Government Operations Committee on Feb. 1st, 2018

[André Leduc]

It's that side of the equation. You have to be able to balance. Do we take a little more risk to get more business, or do we take less and less risk and shut down the door to business?

[Kelly McCauley, Conservative, Edmonton West, AB]

Right.

[André Leduc]

There are firms with head offices in the United States that will set up a small shop of five or six employees in Canada and attempt to sell technology solutions north of the border. They aren't solely large multinationals, but some smaller firms as well. However, when there are legal restrictions like unlimited liability, the lawyers south of the border will say, “We will simply never sign on to a contract that has unlimited liability there.”

[Kelly McCauley, Conservative, Edmonton West, AB]

Okay, that's fair.

Do you hear any feedback from your members about the number of sole-sourced contracts being awarded by the government? I ask because we have questions on the order paper, and an answer came back from Mr. MacKinnon that we were sole-sourcing several thousand, a lot in IT, without going to bidding.

Is that an issue?

[André Leduc]

It depends—

[Kelly McCauley, Conservative, Edmonton West, AB]

A lot of them are getting awarded because of exclusive rights. I see ADP on 20 different companies, exclusive rights.

[André Leduc]

Yes, and if they're building on a legacy system that was instituted by that company, they don't have a lot of leeway or wiggle room to change from that.

[Kelly McCauley, Conservative, Edmonton West, AB]

Going forward, how would we get around something like that, so we are making these contracts available to SMEs and also serving the taxpayer on the bottom line?

[André Leduc]

I think you get around it by—and we've talked about it already—renewing the focus not on the technology or the platform but on what solution the government is looking for. You ask yourself what the problem is that you're trying to solve by going about this procurement and then engage the industry in that side of the conversation.

What the industry sees is normally just the prescribed tech requirements from government, and then everybody is to go bid on that. Half of the industry would be ostensibly expelled from taking part because they don't meet those tech requirements, so they're going to walk away from it before it even gets under way.

There's also the fact that it takes 18 months. There isn't an SME in the country that can afford to spend $600,000 or $700,000 in resources to take part in one of these complex procurement processes that take over a year, so we can continue to say that it goes to larger businesses.

Andy talked about the 15% requirement for set-asides for SMEs on some of these ITB procurements. I think it might be better, rather than using a stick to provide incentives for engaging with SMEs on these and letting some of the larger vendors go out and access SME innovations, if the government isn't doing a great job of it, maybe the larger firms could go out and do it. They're dealing with a lot of SMEs and they're dealing to deliver to the private sector with a lot of these SMEs already.

[The Chair, Conservative, Tom Lukiwski]

Mr. Masse, welcome to our committee, at least for today. It's good to see you again, Brian. You have seven minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair. I appreciate it. This is good testimony. I'm coming from the industry committee, or the innovation committee, with its recent name change.

It's very pertinent to many of the things we've talked about with regard to manufacturing, innovation, and science. An interesting aspect that you talked about here is the network enterprises. I come from the tool and die mould-making industries, where CEOs and senior management are often running around in Europe and other places, securing the next bidding contract, versus trying to fill out paperwork forms and files.

One of the things they've noticed over the last number of years was the reduction in services, even to get through the changes—even, for example, SR and ED tax credits and other types of research things that are available.

In terms of network enterprises, have there been any models we can look at in the Unites States or Australia or New Zealand that they're doing with their SMEs that could be fast-tracked if there were support for something like that?

I see a lot of value in that, at least in getting some of the low-hanging fruit. That would be a good start for some of the businesses.

[André Leduc]

In terms of the platforms that could be leveraged, we're migrating to the cloud. The cloud could be leveraged like an app store on Apple or Google Play Store. A number of SMEs develop applications and solutions that they sell via these platforms.

In the U.K., they use the G-Cloud. Government sets up the platform. Now I think they have more than 2,000 SMEs delivering business solutions for government on that platform.

You could start using the platforms. Government is migrating from the BlackBerry units to iPhone and Samsung. You could leverage that marketplace and have business solutions that operate both on the cloud and on that mobile device. You have bureaucrats walking around town, so we can fix some of the back office side, and we can fix the front office side, which is providing services to Canadians.

Canadians want to be able to interact with their government on their hand-held device. It would be great if you could apply for a passport. You'd take a picture of yourself, apply for the passport, and send it in with the click of a button, instead of having to fill out paper forms and mail or fax them in. That is where a modern government needs to be heading; it's where we all need to be heading.

There are examples of some of these that have seen success that could be leveraged here in Canada.

[Andy Akrouche]

I haven't seen a lot of it in Australia or New Zealand, but there were a couple of situations in which the rules were relaxed in the U.K. to allow this kind of stuff.

You know, it's not really about technology; it's about creating the conditions for small and medium enterprises to team up together on opportunity. If we remove a few of these conditions on these large RFPs and we say we're not going to look in the rear-view mirror, at 10 years ago, then organically the SMEs will get together. We don't need to do anything; they will do it for themselves. They will find the opportunity and they will team up, because they can see it. They can see the opportunity to win and deliver a good service. It's just making the conditions available for them to actually do this. That's really the idea.

[Brian Masse, NDP, Windsor West, ON]

If there is some resistance, I guess....

I suppose the old term is “red tape”. I know the chair has been long enough around here to know that no matter what we do, there always seem to be endless streams and new rounds of it.

Would it be worthwhile to have some capable body helping to facilitate the development for SMEs, a network to do triage, so that if you're a small manufacturing business, there would be at least a base of service to help you cut down the weeds and get the expertise to ride through those types of barriers—the resistance that you have—to help facilitate, without getting another outside consultant or another accountant? It's the same with SR and ED tax credits. There's a cottage industry to help businesses fill it out, and they take a percentage of it.

Is that the type of thing that might perhaps be worthwhile?

[Andy Akrouche]

One of my recommendations is to create a network enterprise support office. That would be a good catalyst, if you like, to help the SMEs form these relationships. When there's a bid on the street, when there is a major DND procurement, when something is going on with the big guys teaming up with the little guys, somebody needs to be helping the little guys get together and create that super-enterprise that can actually do the work.

Right now within the government procurement, there's already a JV, a joint venture, kind of mechanism so people can team up. Joint ventures are created all the time to bid on these things. Even the large firms most of the time create joint ventures—they call them “special purpose vehicles”—to deliver a particular service.

The problem is not the procurement mechanism itself; the problem is the evaluation thing. They're risk-evasive. They want to say, “Hey, I'm not going to give this to somebody who has not done it before.” They don't know how to assess the ability and the capacity of this new enterprise and whether they can do the job or not. They don't have mechanisms for that. Although there are a lot of tools available to allow them to evaluate it effectively, they haven't got there yet.

That's where the help is needed, for both the government and the private sector, through the creation of this network enterprise support office.

[Brian Masse, NDP, Windsor West, ON]

When I had a real job, I was an employment specialist on behalf of persons with disabilities. The biggest barrier was the fact that employers always wanted experience. However, with a 50% unemployment rate and no experience, it was always a challenge.

It sounds to me to be a similar case. It becomes how much money they invest as a loss leader, trying to get that experience to hopefully bid on later contracts, which is very much a dangerous business model.

[The Chair, Conservative, Tom Lukiwski]

We're out of time. We're going to have to perhaps get your response from some other intervenor.

We'll go to Madame Ratansi, please, for seven minutes.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Thank you all for being here.

It's interesting to listen to you. When you said “real job”, I thought, “Is this a dinoceras environment, or what?” I wasn't going to call it an elephant, because an elephant can run pretty fast.

I'm listening to you carefully and I'm trying to balance government and business. The business aim is to make profit. Business is agile; governments are not.

Mr. French, I think you have been within the government and you know how unagile it is.

When you were responding to my colleague's question about being agile and how it is the step forward, within the confines of what the government has to do to protect itself from a legal perspective, from a security perspective, how would you change the mindset?

You suggested a risk officer. You're putting another bureaucracy on top, and we have had enough, you know? How would you solve it in an agile manner?

[André Leduc]

The principle is that by putting the agile teams together, you at least put the barriers up front. By requiring prescriptive legal Ts and Cs and things like unlimited liability, the overall risk to project success is impacted. The chief risk officer would be able to evaluate all of these security requirements, all of these legal requirements, all of these technology specification requirements, and then evaluate that against how many bidders we are actually going to get. If the goal is to get 15, 20, 25 bidders, but we act in this way, we're actually diminishing the number of bidders that we're getting. Oftentimes you'll see RFPs with one, two, and three bidders, and it's in a market space that has 60 or 70 companies operating in it.

Who's evaluating the risk to overall project success against the risk mitigation tools, which are often occurring in silos? Legal is looking at it purely from the legal perspective, security purely from the security perspective, and the tech guys purely from the tech perspective. You need somebody who's looking above and seeing that if we do all of this, nobody will bid. In fact, we have failed RFPs because nobody will bid.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

For example, we had the IBM situation. How would you have handled it differently?

Mr. French, from your experience, this comprehensive approach requires a huge cultural shift. How do you achieve it? We are all here in this room scratching our heads and wondering how we get it.

[Nevin French, Vice-President, Policy, Information Technology Association of Canada]

As you mentioned, I come from within the government at both the federal and the provincial level, and Andy's slide saying that 90% of procurement outcomes are determined beforehand, I think, should be a real wake-up call about how that giant process really narrows down the field.

I think what we're all in agreement on is that nowhere are we calling for any kind of reduction of standards and eliminating that red tape in the RFP process should not diminish the goal of this process, which is to get the best product for the Government of Canada at the best cost for the taxpayers.

At the end of the day, the government is the government is the government. There are certain requirements that they will be looking at and various hoops that firms will jump through, but uploading all of those requirements up front, as André has mentioned, so eliminates that field, and then perhaps, as André mentioned as well, there could be something like that Amazon approach of keeping the spectrum open, but with a smaller application process to enlarge the field of people who are applying.

I was about to make a comment in terms of the experience needed for the first job, but Mr. Masse stole my exact line about that. For SMEs, especially in fields that are transforming very quickly, such as cybersecurity, keeping those parameters open and not being too prescriptive allows for more people to apply, and then maybe the government could look at a round two, or something like that, to then narrow things down.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

I have a question for Mr. Akrouche.

You talked about a network of SMEs. How would they come together? What is the mechanism? Should they apply as loosely contracted people, and what are some of the security risks that the government would have to bear?

[Andy Akrouche]

I will answer that. I want to make a comment on this whole outcome-based prescriptiveness.

There is no one size that fits all. At times, the government needs to be prescriptive; at other times, it needs to be outcome-based.

In every medium to complex procurement, you have three things. You have things that we call known knowns, you have things that are known unknowns—I'm trying to sound like Donald Rumsfeld here—and then you have unknown unknowns.

In the case of those things that we call known knowns, if there are things that you absolutely know for sure, you should prescribe them in your RFP. You should ask for them. You should even ask them for a fixed price—why not? However, when you don't know a whole lot of things and you list a whole series of assumptions and risks associated with that and you try to make that known, that's where the issue is.

In every procurement, there should be things that are prescribed because you need them now and you understand them fully. If you have a high degree of certainty about these things, you should prescribe them. When you don't have a high degree of certainty about these things, don't hide behind assumptions. Say, “I don't know”, and then, at that point, you need to be outcome-based, and for an outcome-based approach to be successful, you need a relationship management framework, a stakeholder management framework, because you need to work together to resolve these unknowns and gain certainty over time so that you can do what needs to be done.

It's not about whether it's too prescriptive or not too prescriptive or this or that; it's really about how much of this procurement needs to be prescriptive or should be prescriptive and how much of it needs to be outcome-based. Maybe it should be outcome-based, but you don't know until you gain that certainty.

The other—

[The Chair, Conservative, Tom Lukiwski]

Thanks very much.

Unfortunately, we are out of time on that round, but perhaps Mr. Kelly will be able to pick up on that thread.

Mr. Kelly, you have five minutes, please.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Thank you.

I am new to the committee and somewhat new to the subject matter. Perhaps also to add some clarity for the record, I've heard references in both presentations about security risk and liability risk and references to the track record and things like that, things that are often inappropriate for the bid at hand and are barriers to small and medium enterprises bidding on government work.

Can you help me and provide, if not concrete examples from actual bids or non-bids, at least the types of bids or non-bids that both of you characterized as artificial barriers?