Government Operations Committee on April 23rd, 2009

[Louis Savoie]

Sir, perhaps I could respond to some of your comments, because I've been waiting for the questions to come through. You did start with a question and I want to get back to that.

When I speak to my colleagues in the industry, certainly the large businesses...30% to 40% of the actual contract work they win goes to small and medium-sized businesses that support them. We can't carry all the staff all the time on our payroll, pay the benefits, all that, for the next 25 to 30 years, because once they're an employee, you're committing for the long run.

So working with SMEs and working with other companies it has to be part of the formula of how we do business. We don't have an ongoing stream of contracts coming in to keep all these people busy all the time. So it is how we operate.

I don't think doing large projects cuts out small and medium-sized businesses at all.

To your issue of security and your concern about security and large breaches, absolutely they happen. If I can use an analogy of a bowl with one hole, and the hole is where the communication comes through, if you could protect that one hole at least you'll protect what's in the bowl.

But if you have multiple holes, which is how the government is connected today in some respects, there's a potential for more breaches to occur. You might have plugged this one and that one--10 of them--but there are still another 50 that are wide open to vulnerabilities and cyber threats.

So appreciate that they could always happen. The risk exists, but it is how you can mitigate those risks, and there is an opportunity to do so by simplifying the infrastructure and consolidating some of it.

I think that responds to most of that.

[Pat Martin, NDP, Winnipeg Centre, MB]

Thank you. That's useful.

With the last few seconds I have, I am sorry...on the engineering industry. I am interested coming from a construction background myself.

But I take your point about low cost versus whole costs. I wonder if you run into difficulties making that case with the federal government sometimes when it is really pretty clear in most documents that the low cost will win the job.

Do you get that total life cycle? Do your clients, the government, get the argument for the “total life cycle of the building” arguments?

[John Gamble]

I think when we deal at a staff level at Public Works or at Defence Construction Canada, where they have the specific expertise, I think they are quite empathetic.

Her name escapes me, but there is an employee at Defence Construction Canada who, as part of her Ph.D. thesis, actually made a direct correlation that the higher the engineering quality the lower the operating and maintenance over the next 20 years.

I think they understand it, and this is not unique to the federal government, but the challenge we have is that those who can actually make the change to the procurement are inevitably the other department.

So we are hoping, by speaking to you, in the collective wisdom of this committee, that perhaps you can shake something loose so that we can have a meeting of the minds.

Procurement is becoming very complex. One of our concerns is sometimes that the procurement methodology is done in isolation of either the technical expertise to evaluate proposals or to scope the work or sometimes even outside the context of the ultimate end user, because we can do a better job if we have a little bit more context of what the desired outcome is.

There is a pressure in government to do everything empirically, to evaluate proposals empirically. I will quote Albert Einstein, who is a little brighter than I am; he said that “Not everything that can be counted counts, and not everything that counts can be counted.” That is a very true statement.

There's a myth that as a private sector we want a completely objective process. We don't. We are professional services. We understand subjectivity, provided it is done fairly, transparently, and we understand the rules going in. We want to protect your right to hire those firms that are going to do the best job for you.

In that way, we can adjust our business cases accordingly. And your interest is, to change that business case, we want to raise our game and be a preferred service provider to the federal government.

[Pat Martin, NDP, Winnipeg Centre, MB]

That was very well put. Thank you.

[The Chair, Liberal, Derek Lee]

Thank you.

At some point we have to go into a teleconference for a witness from British Columbia. I don't know whether colleagues want these witnesses to remain for that portion or not.

We can release the witnesses. They are welcome to stay, but I don't know how colleagues feel about that. My inclination is to release the witnesses and go into the teleconference.

We do have another five to ten minutes available for some quick questions.

Mr. Warkentin.

[Chris Warkentin, Conservative, Peace River, AB]

I'd like to continue to question ITAC especially. There are some points that we have to get to the bottom of.

[The Chair, Liberal, Derek Lee]

Do you want to do that during the teleconference?

[Chris Warkentin, Conservative, Peace River, AB]

I don't know how we're going to facilitate this. We probably recognize we made a mistake in possibly scheduling too many people--I know that's hindsight.

I don't know how we can best facilitate this at this point.

[The Chair, Liberal, Derek Lee]

We need a solution.

Madame Bourgeois.

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

Mr. Chair, I would have liked to ask the engineers questions. I don't know how we could organize that. We could perhaps ask them to come back another time.

[The Chair, Liberal, Derek Lee]

All right.

The clerk informs me that we can go past 1 o'clock, and he believes we can postpone the teleconference until later. That might be a solution. I'll let him work with the witness in British Columbia.

We can continue, then. We would normally go to five-minute rounds. That may or may not serve the purpose, but we can start with that.

I would normally go to Mr. Bagnell, Mr. Roy and then Mr. Warkentin for three five-minute rounds.

Is that okay?

[Some hon. members]

Agreed.

[The Chair, Liberal, Derek Lee]

Okay.

Mr. Bagnell.

[Larry Bagnell, Liberal, Yukon, YT]

Thank you.

I don't necessarily disagree with what you're saying, but I'll be the devil's advocate on a bunch of points.

The bandwidth is provided by large companies, but the rest is provided by SMEs, by and large. All of those are part of the GENS system. And 70% of the non-bandwidth functions are currently provided by SMEs.

Why can't the large companies just continue to provide the bandwidth and the rest would be left open to competition for SMEs, anyone who wants to apply?

[Louis Savoie]

Certainly you could choose to structure the procurement however you see is most appropriate. I'm not sure about the statistics you've outlined. It's the first I've heard of them, so I'm a little caught off guard. I'm not sure if they're true.

You say bandwidth and non-bandwidth. I am going to interpret your statement as saying the wide area network is provided by the telecommunications service providers, and when you get inside the building, the network that connects, I'll call it “from the basement”, where we might terminate our service going onto whatever floors the clients might be on, is normally provided by the client. Whether that's provided by SMEs or not.... In fact, my experience is that our customers would provide those components. So our customers would buy many of the networking components that are inside a building. Our customers would generally contract out the cabling of the building. Bell Canada does a lot of cabling for the Government of Canada in Ottawa. We subcontract that out to SMEs here in Ottawa.

Then the question is how you deliver service on an end-to-end basis. Your experience as the user of a computer, going to the Internet or accessing whatever application you're looking to access, is an end-to-end experience. You can't break it up into pieces. So the challenge is how you manage that, on an end-to-end basis, effectively and efficiently.

[Larry Bagnell, Liberal, Yukon, YT]

To continue being the devil's advocate, with the big system you talked about the bowl with a bunch of wires coming in. I like to look at it more as a bunch of separate bowls. If the government has all its secrets in a bunch of separate bowls, if one of them is penetrated you only get a little part of it. If you have one big system, you have a bigger potential for a cyber effect getting through the entire government system, or a virus.

Also, if a big company is brought down by a lawsuit, for instance.... Once again, if you have the whole Government of Canada shut down, that is a pretty drastic type of thing, whereas if one department is shut down, another department could pick up the slack in that emergency.

[Louis Savoie]

Sure. For some of your statement here, I could say you're right, but we could design around all of these things. We could design diversity to make sure that it's a multi-carrier type of solution or that it has a diversity so that you wouldn't have the situation you've just enunciated. From a security standpoint, again, it's a design issue and a design question. You could protect different departments within--we'll call it--a virtual bowl, or virtual bowls within a big bowl. Everybody is sort of segregated and protected and has different layers of protection so that you don't experience the type of risk that you've just alluded to. I appreciate that it's possible, but these are things we can design around.

[Larry Bagnell, Liberal, Yukon, YT]

Just so the engineers aren't left out, with regard to QBS, you're talking about the qualifications. I could see having qualifications and then having a competition for all the people who have the qualifications. It reminds me of the guy going for a job and every one he goes to says, “You don't have any experience”. If we pick only the companies with experience, then, as Pat Martin says, we're not going to be growing in the industry. It will be harder to grow industry.

[Andrew Steeves]

That's a great question--I was waiting for it. To me, when we talk about qualifications, that could be exactly one of the qualifications you want to look for. You're trying to develop an industry, or you're trying to get local knowledge, or the position itself is for a junior person or a junior firm, if you will, a firm that you want to have built up. This happens a lot under QBS.

I know that in the province I come from, New Brunswick, there are several cities that follow QBS-type processes. Quite often for new firms starting out, maybe there are a couple of new graduates or a couple of young employees who have left a larger firm. They'll give that firm a couple of small projects just to cut their teeth on, to see how good they are--number one--but also to get them used to the processes used by that municipality. That can be, actually, a qualification. At times, what happens is the larger or more experienced firms are told, “Stand aside, because this really is an opportunity for a smaller firm.”

This is a very important point. Canada is an advocate of our association in the international arena, with FIDIC, the International Federation of Consulting Engineers. Of course, you can imagine a lot of consultants from second and third world countries are quite concerned that these large firms from Europe or North America will come in with all the answers and overwhelm the local industry. No, once again, a qualification can be that you need to have local knowledge and local content, and that will address it. That can be a qualification in itself.

[The Chair, Liberal, Derek Lee]

Thank you.

[John Gamble]

If I may...?

[The Chair, Liberal, Derek Lee]

You'd better make it very quick. We're trying to keep it to five-minute rounds.

[John Gamble]

Expertise is not the domain solely of large firms. On the contrary, the key is getting the right project team for that particular project that's available at that particular time to serve your interests. The empirical processes we see in typical procurement are actually more effectively the barrier to small firms. One-third of my members have 15 or fewer employees, and they are behind this process.

As an anecdote, we just finished our awards jury in Ontario, and we're going to be giving out ten awards at the Château Laurier on June 2, if any of you are free. Five of the ten winning firms employ 100 or fewer employees.

We are the fourth largest exporter of engineering services in the world, and that's something we should be proud of. We have a lot of expertise, and we have a firm that can do almost any type of project in the right size and the right type. We have a very diverse and very strong industry across the board.

[The Chair, Liberal, Derek Lee]

Thank you.

Mr. Roy, you have five minutes.

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

Thank you, Mr. Chair.

My question is in keeping with what Mr. Bagnell said. I have a few questions. I fully understand the measures implemented to advance the InfraGuide; I served as a mayor of a municipality over several terms. I'm well informed regarding what you have been telling me. What I am hearing from large businesses is a problem for me.

A private business, especially a major corporation, has a fundamental goal of making money and sharing the profits with shareholders. Let us be clear: the less money that is spent on a contract, the higher the profits, and the higher the dividends paid out to shareholders.

However, you are presenting the opposite vision; you want to see the government get the best expertise possible. In fact, your vision is not totally opposite. You also suggest focusing in on a company's quality and ability to innovate, even if it is a young company, and that innovation in construction should also be fostered.

The fact of awarding this type of contract to a very large company, which will in turn seek subcontractors at the lowest price possible among small businesses... I am not implying that these small businesses are necessarily unqualified, but the underlying goal is to get the lowest bid, and certainly not the highest one. When a large company launches a call for tenders, it is seeking to get the lowest price. It comes down to a matter of cost and the capacity to provide the service, and does not go any further than that.

You state that we should favour competency and innovation in certain areas, but there lies the contradiction. Indeed, I, for one, believe that a private business is not a charity, and never will be.

When we learn that major companies like Rogers will be expanding regionally, this is a big problem for me because I come from a region. I would like to get your reactions to that.