, some thoughts that might in fact improve that? I don't mean just your two departments, but also Public Works' responsibility, OSMI's responsibility for small business, and indeed yours. I would suggest that it is not just with your department, but to the extent that small business operates with the rest of the government.

If you have time, I'd like to hear your recommendations on improving the BC environment, given that a number of provincial governments have made significant steps in the last few weeks.

[John Connell]

They have.

I have a couple of thoughts. The first is that as director general of small business responsibilities, it is a horizontal file. It's one of the most difficult in government to advance because you tend to look up the line to your particular ministerial priorities and ensure that what levers you're having as a department are working very well. You're on the hook to deliver on that, especially. So that's one thing. In my own area, for example, that is ensuring that the supply of financing through the BDC, through Canada small business financing, is working very well. Then we advocate influence horizontally out from that.

There are a lot of departments, a lot of agencies, that affect small business outcomes. So small business policy tends to be horizontal, including procurement policy, if you will, depending on the way you draw the line or your network. There's also tax policy--collaborating with the Department of Finance--and international trade policy and agriculture. Most departments will affect small businesses, so it's a matter of choosing where the highest incremental opportunity is to shape small business.

So we have two sets of files. One is where we have direct responsibility and the other is what I call push and prod. When a memorandum in the cabinet goes through and we have an opportunity to comment on it and influence outcomes in the interest of small business, then we will try to do that.

On procurement per se, we have had a relationship with Shereen, just kind of trying to understand the file, trying to be as helpful as we can.

On the portal, I would emphasize the Canada Business website that we do have. This goes back to 1993-94 when it was established. We have agreements with all provincial governments with respect to the website, the telephone service, and the walk-in service. We really do try to get as much information as we can within that particular program, and to make it seamless and easy for businesses to access.

Is it perfect yet? No. Is it transactional? No. Can we do better? Certainly, we can, and that is something that we are committed to do. It's an ongoing process of collaborating with our colleagues across the country, of ensuring that the content in that particular website is up-to-date. As I said, it's just a constant...you know, a link-over to procurement. I'd be happy to take you through the Canada Business website sometime.

[Martha Hall Findlay, Liberal, Willowdale, ON]

I have been there many times.

Could you speak very quickly on the VC piece?

[John Connell]

The most important way the federal government influences venture capitalists is through the Business Development Bank of Canada. There is the ongoing tax credit for LSVCCs, labour-sponsored venture capital corporations, but the BDC has been investing at a rate of $110 million per annum. They have about 5% to 10% of the market.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Sorry to interrupt, but specifically, a number of provincial governments lately in budgets have actually enhanced the tax credit for VC investment and augmented the limits. Is that something that you think would be helpful at a federal level?

[John Connell]

I think when we benchmark against some of the best venture industries in the world, we'll find that they're funded by institutional investors. They're naturals for investing for the long-term cycles required to realize venture capital investments. I think the question would be, how do you do more to incent teachers, OMERS, or other large pension funds in Canada to provide long-term commitment to venture?

The key to that is getting returns up. So it's kind of getting the ecosystem for venture capital, great entrepreneurs connected with financing, getting better results than we've had—not to say that there haven't been great companies in Canada, but ventures where they're looking for a fairly high return, given the risks involved in the investment.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Thank you very much.

[The Chair, Liberal, Derek Lee]

Merci.

Madame Bourgeois has a follow-up question.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

Thank you, Mr. Chairman.

Ms. saint pierre, I have one final question for you.

When you appeared before the Committee on March 3, you were asked whether you had made a decision regarding contract bundling, and you answered that no decision had yet been made.

However, in the document you provided us last week, it says: “However, there have been a number of significant achievements through the initiative 'The Way Forward'. For example, a government-wide approach to managing goods and services in relation to federal procurement has been developed.”

Ms. saint pierre, is it certain that a single procurement system for information technologies is going to be implemented? If so, will we have an opportunity to look at the management plan for that system? Otherwise, what can possibly be the meaning of the sentence where you state that you have made significant achievements in terms of a government-wide approach to managing goods and services?

[Liliane saint pierre]

That is a good question. We gave the example of temporary help. We deal with more than 100 departments, and they all have to make use of temporary help services. So, we developed a tool which allows them to access such services. We created a competitive process. As part of the government approach, we selected 125 companies that they can use. Any department that is interested can access these tools. That way, we are not continually starting the process over again, day after day, when a need arises. This is very helpful to small and medium enterprises, because they only qualify once. In addition, the ones that were unable to qualify have an opportunity to do so, because the information is updated every year. So, that is what we are talking about with respect to the government-wide tool.

As regards professional technology services, you have heard about the TBITS system on a number of occasions. It was implemented over the past couple of years and, in this case as well, companies are able to prequalify. Depending on their requirements, departments can avail themselves of these companies' services.

With respect to shared service initiatives, the federal government has an entire management system in place, as well as a series of network-related contracts. At the beginning of the meeting, we indicated that, as regards the first network-related initiative, we did hold consultations. The results of those consultations will soon be made available to you, as well as a number of recommendations affecting our procurement strategy.