Evidence of meeting #114 for Government Operations and Estimates in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was federal.
A recording is available from Parliament.
11:35 a.m.
Liberal
Kyle Peterson Liberal Newmarket—Aurora, ON
Is that something the federal government should be doing, then, as part of whatever new procurement policy and directive come out of this? Is it something we should perhaps be investing some resources in and getting information out there on to say that, yes, you should compete on these bids? Here's why and here's how we can help you.
Is that something we should be doing?
11:35 a.m.
Full Professor and Deloitte Professor in the Management of Growth Enterprises, Telfer School of Management, University of Ottawa, As an Individual
I would strongly encourage it. I've not seen a lot of role modelling. I've not seen a lot of good news stories. I've not seen a lot of social capital being built up around this. We have a whole infrastructure of small business organizations in Canada. Does everybody know somebody in PSPC to talk to about an issue?
Proactive outreach by the federal government and a really strong communication campaign will bring more contractors to your door. By doing that, you're going to increase the quality of your suppliers.
11:35 a.m.
Liberal
Kyle Peterson Liberal Newmarket—Aurora, ON
Okay. This is good. To summarize that, are there three or four recommendations for things we as the federal government can be doing quickly and effectively to reach the goal of engaging SMEs in procurement?
11:35 a.m.
Full Professor and Deloitte Professor in the Management of Growth Enterprises, Telfer School of Management, University of Ottawa, As an Individual
I would say have a strong communication program. I would recommend looking at a 25% goal for procuring from SMEs, and not just because I'm an academic but because there's very little data. Given the size and spend of our federal government, I think this is very badly needed, particularly when we're trying to be creative and think about new strategies to bring SMEs into the pipeline.
11:35 a.m.
Liberal
11:35 a.m.
Conservative
The Chair Conservative Tom Lukiwski
We'll now go into our five-minute round of interventions, starting with Mr. Shipley.
11:35 a.m.
Conservative
Bev Shipley Conservative Lambton—Kent—Middlesex, ON
Thank you very much.
Thank you very much for coming here on almost our first day of winter, by the look of it out there.
I have a quick question.
I was interested in the comments—Allan, you mentioned this—regarding the subcontracts. What we find, and what we're hearing, is that this is where a lot of small businesses fit into. They fit into the subcontract because of the number of employees. They don't have the resources, the wherewithal, to meet some of the requirements to take on the full contract, just because of their size.
We also heard from one of the witnesses the other day, which I think was a key part, that small businesses often don't have the resources or the ability to take the long-term investment. Part of this is the payment that comes with federal contracts. If I have to meet my payroll this Thursday, next Thursday, and every Thursday, the comment was, “As small businesses, we have a passionate and a compassionate commitment to our employees to make sure we can keep them. Sometimes we can't get take those long-term investments.” As a result, they get the subcontracts. They take these subcontracts.
We also heard as we went through this that it's often too much about price and not about the value of the product, or in coordination.... In the long term, price is important, but the quality and the outcomes of these things are likely more important, as we watch so many things happen around government here in terms of contracts.
Do you have any comments on that?
11:40 a.m.
Full Professor and Deloitte Professor in the Management of Growth Enterprises, Telfer School of Management, University of Ottawa, As an Individual
You had a two-barrelled question there.
At its root, one had to do with financial management and the issue of that interim between delivering the product or service and ultimately getting paid. That's a problem small businesses face with almost any supplier, not just government. Whether it's worse with government or not, I don't know. I don't have data on that, but it's certainly an issue for a large number of small businesses.
A 2003 study by a couple of Canadian academics found that the most frequent cause of failure among small businesses is financial error, so part of the issue relates to the financial literacy of our whole small business landscape and the ability of small business owners to bridge that kind of gap.
That's a fascinating story, but certainly it's an issue in failure, and it's an issue in management, meeting payroll. I know that the Financial Consumer Agency of Canada, the CPA, and private sector corporations are undertaking major initiatives in terms of trying to bring up the level of financial knowledge among Canadian business owners. That is a huge issue all by itself.
11:40 a.m.
Conservative
Bev Shipley Conservative Lambton—Kent—Middlesex, ON
Okay.
Ms. Orser, you talked about the U.S. set-aside program as an objective for Canada, and then you also mentioned the 25%. However, there was the concern of lack of credibility because of the lack of monitoring with it.
What I understand is that in the United States and Australia, they have targets for the proportion of the procurement, while the United Kingdom has a target for the procurement value.
It goes back a little to my earlier question. Is there a preference? If we were to establish a target, how do we ensure we get the monitoring right?
11:40 a.m.
Full Professor and Deloitte Professor in the Management of Growth Enterprises, Telfer School of Management, University of Ottawa, As an Individual
In terms of preference, I mean they're quite different programs. One is a percentage of the contract, so that's bringing in SMEs as subcontractors potentially. That's important, and they're there already. Although we don't monitor, we know that they subcontract.
I think there is an important commitment to small businesses that they will be primary contractors to our federal government, if we really want to engage as bona fide businesses with PSPC and their client base.
I'm going to indirectly answer your question too. The previous one talked about outcomes, and we rarely think about outcomes. That could be criteria: outcomes such as innovation, such as diversity, outcomes that are being specified by our government as being important at this time.
11:45 a.m.
Conservative
11:45 a.m.
Conservative
11:45 a.m.
Liberal
Ramez Ayoub Liberal Thérèse-De Blainville, QC
Thank you, Mr. Chair.
Thank you both for joining us today.
I have some experience in economics, and I was also involved in municipal affairs because I was a town mayor.
When the government signs contracts and launches calls for tenders, it has to ensure to get the best value for money. In the discussions we have had so far, on several levels and for all kinds of good reasons, what we are saying to the federal government is that the process seems difficult and cumbersome for SMEs, among others. We are asking the government, the creator of jobs, to simplify this process, to be more available and to ensure that SMEs can help grow the economy.
I think there is a way to strike a balance when it comes to free markets, free enterprise and free competition. Of course, some governments can be more interventionist than others, but, if a government wants to intervene, is it not simpler to give targeted subsidies to business groups, be they made up of women, aboriginals or people with specific regional considerations? Canada is a very large country.
I feel that we are splitting hairs. It is becoming increasingly complex and, at the same time, we are asking that the process be simplified. There is no figuring it out.
I don't know what you think about simplifying the process—and this may be very naive—by being a bit more hands off with the market and providing targeted subsidies to specific groups.
Awareness also needs to be raised. Companies often don't even know that they could have access to grants. Businesses don't have the information they need, and when they don't have information, they don't have the necessary knowledge.
Can you tell us what you think about that?
11:45 a.m.
Full Professor and Deloitte Professor in the Management of Growth Enterprises, Telfer School of Management, University of Ottawa, As an Individual
Merci.
I think I'll take that from a municipal perspective. We know that the City of Toronto is really becoming a world leader in diversity procurement. We know there are practices at the municipal level that the federal government can learn from. Part of that is what we qualify as quality contracts and price, so perhaps being a little more innovative, in terms of what is quality and what is price. The City of Toronto is being critical of those kinds of criteria, so they're opening up a little more flexibility, in terms of who might qualify for those contracts.
We certainly understand the concern of complexity when we roll this out on a national level as well. I do think there are opportunities for learning from the city and those are complex procurement processes as well.
11:45 a.m.
Full Professor and Deloitte Professor in the Management of Growth Enterprises, Telfer School of Management, University of Ottawa, As an Individual
I think you're touching on the very basic question relating to how a constrained system is always going to operate at a lower level of optimality than an unconstrained system. How do we go about making up for that gap?
I think part of it is to identify the areas within diversity that are different and where people who are different are disadvantaged. That was the goal of the U.S. 8(a) system. They had eight or nine different levels of disadvantage. Being a woman was one. Being a historically underutilized business area was another, as well as being a veteran or being a disabled veteran. They had eight different categories. Do we have a system that tries to even the playing field for people who are disadvantaged like that, but have much to contribute, or do we just let the market operate as it is? I think there is a lot of merit in being inclusive and diverse. The Conference Board has a business case for that, which I would cite.
It's certain that there would be economic losses in terms of constraining people. I think the idea is that those losses will get offset by the job creation and the innovation that would be endemic to the people who then take the contracts.
11:50 a.m.
Liberal
11:50 a.m.
Conservative
The Chair Conservative Tom Lukiwski
Unfortunately, you may have to get an answer to that in the next intervention with Mr. McCauley.
11:50 a.m.
Conservative
Kelly McCauley Conservative Edmonton West, AB
The two of you are experts. I'm wondering if you could walk us through how you would address some of the complexities of our procurement, the red tape. Again, I think it covers all Canadians. We heard from indigenous people, and from previous witnesses who focused on women and procurement, and we heard the same thing: small businesses don't have the resources to tackle the costs and the complexity of the red tape of our procurement system. How would you start to unravel that?
If you read the procurement ombudsman's report, you see that it's very telling. I think 25 of the top 30 complaints are all about paperwork and changing goal posts of the bid. Walk us through how you would address that. If we can clean up the procurement difficulties, it would address a lot of the other issues we are hearing about.
Fix our system in four minutes.
11:50 a.m.
Voices
Oh, oh!
11:50 a.m.
Full Professor and Deloitte Professor in the Management of Growth Enterprises, Telfer School of Management, University of Ottawa, As an Individual
With the suggestion that of course it would have to be beta-tested within a small envelope.... The current system is based on compliance, with heavy legalese. Your procurement officers are bound to meet the terms of that obligation. I think there is opportunity to look at innovation within that system, and we can make it less cumbersome by making the language and the process less legal.
11:50 a.m.
Conservative
Kelly McCauley Conservative Edmonton West, AB
That's one of the comments we heard from one of our witnesses, that we are very risk-averse. No one ever got fired for hiring IBM—except maybe with Phoenix.
Is it a case of that, that we are purposely so “CYA”, risk-averse, that we go out of our way to make it difficult for everyone?
11:50 a.m.
Full Professor and Deloitte Professor in the Management of Growth Enterprises, Telfer School of Management, University of Ottawa, As an Individual
I think the good people who vet these contracts are bound by those obligations. We may have aspirations at this table to include more SMEs, but when it comes down to adjudicating those contracts, what's on paper is their obligation. To begin to bring out pockets of that kind of procurement activity and be innovative.... Let's look at some outcomes, as opposed to just strict legalese, and let's be creative.