Government Operations Committee on Feb. 6th, 2018

[John Gamble]

In fairness to the government, the private sector clients are among the very best and the worst. Government is sort of predictable; they're a little bit of the devil you know. I think the RFPs often presume an outcome. The way they're structured, they're looking for professionals to come in and produce drawings for production, rather than propose solutions.

Qualifications-based selection is like hiring a person onto your staff and hoping they don't do work to rule. You're asking who buys into your vision. I think it was Bill Gates who said he didn't hire smart people so he could tell them what to do; he hired smart people so they could tell him what to do.

What they discovered in the United States and in the City of London, where they did the same thing, was that the procurement time took less money and wards happened faster. Ask what they can you do for you, how they can get the project over the goal line. Once you have the preferred consultant, then you can sit down and jointly develop a detailed scope with corresponding fees. We have 40 years of experience in the United States and this seems to work very well.

[Kelly McCauley, Conservative, Edmonton West, AB]

Apples to apples, how much more expensive are government projects than similar projects in the private sector?

[John Gamble]

That's difficult to say. Some private clients are absolutely dreadful; they actually do reverse auctions. Others sole-source, because they can. Others will say you did a great job on the last one, and as long as the price isn't out of their budget you can continue. It's difficult because there's no such thing as apples to apples in the private sector.

[Kelly McCauley, Conservative, Edmonton West, AB]

Could you give us some examples of what we could learn from some of the good ones in the private sector?

[John Gamble]

You should emulate the ones that do qualifications-based selection.

[Kelly McCauley, Conservative, Edmonton West, AB]

Okay, but you touched on that already.

[John Gamble]

There may be extraordinary circumstances. We don't even rule out sole-sourcing if there's a compelling public policy or security reason. The procurement process can be very expensive. I think if we had a criticism of government procurement, it would be that it's such an expensive process. What proponents are aggravated by is that if you do 500 pages of document, about 450 of those pages are the same from every proponent, but it's very expensive to do. You want to cut to the chase.

[Kelly McCauley, Conservative, Edmonton West, AB]

That's what we hear repeatedly—it's expensive, it's difficult, and it doesn't necessarily provide proper outcomes.

[John Gamble]

Exactly. You want to get to what is actually allowing the proponents to distinguish themselves from one another. Give them the chance to say what they would do differently, what they would do to add value to the project or policy.

[Kelly McCauley, Conservative, Edmonton West, AB]

Mr. Kendrick, thanks for your information. I was out visiting Robert Allan a little while ago. I need to pop in and see your outfit the next time I'm in Vancouver. You made a great comment about being well-intentioned, but we know where good intentions lead.

I'm wondering if you could give us some feedback. You deal with the private sector, building ferries with other governments. What are we doing wrong? What are they doing better than us? Could you give us a quick rundown on what you think we need to tackle?

[Andrew Kendrick]

Certainly some of the private sector clients we most enjoy working with are the ones who bring us in early, as Mr. Gamble was saying, and treat us as part of an integrated project team. I don't like that terminology but it's sometimes useful.

Don't dictate the solution. Tell us what you want to achieve and then we'll work with you to achieve that. A good example is our work with Seaspan Ferries. They weren't sure at the start if they wanted to have a new ship to run their services to Vancouver Island or if they wanted to do this with tugs and barges or what, so we went through a beauty contest. We convinced them that we were the people they should be talking to, and then we worked together and achieved a very successful result, I believe. The first two ships have been developed. A second batch is now just going out to contract. They are tremendously innovative vessels. They run on LNG fuel with battery hybrid backup—

[Kelly McCauley, Conservative, Edmonton West, AB]

If we could just back up a bit, who else was bidding on that then besides you?

[Andrew Kendrick]

My old friend and yours, Robert Allan.

[Kelly McCauley, Conservative, Edmonton West, AB]

Okay. Walk us through, just quickly, the procurement process if they were able to get to you very fast, whereas for us, the government, it would take probably 15 years.

[Andrew Kendrick]

They asked us for ideas. Cost was not a factor. It was, here's our problem, how would you go about dealing with it? We gave them a set of ideas and they picked among the bids. I believe they got three or four people who proposed in response to that, and away we went.

The government's not comfortable with that, and part of the reason is that it requires expertise. It comes back to the earlier point. If you have people in procurement who really are not sure of what they are doing, then they tend to default to ticks and boxes. Does so-and-so have 10 years of experience doing this? Tick. Does he have a degree in this? Tick. Has he done this exact same thing before? It doesn't encourage innovation.

[Kelly McCauley, Conservative, Edmonton West, AB]

One of the issues we have heard repeatedly is the past experience where you could have the most brilliant young mind but because they haven't done it 15 times before they are excluded from a contract.

[Andrew Kendrick]

I told a Public Works guy a few years ago that they would have refused to accept Alexander the Great as a general or Mozart as a composer. They just didn't have enough years experience under their belt.

[Kelly McCauley, Conservative, Edmonton West, AB]

How much is that and how much is just our general risk aversion? If I look at Seaspan, one bad design, like a Fast Cat type of thing, could sink the whole company, yet they seem quite happy to roll the dice with this process whereas government's not going to sink and yet we still are massively risk averse.

[The Chair, Conservative, Tom Lukiwski]

Give a short answer if you could, Mr. Kendrick.

[Andrew Kendrick]

I don't understand it and I wish it could be changed. What the government really needs to work on is figuring out where risk should reside. Not all risk should go to the contractor. Some should stay with the government. That's a key principle.

[The Chair, Conservative, Tom Lukiwski]

Mr. Masse, for seven minutes, please.

[Brian Masse, NDP, Windsor West, ON]

Thank you, gentlemen, for being here today.

Mr. Kendrick, I'll continue with human resource capacity and not having the expertise. Has that heightened over the last five years or the last couple of years? What has taken place in terms of public servants who formerly had some experience in both the private and the public sector to help facilitate and transition projects from basically the paperwork to the shop floor? What's taking place there?

[Andrew Kendrick]

I can't really talk to all that's going on within the government, but there's been a demographic transition. A lot of the older and more experienced people have retired. A number of the other people who have the expertise within the departments, have been promoted, and unfortunately that leaves the inexperienced people with the day-to-day responsibility for getting the RFPs out on the street. The big difference between how this is seen on the government side and how this is seen on the industry side is that responding to requests for proposal is the most important thing we do. If we don't win work, we're out of business, so it's handled by very senior, very experienced people in our organizations. On the opposite side of the table are the 20 and 30 year olds, and there is not adequate quality assurance of the documentation that goes out. Some of it is just really poor.

The government needs to work on its processes but because it doesn't have enough expertise internally, that tends to fall to the bottom of the queue. There is the essential of getting an RFP out because department X wants something done. The government is not a learning organization. It's not an organization that practises continuous improvement.

We are all required to have ISO 9000 certification. There is no equivalent, from our perspective, going on in the government.

[Brian Masse, NDP, Windsor West, ON]

Mr. Ralph and Mr. Montuoro, in your opinion, what type of outreach is there available to help facilitate SMEs to even dream of making the decision to perhaps bid on a contract? One of the benefits of having a government contract and also any government business is the guaranteed cheque. That should be one of the elements.

I come from the tool and die mould-making auto industry. In the auto industry, tier two and tier three suppliers have to carry debt loads for contracts they win to the larger automotive companies. They don't get paid for half a year to up to a year and end up having borrowing costs as part of an inefficient model of competing. I raise that as an issue, but one of the things they do get out of the government contracts is a stable, set procurement payment that is sound and predictable.

What is happening in your eyes as to federal public servants and support to facilitate fair competition to get SMEs into the game?

[Dave Montuoro]

One of the points I make is that the current system works well. It serves government well. It serves the manufacturer well, and it serves small and medium-sized enterprises well. For the dealer or the small business, the government business is, first of all, a validation. It's a guaranteed source of income that allows them to operate their business, so it's a baseline support for them, which then allows them to go out and be competitive and profitable in other areas of the business in their regions.

That's kind of what we alluded to. Our argument is that the current system works well and supports SMEs across the country. The new procurement vehicle would not do that. It would eliminate all of these SMEs from doing any business at all with federal departments.