Industry Committee on Oct. 26th, 2016

[The Chair, Liberal, Dan Ruimy]

Thank you. Welcome.

Mr. Lobb, you have five minutes.

[Ben Lobb, Conservative, Huron—Bruce, ON]

Thanks very much.

That's for coming.

Mr. Gray, what are some of the complaints that businesses would have dealing with your department? Can you just give us an idea of some of the complaints people might have?

[Desmond Gray]

I should tell you that we go out and do detailed surveys every three years with suppliers all across Canada. The most obvious complaints are that we're too slow; our procurement process is too complex and difficult to understand, especially for small and medium enterprises; and payment is not always on time, which is a very hot issue, because, especially for small businesses, cash flow is critical, the number one issue.

Some other challenges are that they don't understand the process; they're not sure where to find the opportunity; they find our process bureaucratic, even if they understand it or choose to submit a bid; or they're found to be non-compliant because of a technical error.

This is all part of what we do. It is why we were funded as the office of small and medium enterprises. We go out all across Canada. We have six offices in every major region in Canada and we're constantly providing seminars, going to associations. We do about 1,100 trade shows, meetings with associations. All across Canada, we are trying to give people information about how to easily access opportunities through our website. It's an automated, simple process, with simple tools to access it. The challenge is to make them aware, in a very quick and easy way, of how to find opportunities. Clearly, it costs money and time.

Of course, larger businesses often have people who are specialized in responding to RFPs, whereas small companies do not. In Canada there are 2.5 million businesses, of which almost one million are one or two people. They just don't have the overhead. Our job is to make it simple, remove those barriers, and give them the tools, which is what we continue to do.

[Ben Lobb, Conservative, Huron—Bruce, ON]

When I was on the health committee looking at electronic health records, I talked to a few software companies, and they didn't even want to touch the government. It was too much. They could do something else for more money, with fewer problems. I think this sometimes stifles innovation, whether it's federal or provincial.

[Desmond Gray]

You're absolutely correct. The other thing is that we want to expand the base of suppliers. I think diversity was mentioned earlier. We want to increase the diversity of suppliers and bring new suppliers in. That's also part of it.

For instance, we're looking at simplifying. We have a whole initiative on procurement modernization in our department. Some of the key issues are how to simplify the process, how to simplify our policies, and how to make ourselves more accessible both to other government departments—because we serve other government departments—and to the supplier community.

[Ben Lobb, Conservative, Huron—Bruce, ON]

Let's say something is awarded to a firm, and they're going to subcontract it out. They aren't going to do the whole job, but they may do some of it or part of it or whatever. This goes back to your getting the payment to the subcontractors. Are there terms you mandate—30 days, 45 days, or whatever—that the company awarded the contract must pay the subcontractor by? Is there a way you can monitor this?

[Desmond Gray]

There's a rule. We have a rule set by Treasury Board. I know we pay. We hold payment to the prime for 30 days. That's to make sure in part that they have paid their subs. As you can imagine, we don't get involved in the relationship between the prime and the sub, because that's a business relationship. I'm not aware of anything about contract conditions.

[Sylvain Cyr]

Just as Des was saying, we don't get involved in the relationship between the prime contractor and, quite often, the multiple subcontractors that exist, because it would be a slippery slope whereby if anything were to go wrong we would be told that it's because of our involvement. For this reason, we don't do it.

[Ben Lobb, Conservative, Huron—Bruce, ON]

Late at night when I can't sleep, I sometimes go on MERX and shake my head at these things. It's probably a sickness more than anything else. I looked at an opportunity for a snow removal contractor to move snow around the East Block, and there was no contractor in my riding who would touch it, even for $1 million, because of the level of security clearances you have to have, the liability. There are only about two companies in this country that would even want to do something as simple as snow removal. I looked at that and it kind of summed up the problem that's plagued governments for decades.

What can we do to try to make this better?

[Desmond Gray]

I think you have it.

[The Chair, Liberal, Dan Ruimy]

Please be brief.

[Desmond Gray]

I was just going to say you voiced something we have been hearing for quite a long time. It is part of one of the things we are trying in procurement modernization. This reflects perhaps a certain historical viewpoint about procurement and managing risk. It's very easy to manage risk. However, you may over-manage it so that you increase costs and limit access. That means you limit competition.

Ultimately, even when you put those requirements in, it's a cost that has to be borne by the supplier. We have a supplier advisory committee made up of representatives from Canadian industry and major associations. They've raised this issue with us, and we're investigating. We're doing work right now as part of that review to see how we can find a better balance of risk and performance to address this question.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

We're going to move to Mr. Longfield. You have five minutes.

[Lloyd Longfield, Liberal, Guelph, ON]

Thanks, Mr. Chair.

Thanks to those witnesses who have come in today.

I'm going to go on a line of questioning about our relationships with the provincial and territorial governments, where there are some initiatives in Ontario. Invest in Ontario has identified defence and aerospace as a key sector for us to be working on.

Do you work with the provinces and territories to say that if it's important for them, then it's important for us as a sector? Do you work across orders of government? I think a manufacturing study could be very important.

[Jeff Waring]

I'll start this off by saying that when we launched the industrial and technical benefits policy two years ago, we did reach out to all of the provinces to explain the process by which we were looking to leverage economic benefits and to also inquire as to whether or not there were priority areas of capability that they wanted to see supported on a procurement-by-procurement basis.

This is certainly something that we are actively engaged in on the shipbuilding contracts as well, just because of their size. There's a lot happening on both coasts with regard to shipbuilding. We do have open door policies with the provinces, of course, and we look to the regional development agencies, which are now part of the Department of Innovation, Science and Economic Development, to keep that dialogue open and to feed in those kinds of intelligence from the provinces.

[Lloyd Longfield, Liberal, Guelph, ON]

Is that something in our study that we could look at as a new development, or is that something that has been going on for a long time?

[Jeff Waring]

It's something that, when we transform the industrial and technological benefits policy, is a lot more strategic. It has been going on for two years. In the past, it may not have been as open to those kinds of discussions because it was more of a blunt instrument. It was more one size fits all.

[Lloyd Longfield, Liberal, Guelph, ON]

Good. Thank you.

May we hear from procurement, please?

[Desmond Gray]

The answer is that we are working with the provinces and territories, and we're doing it in two ways that immediately strike me as relevant.

One of them is just for the work we do in my group—the office of small and medium enterprise—where we regularly engage with different provincial entities. For example, when we go to Toronto or any major urban centre, we will work with them and have a day with industry. We bring industry in where all the levels of government are working together to promote, share a table, and give presentations. It just makes it cost effective.

Industry doesn't care what level of government you are. What they want to know is, what's the opportunity? We are working closely to do that and to make sure we get our respective opportunities out there.

The second one is that more recently, in 2015, our minister was given the authority through an order in council to offer the other provinces and territories access to our procurement instruments. What this means is we that can now, in working with the provinces and territories, give them access, so that if they wish to use our instruments, instead of their doing multiple investigations on their own, we can now bring it all together.

We've started doing that. We're creating the legal agreements with them and creating the relationships. I think it is advancing very well, and we intend to grow it, but it's another way that we can work in the confederation. We can work more effective horizontally.

[Lloyd Longfield, Liberal, Guelph, ON]

Terrific.

I'll put a put a plug in for chambers of commerce. My background is in the chamber network. We used to have those sessions with the orders of government, and they reached a lot of small and medium-sized businesses in Canada.

Yes, Mr. Halucha, you had your hand up.

[Paul Halucha]

I just want to add a couple of points.

I agree with you. The relations with the provincial governments on economic matters are extraordinarily important. We want the same results. We want growth and we want strong companies, to the extent that you can bring resources together in combined efforts. If you look at programs we do, such as the automotive innovation fund, very typically you'll see that there's a federal support that we provide through that fund, and the provincial government provides matching funding, or vice versa. In the evaluation process, we are typically very well aligned when providing it.

I think from a structural perspective a really important change the government made was moving the original development agencies into the ISED portfolio, which I think really has enhanced that alignment. It has strengthened the type of intelligence that you've suggested would come from that in a really tangible way.

[Lloyd Longfield, Liberal, Guelph, ON]

Thanks.

We're coming short on the end of our study. You heard some comments from across the table that we need more witnesses and we need more information, but unfortunately the time is ticking.

We have climate change on the agenda. Is procurement looking at the credits as well as the tax on carbon that's coming forward? The tax on pollution is one side of the equation, but there's an enormous economic opportunity for businesses with credits. Do you have to revamp your procurement around that?

[Desmond Gray]

I think the answer is that we're looking at that now in the broader sense of green and clean technology, and how procurement could be leveraged to support that initiative.

Over the many years, because I'm getting old now.... I was around 20 years ago when there was a very strong push for green products. For example, 20 years ago, had you wanted to buy paper in the federal government that had recycled content, it didn't exist. Through constantly advising the private sector that this is where the government wanted to go—of course, over the years virtually all the paper we buy has a high recycled content, and it's very environmentally green—we've totally transformed the market. It wasn't just us, but the world at large. You would have to pay a premium now to find paper without green content, so yes.

[The Chair, Liberal, Dan Ruimy]

Thank you.

We're going to move to Mr. Dreeshen for five minutes.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Thank you very much, Mr. Chair.

I'd just like to go back. Right now I'm not 100% sure just which one of the three organizations I should ask to get the information back, but I asked a question about the Defence Analytics Institute and also about the value proposition to Canada.

Perhaps you could go back to the statements and the questions that were asked there. I think it's important that we would have that specifically: reporting on the recent activities of DAI—including that report, as it's a key component on how the government catalogues manufacturing companies in Canada that are tied in with foreign investment—and on whether or not the value proposition guide is being used today and how you would assess its effectiveness versus the old offset model.

If we could get that information from whichever source is best suited, I would appreciate it. Thank you, Mr. Waring.

On the other part, I believe it was Mr. Gray who was talking about the Build in Canada innovation program and the significance that is involved there. I'd like to get a little information on that. I believe you talked about the procurements in which some comes from Canadian businesses and some from places outside of our country. When you're purchasing and bringing things in from other countries, are they subjected to things like GST? How are you going to deal with the competition issue when it comes to our having a carbon tax and the other countries not having it? Have you done any assessment on that, or will you be doing any assessment on how that will impact our industry?