Evidence of meeting #105 for Government Operations and Estimates in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was businesses.
A recording is available from Parliament.
11:50 a.m.
Conservative
The Chair Conservative Tom Lukiwski
That will have to be a question left unanswered as we move along to Mr. Drouin.
November 2nd, 2017 / 11:50 a.m.
Liberal
11:50 a.m.
Liberal
Francis Drouin Liberal Glengarry—Prescott—Russell, ON
You'll get another chance.
Thanks a million for being here. I want to touch on a point, Matthew, that you raised. It has to do with the Canadian Free Trade Agreement, the small business set-aside of $150,000 in the U.S., and how we are limited here in Canada. We weren't able to do that. I recall that the late Dr. Adam Chowaniec was working on a project, and he kept citing the U.S. example and how Canada was limited in that regard.
Is there an amount we are limited to? How is NAFTA impacting that particular set-aside? Does NAFTA say you can't put $150,000 in Canada? Is there an amount that's limited to Canada?
11:50 a.m.
Executive Director, Strategic Policy Development and Integration, Department of Public Works and Government Services
To answer your question a little more holistically, when I said that now we're allowed to look into the use of set-asides because of the CFTA, don't forget that there's a domestic framework as well. We have to abide by the Financial Administration Act. In the government contracting regulations, there are specific exemptions. To date, they do not necessarily provide for the use of set-asides within the Canadian system, so we'd also have to look at the domestic legislative framework and see what would need to be adapted.
Within the context of international trade agreements, it's my understanding that there are no set thresholds. It's left to the discretion of the party to decide what those thresholds are and how they define small and medium-sized enterprises. By and large, for example, for the SBIR, the small business innovation research program in the States, it's 500 employees. For other areas, depending on the sector being looked at—aerospace, for example—that threshold could be different.
In Canada, so far we're looking at how we define SMEs in order to move forward with the possible development of a set-aside program, but the direct answer to your question is that there's no formal requirement within the trade agreements.
11:55 a.m.
Liberal
Francis Drouin Liberal Glengarry—Prescott—Russell, ON
In the States, the small business set-aside limit is $150,000. Does that allow them to sole-source a contract under $150,000, or do they still have to go through a procurement process?
11:55 a.m.
Executive Director, Strategic Policy Development and Integration, Department of Public Works and Government Services
I'm not going to speak for the system in the States. I will say, however, that being set aside from the agreements allows the U.S. to employ any mechanism, including open competition and non-open competition. As a matter of clarity, I'll also specify that the simplified acquisition threshold is the $150,000 threshold. Under the SBIR program, there is no threshold, as far as I'm aware. Once a company has gone through research and development and is looking at the follow-on sale, the government departments and agencies, like any other commercial entities, can purchase those particular goods and services. In that case, it was goods.
11:55 a.m.
Liberal
Francis Drouin Liberal Glengarry—Prescott—Russell, ON
I recognize the system's not perfect. We often hear from those who are not successful, but we also hear from those who report getting a sale with the U.S. government as opposed to the Canadian government. I think the Canadian Free Trade Agreement is a step in the right direction, and I'm assuming you guys are working on something to define that set-aside. That should be good news for SMEs.
Going back to the set-aside through CETA, has there been an amount set for SMEs, or is it just that the framework's in place and we have to work towards a set-aside through CETA for SMEs?
11:55 a.m.
Director General, Market Access, Department of Foreign Affairs, Trade and Development
There is no set-aside in CETA for the SMEs.
11:55 a.m.
Director General, Market Access, Department of Foreign Affairs, Trade and Development
There is one for aboriginal businesses, but not for SMEs. The threshold for coverage of procurements in CETA is much higher than in other FTAs. The threshold for CETA is $221,000, which is significantly higher than in our other free trade agreements.
11:55 a.m.
Liberal
Francis Drouin Liberal Glengarry—Prescott—Russell, ON
That amount is $221,000, let's say, for aboriginal businesses.
11:55 a.m.
Director General, Market Access, Department of Foreign Affairs, Trade and Development
No, sorry; that's the threshold for coverage of procurement.
11:55 a.m.
Director General, Market Access, Department of Foreign Affairs, Trade and Development
There's no limit on the aboriginal set-aside, so it could be for anything. You can just take any procurement at any value and set it aside for aboriginal businesses.
11:55 a.m.
Liberal
Francis Drouin Liberal Glengarry—Prescott—Russell, ON
Okay, got it.
The other aspect I want to touch on is the vendor performance.
From previous witnesses we've heard that the U.S. does take into account previous vendor performance. If company A was supposed to deliver a, b, and c and only delivered a, then they would take that into account for the next procurement cycle.
I'm wondering; I know we don't do this here, but would any trade agreement or our internal policies stop us from doing that right now? We don't do this here right now, but is analysis being done to implement that?
11:55 a.m.
Executive Director, Strategic Policy Development and Integration, Department of Public Works and Government Services
To clarify, in terms of monetary thresholds for coverage, the CFTA provides $25,000 as a threshold, NAFTA provides $28,900 as a threshold for goods, and the WTO and CETA, $221,400.
In what is currently the state of play on vendor performance, yes, Canada does not employ a regime similar to that in the States. It's covered under their ineligibility and debarment policy. However, Canada can debar a vendor for the most egregious poor performance.
However, through our procurement modernization efforts, we are looking at a supplier relationship and performance management scheme whereby we would be looking at strategic intelligence on future source selection by using past performance information to incentivize and inform future source selection for government procurement. That initiative is currently under way. We're consulting around 30 departments and agencies interdepartmentally, as well as our national supplier advisory committee members.
11:55 a.m.
Liberal
Francis Drouin Liberal Glengarry—Prescott—Russell, ON
I'm not sure if you're aware of the U.S. experience, but how do they analyze that? Do they use a scoring system or a pass/fail system?
11:55 a.m.
Conservative
11:55 a.m.
Executive Director, Strategic Policy Development and Integration, Department of Public Works and Government Services
I am aware they're using a scoring system to a certain extent. It's based like KPI, key performance indicators. We would be examining a similar type of system. Without confining myself to what we're up to, we are examining that type of system as well.
Noon
Conservative
The Chair Conservative Tom Lukiwski
Thank you very much.
We'll now go to our five-minute rounds of questions. We'll start with Mr. Shipley, please.
Noon
Conservative
Bev Shipley Conservative Lambton—Kent—Middlesex, ON
Thank you, Mr. Chair.
Thank you to our witnesses for coming.
One thing we realized that comes out of this is the complexity involved around procurement, particularly procurement through our trade agreements, not only because we have one but we have multitudes of them. They can't just be a template.
I'm not sure who's going to answer this. How does the federal government know and ensure that the procurements that go out comply with all our trade agreements? There has to be a compliance factor with it. There's a procurement part.
Also, I have six first nations in my riding, and land claims will impact the compliance.
I'm wondering if somebody can help me with those two aspects.
Noon
Executive Director, Strategic Policy Development and Integration, Department of Public Works and Government Services
Compliance is understanding the agreements and the obligations contained therein. Then, of course, there's implementation of those agreements. We've implemented two this summer: the CETA and the CFTA. We need to update our contract clauses through our standard acquisitions clauses over at PSPC, and then we make sure other government departments and agencies are also aware of the update to those clauses to ensure our clauses are consistent with the agreement.
We update our guidance manual for procurement staff, which is our supply manual. Within that we also include comprehensive land claim agreement obligations and what contracting officers are supposed to do to ensure they're on the right side of the law with respect to those obligations.
We ensure that our staff are trained. Training sessions take place to make sure they fully understand the obligations. We make sure that our infrastructure and systems in place are also updated to ensure trade agreements are complied with.
Furthermore, we have within PSPC a centre of expertise for trade agreements; that is there to provide guidance on trade agreements, as necessary, for individual procurements as well as for policy in, for example, supporting any negotiations that may be under way.
Furthermore, we have fairness monitors. We have the like in looking at it internally within PSPC. Then, of course, we have the bid arbiter, the Canadian International Trade Tribunal.
Noon
Conservative
