Government Operations Committee on Oct. 19th, 2006

[The Chair, Liberal, Diane Marleau]

We're starting a wee bit late because of the previous committee, but we can always make up the time.

While the clerk distributes all the documents, I would like to welcome you. I would inform those who are appearing before a committee for the first time that we are going to ask you to speak in turn for about five minutes. Then, when everyone has made a brief presentation, we ask committee members to ask questions. That's how it works best.

I'm told Mr. Courtois has to leave early. So we'll ask you to begin. You have five minutes, Mr. Courtois.

[Bernard Courtois, President and Chief Executive Officer, Information Technology Association of Canada]

I represent the Information Technology Association of Canada. Our association represents businesses in all the information and communications technology sectors. That includes EDP equipment, computers, printers, servers, telecommunications and consulting services. That gives you an idea of our fields of action.

Essentially, all large businesses operating in this sector in the country, whether they're established in Canada or are foreign businesses, belong to our association and are often represented on our board of directors. However, 70% of our members are smaller businesses, and even the large businesses are very interested in supporting the development of those businesses because the important thing is the development of our sector in general in Canada.

Questions of procurement are very high on our list of priorities. They are among the three top issues we discuss regularly at our board. Government procurement is extremely important to our industry, not only in terms of the dollars spent but in terms of what they represent in helping our sector, which is a world-leading sector for Canada. In staying a world leader, our enterprises large and small will sell software solutions and services that enable the creation of centres of excellence that then sell their services world-wide. The federal government as a client represents probably 4% to 5% of the total business of our industry, which is very large in proportion, but that 4% to 5% has a much more significant impact because of the role of the government as a complex enterprise, buying world-leading solutions.

Our association and our industry support procurement reform. We support the objectives that have been laid out for a 10% reduction in the cost of goods and services being procured, a 10% reduction in the cost of the procurement process, and a 50% reduction in the time cycle for procurement. As an association, and we've said it publicly, we feel it incumbent on us as taxpayers and businesses to support the government spending its money wisely and saving money. At the same time, we do a lot of work on procurement issues. For many years we've had committees that meet regularly with government representatives and among themselves. We have commodity councils of our own that work on these issues. We feel it's extremely important to recognize what is appropriate procurement behaviour. The government, being a better and smarter buyer, we believe creates a win-win situation in which the government gets better outcomes and our industry sells world-class competitive solutions.

In the last couple of years we have begun to stray from the objectives that have been recognized on both sides as to what is needed to pursue in government procurement, and that is to buy value and to buy outcomes. We have strayed from that into focusing too much on the components of a total package, service, or project that the government buys, and that is causing awkward pressures on the procurement process. It is causing us to stray from the solution that is best for the government and for us as taxpayers and for us an industry. For example, when we buy a piece of equipment we wind up focusing way too much on say the 15% of the cost of buying a box, a desktop, rather than the 85% of the total life-cycle cost of the equipment.

On a project, we wind up focusing way too much on the hourly rate or the daily rate of people being hired piecemeal, rather than on the total cost of the project, and much less still on the much greater amount at stake in what's going to be saved or improved in government processes as a result of the project.

This year there was an additional degree of friction that was caused by some changes to the process that appeared to us to be coming out of the blue compared to the process we already had in place to discuss and make progress on procurement reform with the government. It caused a lot of doubt, uncertainty, and friction throughout the industry; and when we sat down with other associations, others shared the same view.

At this point, the minister has done the right thing by stopping some of the things that were causing the controversy and by launching a consultation process. We are in consultation mode. We've participated in the processes that are being led by the Conference Board, and we're looking forward to getting back on track to appropriate procurement reform that will focus on the Canadian government getting the best outcomes and our industry participating with a world-class buyer.

Thank you.

[The Chair, Liberal, Diane Marleau]

My goodness, you're right on time.

We'll go next to Mr. Michel Comtois.

[Michel Comtois, President , Micom Laboratories Inc.]

Good morning. I am the President of Micom Laboratories Inc. and, on an exceptional basis, I also represent the Association des fabricants de meuble du Québec, since Mr. Michaud could not appear here this morning.

This process began for the furniture industry two years ago. In fact, in January 2005, we were informed that the government wanted to change the procurement process. As taxpayers, we are all in favour of the government trying to improve the process. In one way or another, we have all witnessed situations in which the procurement process could have been improved. My perspective is somewhat different since, among other things, we in Canada have a system of national standards governed by the Canadian General Standards Board, the CGSB.

I sit on all the technical committees that set standards for the office furniture industry, and I even chair one of those committees. Although I'm resigning from that position, I have for a number of years been the head of the Canadian delegation for the ISO standards, more specifically for office furniture. I'm also a member of the Association des fabricants de meubles du Québec, AFMQ, and of the Business Institutional Furniture Manufacturers Association, BIFMA.

It is very important to realize — and I believe that the government has very recently been wise enough to stop and review its process — that we shouldn't throw out the baby with the bath water. And that's what the government was preparing to do in June, when it informed the industry of its new procurement policies. There has been an enormous amount of contact and discussion since that time. Fortunately, the government has decided to change direction. Recently, consultations were organized by the Conference Board, which represented Public Works and Government Services Canada. The industry was consulted in order to hear what it had to say.

First, the industry tried to tell government that it had to work with it, that it shouldn't be faced with a fait accompli, because it could help. It's preferable to work upstream rather than downstream. Furthermore, it also tried to assert that the current policy was leading it in the wrong direction. We get the impression that the minister's office clearly understood the message and that matters seemed to be changing direction. We've been reaching out to the government for the past two years; we want to work with it on this issue. It now seems sincere about wanting to do that. Moreover, late yesterday, an e-mail was circulated informing industry people that an advisory committee would be established. We applaud the government, which has had the wisdom to head in this direction, and we reiterate our interest in working with it to that end.

[The Chair, Liberal, Diane Marleau]

Thank you.

We now go to Mr. Fredette.

[Alain Fredette, President, FREDAL Solutions]

Good morning.

I want to thank you for this opportunity to express my concerns about the changes that may be made to the federal government's procurement process.

First, I'd briefly like to describe my business. I represent SMEs working in the same sector as my business, but I represent no association. I am President of FREDAL Solutions, which operates in the field of office equipment and furniture, particularly photocopiers. We distribute Sharp photocopiers, which appear on the federal government's standing offer. FREDAL has been in business for 29 years; it's a service business.

My presentation focuses on my sector, which I know best, the wonderful world of photocopiers. Without giving you a detailed description of the current photocopier procurement process, which you're probably already familiar with, I want to congratulate those who withdrew the reverse auction that threatened us last June. That could have been disastrous for our sector.

Photocopier manufacturers are chosen on the basis of very strict criteria, regarding reliability, price and other equipment characteristics.

Does the process facilitate matters for purchasers? Yes, and at the same time it sets very strict guidelines for them. In addition, the purchase price includes the price of consultations that can be very easily obtained. This makes it possible to obtain information on other options, whether it be in one equipment class or another. In addition, federal government copier buyers seem very satisfied with the current process.

Does the government get the best prices on photocopiers? Some might think that the federal government is currently paying too much for its photocopiers. I can confirm for you that the federal government gets the best prices of all organizations, whether they be school commissions, hospitals, municipalities or provincial governments. The federal government always pays the best price. We even recently discovered that the Canadian federal government pays lower prices for its photocopiers than the United States.

That's further proof that there's no need to reorganize the photocopier procurement system from A to Z. Minor changes may be necessary, but the system works well on the whole.

At present, prices include consultations, in particular to add new characteristics to equipment the client already owns. In my view, the federal government gets excellent value when it buys photocopiers.

Now let's talk about the SMEs. Our business hires a full-time trainer for photocopiers. She serves the federal government and our other clients as well. If the federal government was no longer one of our clients, do you think we could still afford to pay a full-time trainer? The answer is no. We also hire technicians who must be trained for a number of months on our manufacturer's premises so that they can make the repairs to these machines, which are quite complex.

Without the federal government, we couldn't hire those trained technicians, and the companies' operating costs and our own would increase sharply. High sales figures thanks to the federal government enable us to increase our expertise in other markets, whether it be at the commercial level, municipal level, in the health sector, etc.

There's talk about changing the process and having one, two or three suppliers. The dangers of this kind of decision are the following. You can go to small municipalities where a manufacturer has no distributor. For example, if you consider the Petawawa military base, there's no distributor in Pembroke. That means that Pembroke SMEs would lose those service revenues.

There's also a danger when you limit the number of manufacturers. You've probably heard that, in the context of the reverse auction, some of the major players in the photocopier and officer furniture industry said they didn't want to take part in the system because it was too dangerous for everyone. So there was a threat. Overlimiting the number of suppliers in our field would probably cause job losses in most small towns.

In conclusion, I don't want to speak for other sectors, but the photocopier procurement system should not be changed from A to Z. In our opinion, as we've previously indicated, changes may be necessary, but they should be minor.

Thank you for your attention.

[The Chair, Liberal, Diane Marleau]

Thank you, sir.

Mr. Egan, the floor is yours.

[Meredith Egan, Secretary-Treasurer and Co-owner, The AIM Group Inc.]

Thank you for having us here today.

My name is Meredith Egan, and with me is Jeremy Ingle. Also with us are Catherine Tremblay and Barbara Cloutier, who will be able to answer any questions in French, if you so wish. We are all principal owners of local temporary help staffing firms in Ottawa. We appreciate the opportunity to speak with you about this important issue.

First, let me note that we are here on behalf of the many temporary help service companies in the Ottawa-Gatineau area, who are all members of the Association of Canadian Search, Employment and Staffing Services, an association known as ACSESS.

Also let me note that we would rather not be here today. Our business is to provide competitively priced, superior quality staffing solutions to clients, including the Government of Canada. Our business is not to advocate on how government solicits those services. However, we do feel compelled to speak to those issues, given how a good working relationship that has served the needs of taxpayers has very suddenly been soured and needs to be set right again.

Our issue is the standing offer for temporary help services. There is an offer in effect today, the product of over two decades of cooperation and consultation. However, the Department of Public Works and Government Services decided to radically change and alter that offer with an announced new document on June 30 of this year. Without prior consultation but for an impromptu meeting ten days before, and without any other notice, the temporary help services industry was suddenly faced with a dramatically new approach to the solicitation of their services.

We fully appreciate the right of government, as with any client, to change the terms of engagement for their suppliers. However, the kinds of changes represented by the June 30 document made no sense. Among other things, the new approach would have resulted in the elimination of competition from a very competitive process, ignored the issues of quality of service, resulted in the closing of dozens and dozens of small businesses, and dramatically decreased the wages of temporary workers.

In the past, the public works department and the staffing sector had an open dialogue. Yet with this new document, we were cut out from all communication, and for a reason unknown to us, we were treated like we were an adversary. The situation continued to deteriorate over the summer, until very recently, when the department finally decided to engage the industry on issues through a consultation process run by the Conference Board of Canada.

Pre-consultation materials issued by them suggested, however, that this was merely the latest in a series of consultations on the standing offer. This is not true. As internal departmental materials obtained by us through access to information make clear, the last meeting held with our industry and the public works department was in early November 2005. We now await the report from the Conference Board in order to use it as a basis for further discussions.

PWGSC has left the revised standing offer on their website as a consultation document and has promised to identify what it believes are the weaknesses of the original standing offer. Late yesterday they asked us to submit to them our comments on what could be done to improve their procurement process of our services.

[Jeremy Ingle, Chief Executive and Co-owner, SPI Consultants]

I'm here with Meredith Egan because I've been a director of our association for 20 years. I've dealt with the federal government for a similar amount of time. I've been on the national government relations committee for our association since I was first appointed to the board of directors with a special responsibility for dealing with the federal government. So I have a particular insight into how the federal government works and how the industry has developed the current system over the years.

We're more than prepared to sit down with officials and determine what can be done to make the best process for the taxpayer, and we've done that for many years. We do want to know what PWGSC finds wrong with what is in place. But more than that, the experiences of the last several months have left us asking the following questions.

Why were the services of a large consulting firm and outside contractors deemed necessary to improve a process that was working well? Although admittedly it had some flaws, just as any system is bound to have flaws--no system is perfect--this system, which was developed between the experienced public servants and industry representatives, was cost-effective and efficient year over year. Why was Public Works and Government Services not checking the data with industry, particularly after we advised officials of serious fundamental data inaccuracies in the department's assessment of the sector and its involvement with the Government of Canada?

Why did departmental officials feel compelled to advance changes without consultation and in an atmosphere of deliberate secrecy after decades of open, transparent engagement? Why was there so suddenly a rush to amend a process that has a regular schedule for amendment, and the next amendment is due in early 2007?

Why did departmental officials feel compelled to create a limited competitive pool of suppliers, undermining competition in the free market in the whole process and thereby undermining the quality of work for managers across government?

Why did departmental officials not see the contradiction between their statements about working with small to medium-sized business and their conduct that was anti-small-business in their proposed purchasing reforms?

Our desire is to continue to supply competitively priced, superior quality staffing solutions to the managers across the Government of Canada and thereby to the taxpayers of this country. We want to work with PWGSC on this, and hope we can restore what used to be an excellent working relationship.

We hope the Standing Committee on Government Operations and Estimates will look into this matter further. Our industry would be able to put forth witnesses within each stakeholder community, including suppliers, buyers, and temporary workers.

Thank you, Madam Chairman.

[The Chair, Liberal, Diane Marleau]

Thank you, sir.

We will go on the Canadian Furniture Task Group. I believe Mr. Swire is the representative who will be speaking to us, as well as Mr. Axam.

[David Swire, Director of Sales, National Capital Region, Teknion Furniture Systems, Canadian Furniture Task Group]

Thank you.

I want to begin by thanking the committee for allowing the Canadian Furniture Task Group the opportunity to express its views. We believe it's an important issue for the government as a whole.

My name is David Swire. I'm with Teknion Furniture Systems Limited, a Canadian manufacturer. Bob Axam, a competitor of mine also on the task group, is with Haworth Limited, with significant manufacturing facilities in this country as well. We represent the Canadian Furniture Task Group, a coalition of more than 50 participants formed by the Business and Institutional Furniture Manufacturers Association, which we refer to as BIFMA. In Canada, BIFMA includes some 30 members and is the primary voice of the Canadian furniture industry.

I think it's important to state right from the beginning that the Canadian Furniture Task Group and its members are good corporate citizens and that all of us share in the public's desire for the Government of Canada to be more efficient and to reduce the cost to the taxpayers of the goods and services it buys.

We support and have participated in the consultative process conducted by the Conference Board of Canada to ensure that the voice of the furniture industry is heard before the federal government takes any final decisions on how it will achieve its goals. We are encouraged by the direction the process is taking, but are concerned that Public Works and Government Services' consultative approach may end when the Conference Board reports to the federal government.

The Canadian Furniture Task Group believes the government can reach its goal of reducing overall expenditures on furniture by 15%, but the current proposal that assumes savings can be achieved through economies of scale and by simply reducing the number of suppliers under standing offers, without measuring the cost, will not be successful. We believe there is a better way.

The use of the existing national master standing offers, or NMSOs, according to Public Works' own website, has resulted in savings of between 25% and 30% between 2005 and 2006. These savings were achieved with less than half of the government departments, agencies, and crown corporations participating within one full year of marked improvement in the process.

There are many ways we can assist the government to achieve its goals, but as an immediate first step we are confident that further savings can be achieved by making the national master standing offers into national mandatory standing offers across the Government of Canada. This process will also allow our government customers a broad range of choices without reducing access to the many businesses that depend on doing business in the public sector.

We believe healthy competition maximizes price effectiveness and creativity and the product solutions provided. The Canadian Furniture Task Group feels strongly that the national master standing offer program should continue to be open to all qualified suppliers, especially aboriginal enterprises and small and medium-sized businesses throughout the country. We also believe Treasury Board should be given the role of ensuring all departments within the federal government use this system, and with some consequences for failure to comply.

This one single move on behalf of the Government of Canada will achieve more than enough savings to allow the government to achieve its goals without damage to the Canadian manufacturers, dealers, and suppliers across Canada or to the successful aboriginal businesses that now participate in this important sector.

We have encouraged the government to form a furniture council to enable our industry to work with the government's own experts, with the goal of finding additional ways to improve the procurement process while maintaining competition, choice, innovation, and access.

Late yesterday we were notified that Public Works wants to proceed with this idea. There are many models for how this council could work, and we are open to discussion on what form it may take.

The Canadian Furniture Task Group would like to see a council that truly reflects the furniture industry as a whole. All the players must be brought to the table, including manufacturers, the many dealers and suppliers who serve the Government of Canada, and the government's own internal experts, such as facilities managers, ergonomists, contract specialists, and the people who actually use the furniture.

This council can also play a major role in the creation of an improved procurement process that represents the best thinking of all interested parties and affords the opportunity to provide innovative quality products at the best price to the federal government.

These are just some of our ideas on helping the government and taxpayers receive more value for their money.

We'd be glad to accept any questions. Thank you for your time.

[The Chair, Liberal, Diane Marleau]

Thank you.

Does Mr. Axam wish to say a few words?

[Robert Axam, Government Programs Manager, Haworth Limited, Canadian Furniture Task Group]

I'll be here to answer any questions you might have.

[The Chair, Liberal, Diane Marleau]

Well, I thank you for coming. As you know, it's something that is very near and dear to this committee's heart, and particularly to mine, because I've lived some of the problems that have occurred when a national tender was called and the small and medium-sized businesses that used to compete had been totally cut out and were gone. In a sense, it's a question of balance: how you get the best price and keep some of these businesses and some of these profits in the communities where they've been created and where they've been for a long time.

I'm going to go to the first questioner. Monsieur Proulx.

[Marcel Proulx, Liberal, Hull—Aylmer, QC]

Thank you, Madam Chair.

I want to thank all the witnesses for coming here and accepting our invitation.

I know that you gentlemen have a lot better things to do than to sit in a committee and try to convince us of something. Thank you very much for accepting our invitation. I'm sure we will come to conclusions that will be very interesting and very heart-warming for you.

Good morning Mr. Fredette.

You say that talks between the photocopier industry and the government are going well. However, you said that minor changes could possibly be made.

Can you briefly give me a few examples of those minor changes?

[Alain Fredette]

The machine approval process is fairly lengthy. We agree that it's serious, but we have to complete a lot of reports, which we think are somewhat pointless, in many cases. We feel that these reports will be shelved, but government officials have no choice; they have to request them. When we have to submit a bid for these machines, sometimes we have to complete a whole box of paperwork, and I'm not exaggerating. That represents a lot of work for us and for those who analyze the equipment and have to approve it. A lot of savings could be with regard to this analysis.

[Marcel Proulx, Liberal, Hull—Aylmer, QC]

Mr. Fredette, if I'm not mistaken, when a machine — let's call it model 1234 — is approved following a submission, that approval is valid for three or four years.

[Alain Fredette]

It varies from 18 to 30 months.

[Marcel Proulx, Liberal, Hull—Aylmer, QC]

That's good. Let's suppose model 1234 is approved on January 1, 2007, and that, for one reason or another, the model is no longer produced on January 1, 2008. There would then be at least six months left in the rental period.

Could you replace it with another model?

[Alain Fredette]

We could replace it with another model, if it's approved by the specialists.

[Marcel Proulx, Liberal, Hull—Aylmer, QC]

If it's approved by the specialists of Public Works and Government Services Canada.

[Alain Fredette]

That's correct.

[Marcel Proulx, Liberal, Hull—Aylmer, QC]

So you offer the opportunity to replace it.

[Alain Fredette]

That's correct, but there has to be a good reason for it, and it has to be approved. It's not automatic.

[Marcel Proulx, Liberal, Hull—Aylmer, QC]

That's fine, thank you.

Mr. Egan and Mr. Ingle, thank you for being here this morning.

Before I ask you a question, I'm very happy that we are having this meeting here this morning. Obviously, we have provoked the government to do something because there are three or four witnesses who mentioned that yesterday they received notification from Public Works that something was going to be done, or at least they were opening the doors to your opinions and your suggestions. Just that, the fact that this was done yesterday, was worth this morning's meeting.

There has been a mention that within statistics of THS there is a sector that should not be part of that particular way of looking at things, and I'm referring to senior-level information technology and executive-level professionals in that particular field. If that group were to be removed from your industry's statistics according to Public Works, how much of a difference would it make for your industry?