Government Operations Committee on Dec. 10th, 2013

[Desmond Gray]

I can add to that because I used to work in that program. I'm that old. This goes back to the 1980s and the early 1990s. At that time, we did have a UPP, an unsolicited proposals program, with a fund. That was intended in some ways to do some of this thing, but it also focused on certain technologies. It didn't have exactly the same structure, nor did it have the push component in the same way it does now. This is much more open and transparent, and it provides a more competitive process in the end.

For every company that comes into this process, there's a bid notification, a tender notification. They bring their things forward. They're competing, and there's a competitive process whereby they're evaluated against the core criteria. The UPP didn't have that kind of structure to it. This program does. That's one of the reasons why I believe it's delivering such good value.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

That's helpful. Thanks for that.

Just to circle that square, or square that circle, this is still based on an entrepreneur coming forward and presenting an idea, so there's still—

[Desmond Gray]

But it is solicited in the sense that the government is asking firms to bring it their innovative products.

[Pablo Sobrino]

Let me just go through the processes. We send out a request for proposals. We sent one out just last week. We're soliciting people to bring forward their innovations. They must be 80% Canadian. The proposal must be in the pre-commercial stage, and it has to be less than $500,000, or $1 million for the military.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

I understand that, but it sounds like you're really trying to position this as being a solicited proposal when in fact.... I'm not trying to be critical here, but I'm trying to understand this a little bit better.

It's still very open-ended. With the exception that you actually have a call for proposals, you have not pre-identified which company should bid, so it does seem to bear the mark of an unsolicited proposal format.

[Pablo Sobrino]

In that sense I would say, yes, we have some restrictions on it, which is part of the initial call, and then in the screening we go through, the IRAP panel is looking to see whether the company has their business plan in place, whether their technology is in the right area of development, and those kinds of things. Then finally, there's that third look, which is that private sector/academic review, which is to see whether these companies really have what it takes to go through.

At the end of the day you end up with a pre-qualified list of ideas, innovations, and inventions that are then available for departments to access and test.

What's interesting for the businesses is that by participating in this procurement process they are understanding how to put together a document—

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

I understand that. I appreciate that.

There's another benefit in the sense that if the Canadian Coast Guard is presented with a particular business concept or innovation, there's an advantage to the Canadian Coast Guard to participate in this because the money actually does not come from the coast guard's A-base. Is that correct? It's Public Works and Government Services' money, which actually raises an interesting question.

If the product was good, and if it is valuable to the Canadian Coast Guard, why couldn't the entrepreneurs simply go to the coast guard and convince them it is really what they needed to buy because it's innovative and will save them money?

I think I'm probably running out of time, but two things to strike me about this. First, it's easier for government departments to participate in this because it does not come out of their A-base, which does raise a question of legitimacy.

Second, does the existence of this program identify a gap in procurement within the Government of Canada, in the sense that if it were easy for a small start-up, entrepreneurial company to do business with the Canadian Coast Guard or the Canadian International Development Agency, or whomever, why couldn't they do it? Why do they need to do it through this program?

[Pablo Sobrino]

The fundamental piece to this program comes on the innovation side. They have a product that the coast guard doesn't know it might need, so that's really the difference.

The coast guard has all its requirements, and it has to choose from a bunch of priorities within its budget, etc., but this program here is really about somebody coming up to us with an innovative idea. We screen for that idea, regardless of what idea it is, against the basic categories, as I say.

Let's say it's some new rubber for inflatable boats. They come in with that, and we sit there and say, “Okay this is an interesting piece of rubber that you can do something with.” Then what we will do at Public Works is to say, “We're interested in procuring to test this, but we need a department to test it for or with.” That department might be the coast guard, or it might Defence, depending on what we find. So we will go to that department and say, “Does this interest you? Do you think it's worth testing this? And by the way, we're buying it for you to test.” So they will test it.

The question is will they buy it in the future? Let's say they are happy with the product. Now they know of its existence, plus they have tested it so they have some sense of its success and are then able to put it into their normal procurement process and their priorities.

[The Chair, NDP, Pierre-Luc Dusseault]

Thank you. I have to cut you off and yield the floor to Ms. Ablonczy.

Ms. Ablonczy, you have five minutes.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

Thank you very much. This is an exciting program.

As you know, there was concern for a number of years that the same big companies kept getting government procurement, and the little guys were squeezed out and never had a chance to become big guys because nobody gave their product a chance. Of course, the government's stamp of approval goes a long way in the market.

But for every action there's an opposite and equal reaction, as the saying goes. The other thing we have seen in some countries that are very dedicated to internal procurement practices is that the cost is high, and inefficiency can be high, because sometimes companies know they have you over a barrel in the sense that you have to buy Canadian.

You have seen a recent procurement where the delays keep going on and on. The deliveries never happen. Some very important needs are unmet because of that.

My question is how do you see the government and this process keeping the right balance?

[Pablo Sobrino]

It is very much about looking at innovations in this pre-commercialization phase. Part of the reason that we can keep it in Canada is that it is a research and development program. Within the trade agreements, etc., you have exclusions for R and D. That's part of the reason we can have this program: it ensures that Canadian companies have this opportunity at that level.

The other piece that essentially keeps out the bigger players is that these are relatively small contracts. They're small amounts of money. Although we cannot exclude a large Canadian industry from participating in the program, the small companies are able to produce a product at a price that fits within the boundaries of the program. The value of whatever innovation large companies bring has a lot of overhead attached to it, which ends up costing quite a bit more. These small innovators are much more nimble at providing a new product.

That is the incentive to keep the program. We want to keep the program small. The reason the military component is up to $1 million is the fact that even small innovations for the military tend to cost more to develop. We've found that with $500,000—and we had an opportunity to recommend that the government increase the amount—we have had lots of innovations. They're all in that value range, with some I think as low as in the $40,000 to 50,000 range, and others up at $250,000 to $400,000.

That is how we keep the program small and nimble, and it allows the small and medium enterprises to really participate in the program.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

Thank you for that.

As you know, Industry Canada has responsibility for a small business file. It does a lot of work to support and encourage small business.

Could you tell us about the interface between your department and Industry Canada, and their work with small businesses in Canada?

[Pablo Sobrino]

We don't have a lot of interface. This program is a procurement program, so it falls firmly within our mandate. We do a lot of work between our Office of Small and Medium Enterprises and the small business program at Industry Canada.

What we do at Public Works with small businesses is very much helping small and medium-sized enterprises access the procurement system, that is, trying to demystify how to do procurement with government. This program is one way of doing that, but our Office of Small and Medium Enterprises does a lot of that.

We work with Industry Canada on things like business registration. We work with Industry Canada on identifying which of the small businesses, etc.... They have a lot of other developmental programs for small and medium enterprises that fall outside our mandate.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

I know that's true, Mr. Chairman, but I think I'd recommend that this committee look more at the merits of better interface. I think we all know that sometimes government operates, as the saying goes, in silos, so we don't really leverage each other's expertise and programs the way we could.

Mr. Gray.

[Desmond Gray]

I just want to say that because of the OSME activity, we are working with Industry Canada. We do an awful lot of outreach, as you can imagine, for the OSME program right across Canada. We attend many different events, support businesses, and communicate the advantages of this program.

Part of that process is that we also interface with our colleagues in Industry Canada. We share an awful lot of information, as they do with us.

[The Chair, NDP, Pierre-Luc Dusseault]

Thank you. Ms. Ablonczy's time is up.

We come back to Mrs. Day, who has five minutes.

[Anne-Marie Day, NDP, Charlesbourg—Haute-Saint-Charles, QC]

I have in front of me an article titled “Le Canada, cancre de l'innovation”, which basically means that Canada is doing very poorly on the innovation front, that we are something of a laughingstock. The article says that innovation is still the poor cousin of the Canadian economy and that Canada has received the worst mark possible—a D. The calculation is made based on the 21 indicators used by the Conference Board. And here I was, thinking that we were on the cutting edge of innovation.

I am making a link between innovation and development. I don't know whether you are doing the same, but I do see a direct link myself. If we are a laughingstock, do you think that our future economic development is in jeopardy?

[Pablo Sobrino]

I am not familiar with that article. Our program accounts for only a small part of the sector. It is used for the specific development of small and medium-sized companies that have innovations to present.

Other departments, including Industry Canada, are in charge of large innovation programs. I take care of the supply. This program is only one small part of all the efforts made within government.

[Anne-Marie Day, NDP, Charlesbourg—Haute-Saint-Charles, QC]

Where does the support for the network of small entrepreneurs or innovators come from in the regions? Does it come from Canada Economic Development and SADCs?

[Pablo Sobrino]

That is exactly right. A significant portion of that work is done by regional offices of Canada Economic Development in the west and in Quebec, and by FedNor in northern Ontario. Those are the offices in charge, I think, under the auspices of the Department of Industry.

[Anne-Marie Day, NDP, Charlesbourg—Haute-Saint-Charles, QC]

Can you tell us how many projects have been funded over the past year under the Build in Canada Innovation Program, excluding the military component?

[Pablo Sobrino]

I don't have the number.

[Anne-Marie Day, NDP, Charlesbourg—Haute-Saint-Charles, QC]

While you look for the answer, can you tell us whether this is limited to certain regions or whether all Canadian regions can use it?

[Pablo Sobrino]

It is not limited; it is intended for all of Canada. We are very engaged with urban centres and more remote areas. Last month, we participated in a seminar in Banff on innovation for small and medium-sized businesses. We are making presentations across the country.

The total value of contracts issued for 67 projects in three years was $24 million. I could send the committee clerk a summary of the program over the years.

[Anne-Marie Day, NDP, Charlesbourg—Haute-Saint-Charles, QC]

Has the pilot project been evaluated?