Government Operations Committee on April 30th, 2009

[Pat Martin, NDP, Winnipeg Centre, MB]

One of the made-in-Canada provisions that I've cited at this committee before is this. To be able to prove that you've actually canvassed a competitive field in your tender, there have to be three Canadian bids in order to use the made-in-Canada provisions--to say that you've truly tested it.

In the example, an egregious example, of buses, there are only two Canadian bus manufacturers--one in Quebec, one in Winnipeg--so they went out and bought German buses.

Now, we make the best buses in the world in Canada. I think Winnipeg makes the best and Quebec makes the second-best buses in the world. Why would we buy Mercedes-Benz to carry our soldiers around? And the difference in price--get this--was $500,000, on a $50 million contract. It's less than the price of a set of tires on each of these buses, and we ended up buying German instead of made in Canada, made in Quebec. There's something terribly wrong with the made-in-Canada procurement provision if something like that can take place.

[Liliane saint pierre]

This is a very, very good example, to try to very quickly go through the considerations.

For military buses, the first question we ask ourselves is whether or not it's subject to a trade agreement. In this case, it could be subject to the AIT or not subject to the AIT. If it's not subject to it, the Canadian content policy applies.

[Pat Martin, NDP, Winnipeg Centre, MB]

Right.

[Liliane saint pierre]

The Canadian content policy applies only when you can demonstrate that you have three. In this case, you had two and one.

[Pat Martin, NDP, Winnipeg Centre, MB]

I know.

[Liliane saint pierre]

Therefore, we did take that to heart, because the requirement at first was to have one supplier, one contract.

Now, through the industry analysis, who can produce that in Canada and working in concert, when it comes time to re-procure this commodity--and there is a need--we will be in a position to propose a strategy, such as, why do you need only one contractor? If you need two contractors, then it could open the door to Canadian manufacturers, but fundamentally you have to first go back to the trade agreements and what is covered or not.

If it's covered under NAFTA, you have to open it to--

[Pat Martin, NDP, Winnipeg Centre, MB]

To Germany?

[Liliane saint pierre]

You have to open it to the world, to the countries that are part of that.

[Pat Martin, NDP, Winnipeg Centre, MB]

I know I'm out of time, but as a correction for the record, I said there was a $500,000 difference to that contract. It was a $60,000 difference, and I argue that the cost of sending Canadian military officers to Germany to supervise the construction of those buses will cost more than a $60,000 difference. We were the low bidder, but we lost it I think because of real problems with the made-in-Canada procurement provisions. I'm not being critical; I'm just pointing that out as an example.

Thank you.

[Liliane saint pierre]

Our commitment is to take that into consideration, but again it's very important to know what our starting point is. We do have an obligation to comply with those trade agreements. If we don't, we'll be challenged.

[The Chair, Liberal, Derek Lee]

Thank you.

Ms. Foote, we're into five-minute rounds now.

[Judy Foote, Liberal, Random—Burin—St. George's, NL]

Thank you, Mr. Chair, and thank you for this opportunity.

Thank you to the witnesses here today.

This is my first meeting. I'm new to the committee, so forgive me if some of my questions have been answered previously.

As a former minister of industry, I'm really interested in the whole business around small and medium enterprises, access to capital, and what we do to make it possible for them to access capital and procure contracts. No matter where you are--in a province, a territory, or the country--any small or medium-sized enterprise, or large enterprise for that matter, will look to governments as a wonderful opportunity for sourcing contracts. Governments tend to be around all the time, so there's no chance of that contract not proceeding.

I want to pick up on where my colleague Mr. Martin finished off in set-asides for small and medium enterprises.

Ms. saint pierre, is it your position that there should be set-asides for small and medium enterprises?

[Liliane saint pierre]

It's an interesting question, in the sense that in order to come up with a position on this we need to go through quite an analysis that leads to negotiations as part of the trade agreement.

I was involved in one type of set-aside--the aboriginal set-aside--and it has had some results, but you have to look at where they started from. When I look at the contract value that has been allocated directly to small business so far, there has been huge progress in the last few years without set-asides.

The other point I want to make is that you can make statistics tell a lot. When we report 49%, it is for direct contracts. It doesn't take into consideration all the subcontracting work that goes through those small businesses as part of those large contracts. If we had the data and could put the two together, the percentage would be much higher.

So we really need to think carefully in developing those strategies and negotiating set-asides.

[Judy Foote, Liberal, Random—Burin—St. George's, NL]

When you determine criteria for the purchase of products or services by the government or a government department, how do you go about doing that? Who do you involve in that process?

[Liliane saint pierre]

Because we are talking about small business mainly, my comments relate to commodities the government buys in large quantities.

To the question that Madame Bourgeois raised before, we mentioned that in The Way Forward initiative in procurement renewal we did focus on commodity management and trying to determine the best way to approach and to procure. More and more, as a result of the analysis of those buys, we involve both government departments and the industry to develop the standard requirements. I will give you an example that is just off the press.

The government announced today the award of 125 standing offers or supply arrangements, which is technical, to temporarily help firms in the national capital region. Of those 125 firms, more than 90% are small or medium-sized businesses. The requirement definition for that was done with industry and government departments. It's the result of 40 meetings that were held since 2006 with industry and those departments, the main users, in order to come up with the best requirement definition that could be open to all. In this case, it's very important, because what they are offering is temporary help services. That could range from an administrative service that you require one day to something much more specialized, but always on a short-term basis.

So more and more for standard commodities we develop the requirement with the involvement of the private sector and government departments.

For larger requirements, when we have a statement of work or requirement definition, if it cannot be developed with a specific sector of the industry, or even if it's being developed, we'll approach them through a letter of interest or through a draft statement of work and we'll invite the industry that is keen to bid on that, who has an interest, to provide comments, simply to make sure that those requirements are open and accessible and so that through a certain mandatory specification, you don't eliminate a very large group of people and so on. It's not targeted to only one supplier and one product.

[Shereen Miller]

Perhaps I could also add that on top of the formal consultations, we work very closely with industry associations as well, so my colleague DGs in the Acquisitions Branch and I spend a lot of time actually with industry associations discussing the strategies and the processes that are going on in Public Works. That piece of it is very transparent.

[The Chair, Liberal, Derek Lee]

Thank you.

Ms. saint pierre, the area you've described pertaining to the recent announcement, that was in the temporary personnel sector, was it?

[Liliane saint pierre]

Yes.

[The Chair, Liberal, Derek Lee]

Okay, thank you.

Monsieur Roy, for five minutes.

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

Thank you, Mr. Chairman. Before asking my questions, I would like to table the document referred to by Ms. Bourgeois and ask that it be appended to today's proceedings. It deals with the same subject that was addressed by another committee.

I would like to direct my questions to the other witnesses, who are not from Public Works and Government Services Canada. I would like to have them provide a little more information. For example, I would like to know what you consider to be a small and medium enterprise. In terms of the number of employees, based on what data does Industry Canada determine that a company is small or medium-sized? In your material, you say that 98 per cent of the 2.3 million business establishments in Canada are considered to be small enterprises, that 74 per cent of them have fewer than 10 employees and that 57 per cent have between one and four employees.

What is your definition of a small and medium enterprise in Canada?

[Denis Martel, Director, Research and Analysis, Small Business Policy Branch, Department of Industry]

Thank you, Mr. Roy.

The usual definition of a small business is one with 100 employees or less. These figures are based on that definition.

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

Thank you, that answers my question. Public Works and Government Services Canada defines an SME as an enterprise with 500 employees or less. That is what you mentioned in your document, in the answer you provided. If foreign suppliers are removed, 98 percent of the business establishments in Canada which are small and medium enterprises with fewer than 100 employees receive 49 percent of the contracts.

In the table you provided, you say that SMEs are firms with 500 employees or less. That does not answer my question. For example, does that mean that 30 percent of these contracts are awarded to firms with 400 or 500 employees? That is my question. We have been told that 98 percent of Canadian businesses have fewer than 10 employees.

[Liliane saint pierre]

Mr. Roy, thank you for your question. Before giving Industry Canada officials an opportunity to respond, I think it is important to clarify that a small enterprise has fewer than 100 employees and that a medium enterprise has fewer than 500. The statistics we provided you include both. We could give you statistics on firms with fewer than 100 employees, in order to make the distinction between the two. However, because we have a group called « small and medium enterprises », that is the way we present the numbers. I believe the same applies to the Department of Industry.

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

Your table does not really answer my question. If it is true that 98 percent of firms have 10 employees or less, are the 2 percent of firms with 100 employees or more being awarded 49 percent of the contracts? That is my question.

I have another question for Industry Canada. Small and medium enterprises are having trouble accessing the Department of Public Works. Let us talk only about small businesses for the time being; we will just forget about medium enterprises—the ones with no more than 500 employees. There is an access problem. There is also a problem accessing Industry Canada, particularly in the regions.

The complaint that we constantly hear from small and medium enterprises—and when I talk about small and medium enterprises, I am referring to those that have 100 employees or less, and not 500 employees or less—relates to how to access federal government services. There is not a single gateway. Ms. Bourgeois gave examples of this: CFDCs help businesses, the BDC help businesses, Economic Development Canada does so as well, as do the agencies and Industry Canada. A small business does not necessarily have all the necessary research tools to know which is the right door to knock on. There is no one-stop access point to reach the federal government.

Mr. Jordan, who talked about problems in the United States, referred to a single gateway for small and medium enterprises. For procurement, there is a single access point. Has consideration been given to creating a single gateway for small business?

[Shereen Miller]

Yes. Of course, we have chosen Internet as the vehicle that is most accessible to everyone. We are currently developing a business portal. This will be a one-stop gateway. Even before building the portal, we already had a presence on the Internet—a very accessible presence. We have connected all the functions that you described by means of links. It is very easy to navigate from one to the next. Also, toll-free numbers are available for people who want a lot of information about other programs. We can steer people in the right direction. Those gateways are already very well organized in order to encourage…