Madam Speaker, I am glad to join the debate today on the concurrence motion on the seventh report of the Standing Committee on Government Operations and Estimates as it pertains to small and medium size enterprises and their access to federal procurement contracts.
I am proud to be the vice-chair of the committee and was proud to participate in the study that resulted in this report. It was a unanimous report. There was not a great deal of argument or debate about the content of the report.
My colleague from the Bloc Québécois felt it was necessary to move concurrence on this report today because the same issues that gave rise to the investigation and the study continue to plague small businesses today as they seek access to their fair share of government procurement contracts.
I want to thank my colleague from Terrebonne—Blainville, Quebec for the opportunity for us to speak at some length today on this subject.
Let me begin my remarks by pointing out that 98% of all businesses in Canada in fact fall into the small and medium size business category. I learned something when that was brought to our attention. I had no idea.
Even more noteworthy is the fact that SMEs employ 5.1 million Canadians, almost half of the entire private-sector workforce. In fact small businesses accounted for 80% of the job creation between 1993 and 2007. During that period of time, large businesses actually shed jobs. It was the large enterprises that were cutting back and reducing staff. The engine for economic growth, almost the entire backbone of the economy during that period was the job creation from small and medium size enterprises.
We can see why the government should have a real interest in making sure that the procurement by the federal government, which represents a huge volume of financial activity, goes to the sector of the economy that will give the biggest bang for its buck. We argue, and the committee unanimously concluded, that is the small and medium size sector, the SME sector.
However, let me quote from the seventh report of the government operations committee, and this is in the very neutral language put forward by the researcher of our committee, who crafted this report:
The Committee heard overwhelming testimony that SMEs are frustrated with the federal procurement process. From cumbersome and expensive-to-complete RFP processes to the government not paying interest on overdue accounts, many SMEs “have just given up” trying to bid on federal government contracts.
That was the unanimously adopted language of this report. Even the government-side members of the committee did not disagree that this was what our committee heard from small and medium size enterprises. They are frustrated by the process and by the government not paying interest on overdue accounts to the point where they have simply given up. They have found it too expensive and too cumbersome to even participate in the bidding process to get access to the tax dollars being invested.
I do not know if it is a deliberate trend. We did not prove that. We did not prove that it was the policy of the government to simplify its procurement by going sole-source or going to larger enterprises, especially in the IT sector. We do know that the bundling of contracts, especially in the IT sector, has shut out a vast number of actors in that sector. They are justifiably frustrated.
It was a satisfying committee study to take part in, because we heard real passion from real actors in the economy.
We were not dealing with abstracts in this study. We were right down on the ground with the people who are the driving engine of the economy, and they were telling us that the system is broken. Access to government procurement contracts is so frustrating. The wheels have fallen off it. The arse is out of her, as they say in Newfoundland. It is simply not working for them. Therefore, they came to us; they appealed to us; they urged us in the strongest possible terms to bring the message back to government that they want in.
There used to be a saying, the west wants in. Well, SMEs want in, in a substantive way, and they asked us to bring that message to Parliament. We did through this report, but what has been frustrating to us, and I know it has been frustrating to my colleague from the Bloc Québécois, is that the government's response to our report is inadequate. I do not think the Conservatives heard us in any meaningful way. The language they use does not reflect the urgency in our report.
Let me give one example to illustrate what I think is a wilful blindness on the part of the government to the urgency in this sector. Our goal number three said simply that
[t]he federal government must ensure that due consideration is given to small and medium enterprises when considering the bundling of contracts and standing offers.
The response from the government is that it commits to “review best practices related to the consolidation of contracts”.
Everybody who has been around here for a while knows that is bafflegab for stall, delay, rag the puck, buy ourselves some time, status quo. That is what it really means. “We will review best practices” means we will do absolutely SFA, if I may put it that way.
That is a very frustrating response to one of the key recommendations. I want to share what we heard about the bundling of contracts. There seems to be a feeling on the part of government that bigger is better in terms of dealing with one big supplier instead of many small ones, but that way of thinking, that logic is folly. In fact, I argue, it is dangerous, because if we put all our eggs in one basket, especially with our relationship with an IT contractor who is essentially supplying our mainframe and then providing that main government service of IT connectivity, we are vulnerable; we are at risk. I would argue it is an issue of national security, but it is certainly at least a danger in that we have contracted out the ability to service our own systems. We have contracted them all out to one entity that may or may not be stable in the long term, that may be sold, that may merge with other companies, that may have its own internal difficulties, or that may turn into an Enron and have a terrible corporate collapse.
The government has put us at risk if it goes to that single entity, plus there is the other effect that we are concerned about. Some of these big actors, the ones that seem to get the big bundled contracts, are major Canadian success stories. We bless them for their success. We wish them well, but we will never grow another generation of success stories if we let them starve for business. Unless some of the smaller actors get a piece of the action, they will never grow into big actors, hire more people and become international players as some of the big contractors are now.
It is only reasonable that we want to patronize the developing sector, the entrepreneurial sector, the small and medium size businesses that will become our next major players in the IT sector. That work should be spread around for national security reasons, for reliability reasons and for the reasons of providing better opportunity to more players in the field so that we can grow another generation of entrepreneurs.
Above and beyond all that, there remains the question of why we are contracting this work out to begin with. There is a pretty good argument. We are not like any other business. This is the Government of Canada. There are security issues and there are compelling reasons why this should be kept in-house, that the design, the operation, the repair and maintenance of our internal communications, our IT component for the Government of Canada, should not be contracted out to the private sector, because we do not know if we can guarantee the security once the control of it leaves our hands.
I wish there had been more of an emphasis on that in the study that we undertook. It was not part of our mandate, but I think it is worth noting in the context of this debate.
Another thing that is worth noting in the context of this debate is that the expenditure of Canadian tax dollars should be done in such a way as to provide as much benefit to Canadian taxpayers as possible. That means not only achieving the initial objective of the spending, the procurement of goods and services, but hopefully achieving secondary objectives as well, such as providing jobs and opportunities for Canadians. That means to the greatest extent possible we should be buying Canadian goods and services, within the limitations of the trade agreements that we are a signatory to and that we have ratified. We should be knocking ourselves out. We should be going the extra mile to make sure that we are buying Canadian goods and services and IT whenever possible. Let me give one example where we have fallen down in that regard and I think it will shock the House.
The Canadian military needed troop carrier buses. The forces already have a whole fleet of Canadian made buses. They needed 32 new ones. A tender was put out for new buses. There were only two bidders. One was a company in Quebec that makes some of the best carrier buses in the world, I argue the second best, because there is another company in Winnipeg that makes what I argue are the best buses in the world. Both of those bus companies bid on the Canadian armed forces' troop carrier tender. Who got it? Mercedes Benz in Germany. The really shocking is that the difference in price was less than one-half of one per cent. That is by how much it won the contract, less than the cost of a set of tires on one of those buses is what it won the contract by, but lowest bid gets it. Unless there are three Canadian bidders, the made in Canada procurement policy does not kick in.
What kind of a message does this send to our NATO allies around the world and in foreign theatres of operation? It says that if they want to buy a good troop carrier bus, they should buy a German one, because that is what we did. We abandoned our Canadian bus manufacturer in Quebec, our bus manufacturer in Winnipeg, our unemployed standing outside the gate looking in. Germany is building the troop carrier buses that carry our armed forces, all for the sake of less than $5,000 per bus on half a million dollar buses. That is an appalling situation that ignores the best interests of Canadians.
Surely there should be some kind of a lens through which the procurement officers look when they make these purchases. Is this purchase in the best interests of Canadians? Is the best price always the best value? These are questions that need to be asked. It was the final recommendation of our report, to advise procurement officers, or perhaps recommend to the government that the officers be given more latitude to consider the whole cost and value of their purchases. In some cases the lowest cost is not always the best value, if there are quality issues at stake and if there are other maintenance costs.
In this example most of our troop carrier buses are Canadian made but 32 of them will be German made. We now need new tools. We need new training for the mechanics to maintain them. We needed Canadian military officers to fly back and forth to Germany to supervise the manufacture of them.
Whatever savings there might have been in this example were burnt up by all of the other additional costs. The best value would in fact have been either the Quebec buses or the Winnipeg buses. It certainly was not the German option.
These are some of the frustrations that came to our attention as committee members. We had compelling testimony from the wood furniture manufacturing industry. They are very strong actors in Quebec and in the province of Manitoba. We heard from the window and door manufacturers, the furniture manufacturers and the shipbuilding industry. It was not just the IT sector that was frustrated with the lack of access to government procurement.
One can imagine the amount of office furniture the Government of Canada buys. These are things Canada is known for. We have strength in these areas. These are areas of expertise. Canada is a centre of excellence in furniture building because we have access to the resources and we have a long history and tradition in this industry. Would it not make sense that when the Government of Canada needs to buy furniture, it would give some preference, within the limitations of our trade agreements, to Canadian manufacturers? That is not being protectionist. That is being a proud Canadian nationalist. That is what that is.
We see the Americans doing it. We see the Americans going beyond that with their buy American program. We are not recommending that we match the buy American program with a buy Canadian program. Within the context and limitations of NAFTA, we are allowed to show preference for a Canadian product if it is within 7% of the price range. In my example of the buses, if we had availed ourselves of the opportunities that are already available to us, we would have had Canadian buses right then and there.
We had an interesting study, but we are not at all satisfied with the government response to our seventh report of the government operations committee. There is one thing that came up in the context of our debate and I will close with this recommendation. Small and medium size businesses indicated three areas that they were frustrated with: first, government procurement; second, their problem in finding venture capital; and third, the extraordinarily high federal tax rate on small businesses.
I would like to point out that in the socialist paradise of Manitoba, the business tax rate on small businesses is in fact zero. If the federal Conservative government were not strangling the growth potential of small businesses with its crippling small business tax, more Canadian small businesses might be able to fight through some of the other disadvantages, such as their inability to get government procurement.
I hope that my Conservative colleagues are listening to this plea. If they would stop persecuting small businesses with these crippling small business taxes, we may in fact be able to aspire to a burgeoning SME sector in this country. As I said, 80% of all the jobs created between 1993 and 2007 were in that sector. We should be doing all we can to encourage them.
I did have one more point that I would like to make. I was interested in the remarks of my colleague from Newfoundland. She was talking about the shipbuilding sector. We did have representation from the shipbuilding industry. There were some very interesting recommendations and quotations from the shipbuilding sector to which I think we would be well advised to pay attention. However, if I cannot find them in my notes, I can always talk about something else.
Let me deal with one of the other recommendations of the report and the government's response to it. We were disappointed that the government's response to the seventh report of the government operations committee was thin, almost to the point of being patronizing. I do not think it took our recommendations seriously. Let me give one example.
Recommendation number four is that the federal government must establish a system of fairness to encourage departments and agencies to use SMEs.
Disappointingly, the government reacted by saying it is essentially already doing all it can to encourage SMEs. Our recommendation was more along the American model, where the office of small and medium enterprises actually advocates on behalf of small businesses and helps them to ensure that they get a set-aside quota of all the government procurement contracts in that country.
That is the direction we want our Office of Small and Medium Enterprises to take. It is not just to provide information. We want them to take them by the hand, if necessary, guide them through the morass of RFPs and help them achieve a specific quota so that we can proudly say that we support SMEs, not stifle them.