Evidence of meeting #11 for Government Operations and Estimates in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was smes.
A recording is available from Parliament.
NDP
Denis Blanchette NDP Louis-Hébert, QC
Let's come back to the fact that there is a lack of demand for innovation. Are companies too comfortable? As far as I'm concerned, if we do not innovate, we will regress. If that happens, our competitors will eat us alive. So what exactly is going on?
Associate Professor, Départment of Economics, University of Sherbrooke
A study has recently been conducted under the same principle in a dozen OECD countries. What came out of the study is that companies that export are the ones most likely to innovate. However, this did not apply to every type of export. In fact, it applied to companies which exported outside of the United States.
Many Canadian companies view the American market a bit like a domestic market. Markets which are located outside of the United States, to the south and on the other side of an ocean, are perceived as being more difficult to penetrate. We therefore have to find a way to combine innovation and the ability to understand a market, and respond to its needs. The combination of these two elements is very important.
Many companies, especially small- and medium-sized ones, do not actively try to export their products.
NDP
Denis Blanchette NDP Louis-Hébert, QC
You briefly explained how we could stimulate offer and demand. Could you briefly tell us what, in our opinion, are the best methods to use in Canada to stimulate offer and demand in innovation?
Associate Professor, Départment of Economics, University of Sherbrooke
As I said, one way to achieve that is for governments to step in. However, there are other ways. For instance, the government could invest in new technology information for both businesses and households.
Another possibility would be to give out subsidies not for the development of new technologies, but for the adoption of new technologies. It is not always essential that we use Canadian technology. What is important to increase productivity—
Associate Professor, Départment of Economics, University of Sherbrooke
—is that the new technologies are actually being used. In that case, it might be a problem—
Liberal
The Vice-Chair Liberal John McCallum
Sir, your time is up. Thank you.
We will now move on to Mr. Trottier.
Conservative
Bernard Trottier Conservative Etobicoke—Lakeshore, ON
Thank you for coming in today. I appreciate your input.
We're conducting these sessions in the spirit of learning, really, and of gaining a better understanding of the problems. In my former life, I was a business consultant. We always said that there are no problems, only opportunities.
I hope these are opportunities to improve the procurement process and open up opportunities for your companies to participate, not just because it's good for your companies, but because it's also good for the Government of Canada, and therefore for the people of Canada. You've talked about some of the innovative solutions that you've come up with, and there are always needs out there.
I want to follow up on Mr. Cannan's point about the $25,000. Just to clarify, where did that come from? Why is that the threshold? Could you explain to us the DISO process and why it creates this barrier that prevents companies from bidding?
President, SageData Solutions Inc.
It's quite simple. Up to $5,000, you can buy stuff with a credit card fairly easily with a certain level of management approval. Beyond that, up to $25,000, there's a higher level of approval needed.
I referenced earlier that there are different approvals with DISO and everything else, which is poorly understood, so we're often correcting that. I would suggest that less than half the DISO orders we receive are correct. We have to return them to federal government for correction.
Beyond $25,000, I'm not sure what the rule is, as I've not looked at it lately, but it gets into NAFTA, so it has to be offered, and there's work done with the Americans. We're talking about a two- or three-year delay in procurement. I reckon the turnaround time in the federal government is typically two years from the time we say hello until the time we get a purchase order and start running on something.
I really have given up trying to sell anything above $25,000 to the federal government, unless it's more than $100,000. I had one contract for $10,000. We solved the problem fairly quickly, then we had to get their IT approval, and then there was security, and then there was the threat risk assessment. We had to go through all the different departments, and all had the power to veto the system.
Ultimately when it's done, it goes off to PWGSC, and someone we've never spoken to looks at procurement. In one case, a clear case, we spent two years working on a project. We got the equipment, surveyed the market, picked the best stuff, loaded the software, gave it to them to trial, and they wanted it. Actually, we got the software contract, but they gave the hardware contract to two guys in a basement with a fax machine and a reseller agreement.
The deal was that the person making that decision had never met us and knew nothing about us. He was just asked to procure this at the best possible price. So he goes out with a detailed list, which I provided, and asks everybody for the pricing. I've already quoted my price, which builds in our time and effort, plus the support we promised, and the stuff just gets shipped in, in a box, from God knows where. The guys make a 5% markup, and my client is stuck, because he's asking me to support a hardware product that I've not been paid for. That's not an unusual circumstance.
Conservative
Bernard Trottier Conservative Etobicoke—Lakeshore, ON
Right.
Ms. Abu-Hakima, you mentioned how the experience of selling to government is quite a bit different from selling to big corporations, even though there are similarly sized bureaucracies in many cases. Could you talk about how the thresholds or barriers are not quite so imposing with some of your private sector customers?
Chief Executive Officer, Amika Mobile Corporation
My other experience in selling into the larger enterprises would have had to come in once Entrust bought our company. Entrust is considered an SME because they have below 500 people. We sold to large banks, the U.S. government, the Canadian government, etc. They have a way of dealing with the barriers to entry into those places. You have certain focal points in those organizations, such as the CIO, the chief compliance officer, the chief security officer, etc. As soon as you start talking to them, they'll get the director of IT involved. The people who would actually take your solution and use it get involved in the cycle.
In the Canadian government, you have to go through the whole process first. What's interesting is that there are now companies that have been formed to teach you how to get over all these little shenanigans and twisted ways to actually win a contract with the Canadian government. If somebody wants to buy something, he targets the RFP for the particular company he wants to buy it from. Once that happens, it's not a fair process anymore. We have competed in situations like that where we're the last ball that's thrown in, and then we win the technology battle, but not the actual political battle.
Conservative
Conservative
Bernard Trottier Conservative Etobicoke—Lakeshore, ON
The time is up? That's too bad. I had a lot more questions.
Liberal
The Vice-Chair Liberal John McCallum
--and it's my turn.
I'd like to ask each of you the same two questions and get a brief response.
I seem to get the impression that everyone loves IRAP, so my first question is, do you think IRAP is great? Do you love IRAP?
The second question is about BDC. It comes from this expert panel. Someone made a very negative comment about BDC, but right at the centre of the expert panel recommendations, they say that Canada spends a lot on tax credits compared with other countries, and compared with direct loans, to solve the problem of capital shortage at the commercialization stage or at a certain stage in the process. So they're proposing somewhat less money for SR and ED through making it less refundable over time, and more money in direct loans or investments through BDC. Now, if you think BDC is hopeless, that's clearly a bad idea.
Those are my two questions. You each have about 20 seconds.
Chief Executive Officer, Amika Mobile Corporation
I promise that I will keep this short. IRAP is fantastic. I would rather that the government, instead of creating a pot of money for BDC, give half to IRAP and maybe half to OSME to create champions for SMEs--or CICP.
Chief Executive Officer, Amika Mobile Corporation
BDC does not get it. Honestly, I worked through the bubble for 13 years as a technology entrepreneur. They do not understand it. They do not get it. They will not invest in risk unless you're at a million dollars in revenues. You don't get to a million in revenues unless you build the product.
President, SageData Solutions Inc.
Okay. IRAP is great, except that we're constantly teased by hearing things like this: “Well, this is the last one because they are going to cut the program, so forget it after this, but oh no, they've renewed it, and there is a bit more...”. It just goes on. So there's an insecurity around it: a constant threat that it's here but is going to be taken away from you.
With regard to BDC, let's talk facts. I took $120,000, I think it was, from BDC. Part of the deal was that I had to hire a consultant and pay him $6,000. He came in and spent three days interviewing all of my staff and didn't do anything. He was there to show me how to run my company. That particular consultant was a total waste of time. I saw that $6,000 as tax that I had to pay to get the $120,000.
I would like his job, actually--
Former Chair, Canadian Business Information Technology Network
I don't have any direct experience. I will say that our members have pretty much the same experience as what I hear from Mr. Rivenell. I will reiterate that I think more money should be spent on promoting the interest in SMEs in all branches of government.