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.