Thank you very much, Mr. Chair. It's a pleasure to be back speaking with the committee.
In 2022 our research team, which is based at Carleton University and includes both me and Mr. Boots, launched govcanadacontracts.ca, an open access research tool to help people more easily explore the Government of Canada's proactively disclosed data on federal contracting. That tool provides data on all federal contracts between 2017 and 2022, but our focus in the research paper and in the testimony that we'll give today is focusing on just the IT contracting piece specifically. I should note that the paper we're presenting and the findings are still under peer review, but we wanted to release it while that process was under way, given the urgency of the topic.
Knowing that effective IT procurement is not just key to the success of individual digital projects but is also essential to effective modern public administration more broadly, our goal with the research was to better diagnose the extent to which the Government of Canada adheres to widely accepted best practice in IT procurement. We suspected, given previous research and a fairly thick body of anecdotal evidence, that the federal government wasn't following the rules for good IT procurement, but we wanted to test that assumption with stronger data.
To do so, we turned to the proactive disclosure of contracts dataset that is published by the Government of Canada. A fair amount of work went into cleaning those data. If you're interested in that, we outline how we did that on our website and also in the paper we're presenting.
To evaluate that data—in hand, cleaned and ready to go—we created a framework looking at international experience to outline a set of sort of rules for modern public sector IT contracting. Then we assessed the extent to which the Government of Canada follows those rules. What did we find? The main punchline is that the federal government breaks almost all globally accepted best practice for modern public sector IT procurement. I'll give a high-level summary here.
First, federal IT contracts are generally too big, in terms of both length and dollar value, to succeed. That conclusion rests on a strong body of evidence showing that for software projects in particular, contracts need to be small—to allow the project to adjust based on regular and early user feedback, to avoid pooling risk and dependencies in a small number of large contracts, to make it easy to dispense with vendors that are underperforming, and to open up competition to a broad range of vendors, not just those capable of bidding for and winning large contracts. Despite all the evidence that smaller contracts are far more likely to lead to project success, we find that the majority, 53%, of IT spending in the Government of Canada is allocated to contracts that break the threshold dollar value for likely project success. That's the first big finding.
The second big finding looks at the diversity of the number of vendors winning government contracts. We know from basic economics that the more competitive and pluralistic the market, the more likely you are to have success in buying. We looked at the supplier market. We identified a small number of prominent IT vendors where three vendors received over $100 million in contracts annually, making up 23% of government IT contract spending. This is alongside a really long tail of thousands of smaller IT vendors and contractors. We note in the paper that one of the things we can't identify with the data we have is how many of those are pass-through vendors that you've been looking at in something like the ArriveCAN study.
Third, we looked to the importance of building in-house IT expertise, which is something the committee has heard several times. There are reasons that you want to build that in-house IT expertise. You can be a smart shopper. You can build in-house when it makes more sense to do so. You can kind of hold those contractors to account. We looked at the ratios for contractors to in-house staff in this part of the analysis and found that in some Government of Canada departments, the number of contracted IT workers greatly outnumbered in-house IT staff. There is nuance to explore in what that right ratio is, which I hope we can get into in our discussions.
Fourth, again breaching global best practice, in a frankly shocking betrayal of responsible stewardship of public funds, current government policies favour vendor ownership of intellectual property and data and do not prioritize adoption of open source solutions. This is despite strong evidence showing that open source generates more cost-effective, secure, publicly accountable and higher-quality digital services.
These policies on IP represent a clear recipe for ongoing lock in to vendors who produce custom software for government, reducing departments' abilities to share and reuse software, likely resulting in frequent cases in which the Government of Canada is paying for the same or comparable software multiple times over.
We conclude the paper with a series of policy recommendations, which are also detailed in a brief that we presented to the committee on an earlier occasion. We also note several limitations to our analysis, which we'd like to really get into today as well, resulting in large part from the limited data we have. For us, this is really an area that is ripe for immediate attention because, as the committee will know all too well, it's very difficult to get a clear picture of IT contracting patterns in Canada, so this research is one attempt to do that. We really look forward to discussing our research process, the findings and their implications with the committee.