Government Operations Committee on April 24th, 2018

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

So the third party certification acts as a requirement to access the set-asides?

[Annette Verschuren]

Correct.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Part of the discussion so far around here has been about barriers to accessing procurement. I guess I'm just curious to know how cumbersome, relatively speaking, the certification process is.

[Annette Verschuren]

It isn't. It works quite well. I think we interviewed hundreds of people, and they are very, very responsive. I think the government side likes them and I think the people who participate, who look to get certified, find it an easy process, and a process that works.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Go ahead, Ms. Allan.

[Elyse Allan]

It's been going on for a number of years in the States too. That program started in 2011. It originally was initiated in 1994, so you have a bit of history there. I think they've had a chance to work it out. I think there's a lot to be learned rather than starting from scratch.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

This goes back a little bit in the conversation to Ms. Mendès's comments about networking. Are there ways in which procurement can be leveraged to provide better access to networking opportunities for women-owned businesses or women-managed businesses? Is there a way to try to use procurement for mentorship opportunities that might be useful?

[Elyse Allan]

Annette, maybe I can take a stab at that.

I think there's a great example in the report of Accenture. It talks about how, in this case, as a private sector company, they've combined all of those aspects within their supplier program. I know that even at GE we do a lot where we bring suppliers together. We help develop them. Once somebody gets into a larger company's supply chain, it's actually in the best interest of the company to invest in this company and to help make sure they're progressive, able to grow; the leadership gets mentoring, if they need it; and they get exposure to other suppliers. It's part of what I could call a healthy supply chain system and supply and procurement program.

The feedback, certainly in the examples from Accenture, General Motors, and I think a lot of the other major companies, because they've been at it so long in the States, is that they want a healthy supply chain. You get a lot of benefits by being part of it.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

What do you think that looks like from the perspective of government, which in itself isn't part of the supply chain but is hiring companies and wanting the companies it hires to foster those kinds of relationships? What can be done on the procurement policy end to try to have that outcome in the private sector players that are working together to fulfill government contracts without being so cumbersome that it turns prospective contractors away because they feel it is too much of an encroachment on their existing model?

[Annette Verschuren]

Elyse, you can start.

[Elyse Allan]

Sure.

I think in the growth council we certainly spoke a lot about how, again, some programs that could be done by government have been done different levels of government, almost like a concierge program that has helped bring together businesses that are targeted to scale. The scaling businesses can make quite a difference both to the economy, as Annette spoke about, and take advantage of procurement programs.

To the extent that one can target those companies and help them, they'll in fact then help other women-owned businesses. There's a bit of a village. If we can work with the ones that are a little bit stronger and able to go after these procurement programs and can deal with maybe a bit more of the complexity, they can also help work through some of those challenges but also then reach out to the women business community, get word out, and bring them in maybe as secondary suppliers. We talk in the report about tier one suppliers, but there's also an important area for smaller businesses in being a tier two supplier.

[Annette Verschuren]

Perhaps I can add something from a policy perspective. Elyse talked about the market-driven or the solutions approach. There's a new economy happening out there. If we can link those smaller businesses to larger businesses, the acceleration of that.... In our procurement policies we may say, look, it's important to have this percentage of women-owned businesses and SMEs in innovative areas. I think that could really help the country. It is a longer-term perspective, but I think the benefit of that is much greater than sometimes just thinking only of cost in the short term.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

Mr. Peterson, you have seven minutes, please.

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

Thank you, Mr. Chair. I appreciate the time.

It's an honour to be here with two great witnesses. We have a member and an officer of the Order of Canada, both at once. We should feel very honoured to have you both here.

[Annette Verschuren]

Both of us are, yes.

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

That's awesome.

There's so much we can talk about here. I'm trying to focus my mind on the study, which of course is small and medium enterprises vis-à-vis federal procurement. I see access to federal procurement as a possible way for women entrepreneurs to address all four of the barriers that were identified in the report: access to capital, access to talent, the dynamic between wanting to be an entrepreneur and family obligations, and the social and psychological barriers that exist.

Am I correct in saying that federal procurement can help alleviate all these barriers if it's properly implemented?

[Annette Verschuren]

We think so. There are other parts, such as the VCAP that's going to be adopted in this government. I worked with Jim Flaherty in the previous government, and he asked me to be on a panel of that VCAP. We invested $400 million in the fund-of-funds and in incubators. There weren't any women around the table when we interviewed them. At the time, I said, “Look, can't we take 20% of these funds and invest them in women-owned businesses?” I saw it so clearly.

I made the recommendation to this government to do the same thing. There are ways in which we can filter our thinking to allow this to happen. Access to capital is probably the most difficult. It's the number one barrier that Elyse and I discovered. This is really critical. We have to push here. We have to find ways on the procurement side.

Scaling up is so important. It was the first assignment. How do we get entrepreneurs to scale up? Contracts allow people to scale up. You can go to a bank when you have a contract and get working capital to bridge your company. You can go to an investor and say, “Here: these are the contracts I have to get further equity investment in your company.” These are such important parts of how we can grow this part of our sector.

Elyse.

[Elyse Allan]

In answer to your question, there are a number of specific reports, whether it's the Ernst & Young report, the Conference Board of Canada report, or even the World Economic Forum report. In all three cases, not to mention the anecdotal and sometimes quantitative measures that we learn from some of the big businesses like General Motors and Accenture and others, to your point, those programs did in fact address those barriers. I think a lot of evidence shows this in different ways.

Going back to Annette's point on capital, part of it is that when you have this order from the government, a purchase order, you have the ability to take that to the bank and get financing because you have a long-term supply contract. It's incredibly powerful. It gives you collateral that you otherwise wouldn't have. It also brings you something to walk in to other customers with. The one thing we heard at both this study and the growth council is how come our own government, at any level of government, isn't a first customer? If we're trying to grow and are putting all this investment through ISED and other places into innovation, into trying to develop new businesses and scale them, why don't we have the governments really stepping up in creative ways to ensure that they are first customers for these companies? I must say that time and time again we've certainly heard about the cases where we have companies here and their first customer is in the United States.

To your point, I think it does give them access to additional supply chains, so it helps them build their customer base and their network. It gives them access to capital that they seem not to have to the same degree that male-owned companies do. Also, of course, there are all the benefits that Accenture, General Motors, and others have identified, where it brings employee engagement, it helps you on hiring, and it also helps you in terms of access to more customers who are proud to do business with somebody who looks towards diversification in the supply chain.

Yes, I agree with you that there are a number of benefits if you have the federal government as your customer.

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

Thank you for that.

I just wonder if there's any data or any theory that either of you might have when you look at the problem of access to capital. At the same time, you see women-owned businesses being more profitable. In my mind—my naive mind—I always think that capital follows profit. They want the biggest return. Why is there the gap between marrying those two?

[Annette Verschuren]

We're really good at starting businesses and keeping them small. We're not so good at scaling up. That is the big dilemma we face. That is what we're trying to address in the first pillar report. It is a big problem. Some of those jobs, and a lot of the perhaps bigger company jobs, are in STEM. They are in the technologies, the heavy equipment, the machinery, and the big investment in capital. There's a hesitancy, and there is less experience in the STEM area. You'll see that in the second report that we came out with on STEM and technology and trying to get more women involved in that.

That will change things as we grow and get more women educated and involved in these jobs. We know that women have a great capacity to build companies, but there are just not enough of them.

[Elyse Allan]

I'll add to that.

Why don't they have access to capital? I think we go back to what Annette talked about, too, in terms of that network. The fact of the matter is that when you look at financial services and at venture capital, still the majority of the decision-makers are male. One of the things we've found is that when there is actually a woman involved in the decision-making process at the venture capital firm or the financial institution, the allocation of funds towards women businesses actually changes.

Until we have more women in those decision-making roles.... Certainly, one of our calls was to get more women into venture capital firms, and a lot of them are now trying to bring women into the decision-making process, but that's an issue.

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

Thank you very much.

[The Chair, Conservative, Tom Lukiwski]

Thank you.

Mr. McCauley, you have five minutes.

[Kelly McCauley, Conservative, Edmonton West, AB]

Ms. Verschuren, you were talking about scaling up. It leads me to believe more and more that we have to fix our procurement system to allow access, because we'll never have anyone scaling up if they can't access the system.

You talked about the importance of long-term contracts in being able to go into a bank to get funding. A lot of the SME contracts on Buyandsell are one-offs and short-term contracts. Do you see a solution in there to the set-asides? Maybe we can set it so that we're setting aside longer-term contracts? How would you see that set up so that we're making these more important contracts that are going to deliver more value and help build scale? How would that be set up?

[Annette Verschuren]

It's a really good question.