Government Operations Committee on Dec. 9th, 2020

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

Okay.

What about Mr. Olson?

[Rory Olson]

I do not know the answer. I'm sorry.

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

Okay.

It would probably be normal if government hadn't reached out to those who were not on the standing offer, because there are normally three or four vendors that would be on a standing offer. Then, obviously, Nuctech has been flagged as a security issue.

Then, K'(Prime) Technologies, it would be normal that you probably wouldn't have been contacted yet unless there are major changes to the technical requirements of the particular standing offer. I know you have experience in procurement, so obviously, you would understand that. Is that right?

[Sime Buric]

That is correct.

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

Again, I'm not defending the Nuctech decision. Nobody on this committee is defending that. Have you reached out to Global Affairs or perhaps to PSPC or to whoever your contacts are in the Government of Canada to say, “Hey, we have a solution and we tried to present this solution prior to”?

[Sime Buric]

We have not at this time. We wanted to see where this went first.

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

Okay. Perhaps as a Canadian I would suggest, regarding Canadian devices, that you reach out and let them know you have a potential solution.

I'm not going to talk to the CITT ruling, because it's out of our hands. That's an independent body, and they make their own decisions.

To the Council of Canadian Innovators, you talked about leveraging procurement and what that means in this country. We often find ourselves stuck between—and this dates back 15 or 20 years or to probably before I was born—our international obligations on trade and our will to support our local businesses. Time and time again, I have had my fair share of work with IT companies that have said their first sales were to the U.S. government as opposed to a Canadian government. I find it insulting but it does happen. This is not something that is new in 2020. It's something that has been there for a very long time.

How do we fix procurement? This is something that our committee has studied in previous Parliaments. We have noticed the barriers to entry. Long procurements create a natural barrier to those companies, so what is your advice for how we can leverage that particular procurement to give that edge to Canadian companies?

[Benjamin Bergen]

Neil, you laid out a couple of solutions in some of your comments earlier. I'm not sure if you want to articulate them again and maybe add on to them.

[Neil Desai]

In the security space specifically, which is what I will talk about, because that's what I know best, I think we have to emulate and also create our own things that meet our own values and systems.

I will say that security clearance is one big piece. I will say that in other leading security technology countries there is a proactive focus on understanding the marketplace and ecosystem of technology companies, and not just understanding their technology but also understanding their technology road map, how it could be applied to public sector challenges and how that could be influenced. These things are done in a very structured way, not just as one-offs with people going out and talking to companies. It's very structured.

In the United States, there are a number of different programs, things like DARPA, the space program. In-Q-Tel is one that's offered by the intelligence community, the 21 intelligence agencies. They are less interested in procurement of a widget and more interested in a company's broad capability, its technical wherewithal and, frankly, the security and reliability of the board of directors, the executives, the key engineers and the key business people in the company.

I think these are really simple steps that we can be taking to avoid some of the challenges we're talking about here.

I will be clear about one thing. I'm not suggesting that the Government of Canada doesn't need to buy foreign technology, but if you put a strategic lens on top of the capabilities required—where there is Canadian capability versus where there isn't or where you take a longer-term value lens—a lot of these companies will win the procurements and then pad them with afterwork. That's their goal. If we look and project a bit forward and not at a static moment in time, we will get better value over the long run.

I will stop it there, Chair.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Mr. Drouin.

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

That's where it ends.

[The Chair, Conservative, Robert Gordon Kitchen]

Now we'll go to Ms. Vignola for two and a half minutes.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you.

I'll start with Mr. Bergen.

Innovating in Canada is expensive. Not only does it require a great deal of creativity, but also a significant amount of money. I understand that it can be very frustrating to see a company's investments overlooked to some extent.

My question is the following.

To encourage our investors, what procurement methods should the government use to keep these investments in Canada?

[Benjamin Bergen]

I may have missed a bit of what you were saying. Would you mind reiterating the question?

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Given the importance of investing in innovation—in terms of time, money, creativity and human resources—it's also critical to keep the investments in Canada.

How can the Canadian government change its procurement system to boost the return on investments made by Canadians on Canadian soil?

Could the government review the criteria, for example?

[Benjamin Bergen]

Thank you.

I think Neil might be able to illuminate some of the policy ideas behind helping to keep procurement opportunities for Canadian firms. It's a bit similar to what he mentioned in his previous comments.

[Neil Desai]

Thanks Ben.

I'll nuance it. I don't believe it has to favour. I think we have to be very analytical in the outcomes we want. We want to see a successful business sector for the productivity of our country. Some of the facts we have to get on the record here is that Canada spends some of the highest amounts on investments in R and D from the public sector but has some of the lowest productivity outcomes in the OECD. That's our starting point. Continuing to do that and expecting better results is, by definition, insanity.

The second piece I'll say is that when we look at the economic development work we're doing—another member asked a question about some specific examples, but there are many different ones—we also have to be cognizant that the best form of financing for any company, regardless of what they make, is a purchase order. Take it to any bank, and they'll give you much better financing terms than a government grant, a government tax credit or a zero-interest loan. I think we have to acknowledge that in our analytical constructs here.

What I would say is that, if we assess the success of the programs out there in economic development for technology-intensive businesses, let's consider how we get people in government—who are frankly, as a sector, one of the largest buyers of technology in this country—to actually try Canadian tools and technologies.

Let's also be realistic. Through grants and subsidies we are giving companies money—start-ups, scaling companies, large technology companies—through SR and ED credits. Should we not try to take something back?

[The Chair, Conservative, Robert Gordon Kitchen]

Mr. Desai, I apologize. It always seems to be you I am cutting off. I apologize for that. Two and a half minutes goes by very quickly.

Mr. Green, you have two and a half minutes.

[Matthew Green, NDP, Hamilton Centre, ON]

I'm learning a lot, so I really appreciate the feedback here. I'll be an expert—maybe a Ph.D.—by the time we have had five meetings on this stuff, on national security and procurement.

I want Mr. Desai to be able to finish his statement, because he talked about the disconnect between our investments and the OECD average relative to output. I think that's an important point. I would love for you to have the opportunity to expand on it a little.

[Neil Desai]

Thanks very much, Mr. Green.

The last thing I was saying is that, in these economic development programs that give grants or low-interest loans, the government should start taking the technology being built by Canadians and try to find out whether there are users in the government context. Many of our programs—even of our strategic procurement programs—are very ideological. They're either pure demand—the government has a problem it wants to solve, and that's innovative solutions Canada—or pure supply, the build in Canada program, which is when technology companies in Canada have a technology they want someone in the government to test.

The reality is that we need to play in the middle of those two, where Canadian technology vendors have something that's of value and that could potentially solve a government problem. If we get that middle ground right, I'm telling you, there will be major exports to be had and better economic growth for this country.

[Matthew Green, NDP, Hamilton Centre, ON]

When we look at the state capitalism of China, we've heard it characterized in many different ways throughout this committee. I'm going to suggest that it's a state capitalist country, yet we also have our own subsidies and our own preferred ways in which we provide supports here locally to business. If people had it all ways, if we were able to both maintain local production and local consumption within our supply chain in this regard and still export internationally, where do we find that balance to reconcile?

I think I heard some folks speak earlier about how this is only 5% of their business here locally.

[Neil Desai]

That was our business, and I'll tell you, we're not looking for any handouts here. However, I'll give you one example of the challenges that the Government of Canada faces in our software realm: investigating the extremely fast-growing issue of child sexual exploitation online, a massive, growing global issue. The same problem is happening in the U.K., the U.S. and around the world.

They all use their small and medium-sized enterprise exemptions in trade agreements. They all use their national security exemptions to work with their local innovators on solutions that solve problems such as that, or pure cybercrime investigations. That's what we're up against in a globally competitive world.

Again, I'm not suggesting that every piece of technology is going to have a Canadian vendor to solve the problem, but when there is a Canadian vendor that has technical chops and has an export potential and they get the door slammed shut on them, I just want to point out that with technology it's a winner-takes-all game a lot of times in procurement, so when you're locked out, you're locked out now for years and that launch pad is lost.

Therefore, we have to be very careful when there are Canadian players in the space and there are also security considerations.

[Matthew Green, NDP, Hamilton Centre, ON]

Those were very thoughtful responses. Thank you.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Mr. Desai and Mr. Green.

We'll now go to Mr. Lloyd, for five minutes.

[Dane Lloyd, Conservative, Sturgeon River—Parkland, AB]

Thank you, Mr. Chair.

This question is going to be focused on Mr. Desai.

The very fact that a company such as Nuctech could get this far in the process without anyone flagging it for security reasons is absolutely shocking, and I think it just demonstrates how our government—and maybe it has been going on for a long time—is taking our national security so for granted.

I read that the European Medicines Agency was hacked recently. They got information about the Pfizer vaccine. FireEye, the top private cybersecurity firm in the United States, was hacked. Even the cybersecurity companies are getting hacked.

I am being reassured by this government over and over again that they have a plan and that they're ready to protect our vaccine supply chains and protect our data with cybersecurity, but I'm just not convinced when I'm seeing all these countries around the world, countries similar to Canada, getting hacked and top firms such as FireEye getting hacked.

I want to get your comment. Does our government have an adequate strategy to enhance and protect our cybersecurity, and if not, why not?