Thank you very much.
Hello, committee members. My name is Louis-Martin Parent, and I represent the Canadian Federation of Independent Business. Thank you for this opportunity to present to you today on SMEs and federal procurement. Thank you especially for your openness to my presenting via video conference.
By way of background, I've been one of CFIB's leads on the federal procurement file for about nine years now. I authored the report from which I will draw some data for you in a few moments.
CFIB is a political advocacy organization that represents the views of over 100,000 business owners across the country in all sectors and regions. We are a non-partisan group, and our advocacy is funded solely by our members. Finally, we take our policy positions directly from our members through various surveys that ask how they are affected by a given issue.
I would like to quickly mention that CFIB has been active on the procurement front for at least two decades. There are a few reports listed here. We have also been members of PSPC's supplier advisory committee since its founding.
The quote on slide 4 was provided in response to CFIB's federal procurement survey. I feel that it reflects many SMEs' overall views on procurement. Simply put, if the perceived effort is not worth it, SMEs will look for opportunities elsewhere. If the process involved in just getting a foot in the door seems too complicated, SMEs will look for opportunities elsewhere.
Over the course of these hearings, you will hear about many legitimate macro- and micro-level problems with federal procurement. I will mostly focus my comments on red tape and perceived red tape. Improving procurement for SMEs may be time-consuming for the government, but it is important. The University of Ottawa and PSPC recently co-authored a study that plainly states that the government must encourage SME participation in federal procurement because “the growth of SMEs accounts for a disproportionate share of job creation, innovation, and the accompanying economic prosperity.” Ensuring that SMEs can come to the table and sell themselves properly, with the least amount of hurdles, is in the country's best interest.
Moving on, procurement is an inherently competitive process. Firms that lose out on a contract will always be able to point to something that hindered their ability to present the best possible bid. It's also a completely different sales world than what most SMEs are accustomed to. The government has its own language and terms. Bidders often can't talk to the end buyer or user of their product or service. The timelines are much more drawn out than in the private sector. There will always be hurdles and pain points, but the government can make it so that it is easier for SMEs to, one, identify opportunities that are within their area of expertise and have a realistic project scope, and two, promote themselves and bid on those opportunities in a straightforward manner.
CFIB published its report on federal procurement in 2011. I'll present a few data points from that report in a moment. Many of these issues pointed to in our report have been replicated or brought up in subsequent reports, such as a 2013 study by OSME, the findings based on a 2014 email sent by the then-PWGSC minister to 130,000 suppliers in the government database, a 2015 end-of-mandate report by the outgoing procurement ombudsman, and the aforementioned 2017 University of Ottawa and PSPC study. These reports all point to many of the same obstacles. I'll review just a few of these obstacles for you.
Many data points in our survey and others that show that small businesses are integrated into every type of purchase made by the government. They provide goods and services as either prime contractors or subcontractors. Very generally speaking, a small business does a few things well and they stick to that niche, often through a limited number of contracting vehicles, but they touch on every type of government need.
Regardless of how long they have been selling to government, businesses who do federal procurement are usually more established, older firms that have been able to build themselves up prior to selling to the government. There are some positives to this, of course. Being more established gives the government more confidence that the company will be able to follow through on its promises, for example, but it also shows that younger firms are seldom considering federal procurement as a prime target, regardless of promised contract size.
Here are the responses from other members as to why they did not sell to the federal government. The second, third, fourth, and fifth most popular answers can be categorized as red tape related. I should mention here that the government has made efforts to address some of these problematic areas. I'll mention a few of these projects in a few moments.
In terms of how businesses identify potential procurement opportunities, MERX was essentially replaced by Buyandsell.gc.ca for federal procurement. However, the chart shows how business owners of smaller firms, and in particular the ones without a dedicated sales staff, are less likely to sit down and peruse various government websites for opportunities. They have so many fires to put out on a given day that it becomes a difficult choice between what's needed right now and what could be a good opportunity down the road. Once they have successfully done some procurement, it becomes easier and more straightforward for them, but you can see how it becomes a bit of a catch-22 scenario.
A CFIB survey asked members who had sold to the federal government for their thoughts on various aspects of procurement, such as fairness of criteria, promise of response to bids, timelines, etc., but the three aspects that received the lowest ratings are simplicity of forms, clarity of steps necessary to sell to the federal government, and the notification of and access to contract opportunities. Each of these has nearly 50% of members rating them as poor, and they are all red tape related.
One additional note on payment timelines is that less than one-fifth of respondents indicated “typically get paid within 30 days”. A larger group says it takes more than two months to get paid. The broader take-away from this chart is simple. If a small firm gets paid two or even three months after they have delivered a product or service, it will almost certainly sour them on doing repeat business with the government. They will also be likely to tell their fellow business owners about their experience.
Finally, I want to show you how SMEs view their greatest strengths. The top three answers are related to their company's knowledge, reputation, and experience. These are values they bring to the table. Cost-effectiveness is viewed by many as a strength but not as much as the first three are. When the government looks at price as the main determining factor in choosing a supplier, it is by default putting most SMEs at a disadvantage. It is truly a case of price versus quality, and the procurement ombudsman's end-of-mandate report that I mentioned earlier has a particularly good summary of the problem.
As I mentioned earlier in my presentation, the government has made many improvements on a few different fronts. The launch of the Buyandsell.gc.ca website was a big step forward. Whereas previously information was found on multiple websites overseen by different departments, Buyandsell.gc.ca provides a central information point, which is a good start. I will say, however, that I've received a few comments about it being rather overwhelming.
The government recently conducted a pilot for submitting bids via Canada Post's e-post service, which is essentially another way of submitting bids by email. This is very welcome and has already generated positive results for suppliers and government.
Finally the building Canada innovation program has been a successful initiative, encouraging SMEs to approach government with innovative products and solutions. It also shows that communication between suppliers and end-users can be productive, but more must be done.
My first point on the final slide will be my main recommendation. A robust e-procurement platform that lays out a clear process to build on opportunities, written in plain English or French, would be a key to reducing the hurdles for SMEs to successfully bid on contracts. The supplier advisory committee has received many updates on the government's e-procurement plans and I know it is currently aiming to award a contract in the next six to nine months. This will surely be a very complex evaluation and implementation, but they need to get this right on the first try. I would urge the government to prioritize resource allocation to support the successful implementation of the e-procurement solution.
My two final recommendations are to focus on reducing payment timelines as much as possible and to implement strategies to deter procurement officials from focusing only or primarily on price. Both of these issues have strongly discouraged small businesses from selling to the federal government or being repeat sellers.
Thank you very much once again for this opportunity.