Government Operations Committee on Dec. 7th, 2017

[The Chair, Conservative, Tom Lukiwski]

I call the meeting to order.

Welcome, colleagues.

Today we have three witnesses.

One is from the home riding of our member from St. John's. Welcome, Madam Sheppard.

We also have with us Mary Anderson and Stephanie Fontaine, from Women Business Enterprises Canada Council, WBE Canada. Welcome. Thank you for being here.

Madam Sheppard, I believe you have an opening statement. We'll start with you, and then we'll go to our in-house witnesses. We'll follow that with our normal round of seven-minute questions. Please proceed.

[Paula Sheppard, Chief Executive Officer, Newfoundland and Labrador Organization of Women Entrepreneurs]

Thank you very much for this opportunity to participate via conference. This is the first time I've done this, but it's a great opportunity for me.

Good afternoon. For those of you who aren't aware, I'm Paula Sheppard. I'm the CEO of the Newfoundland and Labrador Organization of Women Entrepreneurs here in Newfoundland.

We are the only provincial organization dedicated exclusively to women entrepreneurs, and we work with about 1,000 women every year in all stages of business development, right from the inkling of an idea up into perhaps selling their business. Our mandate is to connect and support women within Newfoundland and Labrador to start, grow, and advance their businesses.

At NLOWE, we believe that tapping into the growth potential of women-owned businesses is an economic imperative, which is why ensuring that these businesses are fully engaged in the government supply chain is so important. At the same time, we recognize that the federal government must work within existing laws, regulations, trade agreements, and so on, while still looking for ways to engage diverse suppliers.

I'm sure you're aware that in Canada nearly 47% of small or medium-sized enterprises have some form of female ownership. According to Statistics Canada, just over 15% of SMEs are majority female-owned. However, women-owned businesses make up less than 5% of domestic and international suppliers to corporations and government.

In Newfoundland and Labrador, female-owned businesses are very small. In our client base, we call them micro-businesses. Most of them have one to four employees. In fact, 97.5% of all businesses in this province would be considered an SME.

Why are there so few women-owned businesses in the supply chain of the government? There are many factors at play, and I'm going to highlight some of them here for you today.

First, there's often a perceived lack of SME capacity, capability, or track record, and therefore they're often perceived as a higher-risk option.

Many SMEs do lack mature business processes and procedures, mainly due to their small size. The business owner is often the person completing the bids and tenders while also being responsible for the day-to-day operations of their business. This lack of developed processes and procedures often hinders them from getting contracts, but without getting awarded the contracts, they can't scale their businesses in order to grow successfully.

Complex bidding and contracting procedures, coupled with this lack of knowledge about the tendering process, are also a major barrier for SMEs. As I mentioned, they may already lack business structure and the supports that allow them to be the successful bidder. When the process is complex and time-consuming, many are not even bidding, because the process is too onerous. If they do bid, they may not be fully aware of the requirements to be successful.

Often there is a disproportionate bidding cost based on the size of the contract. Costs of supplying a performance bond or guarantee or of having a higher level of insurance than currently held cut directly into the bottom line of these businesses. Oftentimes these requirements can be adjusted, as they are based on previous contracts and tenders and not the current one.

Government often has lengthy payment intervals after the contract is awarded. Many small businesses struggle with cash flow, and adjusting payment schedules will make the contracts more accessible.

As you can see, current procurement models are not inclusive, because the bidding process is not targeted to SMEs. The process is complex, time-consuming, often targeted to the same suppliers, and often consists of large bundled contracts for which small businesses may be able to complete part of the work but not the contract in its entirety.

It is difficult to track process when it comes to supplier diversification, as limited monitoring and reporting is taking place. Tracking and monitoring are key. If it's not measured, you can't see if changes are impactful and successful.

At NLOWE's Women's Economic Forum series in 2016, participants communicated overwhelmingly that they expect government to buy from women-owned businesses to help build the supply and service community.

One of the recommendations we put forward in the resulting action plan is that government should expand its supply chain to include more women-owned businesses. For those who would like to read our full report, it is available on our website at www.nlowe.org/actionplan.

Women business owners often do not have the necessary contacts or networks that typically lead to greater business access, and they often face significant challenges because they are more likely to be undercapitalized than their male counterparts.

The Canadian Taskforce on Women's Business Growth estimates that a 20% increase in total revenues among majority female-owned enterprises will contribute an additional $2 billion per year to the Canadian economy. Therefore, in our current economic climate, we cannot afford to overlook this untapped resource. We must fully engage women in the economy by building the capacity of women-owned businesses and opening up the supply chain to diverse suppliers. By not engaging this group, government is missing out on innovation and value, and as a result small businesses do not grow.

Given the potential positive impacts on community economic empowerment and capacity-building, NLOWE encourages the government to consider the following actions.

First, ensure that the procurement culture and strategies of government align with the growing diversity of the small business community and contribute to a healthy economic environment.

Develop and implement a supplier diversity strategy that includes procedures, goals, targets, education, and monitoring.

Develop policies and procedures that engage diverse suppliers. For instance, develop a policy stipulating that if three quotes are required, at least one of the potential vendors must be a female-owned business.

Offer programs for mentoring and supplier training to develop diverse vendors and build capacity so diverse-owned businesses learn how to improve their operations, their goods and services, and their approach to bidding on contracts.

Educate procurement departments and purchasing decision-makers about the importance of supplier diversity.

Simplify tendering and contract procedures. Oftentimes small businesses don't have the capacity or knowledge base to spend the time completing the forms required to bid.

Provide feedback to unsuccessful bidders. Businesses that are unsuccessful in the bidding process need to have constructive feedback on why they were not successful in order to increase their chances of winning the bid the next time.

Implement early payment terms. Most small businesses struggle with cash flow. They are often unable to wait extended periods of time to be paid. Ensuring that contractors get paid on a timely basis will greatly increase the chances of engaging SMEs.

Finally, develop strategic relationships with supplier associations, such as NLOWE, to build and strengthen the supply database by including diverse suppliers. These associations can be used to help distribute bid notifications or connect government with potential suppliers.

Making changes to the current procurement processes would open the doors to female-owned businesses that may not have been able to bid on projects before. Gaining experience in bidding on contracts and ultimately supplying to a new market would help these businesses develop and scale to grow exponentially, which would spin off into the Canadian economy.

An additional goal is to have these companies sell to new markets and possibly export their products and services as a result of their increased experience in selling to the federal government.

NLOWE is pleased to play a key role in assisting with the development and implementation of these policies, and we look forward to the benefits as they drive growth in our economy.

Thank you.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

Now we will go to Madam Anderson for her opening statement.

[Mary Anderson, President, Women Business Enterprises Canada Council]

Good morning. Thank you very much, distinguished members.

My name is Mary Anderson. I am the president of Women Business Enterprises Canada Council, affectionately known as WBE Canada. I am here with Stephanie Fontaine, who is vice-president of business development.

First of all, I would like to commend Paula. We've been collaborating over a long period of time.

You've actually sort of started the whole process for me, Paula, so I'll just take over the next step here.

[Paula Sheppard]

Great.

[Mary Anderson]

I'd like to give you some insights related to individual women's businesses that are currently doing public and federal procurement to let you get an insight into these people themselves.

As Paula mentioned, we certify or verify a business 51% owned and managed and controlled by women. We call them WBEs, women business enterprises. Four provided us with some insights for your information today: Maureen Sullivan, the president of National Education Consulting Incorporated; Ema Dantas, the owner of Language Marketplace; Lise Patry, the owner of Patry Law; and Donna Lee Smith, with both P1 Consulting and P3 Advisors.

We asked them three questions. The comments covered a range.

The first question was “What successes have you had in public procurement?” These were the answers:

I've been awarded contracts for every public procurement process that I've responded to but there aren't many RFPs for legal services as it's a category for procurement that is excluded from the trade agreements. We are fortunate to have several contracts with the Federal government now and we have done it through public procurement—it only took us 17 years to get to this stage! We bid on government contracts regularly, and have an excellent success rate at the provincial and municipal levels. We have not seen any opportunities for our services from the federal government. I am the owner of 2 businesses. ... We are very successful on provincial and municipal procurements...but have not been very successful [with] the federal government.

The second question was “What challenges and barriers have you experienced related to public procurement opportunities?”

One of them explained, again, that it's difficult because of trade agreements. There aren't many RFPs, and they're difficult to find. As Paula mentioned, the federal government tailors some of the procurements to larger organizations that have already had experience, security clearance, and so on. It costs a lot in time and money to respond to federal government RFPs, so one has to think about it before engaging in that request for proposal preparation exercise.

Finally there's the idea of price. The government tends to look at price and not so much at value. That's becoming more of an issue.

Some feel it's the status quo, that it's easier to work with a certain supplier they've already had in a contract than to go with others.

They've tried to navigate the federal government tendering site for opportunities. They've found few that are relevant. They're difficult to find. These people are the experts already, and many of them are training public procurement entities, so if they're finding it difficult and they speak the language, they figure it's going to be incredibly difficult for smaller companies with less experience.

As one person said, they don't see any real barriers with their skill set, but the size of procurement really makes it obvious that the federal government is not interested in dealing with small and women-owned businesses; they would rather deal with larger entities.

What are some of the tools and resources that could support future success for public procurement opportunities?

The resources are there, but they're hard to find. The only things they can think of is more transparency in the contracts that are awarded, streamlined bidding systems, and efforts from federal bureaucrats to stretch their procurements to engage small business participation, perhaps complementing the roles of larger procurement. Simplified procurement requirements are mentioned again.

If I could summarize one point that I want to leave you with, women business owners who are here and doing business with public procurement are those risk-takers and job creators. They're the enablers. They are looking for some tools, and they're simple. They just want additional points of value for being women-owned. They also want to consider value for those who are partnering with the larger entities that already doing business with women. Those are some tools for change.

The Minister for Public Services and Procurement Canada's mandate letter is very clear. It says:

...developing initiatives to increase the diversity of bidders on government contracts, in particular businesses owned or led by Canadians from under represented groups, such as women, Indigenous Peoples, persons with disabilities, and visible minorities, and take measures to increase the accessibility of the procurement system to such groups while working to increase the capacity of these groups to participate in the system

We have to work together. In working together, WBE Canada has had a track record of success and recognition from both corporations and public procurement.

Since 2009 we've been a non-profit organization that's worked to increase the participation of women-owned business and supply chains, and we are called a council. I've alluded to that before. We verify or certify that a business is 51% owned, managed, and controlled by women. Once certified, these women are connected with buyers in both corporate and public sectors that are seeking diverse suppliers and innovative products and services.

Beyond certification, we also work on education and training and capacity-building, but the focus is on that procurement lens.

Again, WBE Canada is a certifying council. I would also say that there's an ask I have of this group: extend your ideas a bit around who else could be considered under-represented. We already have certification councils for other groups, including the gay and lesbian community and veterans. It's important to consider all who could benefit from these ideas.

Again, I would say we work already with large corporations, the major financial institutions in Canada that have supplier diversity, and two of the largest automotive companies, Toyota and General Motors. We work with the telecoms, including Bell and Telus, and the largest municipality in Canada, the City of Toronto.

Leverage the tools that are there. Confirm the diversity requirements that you've already set out. Make sure that the business is certified, that they are women's business, and that they are able to support that public procurement eligibility.

Finally, there are opportunities for public policy. What a perfect time. You're in procurement modernization. This is the time to enable those activities that we've just been speaking to. The federal government can easily develop federal policy initiatives to develop bidders. You've identified them. Consider the options available.

There are point counts provided in RFPs to the bidders who are diverse or who intentionally have programs that recognize and measure and develop those companies that are already looking at and developing and working with diverse suppliers. You do it both ways, with the diverse suppliers and also the companies that are already doing business with the federal government, in recognition together.

We put ourselves up to be a convenor, to bring together the national councils that are doing diversity and certification to support procurement modernization

Incorporate the best practices. There are lots of great programs out there, from Canada's largest municipality to government to the Pan Am Games in the past, and to the U.S. government.

In closing, I say there are lots of great places right now in modernization to do this. There is an intent and a will to do it. There are a lot of good things available from organizations that are really already developing those procedures, like NLOWE. Bring this all together and you can be successful.

[The Chair, Conservative, Tom Lukiwski]

Thank you so much.

Now we'll start with our seven-minute round of interventions. We'll start with Newfoundland's own, Mr. Whalen.

[Nick Whalen, Liberal, St. John's East, NL]

Thank you very much, Mr. Chair.

As you can see, Ms. Sheppard, I was excited to have you here at the committee to learn your teachings, because it's my understanding from our meeting and announcement a couple weeks ago that the organization has already done a first-phase study. I believe some of the recommendations you provided us today have come out of that study, and now you're on a second-phase plan that we've helped fund with respect to gender-diverse procurement, at least at the provincial level.

Can you describe a bit for us the process of your first study, your second study, and what you hope to achieve?

[Paula Sheppard]

Sure. We just finished a three-year project with Status of Women Canada that was funded specifically to help women-owned businesses in Newfoundland and Labrador get business in the natural resource sector because of the Hebron project, the White Rose extension, all of those natural resource projects, and the mining and hydroelectricity projects that we had going at the time.

As we were working through those processes, a lot of the things we discovered were the things I talked about today—the size of the bidding, that it was not debundling for small businesses, that our businesses weren't a really good fit. There were hardly any tier 1 contractors. They were usually tier 2, 3, or 4 contractors within it.

As we started to evolve that process when we talked to these major operators, the first thing they all said was.... In Newfoundland and Labrador there are benefits agreements, so for a lot of those, especially around the Hebron project, they had to have a women's' employment plan and a gender diversity strategy for procurement as well. They would come to us and say government is requiring us to do it, but government's not doing it themselves. Then the women-owned businesses were saying the same thing. They said that if you're imposing these sanctions on other people, you should be leading by example.

We did communicate some of that to the provincial government. Also, in that process we started having meetings with Memorial University. Two things happened here.

One was that as we started talking to the provincial government, we realized that the purchasing act in the province was being revised, finally. It's not in place right now, but they are working on the policies right now. There is one piece that talks about value and gender diversity in the procurement process. They also are talking about best value versus lowest price, because that's also an issue, as Mary alluded to as well. We're working with them right now to help them develop and implement those policies.

The second piece is the university attended our economic action plan forum in 2016. The president came to us and said the university is one of the biggest buyers in the province, and we think there's going to be a fit and that, like the province, there's a responsibility of the university as the largest institution to buy locally. Buying locally, of course, includes these diverse suppliers.

The main thing with the new project is that we're targeting working with the provincial government and the university and two other corporations that we're in the process of identifying right now as a good fit for us. We're starting with how we can help them as a service provider, because like Mary, we've been working on supplier diversity policies since 2009.

We recognize that this is not a quick fix. This is not something that is going to happen right away. There are a lot of constraints in Newfoundland and Labrador, and of course the Atlantic accord and all these things come into play. Federally, of course, you have your trade agreements and all these different layers, so how can we as an organization with our expertise help bring these things in that are easy to do, lower cost, best value, and really stimulate the local economy?

[Nick Whalen, Liberal, St. John's East, NL]

Thank you very much. That's wonderful.

It's somewhat disheartening to learn that the federal government doesn't have the same gender and diversity purchasing programs that we expect of suppliers, and neither does the Newfoundland government.

These are plans we have been pursuing as a federal government—the previous government, and now ours as well—in trying to tackle these problems in a comprehensive way, so thank you for your help with that.

In terms of set-asides, is this something you are asking for as well, and if so, what's the shape those set-asides should take, either for women-owned businesses as the primary bidder or also for women-owned businesses as subcontractors to overall suppliers?

[Paula Sheppard]

This is always a complicated conversation. I will preface it by saying we feel very strongly about this.

What we've been doing all along hasn't been working, so I think the first thing is that you need to keep track of what you're already doing, get a good idea of what are you already doing, and make sure your data is gender-segregated already. Once you figure out where you are, then you can set targets for where you want to go.

When we did the research on the oil and gas industry in Newfoundland and Labrador, we realized that fewer than 1% of women-owned businesses were supplying to the natural resource projects in Newfoundland and Labrador. If we were going to go in with a procurement target of 30%.... We don't want to set anybody up for failure. We want to make sure that these things are successful.

I think the easiest thing to do to start, as I said, is to figure out where we are, but we definitely need—and Mary alluded to this as well—some sort of weighting scheme. All things being equal, we need some extra points to put towards the women-owned business. I think that's—

[Nick Whalen, Liberal, St. John's East, NL]

That's very interesting, Ms. Sheppard. I'm going to move forward because I only have maybe one minute left.

[Paula Sheppard]

Sure.

[Nick Whalen, Liberal, St. John's East, NL]

Ms. Anderson, when we talk about weighting, there's another way of weighting I have been mulling over in my mind, and I am wondering if your organization has given thought to it. There are businesses that are 100% women-owned, 75% women-owned, 25% women-owned, and the full continuum. Has your organization given thought to awarding points, not as a “yes“ or “no”, a binary, but on a weighted scale, depending on how women-owned the businesses are? You're doing the measures for us.

[Mary Anderson]

We've looked at this, and we have decided to follow an international protocol. The reason we do this is really that our certification is also a door opener to other markets. By looking at the 51% owned, managed, and controlled, for many of our small and women-owned businesses that receive that certification, that certification is accepted in the U.S. market, so it's a door opener. If we change that criterion, we're probably not enabling engagement in the larger or wider place.

[Nick Whalen, Liberal, St. John's East, NL]

Thank you.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

Mr. McCauley, you have seven minutes, please.

[Kelly McCauley, Conservative, Edmonton West, AB]

Ladies, thank you for being with us today, and thank you for sharing your time.

Ms. Sheppard, I used to live in St. John's, Newfoundland, in Mr. Whalen's riding, so it's good to see someone here.

You have provided some very good information, and I appreciate that.

Following on Mr. Whalen's comments about the percentage owned by women, I'm wondering if you could give me your opinion on the value of a 100% women-owned company dominated by male employees or perhaps give that value against a company that is 100% male-owned, but largely run by women.

The reason I ask is we had a similar issue with indigenous business and what provides the best value. Is it one person winning, but we're not providing a lot of leadership opportunities internally in the company for women, or the other way around, or is there a way to balance that out in the point system?

I'd like to hear what you think.

[Mary Anderson]

Can I start, and then—?

[Paula Sheppard]

I agree with you.

[Kelly McCauley, Conservative, Edmonton West, AB]

I'm sorry. I think Ms. Anderson was going to start.

[Paula Sheppard]

You can give it to her and then come back to me.

[Kelly McCauley, Conservative, Edmonton West, AB]

Perfect. Thank you.

[Mary Anderson]

Thank you.

The certification process is a process that we follow, as I mentioned.

[Kelly McCauley, Conservative, Edmonton West, AB]

Right.