Government Operations Committee on Oct. 18th, 2011

[The Chair, NDP, Pat Martin]

I'm going to call to order the 10th meeting of the Standing Committee on Government Operations and Estimates in the 41st Parliament.

Today we are gathering to study the effectiveness of the Office of Small and Medium Enterprises and of the Canadian innovation commercialization program.

We have witnesses before us. From the AMITA Corporation we have Monica Preston, president. Good afternoon.

From Bubble Technology Industries, Inc. we have Lianne Ing, vice-president, who perhaps is not quite with us yet. But we do have Mr. Karna Gupta, the president and CEO of the Information Technology Association of Canada. Welcome, Mr. Gupta.

Before we start, Mr. McCallum, you have a question.

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you, Mr. Chair.

Before you invite the witnesses to speak, I wanted to read out a notice of a motion:

That the Standing Committee on Government Operations and Estimates conduct a study into the provision of sensitive economic data by Statistics Canada to public servants, ministers, and ministerial staff before it's released to the public; that the committee consider the impact this has on market confidence, given the potential for this sensitive data to be utilized for personal gain before its general publication; and that the committee report its findings to the House.

Thank you, Mr. Chair.

[The Chair, NDP, Pat Martin]

Thank you.

I think you know, Mr. McCallum, that a notice of motion is not debatable in any way, so we'll simply file that for future reference.

Hello, Ms. Lianne Ing. It's a pleasure to have you with us here as well. We were just about to begin the opening comments from the witnesses, and then we'll have rounds of questions.

Is there an order in which you'd like to go? Perhaps we have first in line AMITA Corporation's president, Monica Preston. That would be a place to start.

[Monica Preston, President, AMITA Corporation]

Sure, that's no problem.

Hello, everyone, and good afternoon. My name is Monica Preston. I am the president of AMITA Corporation and one of three owners of AMITA and WorldReach Software, which is a subsidiary of AMITA Corporation.

I would first like to thank the committee for inviting me here today. It is an honour to appear in front of all of you and to provide my assistance in any way possible.

AMITA Corporation is a public safety and emergency management solutions company, offering innovative commercialized software solutions, information technology services, and expertise in research and development programs.

AMITA is a Canadian company, started in 1991 with three staff. It has grown over the years. I'm proud to say that we have more than 85 staff at AMITA. AMITA has been able to achieve its international success with a strong vision and hard-working Canadians.

Assistance from the Government of Canada is essential, not only to our business but to all small and medium-sized businesses. My company's experience with the Office of Small and Medium Enterprises and the Canadian innovation commercialization program has been positive. At this time we are completing contracting related to our CICP “call one” selection, and our experience with the application and procurement processes has also been a positive experience.

The CICP process is straightforward. It provides a clear statement of what is expected from companies. It has provided us also with a direct incentive to bring a new product to the market.

Something that I would like the committee to consider in this effectiveness study is how big an impact the endorsement from the Government of Canada can have on a small to medium enterprise. AMITA is proof of this.

In 1998 our company began to commercialize a product for consular management. It was built for the Department of Foreign Affairs and International Trade, and this solution was deployed in Canada and today is used in all of the Canadian embassies and missions around the world.

We were very fortunate at that time that our sponsor and champion at DFAIT gave us support and endorsement when other countries inquired about our company and about our products. Seven countries now use our WorldReach products.

A company like AMITA has numerous innovations that are in the pre-commercialization phase. To move to commercialization, a key element to future sales is a strong reference from the Government of Canada. In the situation with the Department of Foreign Affairs and International Trade, they gave us that support and in doing so helped us further and expand our business and create more jobs for Canadians, which in turn strengthens the Canadian economy.

In my opinion, small and medium-sized enterprises are a large part of a healthy economy. Direct government support of small to medium business through government programs and offices like CICP and the Office of Small and Medium Enterprises will ultimately contribute to a healthier and more sustainable Canadian economy.

Thanks very much.

[The Chair, NDP, Pat Martin]

Thank you very much, Ms. Preston. That was very interesting.

Next in line on our agenda we have, from Bubble Technology Industries Inc., Lianne Ing. Are you ready to make your presentation, Ms. Ing?

[Lianne Ing, Vice-President, Bubble Technology Industries Inc.]

Yes, I am. Thank you.

Good afternoon, Mr. Chairman and members of the committee. Thank you for inviting me here today to speak about our company's experience with the Canadian innovation commercialization program.

I'll begin with a few words about our company. Bubble Technology Industries was founded in 1988 and is located in the rural area of Chalk River, Ontario, which is about two hours west of Ottawa.

We are a rather unique, 50-person company, fully Canadian-owned, and we provide products, services, and research primarily in the areas of radiation detection and explosives detection.

Although we are a small company, we have a big footprint. We have more than 400 customers in 25 different countries and have conducted more than 100 research programs for customers around the world and here at home. Our technology has been used to protect people and infrastructure at many major events, including the U.S. presidential inauguration, the Super Bowl, the World Series, and the Olympics. Our radiation detectors were used in Japan to protect workers in the recent Fukushima power plant recovery efforts. Our technology has flown on more than a dozen space missions to support research aimed at protecting astronauts from radiation hazards and is equally used to protect nuclear submariners when they are deployed undersea.

These achievements are made possible by an outstanding team of people with whom I have the privilege to work. Our staff is highly trained and highly skilled, with multi-disciplinary expertise in science, engineering, and manufacturing. Our ability to generate a spark of an idea and then carry that idea through all the stages of research, development, production, and deployment is the foundation of our success.

We became aware of the CICP pilot program in September 2010 when the Office of Small and Medium Enterprises launched the initiative. We assessed our technology portfolio at the time and submitted a proposal in November 2010 for an innovative radiation-detecting speed bump that had been developed through internal company investment but had not yet been brought to the commercial market. In particular, the technology addressed the CICP priority area of "safety and security" by providing authorities with a simple-to-use, effective method of screening vehicles for radioactive materials. In February 2011 we were notified that our submission had been selected as a pre-qualified proposal.

As you have previously heard, an innovation selected by CICP must then be matched with a federal test department, which represents a potential end user of the innovation. We were fortunate, in that several federal departments expressed their interest in the technology. Ultimately, we were matched with the RCMP as the test department. At present, we have worked through the necessary contract discussions with PWGSC and are anticipating the contract award shortly.

The project itself will be 15 months in duration and includes testing of initial prototypes by the RCMP in order to solicit some early end-user feedback on the technology. We will use this feedback to identify and drive modifications to the design as necessary, and the RCMP will then have the opportunity to assess the prototypes through a second round of testing to ensure that the technology meets their operational needs.

As a company that essentially makes its living through innovation and technology exploitation, we have recognized for many years that there is a funding gap in Canada between research and commercialization. Canada has a number of programs that encourage and incentivize research; however, the mandate of many of these programs ends before the technology has actually been commercially exploited, and more importantly, before the technology has actually been transferred to the users who need it.

In our particular industry, which is geared towards defence and security applications, the lack of funding programs to carry the technology that last leg of the journey means that there are first responders and military personnel who are not receiving the benefit of the latest technological advancements as quickly as they could.

In addition, this funding gap means that Canada is not reaping the full economic benefits of technology commercialization, including the creation of high-quality jobs and the benefits associated with strong commercial exports.

From our perspective, the creation of the Canadian innovation commercialization program is a step in the right direction. It recognizes the value of carrying innovations all the way to market and it connects companies with federal departments, who can provide useful feedback on an emerging product and can potentially serve as reference buyers to support international sales efforts.

We sincerely hope that CICP will have an opportunity to continue and to expand. At the moment, the demand for the program appears to far outstrip the available resources. Even a relatively small company like ours will typically have several technologies at any given time whose commercial exploitation could be accelerated if the resources were available.

As the program evolves, there are three key considerations to bear in mind: innovation does take time; commercialization also takes time; but the faster you can do both, the greater the competitive advantage.

Rapid time to market is critical if we want to compete effectively on the world stage, and time to market can be accelerated when companies can leverage efficient, stable, multi-year funding programs supporting technology exploitation.

Thank you for the opportunity to share our thoughts on the program. I'm happy to answer any questions the committee may have.

[The Chair, NDP, Pat Martin]

Thank you, Ms. Ing. That was very interesting.

Next, from the Information Technology Association of Canada, we have Mr. Karna Gupta.

[Karna Gupta, President and Chief Executive Officer, Information Technology Association of Canada]

Thank you, Mr. Chair and honourable members, for extending to ITAC the opportunity to meet with you this afternoon and to participate in the study of the effectiveness of the Office of Small and Medium Enterprises and the Canadian innovation and commercialization program.

At the outset, I would like to communicate that ITAC is in support of both of these initiatives.

If you don't know ITAC, it is the national association of technology companies. Our members are 300-plus companies in Canada. They're as large as CGI, RIM, OpenText, and Rogers, but the vast majority of our members are small and medium-sized businesses. These companies, we believe, are vitally important to our industry in many respects. They represent the future of ICT.

ITAC's mandate has always been to promote the public policy environment, to conduct the effective growth of the industry, as well as to grow the knowledge-based sector in general. Our primary mandate has been to provide a strong, innovative, competitive ICT industry; more accelerated use of productivity-enhancing ICT tools; a fair, progressive public sector business regime in Canada; advancement of e-health; a smart regulatory regime in Canada; and a robust, competitive ICT talent pool for the country.

I hope today I will be able to demonstrate that both OSME and CICP advance all of these causes and the promotion of a strong, innovative ICT industry in Canada while supporting the need for a fair, progressive public sector business regime.

With respect to OSME, in 2005 the office was a major contributor to the important dialogue between the ICT vendor community and the federal government through ITAC public sector business committees. They also participated in various other programs and panels we ran throughout the year.

It supports our core belief that Canada's public sector procurement regime must play a strategic role in the promotion of Canadian ingenuity among the small and emerging businesses. In our view, it plays an essential role in ensuring that the $7-billion public sector ICT market is accessible to all. With respect to CICP, it is the key instrument of fulfillment of its role in the Canadian innovation and commercialization program in the budget of 2010.

ITAC has been in discussion with government, from as early as 2005, about the need for a program. When CICP was announced, it was clearly framed as a policy instrument for the support of innovation rather than a procurement instrument.

To our knowledge, several companies have participated through this process and benefited from it. We fully endorsed the announcement in July, the second call for expression of interest, and actively encouraged our members to participate in this program.

I would be remiss if I didn't comment following yesterday's Jenkins report.

Ladies and gentlemen, it was outlined that the commercialization process leads to new innovation. First, of course, you start with the idea. Then you apply the knowledge of a robust talent pool to develop a prototype and have a trial customer. Then you take the learning from this trial and start the commercialization process. At this stage, you need the infusion of capital to keep the lights on and the process growing. And finally, you do need access to both the local and global markets.

The Canadian government's willingness to play a central role in this process through an organized program is critical to small business. It is also wise public policy.

I cannot overstate ITAC's support for CICP. The only recommendation I can make for its improvement is to make it a permanent part of the Canadian innovation policy.

In this regard, we agree with the expert panel that reported yesterday. Their support for CICP and their suggestions on how to strengthen this program are worth repeating here.

ITAC values its relationship with OSME. Last year we ran an ingenious program looking at various small businesses. To that extent, buyandsell.gc.ca, the government program, became one of the finalists in the event. It sets the best practice for small to mid-sized enterprises who are planning their own web-based program looking outside, “facing” portals.

In conclusion, I simply want to restate the strong support from the ITAC industry for the Office of Small and Medium Enterprises. We're committed to providing any support it may need with its program and, if required, active consultation to further improve its effectiveness.

Thank you, Mr. Chairman.

[The Chair, NDP, Pat Martin]

Thank you, Mr. Gupta.

We'll now proceed to questions from committee members. These will be five-minute rounds. Please take note that this includes questions and answers.

First, from the official opposition, the NDP, we have Alexandre Boulerice.

Alexandre, you have the floor.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Thank you very much, Mr. Chairman. I also thank our witnesses for being here.

I must say right from the outset, Ms. Ing, that if you contribute in any way whatsoever to the success of the Super Bowl, you already have all of my esteem and admiration. I also want to say that I am very happy for the success of your small business. I think that that success has something to do with your presence here today.

I'd like to take a few minutes to provide a broader picture of innovation and research and development in Canada. According to OECD figures, in 2008-2009, Canada was the OECD class dunce with regard to direct investment in research and development. Our businesses come dead last in the rankings. This has consequences such as the fact that we are lagging behind when it comes to registering patents, as compared to our OECD competitors, as we are in the number of doctorates awarded.

I would also like to give you a broader overview, one which goes beyond what the Office of Small and Medium Enterprises can do, and we applaud what they do do, of course. Indeed, the investments made by businesses themselves in research and development has been stagnating since 2000. It was approximately 1% of GDP in 2000 before it went up a bit to 1.3% in 2001. Afterwards, it went back down to 1% in 2009.

What do you think the government could do? Could it not better support businesses, do more to help them to invest in research and development, and support them better through direct subsidies to research and development, since our country is the poorest performer in that respect among OECD countries?

[The Chair, NDP, Pat Martin]

Do you want to direct that to one of the witnesses?

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

My question is addressed to whoever feels comfortable saying how they would see the government help them better, either personally or in helping all of their competitors and colleagues who are working in an innovative field in the country.

[Lianne Ing]

A few of the key things are time to market and predictability in what funding is going to be available. One of the things that can continue to be improved--it's always a process of continuous improvement--is streamlining the selection and procurement processes for many of these contracts, while maintaining the required transparency and fairness in the procurement process.

When a company has a better ability to forecast when a contract may become available and when they have a better ability to forecast what the government's priorities are going to be in future years, they have the opportunity to decide strategically where they wish to invest their own company resources. That would be of great assistance to many small and medium companies.

[Monica Preston]

I agree with that. The whole process from the time you're awarded a piece of work to the time you're able to start work on it can be quite lengthy, and that has huge impacts. Streamlining things like getting requisitions signed and getting contracts out the door is important.

It is also really important to bridge the gap so that the average person in government knows when they can and cannot support, and under what conditions they can support a Canadian company publicly. I think there's confusion there.

[Karna Gupta]

My comment on this draws from my personal experience of running businesses for over 30 years. For small businesses the biggest issue is the commercialization and productization. That is where CICP could play a tremendous role in being the early customer of some of the new innovations in our own country. That would be hugely helpful. We don't lack ideas or money, but often the commercialization process is shaky. By the time we get to market it's way too late and other people have gone there. The CICP and OSNI, through the acquisition process and having government become the smart early customer, will help small businesses grow.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Fine.

I'd like to take the opportunity to put one last question to Ms. Ing.

You have already stated that the program does a good job but that there is a lack of resources. You reminded us that you would probably need more stable funding in the medium or long term. How many years are we talking about? What would allow you to invest in a project that would not be a short-term one?

[Lianne Ing]

When I referred to lack of resources, I meant that the demand for the program seems to be very high, and the current pilot program is funded at the level at which approximately two dozen projects were able to be funded in the first year. So as the pilot program enters its second year and as the government looks ahead to the future of the program, we would certainly hope that CICP would have an opportunity to receive additional funding and to have the funding on a multi-year basis so that companies could plan on perhaps annual or bi-annual calls for proposals and could essentially integrate their research and development and commercialization cycles with the program structure.

[The Chair, NDP, Pat Martin]

On the government side, the first questioner is Mr. Ron Cannan.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Thank you, Mr. Chair.

Thank you to our witnesses.

First of all, congratulations on being accepted into the Canadian innovation commercialization program, otherwise known as CICP. It's something that's long overdue for Canadian entrepreneurs. We have the year of entrepreneurs and we also celebrate small business week. We congratulate all small-business owners. As my colleague alluded, they are the economic engine that drives our economy.

I had the opportunity to be in business, and I know what it's like to realize that sometimes there's more month left than money and to try to figure out how to make the payroll. And you celebrate when things go well. It's kind of like taking that dream and making it a reality. I applaud you for your innovation and creativity.

One of the challenges that has been alluded to is that in Canada we haven't been as successful as we should be with taking the concept to commercialization or taking something from patent to product to profit. That's one of the reasons for our own study--to try to find ways we can help small and medium-sized businesses flourish.

So from your experience working with the OSME and the CICP project, first of all, how did you find out about the project and the program? Was the application process cumbersome the first time?

[Monica Preston]

We at AMITA found out because we regularly scan for these types of programs that can assist us in doing what we do. When we read the requirements we had to respond to, we felt they were very straightforward. These were questions that we expected to see. We had to do some research, of course, to respond to them, but I think it's not overwhelming for a company to respond to that kind of request.

[Lianne Ing]

Similarly, for our company, we actually heard about the CICP program through several avenues. We were sent e-mails by certain contacts within the government when the program was announced, and it was also announced on the federal opportunities website. So I think from a communications perspective, the announcement was well communicated.

From our perspective, because we do quite a lot of government contracting here in Canada, the application process was not overly onerous. We understood the sorts of questions they were asking and it was fairly consistent with other proposals that we've submitted. That process could potentially be somewhat intimidating for a company that's never done business with the Government of Canada, but I think OSME has been doing a good job at holding many information sessions and trying to be very available to answer questions.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Ms. Preston, you made an interesting comment--that innovation takes time and commercialization takes time. So where do you find that we could most efficiently bring those two dynamic areas so we can expedite the process to bring the product to market?

[Monica Preston]

If I look at our experience at AMITA and the consular product suite that we have today, it was really having a really good Government of Canada reference under our belt when we approached other countries, because we knew that this type of modernization was needed for the consular suite. It protects citizens travelling abroad. It does out-of-country passport production and all kinds of stuff like that. It was just really a matter of time before other countries would want it. It's a close-knit community. The fact that we would have the Canadian government supporting us as a company, making themselves available as necessary if other countries are approaching and asking if they can look at how we're using this product and whether we can give them our feedback is very important. That helps on the international side of things.

In country, the hardest thing we struggle with in terms of the small company is trying to anticipate the length of time it's going to take before we can get a contract and start work, because we have to plan ahead and manage our resources really well to be profitable and to have a good, growing company. If you could focus some energy on procurement and on looking at how long it is taking to get contracts out for small and medium-sized business--this is information that's readily available--that would be really appreciated.

Once the contract is in place, things go very well. But it's really the time between the contract being awarded and the contract actually being in place that is really difficult, and probably more difficult for smaller companies.

[The Chair, NDP, Pat Martin]

You have about 15 seconds.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

I have a quick comment strictly from the tech sector. It's a big and growing area. I represent the Okanagan Valley, the silicon vineyard, we like to call it. With respect to the high tech, do you see some of your biggest opportunities ahead? How can Canada help move those forward for your industry?