Government Operations Committee on Feb. 6th, 2018

[The Chair, Conservative, Tom Lukiwski]

I want to welcome all of the witnesses who are with us today.

Colleagues, as you know, we're continuing our study of small and medium-sized enterprises and federal procurement.

Today we have several associations and companies with us to provide testimony. Rather than introduce all of them and their affiliations right now, I'll let the witnesses do that when they speak.

We will start in the order that I have the witnesses on my sheet, with the Association of Consulting Engineering Companies, Mr. John Gamble, president and chief executive officer.

John, you have the floor.

[John Gamble, President and Chief Executive Officer, Association of Consulting Engineering Companies – Canada]

Good morning, and thank you for the opportunity to be here with you.

The Association of Consulting Engineering Companies is a business association representing about 400 engineering companies across Canada. We are a federation of 12 provincial and territorial associations. Our members collectively have about 2,000 offices and employ about 60,000 Canadians, including engineers, architects, natural scientists, and land-use planners. It's very multidisciplinary.

About 80% of our firms have 50 or fewer employees, but Canada also boasts the largest engineering consulting company in the world.

We obviously welcome the opportunity to participate in public contracts. Public procurement fulfills government mandates and commitments. It allows access to expertise and experience and provides the government with flexibility and savings. It creates jobs and opportunities for Canadians and grows businesses and tax revenue. It encourages innovation, and done properly, has a fair and equitable sharing of risk and reward.

Our recommendation for public procurement of not just SMEs but all professional service firms, particularly those in the design sector, would be to adopt an existing document called, “Selecting a Professional Consultant”, which was a best practice guide that was developed by the National Guide to Sustainable Municipal Infrastructure, also known as InfraGuide.

The InfraGuide is a series of documents that were developed in collaboration with the Federation of Canadian Municipalities, the National Research Council, Infrastructure Canada, and the Canadian Public Works Association. It was based on extensive research, and of the 50 best practices they developed over its lifetime, one of them specifically addresses the procurement of professional services, with engineering and architecture specifically in mind.

When they were presented with the challenge that all public sectors have of trying to achieve value in a fair and transparent process, they came to the conclusion that the public agency should be using qualifications-based selection. It attempts to address that long challenge that we've all had together. We're trying to do timely, fiscally responsible delivery and to encourage quality and innovation. At the centre of this is the public interest and the taxpayers' dollars.

It's important to know that engineering and architectural-related services only make up less than 1% of the entire life cycle of most assets we get involved in. Whether it's a building, a port, harbour, or airport, 80% to 90% of the cost ends up being the operation and maintenance. Even the capital construction is rarely more than 10% and is typically around 5%, yet that 1% that you invest in engineering and architecture has a cascading effect throughout the design life of that entire project. It's at this rather modest investment at the front that you have the opportunity to innovate, to look at new materials, new methods, and different ways of doing things.

I would therefore suggest to you that the engineering fees, the architectural fees you pay at the beginning of a project, should not be viewed as an expense to be minimized but rather an investment to be leveraged. It's at the beginning of a project when you have, figuratively speaking, a blank page. The opportunity for innovation and change is easy and inexpensive, but once you start pouring concrete, once steel goes into place, once you start writing code, the new ideas, changes, and alterations become almost exponentially more expensive until you're finally in the operational phase, which can sometimes be decades, and then you're pretty much stuck with what you've decided on. You'll end up living with engineering decisions for decades.

Procurement is the key to leveraging this. It's all about establishing common objectives and outcomes and making sure there's a mutual understanding. It's about making sure there's a clear understanding of cost-benefit relationships and clarifying the roles and responsibilities. At the end of the day, you want to make sure you have the right team for the right job and that they have adequate resources to deliver on what you have committed to the Canadian taxpayer. I would suggest that the lowest price is not the best price. The right price is the best price.

We have common challenges in public procurement. Often it will become a process unto itself rather than a means to an end. It discourages innovation, it often takes an extended period to award, and it sometimes confuses value with low price, whereas a good procurement system will clearly define scope, outcomes, and objectives. It evaluates what actually distinguishes the proponents from each other, as opposed to pages and pages of boilerplate. It fairly shares risk and reward. It rewards proposals that add value and that propose innovation.

It uses a short list where necessary because writing proposals is very expensive for the industry, particularly SMEs, and it considers the life cycle of the project and focuses on the best value rather than the lowest price.

We find that when the lowest price is assumed to be the best price, proponents will minimally interpret the scope of work in order to be competitive. That means they are not looking at alternatives, they are not looking at the value-adds. It will actually penalize you if you propose innovation. It will actually penalize you if you anticipate difficulties that might arise in subsequent construction phases or even in the operations. Consequently, significant life-cycle savings are sacrificed in favour of short-term savings. There's a saying in our industry that sometimes if you know too much about your clients' needs, it's the kiss of death if you want to win the job.

Many public agencies say we only use 20% price, or 40% price, or 10% price. In the handout I have provided to the clerk, you will see that sometimes if the 20% is scored from zero to 20, and the qualifications are all scored in a narrow band, the price will still dominate. Your proponents interpret that as “I have to minimally interpret the scope of work.” Consequently, surprises during construction downstream should really not be surprises.

The best practice known as qualifications-based selection is very much like the job interview process. You request the qualifications, you evaluate and rank your proponents, and you ask for proposals from the front-runners. Then you sit down and interview in most cases, and you select the highest-ranked consultant. At this point, you have not yet asked for a fee submission. You take your top-ranked proponent, you sit down with that person, and you make sure you have a mutual understanding of the project's scope and outcomes. It allows the owner to say, “You know what? We would like to do more of this and less of this.” It actually allows the owner more fidelity with the outcome, and you can make sure the fees correspond to the outcome, to the risk, and to your consultant's level of effort. Then you can award the assignment.

If you can't come to terms, just like a job interview, then perhaps you agree to split company. Just like anyone else, we prefer not to get jobs because we were the low bidder. We prefer to showcase what we can bring to the table. We want to show that we can add value to the organization. If we're liked by the potential employer, then we discuss terms. If we can't agree to those terms, then perhaps they go to someone else. No one says you have to blow your budget. You can work within your budget, just like we do as employers.

Qualifications-based selection is supported not only by the ACEC but also by the Royal Architectural Institute of Canada, Engineers Canada, the International Federation of Consulting Engineers, the American Public Works Association, and organizations worldwide.

I provided you with a number of studies that have been done. This has been done for 40 years in the States. In fact, it's legislated that if the federal government is going to buy engineering or architectural services, it must use qualifications-based selection. Furthermore, if you are receiving funding from the federal government to do projects, you must also use qualifications-based selection. After 40 years there was an extensive study of 200 projects. They found that using qualifications-based selection with a post-negotiated fee with engineers and architects reduced construction overruns by 70%. Schedule overruns were reduced by 20%. Most owners said they received better service and had a greater ability to deal with societal issues.

In summary, you get the right outcomes, the right team, realistic schedules and budgets, fewer change orders and disputes, a better business relationship, and at the end of the day, better service, better quality, and better value for taxpayers.

The good news is that we are in discussions with PSPC about a pilot project. We hope this will take place over the course of 2018, with ROIs to go out. I want to congratulate PSPC and assistant deputy minister Reza for taking on this challenge. There is a lot of evidence out there. As I say, this is not a new and crazy idea. It was validated 10 years ago by InfraGuide, a publication written by the public sector for the public sector.

In conclusion, while putting price aside at the beginning might be counterintuitive to public procurement, the physicist Albert Einstein said that “not everything that counts can be counted and not everything that can be counted counts.”

I believe that our industry, SMEs, and large firms could provide better service and better outcomes for the government if it were to adopt qualifications-based selection as recommended by InfraGuide 10 years ago, as has been commonly carried out by the United States, has been used by the City of Calgary for many years, and we have upcoming pilots from Transportation Alberta and Metrolinks as well as PSPC.

Thank you for your time and your attention.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

Next, we'll have from Brookfield Global Integrated Solutions, Mr. Gordon Hicks.

Mr. Hicks, you have 10 minutes, please.

[Gordon Hicks, Chief Executive Officer, Brookfield Global Integrated Solutions]

Thank you.

I'll start by giving an overview of BGIS, as we're now known. Brookfield Global Integrated Solutions was our previous name.

Founded in 1992, BGIS Global Integrated Solutions provides a full range of consulting, management, and delivery services for occupiers of real estate to improve their business performance. Globally, we manage 320 million square feet across 30,000-plus locations.

Our goal is to deliver innovative business solutions for our clients, continually creating stakeholder value and supporting them in achieving their business objectives. We also strive to be a role model for sustainable operating practices and portfolio strategies. BGIS’s Canadian operations have become the largest provider of integrated real estate services in our country with more than 4,500 employees delivering services across Canada. Our scale and reach across Canada ensures our clients an unparalleled level of support across their portfolios.

In a business world of unprecedented change and competitive pressures, BGIS is committed to pursuing new and better ways of delivering services for clients to enable them to drive their businesses forward. We pride ourselves on being a leader in our industry when it comes to corporate social responsibility and giving back to the communities in which we operate.

Our annual CSR report summarizes our sustainable practices and achievements while highlighting the strategies and goals we’ve created for our company moving forward. As BGIS now celebrates 25 years having started here in Canada as a Canadian organization providing facility management services across the real estate industry, promoting awareness of sustainable business practices remains a key priority, and we remain a key driver in this sense in our industry.

We have a number of objectives related to sustainability, including our 20/20/20 goal of reducing energy, waste, and water, and we drive this across our business environment, across our industry. We have demonstrated our leadership through our actions in diverting our waste and reducing our water consumption, as well as obviously reducing our energy intensity across our facilities and supporting our clients in reducing theirs.

For two years running, Corporate Knights magazine has recognized BGIS as one of the future 40 responsible corporate leaders in Canada in this regard, and we're ranked first out of four in the real estate management development category as defined under the global industry classification standard.

In 2015 we announced the Building Energy Innovators Council, which is a small, not-for-profit organization established to support the clean tech industry and the small to medium-sized enterprises in that industry to bring their new services and solutions to the market and leverage our portfolio globally as well as across Canada to enable them to achieve that goal.

We've raised over $400,000 annually for 34 charities and continue to work to build better communities across our nation.

Concerning PSPC's RP1 and RP2, our organization is a very large service provider to the federal government and in particular, PSPC's real property division. Our contracts in this regard consist of the delivery of diverse real property services for crown-owned and leased government assets. The scope of work includes property management, project delivery, and lease administration services for numerous Government of Canada custodians. Services delivered under these contracts include items such as operations and maintenance, repair for mechanical and electrical systems, building cleaning, and the delivery of construction projects. Collectively under the real property agreements, BGIS is responsible for managing approximately 1,900 locations across five million square metres of space.

The RP1 contracts represent six separate regional agreements including Pacific, Western, Ontario, Quebec, Atlantic, and the national capital region. These RP1 contracts commenced in April 2015, and run for a seven-year term initially and then six years of options.

Concerning RP2, this particular contract is a subset in the national capital region. It started in May 2013 and runs through to 2025 with options.

In providing these services delivered through the real property agreements, BGIS subcontracts in excess of 80% of the available spend it manages on behalf of the government. As such, BGIS understands the importance of maintaining access to a large and diverse list of vendors, including small and medium-sized enterprises. Subcontractor support is critical in the success of our delivery of these services.

Our procurement approach to real property contracts transfers total service delivery responsibility to BGIS for the services covered within the statement of work. With some exceptions, BGIS is principal contractor in the delivery of services and utilizes its own procurement policies and procedures and contract documentation when subcontracting these services, with the requirement that BGIS's subcontract conditions are compatible with those in the real property contracts and not less favourable to Canada.

BGIS also works with PSPC to pursue avenues for leveraging and implementing federal procurement programs such as the build in Canada innovation program, BCIP, with the real property contracts. We create industry awareness of these programs through our industry contacts and ultimately through all of our members of the Building Energy Innovators Council, which engages small and medium-sized enterprises, as stated earlier, in the clean tech sector.

BGIS consistently applies procurement policies and contracting processes that have been designed to ensure best value to Canada. In all of our procurements, BGIS aligns the contractual requirements of our RP1 and RP2 contracts and is also considerate of additional government policies, guidelines, and strategies including such things as the security requirements, which recently have actually become more onerous for this sector.

With regard to supplier engagement, BGIS is responsible for applying procurement and contracting processes that ensure value to Canada and represent cost efficiency, quality of services, and appropriate risk mitigation. Under these contracts, we are responsible for ensuring that procurement activities are conducted in an open, fair, transparent, and accessible manner and provide ongoing opportunities for participation throughout the industry.

BGIS makes every effort to ensure that procurement activities are inclusive of all vendors. Our objective is to provide and maintain a diverse supply chain that is reflective of our communities, employees, client base, and values. We recognize that small and medium-sized enterprises are a core component of our supply chain.

While no consistent governmental or industry certification standard exists to allow for consolidated tracking and reporting of this group, BGIS analyzes its own data sources to identify our subcontracting volume in this sector. Based on The Conference Board of Canada's guidelines regarding small and medium-sized enterprises, we estimate that over 90% of our supplier base utilized in supporting these real property contracts is in fact made up of small and medium-sized enterprises totalling approximately 75% of the annual recurring spend.

BGIS does not establish targets for SME utilization due to competitive procurement activity requirements of openness, fairness, and transparency. However, our goal is indeed to provide accessibility for all opportunities and the associated information to this diverse supply chain.

In order to accomplish this objective, we're actively engaged in a number of industry associations: Aboriginal and Minority Supplier Council, women-owned business enterprises, Canadian Gay and Lesbian Chamber of Commerce, Canadian Federation of Independent Business, Office of Small and Medium Enterprises, Canadian Construction Association, Association de la construction du Québec, Royal Architectural Institute of Canada, Association of Consulting Engineering Companies, and Bureau canadien de certification intégrité. Our vice-president of operations actually sits on the board of this organization.

We have a number of engagement strategies also to ensure that we're staying engaged with local associations and their membership. These outreach activities include meetings, presentations, social media, and other outreach activities.

BGIS makes every effort to work with industry, to respond to industry concerns, adjusting our processes as necessary in order to facilitate continued access and opportunity for all vendors, a recent example being adjustments to procurement processes for construction projects of less than $1 million. I've provided the link in the handout.

BGIS provides communication of opportunities through various social media platforms along with communication channels through industry associations. We deliver accessibility of opportunities by leveraging an electronic bidding tool, providing enhanced access, promoting efficiency, and utilizing an open, fair, transparent, and accessible platform available to all enterprises.

Thank you.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

Now representing the Canadian Printer Supplier Coalition, we have both Mr. Dave Montuoro and Mr. Hugh Ralph.

Gentlemen, I understand you'll be sharing time. You have about 10 minutes between the two of you.

[Hugh Ralph, Director of Direct Sales, Business Solutions Division, Sharp Electronics of Canada Ltd.]

Good morning and thank you, Chair.

Thank you to the entire committee for inviting us to speak to you today.

My name is Hugh Ralph, and I'm the director of direct sales at Sharp Electronics of Canada. Seated beside me is Dave Montuoro, who is a competitor of mine at Canon Canada. The two of us are such fierce competitors that it's hard to get us in the same room, let alone speak to you with one common voice here today.

What we're here to speak about is really a case study of how not to do a federal procurement, a procurement that will eliminate competition and significantly hurt small and medium-sized businesses across Canada.

Shared Services Canada is in the middle of a plan to consolidate how the federal government procures printers and copiers. The Shared Services plan will create an oligopoly of very large suppliers that will inevitably drive up prices, drive down service levels, and of particular concern, it's a plan that will undermine the small and medium-sized businesses that make up our service and sales dealers across the country.

For example, Sharp Canada has 77 dealer partners with offices in 138 communities from coast to coast to coast. These are the small and medium-sized businesses that I'm speaking about.

I'll pause here and let Dave introduce himself.

[Dave Montuoro, National Sales Manager, Federal Government Accounts, Canon Canada Inc.]

Thank you.

Thank you, Chair, and thank you to the entire committee for inviting us to speak today.

My name is Dave Montuoro. I'm the manager of the federal government accounts for Canon Canada.

Canon Canada has 54 independent dealer partners working across the country. The federal government spends about $60 million a year on printers, copiers, and their related services. The current printer and copier procurement system works very well for us, for government, and especially for small businesses. In the current procurement system, there are 12 qualified companies that are eligible to supply imaging and printing equipment across 25 categories of equipment, ranging anywhere from your single function desktop printer right up to your large floor-standing, multi-function printers.

If you work in a federal department, agency, or crown corporation and you're in charge of acquiring printing equipment, you simply go to a government-dedicated website, look at the products available in the equipment category you're interested in, and select one. It's easy, it's efficient, and it guarantees the best price.

Since every supplier can see the prices offered by every other supplier, and with 12 companies fighting over this business, the competition is fierce, with suppliers continuously lowering pricing below normal retail rates. This stiff competition has also driven the companies to provide the highest service levels to their government customers.

Shared Services Canada is planning on eliminating the system and in the process removing at least nine companies from this competition. They will reduce the number of qualified suppliers from 12 to at most three. This is not competition; this is an oligopoly. A monopoly is one company. An oligopoly is two or three companies operating in a cosy relationship.

They say that through this oligopoly Shared Services Canada will create cost savings and increase efficiencies government-wide. That doesn't make any sense to me.

Hugh.

[Hugh Ralph]

It doesn't make sense to me either, Dave. With the removal of these nine suppliers, Shared Services Canada is also removing that fierce competition that's led to low pricing and top-notch service levels in recent years.

In our view, this is a Shared Services Canada solution in search of a problem. The government has publicly stated that it wants government procurement to be more open, more agile, and innovative. It appears to us that Shared Services Canada didn't get the memo. They're taking an open and agile process that allows government to access innovation within the print industry and changing it to a closed process that will be locked for a minimum of six to eight years. This will limit the government's access to new and innovative technologies constantly emerging in our dynamic industry.

The Government of Canada is by far and away the largest single buyer of printers, copiers, and related support services in the country. Shared Services Canada's plan for these office printers and copiers hurts many dealers in smaller communities across Canada, especially those in the more remote regions of the country where federal government contracts support jobs and help our local dealer partners validate the quality of the products and services they offer to the other companies in their communities.

Dave.

[Dave Montuoro]

The Shared Services Canada plan will hurt small businesses, like Klondike Business Solutions. Klondike is an indigenous-owned and -operated small business based in Whitehorse and one of our dealers that relies on federal government business. The plan will hurt companies like Modern Business Equipment. This is a business owned by a woman entrepreneur named Judy Mallard. It employs more than two dozen people and has been a business for over 50 years in St. John's and Corner Brook, Newfoundland. The plan will hurt companies like TOP Office Products in Brockville that is owned by Jan and Carol Risberg and currently supporting four other employees. Jan is actually sitting behind me here.

He wanted to attend this hearing today because he's so concerned about the effect SSC's plan will have on his business. There are dozens and dozens of dealers and small business people just like these whose business will be undermined by SSC's plan to end competition. These are proud people. They're not looking for handouts. They just want to be able to compete for government business as they always have. The government needs to stop Shared Services Canada from implementing its plans for office printers and copiers or at least modify it, so that it doesn't hurt the small and medium-sized businesses that make up our dealer networks. Canon and Sharp and our 132 dealers across Canada just want to compete.

Thank you again to the committee for inviting us to speak. We'd be happy to do our best to answer any questions you might have for us.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

Finally, we have from Vard Marine, Mr. Andrew Kendrick.

Go ahead, Mr. Kendrick.

[Andrew Kendrick, Vice-President, Operations, Vard Marine Inc.]

Mr. Chairman and ladies and gentlemen, thank you for the opportunity to appear in front of this committee. Improving government procurement is, in our company's opinion, a real priority for the health of Canada's economy and for the perception of Canada's government by its taxpayers.

I'll say just a few words to provide context about Vard Marine. We are an SME. We are about 110 people, 90 of whom are in Canada. We are headquartered in Vancouver, and my office is here in Ottawa. We design ships, and we do related marine consulting.

In Canada, we're responsible for the design of the Arctic offshore patrol ships and the new polar icebreaker. We have recently finished the design of a new Antarctic icebreaker for Chile. We design ferries for companies such as Seaspan Ferries, BC Ferries, and STQ in Quebec.

Also, we are completely global. At the moment, our projects include countries from Senegal and Turkmenistan to Taiwan and South Africa. We have experience of a very wide range of procurement systems in both the government and the private sectors.

Because my time is limited, I will summarize and paraphrase some of the remarks in the written material I have provided to the clerk. Thankfully, I'm helped in that by the submission from Mr. Gamble, to almost all of which we would just say, “Hear, hear!”

I do have a few other things that I'd like to emphasize.

Our company's general impression of Canadian government procurement is that it's extremely well intentioned. It sets out to apply sound principles of fairness, openness, and transparency. Unfortunately, the internal problems of the system mean that it often achieves quite poor outcomes and all too frequently manages no outcomes at all.

Changes to the processes in recent years have often been counterproductive, and that's particularly the case for small and medium-sized companies and innovative companies. The changes have driven up our costs of doing business, increased project timelines, and considerably increased project uncertainties.

The government's procurement expertise is spread very thin. This has been acknowledged by a number of government officials, and our own experience confirms it. I'll try to provide a few examples of some of these points.

The government is increasingly using requests for information, industry consultation sessions, and releases of draft requests for proposals to solicit input from industry. The intention is completely laudable. It's to try to ensure that a final request for proposals is as good as possible, but this, from our perspective as an SME, is free consulting. It takes time. It takes money. We cannot afford to send people across the country for consultation sessions. Also, it skews the outcome of the process towards larger companies that have lobbyists who can afford to do this. What we often see happening is that it makes the procurements more complex. Adding complexity does not help us, and we don't believe it adds help for the government.

In recognition of some problems, the government has been making increasing use of supply arrangements and standing offers. This is a way of simplifying things, potentially, but it's not always conducted terribly well.

A number of government departments are making increasing use of one mechanism, ProServices, which started off as an IT vehicle and is now being expanded to other things. From the engineer's perspective, it's interesting that in that mechanism all engineers are lumped into a single category of “engineer”, whereas you have another category for badges, insignia, and ceremonial accoutrements technologist. I'm not sure that their relative contributions to the Canadian economy are on the same level.

I do realize how important the insignia are.

What this means is that when departments use this vehicle, they create a whole new RFP process within it and quite often, in our experience, they get it wrong.

We were recently asked to bid on a requirement that had already gone out to tender twice and failed twice because the qualifications requirements that were being asked for just didn't exist in the Canadian industry. We could have done this, except that we were asked to provide somebody with a Canadian degree as our subject matter expert. We have many professional engineers and many people with other degrees, but none of the ones that were relevant were from Canadian universities. We don't understand why that was asked for.

I won't talk about low bid. Low bid has been covered off already, and very well.

What's even worse than low bid is low rate, and that often appears in these supply arrangements. If the government is really interested in finding the engineer who will charge the lowest hourly rate, then shame on the government: they are probably not the engineers you want. It's a far worse mechanism than low bid for a package of services.

Social engineering aspects, which we see in the large contracts—industrial regional benefits, industrial technical benefits, value propositions—are not easy for SMEs to handle. We can provide 100% Canadian content because we are 100%, but when we get into things like value propositions, this is difficult. The terminology is difficult. You have a few specialists who will give you consulting advice on this, for which you have to pay handsomely. They don't always have the same opinions on what's required, nor does the government. Further, there's another problem, which is that the time frames for these are often out of step with the procurements. Setting up a consortium R and D project with Canadian universities and other Canadian companies involves NSERC approvals and other mechanisms. We just can't get the time frames to match on these.

Before getting into a few recommendations, which we offer purely as our suggestions, I went through some of the earlier testimony to this committee looking at ideas such as set-asides. On small business set-asides, indigenous people set-asides, women's set-asides, we have experience with these in other countries. We caution you, if you are going to go down that road, to do it very carefully. What we see happening—and this is particularly the case in the U.S.—is that these privileged organizations now start to act as gatekeepers. They're not actually achieving trickle-down effects; they're merely increasing the cost of providing the services.

We are a matrix organization. My project manager in our single largest project at the moment is a woman. Recently one of my staff in Ottawa was named one of the outstanding female engineers in Ontario by Professional Engineers Ontario. I fail to see how it would help them if we failed to win government contracts, and instead were replaced by women-owned businesses.

We decided to make some recommendations for things that we think could be done better. We offer these up as part of a menu that you should consider, and certainly not going against what John Gamble was talking about earlier, which are all good recommendations as well. We don't see there being a one-size-fits-all solution for contracting; it's different depending on whether you're buying printer services or real estate or engineering, so all of these have to be looked at sensibly.

Here they are in no particular order. One thing is that, since I arrived in Canada, which was in 1981, your threshold for sole-sourcing has been $25,000. In fact it's gone down because that now includes the tax. That increases the burden on contracting. It makes it more difficult. I realize that sole-sourcing is not popular, but some of what you're doing instead creates sole sources. It creates sheer monopolies. What we see with national defence is that it awards 10-, 15-, and 20-year contracts to single organizations, which essentially become sole-source; and with all respect to the incumbents, it increases the temptation to charge as much as the market will bear. We think you should really look at what's possible under procurement rules, to reduce the number of contracts you actually put out on the street while avoiding sole-sourcing.

One thing we'd like to see is that you declare your budgets. Particularly in the consulting world you can have a $10,000, $100,000, or $1-million solution. Please tell us what you want.

You need to also display price realism.

To reduce the burden on industry, have page-count limits on proposals. This is done in the U.S. and in many other places. We've been in on the design of the polar icebreaker. Our proposal was longer than the design and build, which the U.S. government is looking for, for its polar icebreaker.

Please look at our past performance. Please evaluate it. We'd really like that.

I'll leave you with one other point, which is innovation. Fifteen to 20 years ago, the government encouraged innovation through the unsolicited proposals program. The build in Canada innovation program is a good but partial substitute. It only covers build in Canada, and that's a small fraction of our economy.

There are many other items we'd like to propose solutions for. I'll leave the rest of it to any questions you may ask.

Thank you again.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much, to all of our witnesses.

Colleagues, here's one little point of business. We will suspend around 12:45 p.m. I have about 15 minutes' worth of committee business, dealing primarily with the upcoming calendar and where our next meetings will take us.

With that, now we'll go to our normal round of seven-minute interventions, starting with Mr. Jowhari.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Welcome to our witnesses, and thank you for your great testimony.

I'm going to start with Mr. Kendrick. You specifically mentioned that government procurement expertise is diminishing. I want to go back and try to get an understanding of what you specifically meant by government procurement expertise, and in what specific area.

[Andrew Kendrick]

Let's take National Defence as an example. They have a very ambitious procurement program which is coming up at the moment, and because they haven't had any major procurements for many years, they don't have enough staff to deal with this. This has been said by DND; it's been said by PSPC. They need to rejuvenate that expertise, and that's a tricky task. Twenty or 30 years ago, many of the people who were in government procurement were from the industry. They were recruited into industry at various stages in their career. They understood how industry worked. That seems to have become increasingly difficult. What we see now is a lot of very junior people who don't understand how the industry works, trying to make decisions without having the background. We see the consequences of that in some of the rather poor procurement documentation that comes out on the street.

[Majid Jowhari, Liberal, Richmond Hill, ON]

You also touched on the fact that the size of the procurement bids are getting larger, and you wanted to limit the number of pages or page counts. Can you touch on that?

[Andrew Kendrick]

It's something that we see elsewhere in the world. I mentioned the U.S., Australia, South Africa where we've done proposals recently. They will say that you're limited to 20 pages for your technical proposal. We very rarely see that in Canada. As I said, on our polar icebreaker proposal, which we won, our proposal was 500 pages thick. That's a significant volume of effort to create documents like that.

Our opinion is that if you can't present your intentions in a relatively small document, then you probably don't deserve to get the job.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Probably that would be a nice thing. If the expertise is there, you could clearly state your requirement and make it much shorter. Okay.

I'm going to go to Mr. Ralph and Mr. Montuoro. You said that Shared Services Canada is creating this oligopoly. I'm glad I got the term right. Let me understand. Going from 12 to three, in your opinion, why is Shared Services Canada doing this?

[Hugh Ralph]

In my opinion, they are undertaking this process with a view to centralization, which will allow them to create efficiencies from a cost perspective and across the total range of devices that the federal government procures. In our experience, a couple truisms come into play. One is where there's mystery, there's margin. What they're moving towards is what's referred to in the industry as “ a managed print solution”, so it's not just for the hardware, but also for a variety of professional services' elements that aren't being bid and competed as part of this process, but will be part of the award. Hence my comment around where there's mystery, there's margin.

I've worked in the industry for 30-plus years, primarily in Canada, but also in the U.K. and the U.S. In some ways, this structure will allow the three successful proponents, if there are that many, to add price flexibility and margin attainment through the professional services piece and to no longer compete as aggressively on the price of the hardware. Their goal is—and will be stated I'm sure—“this will allow us to control, centralize, and drive cost savings for the government”. However, in our experience, while that might work in a private sector model—large global companies with command and control can do that—in a decentralized decision-making environment such as your departments and agencies, it's fraught with difficulty and not prone to success.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Mr. Montuoro, do you want to add anything to that?

[Dave Montuoro]

We asked these questions during the industry engagement pieces. The answer always seems to be that it will be easier to manage, “we will only have to vet equipment from three companies versus vetting equipment from 12 companies”. It really comes down to making their lives easier in managing this procurement vehicle.

Our response to that was you're not really managing it today. The way the process works now is we go through a third party known as NSTL, where they do the vetting of the equipment and we pay for that vetting. Previously, when Public Works was managing this standing offer, it was set up that way. We don't really see any reason to move away from that—

[Majid Jowhari, Liberal, Richmond Hill, ON]

I want to get to Mr. Gamble and talk about qualification-based selection. You basically said to put the pricing last. First, make sure there's qualification-based selection and open it up to small businesses, then bring in your concept of innovation, and at the end bring the prices.

Can you tell me which countries or jurisdictions have done this and what kind of success they've had? What do you consider as the barrier? I want to give you the opportunity to talk about some of the best practices.

[John Gamble]

It's counterintuitive. The United States has been doing this for 40 years. Included in the USB I gave to the clerk, there's an extensive study they've done. I provided the InfraGuide document itself. The City of Calgary has been doing it for many decades, and it's done it very successfully. They would be a very good example, and you might consider inviting Jennifer Enns if you want to learn more about this. It has worked very well in the States, and it yields significant reductions in construction cost overruns and schedule slippage, if you do the engineering and architecture right.

[Majid Jowhari, Liberal, Richmond Hill, ON]

I was hoping to tie it to the expertise.

[The Chair, Conservative, Tom Lukiwski]

Mr. McCauley.

[Kelly McCauley, Conservative, Edmonton West, AB]

Thank you, gentlemen.

Mr. Gamble, we've heard repeatedly about the difficulty with our RFP process. My favourite was for the fixed-wing search and rescue. I think it was 38,000 pages, and they still overlooked that the government was willing to spend an extra billion dollars that wasn't listed in the RFP.

How is it different dealing with private sector businesses, as opposed to the government with their RFPs? Give me some best practices. Would you just trim out items in the government RFP? We heard about issues such as having to put in unlimited liability. We heard issues of having to have social structure built in. Just give me some feedback on what we need to trim out on the government side.