Government Operations Committee on Feb. 6th, 2018

[Brian Masse, NDP, Windsor West, ON]

My point is that it is a stable part of an operating revenue stream coming in that gives them predictability to work on other projects, and they don't get the same benefits perhaps from other private sector contracts.

What about supports, though, in terms of expanding or trying to get into other procurement? Is that something that is out there that you're worried about with the transition here? What's been offered to those organizations and those companies that have current contracts that ameliorate the problems you foresee? Has there been any outreach? Have there been any supports under the new process to bridge that gap and to create some fairness that way?

[Hugh Ralph]

The Shared Services process that's still under way has such size and scale requirements embedded into their invitation to qualify process that we, at Sharp Canada, as the OEM, were precluded from bidding. All of our dealer partners are now automatically locked out, once this is awarded for the six-to-eight-year time frame that I referenced.

As an example, there were four or five criteria that were mandatory pass/fail that were purely based on the size and scale of your business in Canada as the OEM. I think there are 12 proponents currently supplying the federal government, and only seven organizations bid. Five were eliminated out of the gate even after industry consultation by Shared Services, which was long and extensive. I give them due credit for that, but they ignored the voices. Consultation is one thing, actually hearing it is another, where people like myself wrote submissions suggesting that would be the outcome of “large is big” and “better is great”.

[Brian Masse, NDP, Windsor West, ON]

On the Hill, I think there's a lack of public and institutional understanding of how large, changed, and radical Shared Services is. That even affected our Canada census in terms of procurement and securing and protecting data and the use of the data for statistics surveys in the market.

[The Chair, Conservative, Tom Lukiwski]

Unfortunately, we're going to have to stop there.

Mr. Peterson.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Thank you, Mr. Chair, and thank you to everyone for being here. It's a good cross-section of industry at the table today and it's nice to hear the different perspectives.

I just want to focus first on Hugh and Dave and talk about the situation you find yourselves in. Am I right in hearing that the status quo is working great? Is that how we would like to see it or is there improvement that can help reach the outcomes that are not proposed by Shared Services?

[Hugh Ralph]

Based on extensive industry background and experience, if managed print services is a direction the federal government would like to go and implement, I'm not convinced. In fact, I'm strongly opposed to the fact that it should be managed print services from only three proponents. A number of the submissions in the consultation phase said that the feedback from suppliers and the feedback from our customers, the departments, was that individual companies have regional expertise. Modern, for example, services frigates that come into the port in St. John's. It turns the photocopier service around as part of getting them back out to patrol. There local expertise that is totally ignored by this procurement process.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Okay.

Go ahead, Dave.

[Dave Montuoro]

One of the points that I'll make is exactly what Mr. Kendrick alluded to regarding your procurements, where you have these check boxes. The check boxes don't really give you what you're looking for in your end result. The fact that one company has 60,000 devices installed across Canada doesn't mean that they can provide a better service for the government. Hugh mentioned that there were companies that were precluded from even bidding, as part of this ITQ. Only two companies were able to bid on their own. The rest of the companies that did bid were forced to bid as a partnership or as a joint venture. We actually bid as a partnership with a competitor, which, in our business, doesn't really make a lot of sense to us.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Yes. I understand that. I appreciate the insight.

I want to bring in Brookfield. It was great to read your submission and hear your presentation. You are doing a lot of good stuff engaging SMEs in the supply chain process in your business. Can you elaborate? Is this from the top down? How did you get to where you are? Is it because it's the right thing to do, or because it's good business, or is it a combination? How do you implement the great stuff that you're doing?

[Gordon Hicks]

Firstly, we started as a small business. Twenty-one years ago, when I joined the organization, we were 85 people. We built the business up. We're now a global player. It was the Canadian government that gave us our first contract, which allowed us to get our feet under us to then build the scale and competence to grow and compete globally. We have about 7,500 team members now across 12 countries around the world, although we remain very strong here in Canada and we create jobs in Canada by virtue of the fact that our operations centres are here, our core centres of expertise reside here. It's pretty exciting from that perspective.

That said, when you've been there, you start to understand what it takes to be able to support small businesses to be successful. What we try to do with our contracting is to make sure we have contracts let regionally. When we let those contracts regionally, we group them into portfolios whereby there's a sufficient amount of work for a local business for it to be attractive. Some of the conditions that we have to put contractors and consultants through to comply with the requirements of the federal government are relatively onerous. The security requirements alone are pretty significant. To find the right balance between best value to Canada and a meaningful amount of work for the local proponent is something we've worked hard to achieve.

Then there's being visible. We have regional procurement teams, so they understand the nuances of the local regions. We can be out there meeting with the different associations and encouraging them to participate in some of the activities that are happening within our work with the federal government, but also beyond that within the other parts of our business.

I think those are two key areas.

We've talked a lot about the professional consulting-type activities that are happening. John, with ACEC, and certainly Mr. Kendrick and I would tell you that it resonates. These RFPs are extremely onerous and expensive for consulting engineers and so on to participate in, so we've gone out with RFSOs—requests for standing offers. In the fall of this year we went out, and we had 200 organizations submit to participate and work with us. We selected 40 across the country, in 12 different regions of work. Of those 40, over 50% are small to medium-sized enterprises, so we think that process works.

We then work on a rotation basis for projects under $1 million. We rotate through in those given geographies, based on that RFSO, the three or four consulting engineers that have been pre-qualified in an effort to be fair and equitable with the apportionment of work. That was qualifications-based—90% of the criteria for selecting those proponents were qualifications-based; 10% were price. We're constantly learning, but we think we're doing some things well and we're going to continue to do those things.

Then of course, we have outreach to the different associations, because we're constantly trying to open our minds to new ideas and listen to some of the input from our constituents so that we can become even better at bartering with our colleagues to be able to provide best value to Canada at the end of the day.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Thank you for that elaboration.

[The Chair, Conservative, Tom Lukiwski]

We'll now go to our five-minute rounds.

Mr. Kelly.

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

Thank you, Mr. Chair.

Mr. Kendrick, I was intrigued by your discussion around page-count limits on procurement. We've heard before today from other witnesses...in particular when it comes to a small or medium-sized enterprise that doesn't have the same capacity to lobby or have in-house professional skill to prepare for a bid.

Can you elaborate on this? I think you said that this was something that exists in the United States already. Is it possible, on a very large or complex project, to get a really concise RFP?

[Andrew Kendrick]

I believe that it is. In the example I noted, the U.S. government is planning to buy three new heavy icebreakers. There are five industry teams that are going to bid on that. They've been told that their proposal—technical, price, qualifications—has to be 200 pages maximum. They say that they expect that to be about a $3-billion procurement.

We also recently were successful in winning another contract for the U.S. Coast Guard where they're building 27 essentially light frigates. We had the same thing there. There was a page limit for that one. I think it was 400 pages in total. That's 27 ships, each at a unit cost of about $350 million. It's the single largest procurement in the U.S. Coast Guard's history. It can be done. As I said, other countries that we deal with do this all the time as well.

My wife used to sit on the committee that awarded Fulbright scholarships. There, the key gate was a two-pager. They had two pages to describe what they were going to do, which was quite complicated. I read one, and so did she, about string theory. It was just amazing. For 10 minutes I understood string theory. It's gone now, but it was a very, very impressive proposal.

Even quite complex concepts can be reduced to their essence in a fairly small amount of material.

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

Does this go to the deficit in expertise? Is that the issue?

[Andrew Kendrick]

It's partly that. It's partly a matter of attitude. I think the more expert you are, the more you can recognize quality quickly.

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

Churchill, I think, was the one who once said that he apologized for preparing a long speech, and that if he had had more time, he would have prepared a short one. It's difficult to be concise, and it requires expertise and the ability to express something that is complex in a short space.

With the limited time I have left, I will quickly turn to Mr. Hicks.

You mentioned that you do not have a set-aside, or you do not use set-asides, for small and medium-sized enterprises for competitive reasons, and you listed very quickly a number of industry groups that represent various types of small businesses. Do you track or do you know what percentage of procurement ends up with small and medium-sized enterprises—or for any of the categories of the business that you mentioned?

[Gordon Hicks]

We do. We track it on our own. About 96% of our subcontractor base is small to medium-sized enterprises. The reality is that we're very careful in the context of ensuring that our procurements are open, fair, transparent, and accessible. We don't want to preclude a large organization from being able to access and secure work while we are trying to encourage small to medium-sized enterprises. I think we try to find the right balance by virtue of exposing the different enterprises to the fact that there are opportunities with an organization. We actually try to educate them and help them learn about how to do business with our organization. We have procurement vehicles, electronic bidding, and so on that makes that possible. That has been our approach, and it seems to be working quite well.

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

Thank you.

[The Chair, Conservative, Tom Lukiwski]

Mr. Ayoub, you have five minutes.

[Ramez Ayoub, Liberal, Thérèse-De Blainville, QC]

Thank you, Mr. Chair.

As one of my colleagues said, it is very interesting to hear from different companies and consultants. Professional engineering services are very different from direct equipment sales. I know it thanks to my past experiences.

Sometimes companies will do both. In the field of high technology, it is necessary because we often need both. The difficulty is to have the knowledge, expertise and specialization in engineering to be able to make the link between all this.

In the past, I worked in the technology field. The companies I worked for had the primary motivation to enter the market and eliminate the competition. All means to access markets were good, for example by lowering prices. We talked about lending employees. Employees were at the company's premises to do the work and to propose solutions. In the end, the goal was to be in the business and have the chequebook, and the business prospered with that money.

I have worked in the municipal sector, and I am now a member of Parliament. I can tell you that our goal is to protect citizens' money and make the best choices possible. The question is always that of shared risk.

As I understand it, Mr. Kendrick said that sometimes the risk has to be attributed more to the government. There is an important difference of opinion as to how to bring all this together.

Mr. Kendrick, if you were the minister responsible for procurement services, would you make the same speech as today or would it be slightly different in terms of the motivation? What would you change?

[Andrew Kendrick]

Thank you. I apologize, but I will respond in English. My French is good enough for comprehension, and luckily—

[Ramez Ayoub, Liberal, Thérèse-De Blainville, QC]

Go ahead in English. That's good for me.

[Andrew Kendrick]

Some of the time we would like to be fat and happy and not have to compete, of course, but we recognize that's not the reality of the life we live. I've spent enough time in the old Soviet Union to see where lack of competition and government direction end up at the ultimate.

I think, though, that what you need to do is compete to the extent that is necessary. I apologize to anyone who sells pens, but buying a pen is different from buying services. It's a very small part of what is done. Even with what seem to be relatively simple services, perhaps, to some people, such as buying photocopying services, this is much more complex. It really is more complex. It's a complex environment that we're all working in. Building services is complex, and although we seem to be a cross-spectrum, many of the things I hear from Brookfield are exactly the same things that we would say are important to the business.

Important for Brookfield and important for us is that the government work gave us our stepping stone to becoming an export success. Seventy per cent of our business is exported, and that's largely on the back of initial contracts that we got from the federal government. It was a seal of quality, a seal of approval, that we were able to take to other countries worldwide.

I'm not sure if that's a complete answer to your question, but we need to stay on top of our game. The only way that we stay on top of our game is by competing with other people. We have to do that.

[Ramez Ayoub, Liberal, Thérèse-De Blainville, QC]

Government assistance, competitiveness and the RFP approach where it is important to be as competitive as possible are two ways to help small- and medium-sized businesses across Canada.

For this to happen, should government support be important and competitiveness even more so?