Government Operations Committee on Feb. 6th, 2018

[John Gamble]

First of all, I'm not going to speak to Phoenix, because I just don't know enough about it. I'm just glad I'm not a civil servant.

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

I know that.

[John Gamble]

First of all, we've heard this. There is inherent owner risk with any project. However, through the business sector, we're prepared to take on some of that risk, provided, one, that risk is very clear to the proponent and is clearly and well understood, and two, there is the ability to manage and mitigate the risk. That's both the technical and managerial capacity to manage the risk, but also the contractual authority to manage that risk. The third piece is that the remuneration has to be appropriate. That's what QBS tries to do. It tries to wed the deliverables and the outcomes directly.

Under conventional procurement, you get a price envelope, you have people write a proposal, they get in, you go through a mechanical formula. These may or may not match what's been promised. Under QBS, the whole point is to allow you, as the owner, to say, “You're not doing enough QA/QC here. What would that cost us? Do you need to do that?"

It allows that sort of post-award negotiation for more efficiencies and operational considerations, but it also allows very direct discussions around risk.

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

In 1972, the United States introduced QBS. You have been bidding a lot on that contract, Mr. Kendrick. Has the Auditor General ever audited that procurement process and come up with a positive or negative result?

Both of you can answer it.

[Andrew Kendrick]

I'll defer to Mr. Gamble on that.

[John Gamble]

[Inaudible—Editor] exclusively to engineering and architectural services. It has survived Nixon, Ford, Clinton, Reagan, Bush, Obama, and so far Trump. It's been under scrutiny. In fact, since it was introduced in the 1970s, 46 states have adopted similar or comparable budgets, so I think the success votes for itself. I believe California had a third party audit of their services in the last three or four years.

The bottom line is that it has worked. Its seems to have had high-level success. It's counterintuitive to typical public procurement, so it is under siege from time to time, but it always seems to prevail.

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

Thank you.

Mr. Hicks, you were talking about changing from an RFP to an RSO. I'm wondering how that would fit in with a government. I think there was a question asked about the type of business or the outcome-based procurement that the government is trying to achieve, where it is a pilot between the Treasury Board and PSPC. I'm wondering whether you heard about it or whether you think that would be a more agile approach. I think Mr. Ralph was saying, no, maybe not, because people don't understand it.

Have you any thoughts on it?

[Gordon Hicks]

No. I don't have enough information on that to give context, so I'd prefer not to comment.

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

Okay. Not a problem.

[The Chair, Conservative, Tom Lukiwski]

Ms. Ratansi, that would leave you approximately two and a half minutes to cede to Mr. Drouin, if you wish.

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

Mr. Drouin.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Great. Thank you.

First off, thanks, everybody, for being here.

I have a couple of questions for you, Dave and Hugh. This is with regard to your thoughts on what the problem was from the get-go. Was there an issue with printers in the Government of Canada? For the life of me, I can't understand what the issue would be with buying printers. It should be a fairly simple procurement. As well, once the printer breaks down, if it needs servicing, it should be a fairly simple issue to solve. Somehow we are stuck in this conundrum again, within procurement, and we can't seem to solve it.

[Dave Montuoro]

Nothing's broken.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

What was the problem from the get-go?

[Dave Montuoro]

Well, there isn't.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Did Shared Services share the problem?

[Dave Montuoro]

Well, there isn't a problem.

We questioned this, and the answer was that there will be less equipment for us to vet. That was the answer that was given to us. I know that they have other reasons and other explanations of why they want to do this—you know, if they're dealing with three companies, and one department has one vendor only, there are savings there—and that's all correct.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

It would simplify calling 1-800 as opposed to calling 1-866?

[Dave Montuoro]

Not even; not even, because all of that exists today. What they want to do is to have departments deal with one vendor and one vendor only. Well, you can do that today with today's procurement vehicle. But today the Department of National Defence can put out an RFI or a tender and 12 companies can respond. Just imagine 12 companies responding to a bid versus three companies responding to a bid. The chances are that you're going to get the best price, and you're going to be forced to give the best service. You want an opportunity to continue to do business with that department and other departments, and also to gain other business within the department.

That is the current system. It is as simple as I mentioned. If you need a new photocopier or printer in your department, you simply go to a website hosted by NSTL. If you know that you need something that runs 40 pages a minute with all of these different options, you can configure the unit. You can configure mine, you can configure his, you can configure all of the vendors that are qualified within that area, and if the price—

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

And your printers work with all operating systems?

[Dave Montuoro]

Yes. They work with all operating systems.

Thank you.

[The Chair, Conservative, Tom Lukiwski]

We're out of time there. However, Mr. McCauley has ceded the last seven-minute intervention to the chair. I invoke this right very rarely, but I will ask a couple of questions.

I'm curious, just to follow up on what Mr. Drouin and Mr. Masse were saying, about Shared Services Canada's apparent decision to reduce the number of qualified competitors from 12 to a maximum of three. It may be one or two. We don't know that yet. To me, I just have an inherent bias: I'm in favour of competition. I think the more competition the better. It's been proven time and time again. It lowers prices and increases efficiency and service.

Beyond that, my question to you specifically is this. Do you know how Shared Services Canada came up with a six- to eight-year rationale? I don't see why eight years is an appropriate time frame to evaluate the effectiveness of the program that they're suggesting. I would think that it could be done in far less time than that. Giving any company unlimited, unparalleled access to the government and their printer services for eight years is far worse than the monopoly that might occur.

How did the six to eight years from Shared Services Canada even enter into the discussion?

[Dave Montuoro]

I'm going to make a point then I'm going to let Hugh answer that question because he can answer that better than I can.

We talk about six to eight years. That's the term of the contract. If a department procures a service in year six or year eight, then potentially, that is a five-year deal, so that six to eight years could actually be 13 years.

You can answer the other part.

[Hugh Ralph]

Thank you, Dave.

Shared Services' approach is based on the premise that industry analysts will say that this managed print approach, which involves doing an enterprise study and a total cost of ownership, will drive organizational savings and that they've consulted with people. From our view and having worked in the industry and for competitors that lead in espousing that approach, there is validity to that. However, in my earlier testimony, I mentioned that, in my experience, it's primarily based on private sector organizations that can exert command and control.

While Shared Services is down a path with these large entities, the feedback from larger entities in the procurement process is that it will take them six to eight years to work across government and deploy this model. Therefore, the pieces of feedback from industry that they've chosen aligns with the centralization, or decision-making at the centre, for deployment at the departmental and agency levels.

We had an experience ourselves at Sharp Canada, where the Province of Nova Scotia went through a similar procurement and awarded to a single supplier. They awarded in 2014 and sitting here today, in 2018, we got our first notice of cancellation, which indicated that the award-winning proponent might be ready to deploy their hardware, after four years into the agreement. For other large players in the industry that are advocating for the lack of competition, it gives them command and control and they pushed, in my view, for that length of contract to allow them the flexibility to deploy in a complex and very decentralized fashion across the Government of Canada.

[The Chair, Conservative, Tom Lukiwski]

I have a final question in the two minutes or so that I have left.

If I'm hearing you correctly, you would be recommending that Shared Services Canada revisit their apparent decision to reduce the number of qualified suppliers from 12 to two or three. Are you also suggesting or asking this committee to make a recommendation that Shared Services Canada eliminate or go back to the status quo of the methodology in awarding contracts to supplier companies that they've had for the last number of years?