Government Operations Committee on Oct. 19th, 2006

[Meredith Egan]

If I may, the department officials have suggested that the current system is broken. We have been requesting through the course of the summer an opportunity of hearing how they feel it's broken. We are still awaiting that opportunity. We're quite willing to sit and figure this thing out and get this thing right, but we have to know what's wrong with it.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

I have not personally seen any statement by the government that suggests that whatsoever. I think what we have seen out of the government is a willingness to say the status quo is not acceptable, but we need to move on. That's why I'm really pleased to see that we have at least a level of consultation, a level of willingness to move.

Thank you, gentlemen. We'll talk to you a little bit more when we have another opportunity for questions.

[The Chair, Liberal, Diane Marleau]

Thank you.

We will now go to Mrs. Nash.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Thank you, Madam Chair.

Thank you to all the presenters this morning for taking the time to come here.

Obviously the procurement by the federal government is huge. They're the largest single purchaser of goods and services in the country. And we know that the government has stated its intention to cut $2.5 billion out of the annual procurement system over five years out of the $13 billion that they are currently spending, which is a sizeable cut.

Frankly, I don't think they're off to a very good start, because of course their contract for developing their cost-cutting strategy ballooned over 32 times their original estimate for the contract and ultimately ended up being 14 times the value of what was awarded. So their start in cost-cutting was not particularly strong. Nevertheless, there is concern about the cost of procurement, and if this initial contract is any indication, certainly that cost was out of control.

What we've heard from each of you is that there were announcements made about changes to procurement that would quite significantly change the way procurement takes place, and with very little consultation and in some cases no consultation. I'd like to know from you what is the best system to get your input on an ongoing basis, so that when changes are made they're made with the best information possible and we're not just hiring some consultant to come in and make a quick and dirty analysis but we're really truly consulting with the people who have the best information because you're the ones who actually work with the system every day.

So I throw that out as a general question: What kind of consultation would you like to see on an ongoing basis?

[Bernard Courtois]

Maybe I'll start by saying that in our case we do participate on a regular basis in consultations with the government. We've been trying hard to help improve a process that really is in need of tremendous improvement, because government buys in a way that's much more complex than it needs to be, and that hurts everybody. We need to move to more standard, commercially acceptable clauses. That's causing a lot of difficulty in the industry as financial reporting requirements are harder, and that's causing more grief and making it harder to bid openly for the government.

I think what the experience of the last few months showed was that something that is brought about circumventing those consultation processes should not be attempted again. In our industry, information and communications technology, where there is some spillover with the temporary help people, I certainly wouldn't want the more sophisticated experts who are currently under the temporary help offers vying to stop that. In those areas there may be a need to get the multiple associations together from time to time and try to get as close to a consensus as we can. It will simply help everything work a lot better. We had suggested some sort of council like that.

In our view, there's a fundamental problem here that is going to cause all these efforts by individual commodities or services to keep being more frictional than they need to be, which is that we're not sure that it's only a matter of Public Works. There may be a triangle between Public Works, Treasury Board, and some of the key buying departments. Public Works needs to improve its processes as much as they can, and there are lots of improvements that need to be made, but if they're doing the best process in the world to buy the wrong thing, then the government's getting the wrong thing and our industry is missing out tremendously. So there needs to be perhaps some sort of a triangle there to really address the fundamental problems.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Thank you.

[David Swire]

What we'd like to see—and I don't care what you call it, a committee, a group, or task group—is a group that comes from all the different disciplines across our industry, representative of our industry and at the same time, on the client and government side, that truly represent what the government is comprised of so it has the different stakeholders involved who understand our particular world, how that impacts on your organizations, your employees, your people, and have that ongoing.

We're very happy it began. This is the first time we've had a truly consultative process in the last several months. We think it's been very productive and we were able to come up with some very interesting ideas. Mr. Kramp mentioned one of them, and there are many more. We don't want it to stop. We look at this as the beginning, not the end. We want this to be the beginning of a process.

It's very often helpful if we include a neutral third-party arbitrator or consultative group. We find that helps keep the agenda going and takes out all the individual interests on both sides. Don't forget, we're sitting at a table with people we're trying to compete with and beat when we leave this room. It's important to have a neutral body involved that allows us all to stay on message and keep moving forward in a positive fashion.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Thank you.

[Meredith Egan]

With respect to what can be done, we heard with pleasure yesterday about the creation of a permanent government-industry committee, but this is not a new invention. This was the relationship we had up until January this year. Our current system is a product of over 25 years of ongoing consultation with the department. The whole system was developed through that process.

That process was cut off from us. It's not a revelation or a grand announcement that we're going to have this permanent committee; we're returning to a situation we used to have that should have always been, but seemed to have been cut off through this whole A.T. Kearney experience and their methodology, which seems to be shrouded in secrecy. Their whole principle seems to be don't speak to the purchasers, don't speak to the vendors; this is what we're going to do, and we're going to ram it through whether they like it or not.

Although we were pleased to hear of this permanent government-industry committee, it is something that was in place in the past, something we experienced, and that both government and industry benefited from for over 25 years to develop our current system.

[Peggy Nash, NDP, Parkdale—High Park, ON]

To follow up on that, on the committee that has been announced, do you believe that ongoing consultative process is enough to deal with the government's announced goal of saving $2.5 billion, or is there a particular review that should take place involving all the different stakeholders to deal with that particular goal?

[Meredith Egan]

Two things are going on here. There's the whole way forward, procurement reform, and then there's the individual, how we're dealing with the individual sectors and how we're going to purchase their particular products and services. My interpretation was that the permanent government-industry committee was going to be the THS sector sitting down again with the government to determine how we can figure out where we're going and what we're going to do under the whole government procurement reform policy. I didn't see this as being at the level of discussing the government's procurement reform policies with other industry representatives; I saw it more as looking at how our industry is dealt with in providing its services to government.

[The Chair, Liberal, Diane Marleau]

Thank you very much, Ms. Nash. You'll get another turn, I'm sure.

Mr. Alghabra.

[Omar Alghabra, Liberal, Mississauga—Erindale, ON]

Thank you, Madam Chair.

Good morning to everybody. Thank you for coming here today.

I don't mean to draw you into a political statement, but I'd like to remind everybody here that many of us have been saying that we have a mean-spirited government, a government that is unable to build consensus, that is ideologically driven, and that has a “fend for yourself” policy. So I'm intrigued by a statement that was made here earlier today, that the government seems to be contradicting itself, when it has created the office of small and medium enterprises yet is contradicting itself in its behaviour.

I'm interested in hearing from the small and medium businesses that are here today how you think a government can balance.... I came from the private sector, and I can tell you that for the private sector, unlike the federal government, the bottom line is the most important target, yet they're very careful about the small and medium businesses that are around them and make every effort they can to protect the industry around them, because they depend on them to survive and can't exclusively depend on large corporations.

So I'm curious to hear from many of you here today about how you think a government can do this? I agree with you that we should find a way to encourage and help small and medium businesses. How do you think we can do it?

Maybe we'll start with Mr. Ingle, since you are the one who made that comment.

[Jeremy Ingle]

Did I?

Our industry mainly comprises very small businesses. There is no exception to that in the supply of temporary help to the federal government. Of the 50 or 60 real suppliers of temporary help to the federal government—I'm not talking about the people who are actually on the standing offer, but the real ones—about 90% of them are small businesses, some of them very small, some of them very small shops. Those small businesses currently do about 80% of the business. So we have protection in the existing system; we don't need to protect them any further.

What we don't need is the proposal put forward by A.T. Kearney to push all the business to large companies: that in order to protect small business, which is a totally phony deal, the small businesses should form consortiums. That was the only way we were “protected”.

We don't need any further protection than what we have at the moment. What we don't need is somebody saying the only way you're going to do business with the federal government is to form yourself into a coalition with other companies, which doesn't work, because our margins are so small that you can't do it.

The other thing is, how do you divide it up? It's not like making widgets, where one company can make one size of widgets and one company can make another. You can't do that with temporary help. The margins are less than 4.5%. You can't split that between two or three companies and say, you take half a percent and there's another half a percent there. It's absurd.

[Bernard Courtois]

We have the same issue, but a little bit of a different perspective because of what our members sell. Our small members are quite prepared to compete for government business. They're mainly interested, large or small, in selling solutions, and in selling technologically advanced approaches, and selling projects or working in projects that are innovative. That's the nature of the membership we have.

Our approach is that the procurement process should not be set up to eliminate people from competing from the very start. The small businesses are prepared to compete for solutions as long as they get a chance to compete. That doesn't mean the requests for quotes and so on can't eliminate people who aren't qualified. We recognize that there has to be some qualification requirement; I think everybody recognizes that.

The first thing is not to cut them out from competing in the first instance. Let them put their solution forward and see whether it can win. Then, of course, there might be one winner, or two, or three—a small number—but at least let them compete.

The other thing is there's an entirely different level.... And forgive me again. In our industry, innovation and selling to a government as a reference customer or as a complex customer is extremely important—important to our industry and our country and to our country's leadership. We need to find ways of having government departments buy more innovative solutions. That may mean that outside of the normal procurement process there has to be a bit of a fund for pilot projects where innovations would be favoured.

That's done in the U.S., in some degree, through research-based new projects. It's another way of helping our truly innovative companies that want to do this get the Canadian government as a reference customer and then go out to fight in the marketplace and complete the development of their innovation in the process.

Thank you.

[Michel Comtois]

I share your view: the government's intention to open an office for small and medium-size businesses in order to help them continue working with the government was paradoxical in itself. For example, in the furniture industry's case, under the policy originally announced, only two Canadian companies could have become potential government suppliers. All the other small and medium-size businesses would have been automatically excluded. They would then have had to go through the Office of Small and Medium Enterprises, which would have increased the costs associated with their business relations with the Canadian government, adding a step to the bureaucratic process. That was absolutely unnecessary. For that reason, the government should maintain the status quo, but improve the aspects that need improving.

However, the government how seems to have gone beyond that stage and has come back to more sensible provisions regarding the way the industry and government should work together.

[David Swire]

Yes, we think the key to this is that if you don't limit access--and I think there is some suggestion and discussion now that there is some changing of views there--you keep the doors open to allow small and medium-sized businesses to participate in this very large market of government business.

Whether we're a small manufacturer or a large manufacturer, we all have, across the country, dozens and dozens of small businesses that are our business partners, acting as distributors and service providers, allowing us access to the business and the opportunity to compete for it, and that's the key. We don't want you to give it to us, we just want access to compete for it on an ongoing basis as opposed to the winner take all. I believe that will protect the ability of small and medium-sized businesses to succeed here.

We are one ourselves. We're a good success story. We were a tiny company 20 years ago. We're one of the top 10 in our industry now in the world, and we do believe that paying attention to our home market in Canada, and particularly the federal government, because it was such a large component of it, allowed us to grow and succeed. And there are other companies like that out there that can do the same thing.

But again, we're happy that we seem to be moving into that process where there is more listening and consultation going on, and really that's all we're asking for. We have great ideas; we just need people to share those with, people who understand what we're saying, as well.

[The Chair, Liberal, Diane Marleau]

Thank you.

Now we'll go to Mr. Albrecht.

[Alain Fredette]

Perhaps I could add a single comment.

[The Chair, Liberal, Diane Marleau]

Yes, I'll give you a second. Do it quickly.

[Alain Fredette]

Yes, I simply want to add, as I said earlier, that paperwork could be reduced. When we request accreditation, the paperwork is enormous. That would obviously help government officials, but it would especially help small and medium-size enterprises.

Thank you.

[The Chair, Liberal, Diane Marleau]

Merci.

Mr. Albrecht.

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

Thank you, Madam Chair.

It strikes me as odd that a photocopier representative would ask us to get rid of the paperwork.

I could also probably have saved Mr. Alghabra from entering the partisan remarks if he had just given me his speaking spot, but we'll leave that where it is.

I think all of us around this table are committed to getting the best value for our money. Whether that's personally in our home budget or certainly as representatives of our constituents, we want to ensure that we are getting the best value for the money we spend.

It seems that in spite of a desire on the part of government to help small and medium-sized enterprises, there are a number of examples this morning that many of you have given that indicate that may not have been the end result.

Mr. Ingle used the term “anti-small-business”. Mr. Egan said there is an effort to eliminate competition. But in spite of those remarks, I think overall I've heard this morning that there is hope that an increased level of consultation has begun. So that gives me hope as well.

Mr. Swire, there is one comment you made that does concern me. You said in your comments that you're concerned that the consultative approach may end when the Conference Board reports to the federal government. I'm wondering why you still feel that the consultation process might be cut off.

[David Swire]

No one has said anything as such, but really, throughout this whole process, this is really the first time we've been listened to, after trying so hard. So I guess it really is more of a plea, if anything, that it not stop. But no one has said anything to us otherwise.

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

That's my concern, Madam Chair. There has been a great degree of hope, I think, expressed around the table this morning, and it would be my hope that a few negative comments would not derail the positive direction we have begun.

I have another question in relation to the administrative red tape, as we sometimes call it. Is that a huge financial burden and disincentive for the average small or medium-sized enterprise to get involved in? If so, what are your recommendations for government to reduce that disincentive?