Government Operations Committee on Oct. 6th, 2011

[The Chair, NDP, Pat Martin]

Thank you, Mr. Sobrino. Thank you, Dominic.

Next is Kelly Block.

[Kelly Block, Conservative, Saskatoon—Rosetown—Biggar, SK]

Thank you very much, Mr. Chair.

Thank you again for being here today. I too was looking forward to this meeting and to hearing more about this project.

In keeping with the government's commitment in 2010 to promote economic growth through innovation, this program was launched, and your year one is coming to an end. You have another year of the pilot project.

You mentioned that you're in your first year, so no products have reached completion; is that correct?

You also mentioned that you do procurement testing and that typically these products are ready to go to commercialization. How long does that take? You mentioned five to ten years, but at what point are you procuring these products for testing, and how long will it take for you to know whether or not they will be successful? And how many of the funded projects are expected to be successful?

[Pablo Sobrino]

On the first question, we take the product at a point where it has been invented but not yet commercialized. They haven't monetized it, they haven't figured out how to sell it, but they need to assess whether it's a useful product.

That's essentially the contract that the federal government is offering: you have a product that you think is worth something, that can do something, and we have many government departments with many interests. Hopefully we can find somebody who's actually interested in that product and will take it, test it, and give you feedback on whether it works, how it works—all those things. Then you can go back and do the work on it.

We won't do the commercialization side. There are other agencies—the Business Development Bank, other kinds of programs—that can help commercialize, that deal with taking the product from an idea.

We're at the point where the idea has been had, they've developed a prototype, and we're assessing the prototype. Then, if that prototype with our feedback can be made better, they can move to commercialization.

As to the notion of five to ten years, and I'll have Shereen correct me if I'm wrong, the experience in the United States, which has a kind of program like this—it's a bit apples and oranges, but they have an innovation program like this—is that it takes, from the time the idea comes out to testing and to getting it as a commercial product, five to ten years. That's how long it takes to get an innovation to market. We're just one step along that way.

[Shereen Benzvy Miller]

The second half of your question was what percentage of the products will be successful.

There's no way of even defining what successful is, because when a product is tested, between prototype and commercialization a lot can change from the feedback as to what needs to happen. They may potentially have to go back to the drawing board.

In the innovation world, they say that 50% of innovations make it to commercialization. We don't expect our ranking to be any better or worse than that, but we have no way of knowing, really, and the truth is that we've never really set the program up on the basis of our not being commercialization experts. What we are is experts in helping businesses and leveraging government procurement to help businesses.

Will we be successful in that? I think we'll be successful in that 100% of the time, whether or not the company is actually successful in commercializing that particular innovation.

[Kelly Block, Conservative, Saskatoon—Rosetown—Biggar, SK]

Do I have any time left?

[The Chair, NDP, Pat Martin]

You have one and a half minutes to go, Kelly.

[Kelly Block, Conservative, Saskatoon—Rosetown—Biggar, SK]

A couple of days ago you mentioned that you had just had cake, that you were celebrating the buyandsell.gc.ca website, and that it was quite a thing to celebrate because you were also in the process of the first year of this pilot project.

What has the impact been on your office of this expanded mandate to help innovators in this area?

[Shereen Benzvy Miller]

Where do I begin? In the Office of Small and Medium Enterprises, we like to describe ourselves as small but mighty. When the government, in a budget that really didn't have a lot of new money, gives you $40 million for a two-year pilot, you feel a lot mightier.

We have really taken that responsibility very seriously, and everybody in our regional offices, for example, has become involved in the outreach. We were already doing seminars on how to do business with the Government of Canada, but now it's not only how to do business with the Government of Canada, but “Did you know that we might also be interested in buying the things you haven't sold yet?”

It adds an element of offering and service that the industry is very hungry for. The feedback we've had from industry, which is the only way I can really measure the impact, has been phenomenal. The two things that have been said that would be somewhat negative are that it's only a pilot—that's a bummer—and that $40 million doesn't seem like enough money to buy all the innovations in Canada.

I figure that's pretty good feedback, and the impact, obviously, of the good feedback has been to really energize us to buy as many great things as we can.

[Kelly Block, Conservative, Saskatoon—Rosetown—Biggar, SK]

Thank you.

[The Chair, NDP, Pat Martin]

That's the end of your time, Kelly.

That's the end of the first round. Just as a point of clarification—and this may be repeating your testimony from Tuesday, but I forget—what is the number of FTEs that you have in OSME, and what is the annual budget, and what is the size of your American counterpart's office?

[Shereen Benzvy Miller]

I can't even tell you the full size of my American counterpart's office. I know that they have 1,000 ground personnel who go out into the field, and we have fewer than 20 who do that. Their budget is $842 million. The budget of OSME per se, for salaries, is, with the regional offices, close to $6 million. We also have separate moneys allocated for the government's electronic tendering system. As I mentioned, we're responsible for that contract.

That's not all salary; that's salary and O and M.

In terms of the number of people, the reason I'm not being particularly specific is that we're in the process of melding. As you may have heard Mr. Sobrino say, I'm now the director general actually of two sectors: not just the Office of Small and Medium Enterprises but also the client engagement sector. We're in the process of trying to do efficiencies—

[The Chair, NDP, Pat Martin]

What you've told me is helpful. I'm just trying to see by ratio and proportion where we stand with our American counterparts and our commitment to not only service to medium and small enterprises but to the commercialization of innovation. As I understand you, there are roughly 1,000 people doing this work in the States, and it's a country 10 times the size...and you have roughly 20.

[Shereen Benzvy Miller]

That's the outreach for their field personnel.

[The Chair, NDP, Pat Martin]

Okay, that's helpful.

We're starting the second round with Denis Blanchette for the official opposition.

[Denis Blanchette, NDP, Louis-Hébert, QC]

Welcome once again.

In his presentation, Mr. Sobrino talked about the qualification process for enterprises. It's very detailed, and we appreciate that. I would like someone to explain to me a little how the selection process operates. For example, in the first selection, how did you whittle 300 businesses that had pre-qualified down to 27 businesses? What were the criteria? Are sectoral quotas determined in advance and so on? I'd like someone to give me a bit of an explanation of the mechanism.

[Shereen Benzvy Miller]

I'll be pleased to do that.

The process takes place in three stages. The first is carried out by our department. We verify the mandatory criteria. For example, we determine whether the proposal amounts to less than $500,000. That is the maximum amount allocated for a purchase. We also determine whether the innovation has already been commercialized, in which case the proposal is rejected. We determine whether the company is Canadian because this is a program intended solely for Canadian companies. We also determine whether the goods or services in question have 80% Canadian content.

[Denis Blanchette, NDP, Louis-Hébert, QC]

I understood all that. That's the pre-qualification.

[Shereen Benzvy Miller]

You don't want me to tell you about the specific criteria?

[Denis Blanchette, NDP, Louis-Hébert, QC]

I'd like you to tell me about what happens after that.

[Shereen Benzvy Miller]

Once we've determined that a proposal is eligible under the program, we send the documents to

NRC, IRAP, the National Research Council industrial research assistance program.

Those people conduct two independent evaluations of the documents and then submit a list to us in the order in which the proposals have been scored. We then go down the list until we reach the amount allocated for that round.

We cut the budget at that round and then we take the resulting companies. So a list of 40 in the first round went to the innovation selection committee, which is the external committee, and they looked at all of the proposals under that round to confirm that the rank ordering was accurate. Where they had questions or where they had doubts, those went back to NRC IRAP for re-evaluation. Then we finalize the list based on the amount of money to be spent in each round.

[Pablo Sobrino]

As in most procurements, requests for proposals go out, proposals come in, we assess whether they meet the mandatory criteria. The mandatory criteria get knocked off, and then you're left with a bunch, and then you rank-order them in terms of how they meet certain evaluation criteria. Shereen has just explained some of the evaluation criteria. Then you have 1 to 40, and we have money for 25, so it's 1 to 25 that are granted this. You don't get passed up the list. The list is set. Then we allocate the money that way.

[Shereen Benzvy Miller]

But I do need to say we don't necessarily buy all the pre-qualified innovations, because even after that we need to make sure, first of all, that there is a department that would be interested in testing it so there's a usefulness in government and also that the company is actually ready, because sometimes some of the innovations may not actually be ready to be sold. So they have to be ready for contract.

[Denis Blanchette, NDP, Louis-Hébert, QC]

There's currently a two-year pilot project, but you're saying that, in some cases, it will take five to 10 years for the innovations financed in this manner to become commercializable. How will you be able to assess the program after only a two-year pilot project?

[Shereen Benzvy Miller]

The purpose of the program is to help companies as they move along the path toward commercialization. The question for us will ultimately boil down to whether they've commercialized their goods or services, although the fact remains that that is not the main purpose of our program. In principle, it's designed to help them. For us, these are measures related to the commercialization process and to the path that companies take to bring a good or service from the idea stage, that is from prototype, to commercialization. We're going to use the feedback from those companies. For example, we'll determine whether our test helped them improve their products as they moved toward commercialization and whether the industries improved as a result of that. We will also determine whether this subsequently generated sales for them. That will be another measure, but further on down the road.

[Denis Blanchette, NDP, Louis-Hébert, QC]

Only two of the 27 businesses that pre-qualified were from Quebec. Is there some weakness or something that might explain that? Was that because few businesses from Quebec submitted a proposal? What happened?