Mr. Chair, ladies and gentlemen members of the committee, good morning.
My name is Pierre-Yves Boivin, and I am the Vice-President of Strategy and Economic Affairs at the Fédération des chambres de commerce du Québec. Today, I am accompanied by Mr. Yvon Boudreau, who works with us on access to government procurement.
We are very happy to be here today to talk about a topic that is very important to Quebec SMEs and many of our members, that is to say access to federal government procurement. I would like to thank the committee for its invitation to take part in the consultations.
I'll start by saying a few words about the Fédération des chambres de commerce du Québec, the FCCQ.
On the one hand, we are a federation of 140 chambers of commerce that are active in all regions of Quebec, which gives us a broad regional scope throughout the province. Moreover, the FCCQ is the Quebec provincial chamber of commerce, and we have more than 1,100 enterprise association members. So we have both a sectoral and a regional perspective on Quebec's economy.
Our federation represents close to 50,000 active businesses in all sectors of the Quebec economy. Our objective is to encourage an innovative and competitive business environment. That is why it is important for us to take part in today's consultation, especially when one considers that federal government purchases represent annual expenditures of $20 billion, which is a considerable amount.
Simply for your information, Quebec government procurement is also on the order of $20 billion annually, because it involves areas like education, health and transportation, and a large proportion of expenditures in these sectors are government expenditures.
As for Quebec municipalities, the volume of their annual procurement is in the $10-billion range.
According to the Organization for Economic Co-operation and Development, the sum total of Canadian government procurement at all levels represents approximately 13.3% of Canada's gross domestic product. That is enormous. That is of course one of the reasons why we feel it is important to be here.
Public procurement allows governments and municipal authorities to have access to the private sector's vast production capacity, expertise and innovation. Procurement thus has the concrete effect of consolidating many private businesses. In addition, the expertise of certain businesses is strengthened by providing goods and services to governments and municipalities, which allows them to conquer new markets, accelerate their growth, and export products. Public procurement is a part of our economic ecosystem. And so it is very important to take an interest in it.
According to Public Services and Procurement Canada data, fewer than 10% of Canadian SMEs were suppliers for government contracts over the past few years. During the 2013 to 2016 period, they were involved in purchases of $5.5 billion, or approximately 35% of the government's procurement contracts.
According to the very interesting study on the topic published by the University of Ottawa, the SMEs that are involved in government purchases have a particular profile. These SMEs are focused on growth. Their growth intentions translate into market development, they want to export, and they have a high rate of innovation.
It is unfortunate that more than 90% of SMEs seem to neglect government procurement or cannot take part in it. There are various reasons for this. The representative of the Canadian Federation of Independent Business mentioned this. There is a perception of inaccessibility in that small businesses feel that they will not win the bid, and so they feel there is no point trying. One of our working groups met this morning and this issue was raised, and those are the comments that were made. Consequently we must encourage the efforts that have been made for some years now to streamline the call for tenders and contract awarding procedures.
To help guide government action, the FCCQ has been reflecting on five broad avenues for action that would help improve the level of participation of SMEs in government procurement.
First, the processes must clearly be simplified. It is true that there are limits to simplification, since we are working with public funds and there has to be a high level of accountability. However, it is clear that over the past years, regulatory requirements have been added that have not necessarily been harmonized. We feel that the government should continue to try to resolve this issue. We invite the Government of Canada to re-examine the procurement management process in order to accelerate and improve the participation of SMEs in public procurement.
The second interesting avenue, in our opinion, is to bring together SMEs and large businesses that perform major projects for the government of Canada. We can discuss this further during the question period if you are interested.
In the case of the replacement of the Champlain Bridge in Montreal, the Fédération des chambres de commerce du Québec, in co-operation with the Government of Canada, organized what was known as Industry Day in March 2014. It was a co-operative venture between SMEs and large purchasers. We feel that the Canadian government should multiply these experiences, because they facilitate meetings between SMEs and large businesses that were hired to execute major projects for the federal government.
In certain cases, it may be difficult for an SME to have access directly to government purchasing. However, it may be easier for it to act as a sub-contractor for a larger business. We think that that formula could be interesting for the Canadian government. It is beneficial for SMEs and will ensure economic spinoffs.
The third important element consists in avoiding the excessive centralization of purchases. Centralization certainly favours large businesses in large cities. Obviously, a balance has to be found. We think that centralization is necessary for certain types of purchases, but that it is not as necessary for others. For instance, you may want to centralize purchases in the military domain, but is it really necessary to do so in the case of all-purpose supplies for detention centres?
The fourth important suggestion consists in using procurement as a showcase for exporting certain innovations. As we know, Canadian entrepreneurs, especially those in the innovation sector, must establish their credibility with the markets. This is particularly true in export markets. They have to show that they have an important list of purchase orders and show that they have the necessary credibility to obtain contracts. During the startup phase, which is really critical, if an innovative enterprise can show that the Government of Canada has used its product, this will accelerate its entry into markets considerably.
Recently, in Budget 2017, the Canadian government earmarked new credits for research and development and support for the commercialization phase of prototypes. That is a step in the right direction, but we think it would be a good thing to take this further. In our opinion, the Canadian government should be an open technological showcase for innovative businesses, and allocate part of its procurement to the acquisition of emerging technologies or innovative products. In this way, it would provide concrete support to certain categories of businesses.
More broadly, I think it is important to consider public procurement as a tangible form of contribution to economic development. To that end, it could be advantageous to create alliances between the private sector and the Government of Canada in order to further the development and the export of Canadian technology and know-how.
Finally, the fifth interesting avenue of action for the government consists in developing strategic procurement. There is a lot of discussion about the importance of not considering price alone, and not focusing only on the lowest bidder. In fact, the Conseil consultatif sur l'économie et l'innovation, which was created by the Government of Quebec and is directed by Ms. Monique F. Leroux, formerly of the Mouvement Desjardins, made an interesting recommendation we wish to pass on to you today.
Many governments throughout the world are moving their procurement policies toward what is called strategic government procurement. Rather than seeking to acquire particular goods or services and asking enterprises to meet very precise specifications, governments ask for proposals to resolve a problem. This allows various businesses to get together and put forward innovative solutions or products that are not used in the standard way, in order to meet a particular need. By focusing on projects or problems to be resolved, governments can encourage this type of solution and allow new businesses to have access to public contracts.
We thus recommend that the Canadian government gradually put in place a strategic government procurement process in public departments and organizations, by using competitions for special projects.
In conclusion, even if the participation of SMEs in Canadian procurement poses obvious challenges, it is important and even essential to actively seek ways of increasing SME participation. This can be done by reducing delays and simplifying processes, but also by reflecting on the most strategic way an SME can, in light of its situation, participate directly or indirectly in Canadian calls for tenders.
I thank you for having invited us today.