Government Operations Committee on Feb. 8th, 2018

[Brian Masse, NDP, Windsor West, ON]

I just want to reconfirm that you do have discretion in your procurement decision-making. Let's say, for example, because of historic or systemic disadvantages that groups have, if somebody bidding on a contract comes in a little bit higher to deal with those, comes in a little bit higher than the contract because their costs are more to deal with those systemic problems, then there's a green light for the selection process to go, not with the lowest bidder, but maybe with the best-value bidder for the community, given that it's dealing with some of the systemic barriers that are now being addressed by the contract. Is that correct?

[Eugene Cornelius]

Well said, up to 10% of the cost.

[Brian Masse, NDP, Windsor West, ON]

Well, thank you very much. That concludes my time. We'll see how the Lions' new head coach is going to do.

[Eugene Cornelius]

Yes.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

Madam Ratansi, you have seven minutes, please.

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

Thank you very much.

I'm Yasmin Ratansi.

I am interested in a study that was done, and I'm interested in your opinion on the WOSB program. There was a study done by the Madison Services Group. It said that women-owned businesses did not really benefit. I'm wondering if there is a tracking mechanism that you have employed that enables you to figure out whether these small and medium-sized enterprises that are women-owned are really benefiting or taking advantage of the program.

[Eugene Cornelius]

As I said we're very careful not to become a police state. I understand the issue that it comes to there. We look at only two things. Is it a small business-owned, women-owned operation, meaning is the ownership 51% or more? That's the first thing we look at. Then when we look at a procurement or a contract, we look at the lead on that contract. Who is the project manager, and who has the decision-making ability on that contract? Is that the woman's contract? We let them self-employ that. We only look at those things, and based on those things in operations, we have met our 3%.

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

For the number of contracts that are being granted from a federal perspective, have you got a tracking system on how many small and medium-sized enterprises are benefiting from those contracts?

I know that you have a self-certification program saying they're a 51% woman-owned business. That's not my question. My question is, is there evidence-based analysis that you do to say...? What sort of evidence-based analysis do you adopt that we might be able to use?

[Eugene Cornelius]

Yes, based on the 24 different agencies, the contracting officer has to do a site inspection and has to do an evaluation of who they gave the small business contract to, and if they're alleging that it is a woman-owned business, they have to certify that they have looked at the financial documents of the business, the tax returns, and everything else. They have to look at the contract and the performance of the contract and who was the lead on the contract, and they have to certify that this was a small business, as they report to us for our scorecard.

[James Parker]

I'd like to weigh in a little on that. Eugene is absolutely right, we do not want to have a police state, and honestly, it would take a crew of hundreds if not thousands of people to run a really strong oversight of that kind of thing.

However, as a practical matter, the small businesses themselves are very quick to bring any kind of violation to the contracting officer's attention. In my experience, other small businesses in that area, whether it's local janitorial services or computer services, are very well aware of the competition. I think Mr. McCauley asked a similar question. If a shell company or a company that really doesn't fall into that category would not properly benefit the community, the other small businesses that this shell company or that small business might compete against are very quick to bring that, not a fraud but a failure of support, to the attention of the contracting officer.

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

I've got two quick questions. First, on your capitalization, you require a net worth of $750,000 and we are dealing with a very wide range of women entrepreneurs. Sometimes they have a problem with that type of capitalization. Do you face similar challenges?

[Eugene Cornelius]

Yes, we do. That $750,000 capitalization is absent of their home so when we look at net worth, we're taking out the home.

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

So you're taking out the tangible asset and then you're looking for some cash there.

Second, on your hub zone, I'm quite intrigued by how you came up with your hub zone for the disadvantaged and how it is working. You said that businesses in that hub zone should employ at least 35% of people living in that marginalized or hub zone area.

[Eugene Cornelius]

Correction, 35% of their employees should come from a hub zone, not necessarily the hub zone they're in.

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

Okay. How did you come up with that hub zone idea, and can we learn from it?

[Eugene Cornelius]

We came up with that because we realized that it's not only the minority communities that are underserved or experience economic downturn, but it's our rural areas as well. When our rural areas drop below the poverty line or those standard deviations of the poverty line, historically they become underutilized areas.

Employment is the key because I think when our name comes up—Small Business Administration—people think that our goal is to create small businesses. No, our goal is to create jobs. We use small businesses to do that because small businesses created two-thirds of the jobs in the last five years. We know the engine of our economy as far as creating jobs is concerned.

The question is how we get that into complete areas and not only in our minority areas, but our rural areas, our Native American areas, and our other underserved areas as well. We created the historically underutilized business zones for that reason.

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

Thank you.

[The Chair, Conservative, Tom Lukiwski]

We'll now go into our second round of questions, which will be five minutes in length.

We'll start with Mr. Kelly.

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

Thank you.

I'm Pat Kelly, member of Parliament from Calgary Rocky Ridge.

In the aspirational set-aside you have, which has the goal of 23% with the various breakdowns, how do you measure...? I want to make sure that I was clear on this. It was discussed a bit earlier. You measure a targeted area by poverty rate. I heard something about being two standard deviations below the mean, or something like that. Is it a matter of labour force participation? The two are obviously correlated but they are not the same thing.

Are you targeting areas that are statistically impoverished or those that have a significant level of unemployment?

[Eugene Cornelius]

Both. More likely I would say that if you look at the alignment, you see it's those that are historically in that situation. We do allow for when economies change and situations occur, and if they fall below, they can become a part of a hub zone. It's not a rigid map; it can vary. For example, we were talking about Detroit. Detroit today may not have as many hub zone areas as it did five or six years ago when it was going through its most difficult economic times. We look at those things.

However, I want to be clear that the hub zone is only one part of our program. It is not an umbrella of our program. We still have the set-aside for small businesses, women, and all the other things outside of the hub zones. Hub zones are only one particular vehicle that we use.

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

Maybe I misunderstood the nature of the hub zones, then. The hub zone is not within the small business set-aside; that's something separate from that.

[Eugene Cornelius]

That's correct.

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

I'm going to make sure again that I understood this and that we have it clear on the record. I heard that the total American government procurement is $500 billion.

[Eugene Cornelius]

Yes.

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

Therefore 23% of that would be just over $100 billion.