Thank you, Mr. Chair and honourable members, for the opportunity to speak to you today about small business and the procurement process.
What can we be doing to ensure that small businesses benefit from the procurement process, what's working, and what could we be doing better? Those are the questions that I want to try to answer in my remarks this morning. They're questions that matter to us at AIAC, because of the over 700 aerospace firms in Canada, 93% are actually small businesses. I'll also point out that, as you will probably be able to tell, these are topics that are very close to my heart. I've spent about 22 years living this particular dream, working for and eventually running a small company that did a lot of government work. That's why I asked Jim if I could be the one to give our remarks today.
To put it simply, as you've already heard from the previous two speakers, really the most important thing you can do in government is to understand small businesses and do business with them in a way that is advantageous to small business. Know what they need to succeed and thrive, and make sure that government policies, programs, rules, and procedures take their unique nature into account.
I want to spend a bit of time talking about small business.
First of all, I want to talk about what small business isn't. Small business, first of all and primarily, isn't big business that hasn't gotten big yet. A small business doesn't want to be a big business when it grows up. In important ways, small businesses function differently from large corporations. They succeed and thrive in a different environment and according to different imperatives and constraints, and they need to be dealt with in their own way.
The other thing to remember is that small business is neither inexperienced nor unsophisticated. Particularly in our sector, small businesses are specialized, highly innovative suppliers to customers in global supply chains. They're owned and run by skilled businesswomen and men who have dedicated considerable training and experience to building profitable companies in an extremely competitive business environment.
What, then, is small business? There are two defining characteristics that we often talk about, and the first one for small business is that they are cash-flow focused and not balance-sheet focused. This can come off as looking a bit like a short-term focus, but really what it means is that in order for small businesses to be able to make investments in their future growth, they have to take care of their short-term risks first. That affects the way they deal with their customers and the way they consume government policies and programs. Really, the key thing to remember when you deal with a small business person is that whatever else is going on, this is a person who needs to make payroll for 20 or 75 or 143 people this Thursday and every Thursday.
The other thing to remember about small businesses is that they do not have a lot of specialized staff. There are no contract or legal or HR departments in small companies. Well, there are, but it's usually one person who does all of those things. You can see in this context why the simplification and the cutting of red tape in the bid and proposal process is not just desirable but absolutely directly related to that problem of paying everybody this Thursday and every Thursday.
This also leads to the great strength of small business. As Louis has already alluded to, small businesses are lean and customer focused. Small businesses know how to maximize their limited resources, and they're focused on maximizing those resources for the benefit of their customers because, simply put, a happy customer is a return customer, and return customers make it easier to make that payroll every Thursday.
With these general observations as our foundation, what are some of the specific practices and recommendations that make procurement easier and better for small businesses? Let's start with some of the things the federal government is doing that are really working.
In terms of government programming, there are two things I would really like to mention, and they've already been mentioned, but the build in Canada innovation program, or BCIP, is viewed by the small business community as a real success. Small businesses really have a lot of respect for the office of small and medium enterprises, or OSME, which administers it. BCIP is a great opportunity for small companies to access procurement opportunities in Canada, and OSME is very effective at understanding small business needs and advocating for the small business point of view inside the procurement system.
We would also point out that innovative solutions Canada is another program that, although still in its early stages, seems to be holding a lot of promise. It's modelled on the United States' highly successful SBIR program and is designed to leverage procurements to fund and purchase innovative new products and services from small businesses, providing them with that valuable first-buyer support that they all tell us is critical, especially in the kinds of procurements that our companies are involved in.
Lastly—although it's a little bit policy-wonkish—rated and weighted value propositions inside the defence procurement system can help and are helping encourage large bidders to incorporate small businesses directly into their successful bids. Although I think there is still more that we could do here, it definitely seems to be going in the right direction.
There are some things, though, where we think there is a little more work to be done, so I'll conclude with four recommendations for you to consider during the discussion today and as you develop your report.
The first of our recommendations is simple: be aware of small business needs. When you're developing policies and processes, reduce the complexity of contracts and contracting processes. Also, as Louis said, nothing presents a bigger problem to small businesses than struggling to collect payment for services that have already been rendered. Making sure that contractors are paid in full, on time, every time should be a top priority of every procurement officer in the federal government, period.
Second, we recommend the development of a vendor management system that rewards good performance with the opportunity to do more business with the government. Allowing procurements to take into account previous performance, something that is specifically prohibited in the procurement system today, will allow small businesses to employ their people where they are most productive, working for customers, and that's what will allow them to plan, invest, grow, and pay everybody this Thursday and every Thursday.
Third, we recommend that the government find more ways to work directly with small businesses through the procurement process. Reinforcing BCIP, and implementing innovative solutions Canada, both of which I mentioned earlier, would be excellent places to start.
Finally, value propositions and the way they're handled can and should be used to leverage the inclusion of small businesses in negotiations with large manufacturers and bid teams prior to the bidding process. We need more than a commitment from large bidders to use small companies on their teams after the fact. We need them to engage with small bidders prior to actually submitting a bid, with the understanding that the participation of those small companies is essential to their winning the bid. This will give our small businesses the leverage they need to conduct the negotiations that are advantageous to them to make sure that they participate in the procurement process in ways that they deem to be of most value to themselves.
I will stop there. I will be happy to answer any questions you might have.