I wish to thank the committee and the members, and everybody else present here, for allowing us to speak to you today.
My name is Mike O'Neil. I am chair of CABiNET, Canadian Business Information Technology Network, which is a non-profit organization representing about 20 IT professional service providers, mainly based in the national capital region. Our combined sales are valued at over $100 million and we have about 1,000 subcontractors and/or employees working for our companies.
Let me first start by taking the time to review this issue. What is at stake here today: first, the Government of Canada's ability to find cost-effective solutions that meet its needs; the Government of Canada's control over its IT projects and initiatives; the very existence of many small and medium-sized enterprises, or SMEs, that until now have provided loyal and cost-effective services to the Government of Canada; innovation, flexibility, and entrepreneurship that will soon disappear due to the way the proposed procurement model is being structured for this initiative; and last, the financial stability and job security for about 5,000 highly trained professional IT resources in Canada.
Currently, the Government of Canada purchases commodities that can be described mainly as hardware and software products and network bandwidth. It also purchases IT professional services that support these products--develops architectures and provides operational support, etc. Both types of procurement are clearly separated in the acquisition process today.
At the present time, SMEs have competed and won between 65% and 70% of the value of the contracts for IT professional services within the federal government. The total value of all contracts awarded by the federal government for IT professional services was recently estimated at $600 million annually. SMEs have won the great majority of these contracts due to their ability to effectively respond to the federal government's needs, their knowledge and abilities, their low overhead costs, their flexibility, and their innovative solutions.
The government has tried in the past to bundle several contracts and develop large IT projects. For the most part, they failed to deliver on expectations, went over budget, and became unmanageable. Examples are the firearms registry and the Secure Channel project.
When the government contracted for services and solutions in what we call “chewable chunks”, i.e. manageable projects, the projects typically succeeded. The shortcomings of the large bundles contracts were made clear in reports from the Auditor General and the House of Commons Standing Committee on Public Accounts.
The government's brightest new plan is to have an even bigger project. Their reason is to cover anticipated cost savings and an aging workforce. Let us clearly explain that we are not opposed to what is called the shared services initiative. We are adamantly opposed to the bundling of IT professional services with generic commodities, such as network bandwidth, and we are in general opposed to the bundling of IT professional services contracts.
What is the government proposing? Based on a request for information, an RFI, published on the government's electronic bidding system MERX in December 2007, presentations made by Steven Poole, CEO of the information technology services branch at PWGSC and an amendment to the RFI that was published on Friday, June 6, the government intends to bundle the commodities and the IT professional services together in order to issue four what we call “pillar contracts”, each of a value that could exceed $1 billion annually for a period of up to 20 years.
Is bigger better? This simplistic approach to problems makes absolutely no sense and can only be conceived by people who are not spending their own money. Additionally, it makes no financial sense.
As you know, the cost of products in the IT world has decreased immensely in the past few years. In the last 15 years, the cost of network bandwidth and computer hardware has decreased to a fraction of what it was 15 years ago. For the Government of Canada to suggest they can purchase products for a 15- to 20-year period and save money in the long term defies any prediction made by industry analysts. When this question was raised with Mr. Poole, his reply was that the government would find ways to negotiate with the winning bidder to solve this problem. We believe that to commit the government to such a lengthy contract period makes no sense whatsoever.
Lack of ongoing competition will also increase the cost to taxpayers. Currently, when RFPs are issued, many companies, including SMEs, can compete, and they're aware of the fact that generally most technical evaluations of the bids are fairly close. Bidders know that costs will be a deciding factor. The ensuing competition results in lower costs for taxpayers. By eliminating all SMEs from the bids, the government will be creating a situation where two or three large IT companies will dictate all prices, which historically has never resulted in reduced pricing but rather has increased it.
It's hard to understand why, in this case, senior bureaucrats are trying to eliminate competition while in most sectors the government is attempting to establish competition to reduce costs. A classic example is the home telephone industry.
In the past, similar attempts involving large IT professional services contracts have resulted in cost overruns and project delays. Recent examples include the firearms registry and the social services system that was attempted in Ontario in the late 1990s. A number of additional examples can be easily provided.
We urge you not to take only our word for it, but also take the words of an officer of Parliament, the Auditor General, and those of Ontario's provincial Auditor General, who both condemned large IT projects.
It is interesting to note that when the Canadian government decided to establish an efficient and cost-effective system to collect taxes--in this case the GST--it turned to a local group of SMEs that successfully delivered the requirements in a cost-effective and efficient manner.
It also makes no organizational sense. The negative impact for the Government of Canada resulting from this proposed acquisition model doesn't stop at financial considerations. The government will also lose its ability to count on the flexibility and innovation that characterizes SME companies.
SMEs are able to offer various solutions. We're not bound to one model; we're not tied to a single system or vendor solution. SMEs offer a challenging, innovative, and interesting model to our employees and subcontractors. Due to the type of employees that SMEs attract, they are able to better service their clients. Handing a single contract to one company for a period of up to 20 years will destroy any need for ongoing research and innovation within that government sector.
At this time I would like to introduce Mr. Jeff Lynt, who is president and CEO of one of the fastest growing IT companies in the Ottawa-Gatineau region. His company specializes in service management consulting.
