Government Operations Committee on Nov. 9th, 2006

[The Chair, Liberal, Diane Marleau]

I call the meeting to order.

We welcome the Minister of Public Works, the Honourable Michael Fortier.

Thank you for responding to our request and appearing before the committee today.

You know how this works: we give you a few minutes to make your opening remarks and then we go directly to the questions.

Mr. Fortier.

[Michael Fortier, Minister of Public Works and Government Services]

Thank you very much, Madam Chair.

Thank you for inviting me here today to discuss my department's work to transform government procurement. I obviously welcome the opportunity to update the committee on this project.

Let me first say, Madame Chair, that my department is carrying out a number of important reforms touching procurement, which is the topic today. Another of these reforms involves real estate, which we are also looking at, as you know. One could argue that real estate is as important as procurement given our significant foothold in the Canadian real estate world.

All this work is aimed at strengthening management and accountability, increasing transparency, and ensuring good value for taxpayers. Procurement reform is therefore only one element of the department's renewal agenda, and it is clear that procurement is an area that needs improvement.

Madam Chair, on October 19, this committee heard from industry representatives. The message that came out of the meeting—and out of the many consultations Public Works has held with the supplier community—is that in its current form, our procurement system needs improvement and our procurement practices need to be streamlined. Dealing with the federal government can and should be simpler.

Year in and year out, the Government of Canada spends some $20 billion buying goods and services to support its operations. PWGSC handles only about 10% of the total number of transactions, but these represent about 55% of the total value.

The transformation of federal procurement represents a big change, not only for the government, but also for its suppliers. A number of them have participated in the consultations held by Public Works and have helped to identify possible improvements.

And that is why I directed my department to undertake further consultations with suppliers and industry associations before proceeding with some elements of the initiative.

The new round of consultations was launched on September 20, and a broad range of procurement issues was discussed. The only issues not on the table were our commitment to reform procurement and our commitment to achieve value on behalf of taxpayers.

I'm also pleased to announce that we are following up on the request of suppliers and are creating new permanent government-industry committees in the areas of temporary help services and office furniture.

Madame Chair, we are also making procurement simpler and ensuring fair and open access for all suppliers--large, medium, and small--right across Canada. We are listening to what suppliers have to say. For example, in the furniture industry, suppliers explained to us the challenges imposed on them with orders coming in at the end of the government's fiscal year. As a result, we are finding solutions for them.

We must take advantage of the government's buying power. We will do this by consolidating the purchase of goods and services across as many departments as we can. This means buying fewer models of certain goods that are purchased by federal departments and agencies. Consolidation not only will make purchasing simpler for everyone but will also will lead to better prices.

In fact, based on the experience of other private and public organizations, we believe we can achieve important savings as well. Through these and other procurement changes, we will ultimately improve the delivery of services to Canadians.

Reducing the cost to Canadians is not the only objective of Procurement Transformation. Procurement savings will be reinvested for the benefit of all Canadians.

Our strategy to reform procurement is based on improved access to goods and services from competitive suppliers, more efficient purchasing for all government departments, and an improved ability to account for taxpayer dollars.

Businesses will benefit from having fair, simple and open access to compete for standing offers and other procurement opportunities across Canada. Winning a standing offer competition to supply the government will actually mean winning business.

Procurement transformation also means ensuring that social and economic considerations are integrated into the procurement process, such as encouraging green procurement, supporting aboriginal businesses, and ensuring that companies right across Canada have an opportunity to compete.

In terms of green procurement, we share a heightened responsibility to purchase products and services that have a lesser effect on human health and the environment when compared with competing products or services that serve the same purpose.

The transformation of government procurement also involves adopting procurement practices that reduce the cost of doing business for suppliers, regardless of their size. I am particularly committed to ensuring fair access to government business for small and medium-sized enterprises across Canada. In fact, my department has already taken a number of steps to address the specific needs of SMEs.

Public Works has established six new regional Offices of Small and Medium Enterprises to ensure that small vendors and vendors in all regions of Canada receive due consideration in bidding for government contracts. These are now all in place and ready to work with SMEs in each region of Canada.

PWGSC also previously reduced the cost of bidding by eliminating fees for the tender documents suppliers order through MERX, the Government of Canada’s electronic tendering system. We have simplified the language in bid documents and contracts, and established a toll-free helpline and a website to respond to enquiries from SMEs. We have also developed procurement best practices, as well as training with the Canada School of Public Service.

The transformation of government procurement requires information technology so that the government can speed up the ordering process and eventually improve its ability to track what is being bought. It requires time and training, and it requires that departments adapt to new tools. My department will introduce two critical procurement-related tools that will help us save considerable amounts of taxpayer dollars.

The Government of Canada marketplace simplifies procurement by giving departments access to pre-approved goods and services using electronic catalogues. Public servants from all departments will be able to consult and ultimately order from a catalogue those goods and services they require.

The shared travel services initiative will improve the purchase and reimbursement of travel services within government.

I mentioned at the outset that improved accountability goes hand-in-hand with saving money as a fundamental goal of procurement transformation. As the Committee knows, the Federal Accountability Act will legislate the principles of equity, openness and transparency, so that they are permanently imbedded into federal procurement practices.

The Act provides for the appointment of a Procurement Auditor, and a Code of Conduct for Procurement is being developed to clearly outline for employees and suppliers what is acceptable conduct when contracting with the Government of Canada.

In closing, Madame Chair, let me reiterate for the committee that we are sensitive to the concerns that have been expressed in some quarters about the potential impact of procurement transformation on suppliers, and we will do our best to resolve those issues, but we will not take our eyes off the ball. We will achieve significant savings while also improving service delivery and ensuring that companies in all regions of the country are able to do business with the Government of Canada.

Merci beaucoup.

[The Chair, Liberal, Diane Marleau]

Mr. Proulx, you have eight minutes, and that includes the answers to your questions.

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

Thank you, Madam Chair, I appreciate it.

Good day to you Mr. Minister and to your key staff members, and welcome. I am pleased that you spoke about SMEs, as that will save me at least a minute and a half, since I won’t need to introduce the subject.

Mr. Minister, in the documentation you provided it says that SMEs are important to your department. Yet, suppliers tell us that almost all the Public Works and Government Services Canada bidding processes involve so much red tape that it is very difficult for them to consider doing business with the Government of Canada.

I presume that your reforms will take into consideration the enormous burden that all this red tape represents, because not only does it mean considerable costs for SMEs, it also costs a lot for your department to prepare all this paperwork and then analyze it.

Unfortunately, the Government of Canada has the bad habit of only considering businesses of a certain size or with certain total sales, arguing that, if by mischance, the business could not meet its commitments, the Government of Canada would be the loser. Your department is in the best position to put an end to this bad habit. Furthermore, smaller businesses are not being given the opportunity to build on or improve their expertise, or to win big enough contracts to be able to hire additional personnel.

We’re shooting ourselves in the foot, because if we don’t give SMEs a chance, they will never become big enough to do business internationally and to create a large number of jobs. We will have to do business with international or foreign companies.

The winter 2006 issue of that fine publication Doing Business with PWGSC refers to a well-protected piece of Canadian heritage, the Canadian National Vimy Memorial.

The Government of Canada refused to let the repair or renovation work on our monument in Vimy be done by Canadian contractors. It insisted that European contractors be put in charge of the work. If my memory serves, the contract was awarded to a Belgian contractor, even though Canadian contractors said they had the necessary expertise and as much access to the materials needed as any other contractor in Europe, as the materials were European. That was an opportunity for your department to help Canadian contractors be better considered by the Government of Canada.

I am listening very closely, because we do not often have the opportunity to hear you in the House of Commons. We do not ask questions about the Department of Public Works and Government Services because, even though your Parliamentary Secretary does the best he can, he does not have all the information. That’s why we seize the opportunity when you are before us.

[Michael Fortier]

I am very proud of my Parliamentary Secretary, not just because he’s 6’5” and weighs at least 50 kg more than me, but because I like him a lot.

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

If he played hockey, he’d be a great goalie!

[Michael Fortier]

Thank you for your question. If you will permit, I will answer your first two questions at the same time, because I believe they are related.

Even though it isn’t what it should be, the picture for small and medium-sized businesses isn’t as dark as you think it is, even though, as I said, it could be better. According to the available information on the participation of small and medium-sized businesses in Government of Canada purchasing, SMEs make up 29 or 28% of the market.

I am pleased to say that a large number of these SMEs deal with PWGSC, but there is a 15-point gap in the SMEs’ contribution to Canada’s GDP. Our long-term objective should be to close this gap. If SMEs contribute 40 to 43% of the GDP and government procurement comes to $20 billion, it would be a laudable and necessary objective to try to give SMEs sufficient tools to close this gap.

The goal is not necessarily to throw out statistics and say that since SMEs contribute 43% of the GDP, let’s give them 43% of federal business. It goes beyond that.

I worked for 20 years in the private sector for a number of small and medium-sized businesses and I can tell you that they are very creative. We need their products and their services. We’re not helping them, we’re helping ourselves. That’s why, when we launched the Office of Small and Medium Enterprises, I repeated during numerous press briefings that when I open offices, my objective is to give them many more opportunities within the federal system.

As for the documentation and contracts they are obliged to read, I need to be responsible and prudent in my reply. I’ll give you an example in a few seconds, but let me assure you, Mr. Proulx, that I share your concern regarding the paperwork burden.

Department lawyers will claim that several contract clauses have been added, over the years, as result of court decisions. One article becomes 10, and 10 articles grow into 100. I experienced it myself this summer, when we launched the process to hire two advisors to give us information on our real estate properties. In the summer of 2005, your colleague and my predecessor, Mr. Brison, sent out a 300-page request for the same services.

It lapsed, because no one could qualify. I examined the document in question, which had at least 50 or 75 pages. We can try, and my officials have been informed that one of my goals was to streamline the paperwork. I appreciate your raising the question, which comes up on a regular basis, in fact.

I have no information regarding the Vimy monument. Perhaps one of my colleagues could—

[The Chair, Liberal, Diane Marleau]

They will be heard later.

I turn the floor over to Ms. Thibault.

[Louise Thibault, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you, Madam Chair.

Mr. Minister, thank you and your two senior officials for coming today.

My question is for Mr. Marshall and it is a bit off topic, but nonetheless very important.

Labour representatives have shared their concerns with me regarding your department’s pay system. Has the situation improved? The unions are very concerned, and I wanted to take advantage of your presence here to bring it up. However, if you prefer that we discuss this at a later time, I will make an appointment with you.

I can see from your gestures that you would prefer discussing it at another time. It will be my pleasure to talk to you at another time.

[Michael Fortier]

Are people getting paid?

[Louise Thibault, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

That’s not the question: there were enormous delays in pay services. When someone is hired, for example, we all know that there is some delay before getting that first paycheque. You don’t get paid right away, you may have to wait four or five weeks, but in the case in question, there were unwarranted delays. The same thing would occur with overtime pay: there really were problems.

Since you were there, I wanted to ask you the question. It’s my privilege. I see that my colleague does not appear to agree.

[David Marshall, Deputy Minister, Department of Public Works and Government Services]

Madam Chair, I'd be happy to answer the question.

The situation, of course, arises because of the very complex pay structure of the government and the systems that exist, which we are addressing by changing and introducing a new pay system for the government as a whole. We have put on extra staff, and we're catching up the backlog. We're meeting with the unions to keep them informed. I think it's a widespread issue across government.

[Louise Thibault, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

It’s improving.

[David Marshall]

Yes. It is improving.

[Louise Thibault, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you, Mr. Marshall.

Mr. Fortier, earlier, in your speech, you talked about the concern for the environment that is part of the procurement reform, and that is obviously a good thing.

How do you now ensure, and how will you ensure even more in the future, the Canadian content of purchased goods? That is the first question.

Here is the second question. In reference to the procurement process, I note that Conference Board documents provide figures concerning some provinces. I’d like to know if your department is also concerned with different regions. I’m certain that you are aware of the manufacturer’s general status at the national level, and perhaps more in some areas in particular. You must understand that, like other colleagues, I come from a region distant from yours. Personally, I don’t consider that we are distant.

Is there such a concern? These are my two first questions; I will have others.

[Michael Fortier]

As a rule, when it comes to procurement, we are subject to the treaties signed by Canada. So, other than in rare exceptions, when a call for bids goes out, it is usually open to everyone. I’m saying this in answer to your first question. What you may be concerned about, although I don’t mean to presume, is that Canadian suppliers are not getting their fair share. I would ask you to examine the statistics on the identity of government service providers. You will see that a great majority of them are Canadian residents. So even if we open the doors, you know... Opening the doors is important. A short time ago, Mr. Proulx said he hoped that small and medium-sized businesses would get large enough to play an international role. If that’s what we want, it means we want them to get contracts in other countries, other jurisdictions. So we also have to accept the fact that other companies from other countries will also be entering our markets. However, a very large majority of suppliers are Canadian.

[Louise Thibault, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

But even if they are Canadian, can the suppliers use materials that come from elsewhere, Mr. Minister? That’s my question: if we talk of Canadian content, how does it work in terms of fabric, lumber, wood chips used for secondary or tertiary processing? We are all aware of the current crisis in the lumber industry. How can we promote the procurement of Canadian materials? It’s a quasi-indirect benefit, but it should be a direct benefit.

[Michael Fortier]

I’ll give you an example, and I hope you find it a good one. It involves the ads we put out this summer regarding military procurement. Having realized that some of the products the government was going to purchase would probably be manufactured outside Canada, we told potential manufacturers that they would have to invest a dollar in the same sector in Canada for each dollar we would give them—in this case, national defence and aerospace. Of course we are well aware of this situation, but in sectors other than the military sector, I would say that there are few products—because the services are almost all available here—that are not manufactured in Canada.

[Louise Thibault, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

As for the consultations you held with stakeholders... We know what happened in the very beginning. Everyone is aware of the steps taken, quite legitimate ones, incidentally, by these people. We had the pleasure of welcoming some of them here as witnesses this summer and fall.

Are you entirely convinced that you consulted them the right way and that the action you will be taking further to the recommendations they made to you are appropriate? Will you be able to implement most of the recommendations that these very concerned business leaders or association presidents made to you? Do you think you can take them into account?

[Michael Fortier]

The government was in a particularly difficult situation when it entered into these consultations. And by “government” I mean the Department of Public Works. The department or client was also the one that made the regulations. It set the rules. I believe there was a conflict of interest there. I may be exaggerating the importance of the situation a bit here. Let’s say there was an appearance of conflict of interest. I think it was a good idea for the government to take a step back and ask a third party—that’s what we did with the Conference Board—to oversee certain consultations.

Am I pleased that we undertook these consultations? Of course, since I wanted them.

Of course, it was important for me to let the department interact with suppliers. There are 10,000 of them and they do not deal with a computer screen, but with real people. We gathered some impressions from our own employees who interact with suppliers, but it wasn’t enough. That is why we asked the Conference Board to oversee these consultations. And in fact I believe that several representatives were here before the committee on October 19. They have made recommendations and continue to do so. We continue to take them into account in the implementation and execution of the reform plan.

[The Chair, Liberal, Diane Marleau]

Mr. Kramp.

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

It's a pleasure to have you here again.

Many people over the years have stated that SMEs represent the backbone of our economy. Without small business, where would we be? Small business is innovative. Small business is flexible. Small business can adapt to change very quickly.

I'm going to focus a number of my questions on the relationship between your ministry and the opportunities and/or problems that have occurred and/or possibly the recommendations and the changes that you have made to affect SMEs in the process of procurement. Given my experience in my own particular field--thirty years in small business--I hope to be a representative voice for that community in directing my questions along that line.

This is my first concern and/or a question, which I'm hoping you can answer, Mr. Minister. In your process of procurement, how can you assure the small-business community and the SMEs that they actually have enhanced or increased opportunities to participate in the process?

[Michael Fortier]

Thank you for the question.

As I indicated earlier in French, this is a concern of mine. Like you, I come from that world. I'm more from the advisory front than that of running a business, but still....

It seems to me that we, as clients, are the big losers, and ultimately it's because of our economy. As taxpayers and as Canadians who want to create more wealth in our communities across the country, it seems to me that we should have more of these folks at the table, bidding for business and winning business. Not in all respects, but in many respects, they are quicker to turn around and quicker to adapt their products or their services to our needs, because our needs are changing. I also believe they are more constructive or more creative in terms of pricing goods and services. So that sounds like a winning formula to me in terms of a client-supplier relationship.

We have created those offices, and I certainly don't expect that by the mere fact that we have fifteen people around the country calling themselves heads of small and medium-sized enterprise offices, that will do the trick. These people have been instructed to be proactive, to go out there, to meet chambers of commerce, to meet small business leaders, and to help them access our business. We haven't done that in the past. It comes back to what Mr. Proulx was saying. It also has a direct link to plain language and simplifying the contracts that we're proposing these folks enter into.

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

Some people are saying we need less bureaucracy, not more, yet you've now established regional offices.

[Michael Fortier]

We have, but in terms of the folks we've hired as additional full-time public servants, the net result is quite modest, and this is a great investment for us. Adding a few bodies will make a difference in bringing people to the table and saving us money at the end of the day.