Government Operations Committee on Oct. 6th, 2011

[The Chair, NDP, Pat Martin]

I call the meeting to order.

Welcome to the ninth meeting of the Standing Committee on Government Operations and Estimates.

Today we are hearing testimony.

We have two witnesses from the Department of Public Works and Government Services: Mr. Pablo Sobrino, the Associate Assistant Deputy Minister of the Acquisitions Branch, and Ms. Shereen Benzvy Miller, the Director General, Acquisitions Branch, Office of Small and Medium Enterprises.

Today we will be looking at the Canadian innovation commercialization program.

I know that witnesses are eager to ask questions, but I understand you'll have opening remarks first.

[Pablo Sobrino, Associate Assistant Deputy Minister, Acquisitions Branch, Department of Public Works and Government Services]

Thank you, Mr. Chair.

I'm very pleased to reappear before you today to discuss one of the programs under my direction, which is the Canadian innovation commercialization program.

We touched on this topic briefly during our appearance earlier this week and welcome the opportunity to speak about the program in more detail.

Returning with me is Ms. Shereen Benzvy Miller, the director general who oversees the Office of Small and Medium Enterprises and the client engagement sector of the acquisitions branch.

The goal of the Canadian innovation commercialization program is to bolster innovation in Canada's business sector by assisting Canadian businesses in commercializing their innovative products and services. A key driver for the creation of the program was this committee's 2009 report entitled “In Pursuit of Balance: Assisting Small and Medium Enterprises in Accessing Federal Procurement”.

In response to that report, the government stated the following:

The Government recognizes that innovation drives business competitiveness, quality and productivity improvements and ultimately economic growth for Canada. In the past, the Canadian government has used different procurement programs to support innovation in high technology sectors. Through the modernization of the procurement process, the Government will work towards making the procurement process less prescriptive, improve considerations of quality and favour the incorporation of innovative goods and services.

Consequently, Budget 2010 included a commitment by the Government of Canada to promote economic growth through innovation.

The Canadian Innovation Commercialization Program was launched in September 2010 on a pilot basis for two years. The program covers four broad areas of innovation: environment, health, safety and security, and enabling technologies.

The program works with Canadian businesses to match their innovative ideas and products with a federal department, to test, evaluate and receive critical feedback on their innovations.

The program is based on two complementary components; the first component is an innovation procurement fund and the second component is an outreach strategy that informs and educates Canadian businesses.

The innovation fund is delivered as a procurement. Consequently, Canadian businesses must be successfully pre-qualified through a competitive call for proposals process.

These calls for proposals require that Canadian businesses submit information on their innovations, business plans and testing requirements.

The evaluation process is completed in three stages.

The first stage of the evaluation is completed by Public Works and Government Services Canada, and it serves to verify whether each proposal is in compliance with the mandatory criteria. This includes whether the business is Canadian, the proposed innovation includes 80% Canadian content, the proposal is under $500,000, and whether it is at the appropriate stage of development for the program.

Those that are compliant move forward to the second stage. This constitutes reviewing the level of innovation provided by the proposal, the business and commercialization plans of the business, and the benefits of the innovation to Canada. This stage of the evaluation is carried out by the National Research Council's industrial research assistance program in their capacity of recognizing and understanding innovations. PWGSC receives a ranking of proposals from highest to lowest.

The third stage of the evaluation is completed by an innovation selection committee, which is currently comprised of mostly private sector experts with relevant experience in innovation and commercialization. The selection committee reviews the top-ranked proposals to validate the conclusions of the second stage of evaluation. To protect the interests of the bidders, members of that selection committee are required to sign non-disclosure and conflict-of-interest agreements.

Following the validation by the selection committee, PWGSC selects the highest ranked proposals based on available funding for that call for proposals. These bidders are notified of their pre-qualification and can begin a search for a test department that is suitably matched to test, evaluate, and provide critical feedback on the innovation. To support this search, the program works with the pre-qualified businesses to identify potential test departments and to facilitate communications.

Once a pre-qualified innovation and a test department are matched, contract negotiations proceed and the specific details of testing are worked out between the business and the applicable department. In some cases, negotiations will take into account the size and scope of the proposed test and the capacity of the department to accommodate it. The final step is the issuance of a contract, which outlines the final costs, the timelines and the expected outcomes.

To support the promotion and education of the opportunities that exist through the program, as well as other opportunities that may exist to do business with the federal government, an outreach strategy has been included as an integral component of the program. The outreach effort is delivered by the regional offices of the Office of Small and Medium Enterprises, allowing it to build on its experience working with small and medium enterprises.

Additionally, the program also reaches out to other government departments to allow for an opportunity to identify what potential innovations exist in Canada that may support their operations and mandates.

To follow this overview of the program, I will now provide you with information of what has been achieved to date.

There have been two calls for proposals released since the launch of the Canadian innovation commercialization program in September of 2010. It's been one year.

The first call for proposals was released in October 2010, and in response the program received 375 proposals. Based on available funding, 27 proposals were pre-qualified to be matched with government departments, the majority of which have already been matched. The second call for proposals was released in July 2011. We have received 335 proposals, and the evaluation process is currently under way.

Given that this program has been operating for only one year, no products have completed their testing. It is anticipated that up to five to ten years may be required for full commercialization of many of the successful program participants. Such is the notion of innovation.

One measure that we can report against is the budget 2010 commitment for the program to support up to 20 innovations. It is anticipated that this commitment will be exceeded in the first round, with over 20 of the 27 pre-qualified proposals proceeding to negotiations and to contracting.

However, the current best measure is early results and feedback from Canadian businesses and associations, which have shown a strong desire for a program like the Canadian Innovation Commercialization Program. With over 710 proposals submitted for two rounds of calls for proposals, feedback from businesses suggests that demand exceeds the resources available through the program.

Positive feedback has also been received from high profile and well-known Canadian innovators. For example, in September 2010, W. Brett Wilson of Canoe Financial stated:

[The program] is about the government recognizing that the gap between innovators' ideas and the marketplace is simply someone willing to bet on them, willing to take a chance on their product, and then willing to give them feedback so they can grow their business.

We trust this program provides this type of opportunity through a unique approach to procurement that can support Canadian businesses and innovation in Canada.

I would be happy to answer any of your questions.

Thank you.

[The Chair, NDP, Pat Martin]

Thank you, Mr. Sobrino.

I know there are committee members interested in asking questions.

First, for the official opposition, is Alexandre Boulerice.

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

Thank you, Mr. Chairman.

I would like to welcome you once again.

Last time, we had the opportunity to enjoy your web site. You'd think there's something in the air because we also talked a little about web sites today. I just hope it didn't cost $73 million.

You're presenting a program to us. A key driver for the creation of the program was a report entitled, "In Pursuit of Balance: Assisting Small and Medium Enterprises in Accessing Federal Procurement".

In response to that report, the government stated the following:

Through the modernization of the procurement process, the Government will work towards making the procurement process less prescriptive, improve considerations of quality and favour the incorporation of innovative goods and services.

The program is a consideration.

Certain environmental proposals were accepted. Reference was made to a New Brunswick business that farms sturgeon—Acipenser brevirostrum—on a sustainable basis. The fish is being processed for caviar and flesh.

For exactly what department do we want to produce caviar? Who do we want to supply?

[Shereen Benzvy Miller, Director General, Acquisitions Branch - Office of Small and Medium Enterprises, Department of Public Works and Government Services]

Thank you for your question, sir.

It's important to know that we aren't buying caviar. We will be buying information of prime necessity from our departments in order to carry out our mandate, which is to ensure that food products are well tested and that the tests meet approved international standards.

In overall terms, we are going to review this company because it has an innovative way of manufacturing the desired product. Then we're going to test it with the federal government to ensure the process meets all international food products standards.

It's true that this is a small New Brunswick company, but what is interesting is that it is operated in the context of the regulations made under what is called

CITES, Convention on International Trade in Endangered Species.

Those regulations prescribe all the conditions for keeping and preserving various fish specimens.

In this situation, it is the information this company produces that we're buying.

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

Thank you very much for your answer.

My second question is a little less surprising. I'm going back to the F-35 question, a controversial issue for which I won't recall all the details.

However, it would appear that, for one of the pre-qualified proposals, the government is spending money on the "development and demonstration of environmentally benign technology for life extension of the F-35 gun system, a major component that will make the entire aircraft system green."

I didn't consider F-35s or gun systems as environmentally benign devices.

I would like to have your opinion on that issue.

[Shereen Benzvy Miller]

The CICP is an innovative program that relies on a fully competitive procurement process. The objective of the program is to acquire the innovations of Canadian companies in four priority sectors, as Mr. Sobrino mentioned: enabling technologies, environment, health and safety and protection. This last priority sector is closely related to the defence sector, and that is why this purchase will be made.

We have opened up these four priority sectors, which cover a broad range of industries, to Canadian enterprises. The program excludes no innovation based on the industry from which it originates. It is an entirely open procurement process.

We do not decide on the products that will be put forward for the program; it's the industry that proposes them. If an innovation meets program requirements and the needs of the federal departments, it will very likely be purchased for testing purposes.

In this case, this is an example of a product that enhances the effectiveness of something that is of interest to the federal government. It also offers environmental benefits.

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

I have a somewhat technical question to which you may not have an answer, but I would like to know how the life of a gun system can be extended in an environmentally benign way.

[Shereen Benzvy Miller]

When products are tested in order to be commercialized, that is done, among other reasons, to test all the statements made by the companies. In this case, the company is saying that the project will produce a more environmentally benign gun. Consequently, it will be tested in the context of the program.

[Pablo Sobrino]

I would clarify one point because I have considered the same question.

The process used to manufacture the gun has a significant impact on the environment. The company is proposing a method that has much lower impact at the stage at which the metal used in the device is treated. This method has potential defence system applications that go beyond the F-35 itself.

This is also a small company testing an idea. We are facilitating the interaction between that company and a department that may use the product.

[The Chair, NDP, Pat Martin]

I'm afraid that concludes your time.

The first speaker for the Conservatives is Jacques Gourde.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Thank you, Mr. Chairman.

Thanks once again to the witnesses for being here today.

I'll be asking some questions to help small and medium enterprises benefit from the Canadian Innovation Commercialization Program.

For what kind of business is this new program intended? Please try to illustrate your answer.

[Shereen Benzvy Miller]

That's a very good question. This program is intended for any business in Canada that has innovations that have not yet been sold, that is to say that are at the pre-commercial stage. In the research field, for example, we're talking about a product that stands somewhere between a prototype and a product that is already being sold, commercialized.

Any company with new ideas can put them forward in the context of this program. Moreover, that is why we created four very broad categories of goods and services, to include as many businesses as possible.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Some examples were cited earlier. Can you give us other examples of Canadian enterprises that have already passed the first call for proposals stage in the process? The idea is to see what kind of products we're talking about and what type of businesses this program is aimed at. Certain small and medium enterprises in my constituency may have similar products, but they may not think they're eligible for this kind of program. So I would ask you to give us some concrete examples.

[Shereen Benzvy Miller]

I'll be pleased to do that. With all due respect, I'll answer in English and use the appropriate language because I wouldn't want there to be any translation mistakes.

For example, we already have a contract with DataGardens.

The contract is for a cloud federation system that allows virtual machines to be migrated and protected across sites. That's an Alberta company and the testing is starting shortly within government.

Another example of a cool thing we're buying is the G2 Robotics--I love this name--ULS-100. I'll tell you what it is. It's the underwater laser scanner capable of creating digital three-dimensional re-creations of underwater environments. So it allows you to actually re-create it digitally and then work on it for research and things. That's a company from Ontario and that is in the safety and security domain.

Another one would be Amika Mobile Corporation's server emergency alerting edition, which is a patented emergency mass notification and network vulnerability platform--say that ten times fast--auto-discovered wired and wireless devices in airports, on campuses, and in arenas. That helps, obviously, in emergency situations. That also happens to be an Ontario company.

Another one that might be of interest is Virtual Marine Technology's MissionQuest multi-task simulator, which is a marine training solution. It helps as a simulator designed specifically for coast guard, navy, and water-borne enforcement agencies for tactical small boat crews. That's a company from Newfoundland and Labrador.

Those are some of the ones we are already beginning testing on. We have a number of others that are currently in negotiation for matching with federal departments. Obviously, and I do need to stress this, even in the pre-qualified innovations, only those for which the government could have a use--in other words, we have a match for--will actually go to contract.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Mr. Chairman, I'm pleased to see that the work we're doing in this committee is leading to the creation of new innovation programs. Canada's future truly lies in the jobs of tomorrow, jobs in the high technology field, high calibre jobs that make their contribution at the world level. I believe this is the kind of program our government has put in place. However, very competent people have established them, implemented them. That enhances our committee's role, and I'm very proud of that.

Thank you.

[The Chair, NDP, Pat Martin]

That concludes your time, Mr. Gourde.

Mathieu Ravignat.

[Mathieu Ravignat, NDP, Pontiac, QC]

Thank you, Mr. Chairman.

Thanks to the witnesses for being with us again.

I'm quoting from the Library of Parliament briefing notes:

According to PWGSC, 70% of Innovation Selection Committee members were from the private sector and were chosen based on their experience in investment and entrepreneurship, knowledge of innovation and commercialization trends, and knowledge of international business practices.

In your presentation, you referred to conflicts of interest. What specific mechanism have you put in place to prevent all conflicts of interest, both real and perceived, between members of the Innovation Selection Committee who come from the private sector and the enterprises that will be taking part in the CICP?

[Pablo Sobrino]

That's definitely something we took into consideration. For the first time, we formed a selection committee outside the government. That committee included innovation experts, lawyers with knowledge in the intellectual property field, entrepreneurs with some knowledge of finance and certain representatives of companies operating in the field of innovation. We asked them to complete a declaration form stating that they had no conflicts of interest. We also made calls to check references.

However, we understand that there are concerns. A number of small companies are taking part in the program. Consequently, we are trying to establish another model for the future. Members of universities who have considerable innovation knowledge would be more involved, and the industry would be less so. That's another model that we're examining in order to resolve this problem.

[Mathieu Ravignat, NDP, Pontiac, QC]

Could you tell us whether there are any regional, linguistic criteria, perhaps even by private or public sector, for choosing selection committee members?

[Shereen Benzvy Miller]

The answer is yes and no. We tried to find people in various fields, as Mr. Sobrino mentioned, taking Canada's geography and diversity into account. We therefore tried to create a quite representative committee, but one that would also have very useful expertise.

I would just like to mention the other measures we have taken. Committee members saw no documents before the meeting. During the meeting, they read the portions of the proposals they needed in order to conduct the evaluations. However, they were not allowed to keep any documents.

[Mathieu Ravignat, NDP, Pontiac, QC]

Thank you for your answer.

Mr. Chairman, do I have time to ask another brief question?

[The Chair, NDP, Pat Martin]

You have one and a half minutes left.

[Mathieu Ravignat, NDP, Pontiac, QC]

For greater transparency, are you considering publishing the criteria for the selection committee members, in addition to the details?

Do you also think a list of the names and qualifications of selection committee members should be published?

[Shereen Benzvy Miller]

That would be a possibility, since this is still a pilot project. We aren't opposed to that.

However, I wouldn't propose to publish the list until the evaluations are completed or the contracts signed because it's important to keep the evaluation process closed in every case since it concerns an acquisition. Then we could publish the names.

We could indeed publish the criteria. For the moment, I would note that we have requested recommendations from the associations to see whether there were any experts that we had not considered.