Government Operations Committee on March 3rd, 2009

[Liliane saint pierre]

It could be also included in the requirement definition, and it could also be included in the resulting contract.

The other point I want to make is that for those large military requirements--and $30 million is quite important--we also do have considerations that we call the industrial regional benefits, by which a company will commit to invest in Canada for every dollar that is being contracted for. There are other benefits that could be derived and are derived as a result of contracts that are being awarded to outside firms.

[Pat Martin, NDP, Winnipeg Centre, MB]

That's a very convoluted way to offset the impact. We're not satisfied where I come from, obviously, and that happens from time to time.

[Liliane saint pierre]

You understand that we have to live with the trade agreements.

[Pat Martin, NDP, Winnipeg Centre, MB]

Yes. We also know, though, that the trade agreements allow some margin of advantage to the domestic bid. I don't know that we're flexing enough muscle to buy Canadian to the greatest extent possible. I certainly don't understand...in this particular letter I have here from a frustrated furniture supply place, it doesn't sound as if they bid on something and lost it; it sounds as if they had the rug pulled out from under them.

I know we're here talking about SMEs, but this is an SME that's a group of companies, furniture systems, upholstery, etc., with outlets across the country. I don't know why they wouldn't be allowed to bid on or to have this national standing offer, why we wouldn't be allowed to purchase from a company like this.

I don't know, it's more of a question. I don't even know how to phrase the question.

Thank you, Mr. Chair.

[The Chair, Liberal, Derek Lee]

I just wanted to note that there's a minute left in Mr. Martin's time and I'm going to take it.

Many of these office furniture suppliers, Mr. Rapier, would be ISO certified, is that true?

[Greg Rapier]

Yes, the vast majority.

[The Chair, Liberal, Derek Lee]

And I know how difficult ISO certification can be. When you get there, the companies are all very proud of that. It allows them to sell around the world based on certain standards. So it's shocking to me that so many of these companies are ISO compliant, certified, and then when it comes to Public Works tests, the 200-page document shown by Mr. Warkentin, they are classed as “non-compliant”. They flunked the compliance test in Canada but they're ISO around the world. It just seems to be such a wrong-headed thing to do on such a massive scale.

Again, I'm tempting the gorilla to jump on somebody here, so I'm going to stop and we'll go to Mr. McTeague. I think we're into five-minute rounds now.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

Still, Chair, is it eight minutes or five? I'm just trying to get three minutes back from you, Chair.

[The Chair, Liberal, Derek Lee]

Your chair knows.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

Yes.

Witnesses, thank you for being here today. I have three very quick questions, given the shortness of time.

Perhaps I'll go to you, Mr. Rath-Wilson. The previous committee, so I'm led to believe here, had advocated and hoped there would be something along the lines of a transparent business plan from Public Works, particularly given the large nature of the purchases you anticipate making over the course of the next decade or so, or two. If that number is correct at about $4 billion, it certainly is much weightier and more substantial than even the stimulus package itself. I'm wondering if you could enlighten the committee on what your progress is and if you in fact have a crisp, concrete business plan, as was suggested here earlier.

[John Rath-Wilson, Acting Chief Operating Officer, ITSB - Office of the Chief Executive Officer, Department of Public Works and Government Services]

Thank you for that question.

Mr. Chair, yes, we have been working, as you were aware from our previous appearance last week and previously, on a consultation with Industry around the GENS project, which is the government enterprise network services initiative. We concluded our consultations with Industry early in February, and we are currently analyzing those results. We will be bringing them forward with a business rationale for these services at the end of March or beginning of April.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

It would be helpful if, now that we have seen that, a committee could actually be devoted to that. That's a substantial undertaking. I thank you for that.

Mr. Gauthier, can I ask you a very simple question? With the United States possibly putting a series of measures in place and with “Buy American” as their watchword, do you foresee any problems, any difficulties? What do you or your department feel are the difficulties, the challenges that small and medium businesses in particular could be facing?

[Gilles Gauthier]

Thank you for your question. When those suggestions first arose, the department, and specifically Minister Day, expressed a great deal of concern about them. We have been assured by the American administration that they are going to comply with their international obligations. We have every reason to believe that this will be the case. We will have to examine how the program is implemented case by case to make sure that those commitments are respected. When government procurement is governed by an international agreement like NAFTA or WTO, we have to make sure that Canadian suppliers have just as many rights as American suppliers in offering services.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

Merci.

Mr. Rapier, I wanted to ask you more specifically about the concerns you have on RFPs. Can you furnish for this committee any specific examples of RFPs that are of concern to your organization, that have not met the challenges you've set out?

[Greg Rapier]

The most important one would be the free-standing national master standing offer that was just concluded. There were a number of things, and I think the results speak for themselves in terms of the number of manufacturers who were not able to complete the document to the point where they were eligible. And there's a couple of things that come into play. One is that when new requirements are put out without any advance notice to the industry, as happened on this procurement, and you have a very short window of time to pull your entire response together, there is major opportunity for errors in your submissions. And there were companies—one of our member companies—that were eliminated from the contract because of typographical errors in their bid submission, according to what they were told.

You also have a scenario where, as it relates to office furniture products, the Government of Canada has its own unique technical specifications that are outside the industry-accepted standards that have been developed by BIFMA in collaboration with ANSI, the American National Standards Institute. So this requires additional testing, over and above testing we're required to do as an industry, to provide our products to every other client organization in North America other than the Canadian federal government.

So you have unique requirements, additional costs for testing, and again in this procurement, because you really were not in a position to finalize your testing until the day the RFSO came out and you could see the entire mandatory product requirement, there was left little time for a company to complete the entire testing.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

I have little time. I just want to make sure that if you have any specific examples.... You've given a few more generally, but more specific to actual companies, it would certainly help me get a better understanding of the significant challenges faced by some of your members.

But on that note, on the question of consultation, I know there has been a broad sense of consultation over the past couple of years. How successful have they been? Maybe I'm putting the cart before the horse, but obviously they've not. To what extent have these consultations yielded any positive outcome for you and your organization?

[Greg Rapier]

In the beginning, we felt there was positive outcome. The direction that was being considered, as it related to office furniture, did see a significant change from the initial concepts of “The Way Forward”, which initially targeted sole-source procurement within the office furniture category. Our industry advocated open access and open competition.

The challenge has come in the last year of the consultations, where again our industry feels we are really being selectively listened to in areas Public Works decides they want to pay attention to. In a number of other areas where we raise repeated concerns in terms of timelines, when information is going to be published, and the challenge this is going to create for everyone in the industry, large and small, to respond effectively, those have not been listened to, and in the free-standing procurement we see the result, which is the significant reduction in the number of qualified manufacturers.

[The Chair, Liberal, Derek Lee]

Thank you.

Monsieur Roy, pour cinq minutes.

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

Thank you, Mr. Chair.

Ms. saint pierre, I have a formal request for you, on behalf of myself and the other members of the committee. How many small and medium businesses were awarded a contract by Public Works and Government Services in the fiscal years 2004-2005, 2005-2006, 2006-2007 and 2007-2008? I would like you to provide us with those figures in the next few days. Thank you for doing that.

As well, I would like to know for how much Public Works and Government Services paid for goods and services in fiscal year 2007-2008. We do not really have precise figures. Perhaps Mr. Masse could give me an answer. You tell us that, depending on the year, it varies between $11 billion and $15 billion. What was it for the last fiscal year?

[Normand Masse]

Going by memory, I think it was $12.5 billion.

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

Very good. Thank you.

Ms. saint pierre, you told us in your presentation that, in 2007-2008, 49% of the total value of Public Works and Government Services’ transactions with Canadian suppliers went to small and medium businesses. In Mr. Masse’s presentation, he told us that small and medium businesses received $4.8 billion in contracts for goods and services out of a total of $12.5 billion. But $4.8 billion is not 49% of $12.5 billion. Unless there is something that I do not understand, we are a long way from 49%. That would be about $6 billion, not $4.8 billion.

[Liliane saint pierre]

Thank you for those comments. Let us share with you the detailed data that led us to the figure of 49%.

I mentioned that the percentage was based on the business income generated by Canadian companies. So if you take $12.6 billion, our amount, you have to subtract the portion that went to foreign companies. In 2007-2008, that figure from foreign suppliers was $2.7 billion. So our calculation starts from a base of $9.8 billion. If you do the math then, you get 49%.

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

OK. That answers my question. I had a feeling that was it.

I was also listening carefully to what you said when Ms. Bourgeois asked you if there was a policy of bundling. You answered that there was none, as far as you knew. I have a different question. Would Public Works and Government Services like to bundle contracts? I am not talking about a policy; I am talking about a preference, which is very different.

Last week at the committee, we became aware of four or five companies, SNC-Lavalin among them, that had replaced 340 small and medium businesses in managing and maintaining federal buildings. For furniture and information technology, Public Works and Government Services also wants there to be only one huge contract. Of course, that company will use small and medium businesses as subcontractors.

My question is very specific. You say that there is no policy of bundling contracts at PWGSC, but we sense a preference along those lines. When I asked a senior PWGSC official last week, his answer was that it was significantly cheaper to deal with a single company, SNC-Lavalin in this case, than with 344 small and medium businesses. I want to know if PWGSC really does want to bundle contracts

[Liliane saint pierre]

Public Works and Government Services provides a procurement service to its departmental clients for goods and services. Consequently, our actions are governed by the requests we receive. I would like to clarify two points. First, we have implemented standing offers that are open to all departments. We have an increasing number of standing offers at the moment. In the last two years, we have established what we call commodity management. So, when departments have consistent on-going needs, we set up committees with them, we get to know the industry better and we develop global purchasing strategies for all products of that kind. We establish mechanisms that lead to a number of standing offers. However, we are moving away from standing offers because there are so many of them and because companies had no figures to provide about them. That is the first thing.

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

I have no speaking time left. That is unfortunate because I would have liked to ask you for clarification on something.