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GOVERNMENT RESPONSE TO THE SEVENTH REPORT OF THE STANDING COMMITTEE ON GOVERNMENT OPERATIONS AND ESTIMATES: In Pursuit of Balance: Assisting Small and Medium Enterprises in Accessing Federal Procurement

GOVERNMENT RESPONSE TO THE SEVENTH REPORT OF THE STANDING COMMITTEE ON GOVERNMENT OPERATIONS AND ESTIMATES: In Pursuit of Balance: Assisting Small and Medium Enterprises in Accessing Federal Procurement

INTRODUCTION

The Government of Canada is pleased to respond to the Standing Committee on Government Operations and Estimates’ report “In Pursuit of Balance: Assisting Small and Medium Enterprises in Accessing Federal Procurement”. This document provides the Government’s Response to each of the Committee’s goals and suggested actions.

The Government recognizes that Canada’s small and medium enterprises (SMEs) form the backbone of our economy and it is committed to ensuring that SMEs have fair and open access to government procurement opportunities. As per the Speech from the Throne 2008, the Government is committed to “cut the red tape faced by the private and not-for-profit sectors when doing business with the government. Fixing procurement will be a top priority. Simpler and streamlined processes will make it easier for businesses to provide products and services to the government and will deliver better results for Canadians”.

The Government is working to improve the procurement process for small and medium enterprises and facilitate their awareness of and access to federal contracts. It should be noted that Public Works and Government Services Canada (PWGSC) is responsible for a large portion of procurement (85% of the total value spent, which is between $12-18 billion annually) as a common service provider for other departments. The policy governing procurement is under the mandate of the Treasury Board Secretariat, and SMEs are under the purview of Industry Canada. In light of the multitude of departments involved, PWGSC will endeavour to sensitize government departments to the needs of SMEs. PWGSC will report on its progress in addressing the goals within its mandate in its annual Departmental Performance Report.

PWGSC’s Office of Small and Medium Enterprises (OSME) was created in 2005 within PWGSC to advocate on behalf of SMEs in federal procurement. The OSME improves SMEs access to government contract opportunities by reducing procurement barriers, simplifying the contracting process, providing training and education to SMEs wishing to do business with the government, collaborating to improve procurement policies and best practices and working with SMEs to ensure their concerns are brought forward and heard. In 2006, the Government increased OSME’s regional presence through the Federal Accountability Act Action Plan, and established six offices across the country. Since its’ creation, the OSME has assisted over 53,000 individuals and suppliers through outreach seminars, trade shows, and meetings. In addition, since 2006-2007, PWGSC has awarded, on average, more than 43% of the total value of contracts transacted with businesses located in Canada to SMEs.

The Government would like to thank the members of the Standing Committee on Government Operations and Estimates for their efforts.

GOAL 1: The procurement process must be improved for small and medium enterprises to facilitate their awareness of and access to federal contracts.

  • Improve MERX so that SMEs can get all the information they need on federal procurement opportunities;
  • Reduce the complexity in completing [Request for Proposals] RFPs; and
  • Assist SMEs by reducing the costs of bidding on an RFP; or
  • Assign a technical procurement officer to each RFP to answer questions from potential bidders.

Response:

The Government is committed to ongoing dialogue with SMEs through consultations, surveys, and outreach activities. Such a dialogue enables the Government to better understand their issues, including complexities of solicitation documents and the costs of bidding.

The Government is also committed to ensuring that SMEs have access to information regarding federal procurement opportunities. The Government Electronic Tendering Service (GETS) is an on-line system that advertises government contracting opportunities to potential bidders. GETS is operated under contract by Mediagrif Interactive Technologies Incorporated, and is commonly known as MERX.

Departments and Agencies must use MERX for requirements subject to any of the trade agreements (such as NAFTA) – over 12,000 Request for Proposals (RFPs) are posted yearly. Some departments use MERX for other procurements as well.

The Government, through PWGSC, has and will continue to make upgrades to the GETS. The quarterly updates are intended to enhance functionality and user friendliness of the system and ensure that suppliers have access to required information on procurement opportunities in order to participate in the process.

Given that there are user fees associated with accessing some contract opportunities (for example, provincial and private sector) posted on MERX, the Government has covered the fees to access the system so that suppliers can view and order all federal procurement opportunities at no cost.

Since 2007, PWGSC has made the following enhancements to the GETS:

  • Ensured consistent language and terminology was employed on the MERX website;
  • Added additional links on MERX to the Business Access Canada website, which is a site that provides suppliers with enhanced information on how to do business with the Government of Canada and helps suppliers with the various steps involved in selling to the Government of Canada, promote their goods and services and find federal opportunities;
  • Provided suppliers with the ability to determine the number of times an opportunity has been viewed as well as the identity of those suppliers who have viewed the opportunity, so that suppliers can make informed business decisions;
  • Clarified and highlighted the process to register on MERX without providing a credit card number (by providing the Procurement Business Number), so that suppliers are aware that they can access federal opportunities free of charge;
  • Provided, on the MERX main site, a way for users to locate and review all current Government of Canada Standing Offer Opportunity Notices that are published; and
  • Added an email notification to advise suppliers of any amendments to solicitation documents that have been previously ordered to ensure suppliers have up-to-date information.

As part of the long-term strategy for GETS, the Government is developing a more comprehensive e-strategy through an improved web presence for procurement. It will leverage the Internet as its core channel for delivering procurement services to Canadian businesses and Government buyers. This e-strategy will provide web-based information services, available 24 hours a day. Canadian businesses will have one-stop access to information on how and what to sell to the Government.  The Government will also improve the registration process of businesses for Government contracting opportunities through the creation of a common business number for all businesses. The first stage of this comprehensive e-strategy will be launched in spring 2010.

The Government is committed to reducing the complexity involved in responding to a RFP while recognizing the complex nature of these documents.

The Government, through PWGSC, has already undertaken the following initiatives:

  • Mandatory standard templates for its solicitation documents to provide a consistent design and simpler language for PWGSC issued procurement documents;
  • The review of PWGSC issued solicitation documents for mandatory commodities in order to ensure that the requirements do not pose challenges to SMEs;
  • Regular free seminars across the country to suppliers on how to conduct business with the Government;
  • Demonstrations to suppliers on how to use electronic systems, including the Supplier Registration Index (SRI), Contracts History Database, and GETS (MERX); and
  • Engagement with industry to better identify the source of SME concerns with the procurement process.

The Government, through PWGSC, will be undertaking additional initiatives, including:

  • The development of a seminar on how to complete solicitation documents, which will provide suppliers with general tips and tools to compete on federal opportunities.  This is expected to be launched in the winter 2010.
  • The development of a governance and process framework for the management of commodities that will improve the ability of SMEs to comment on overall procurement strategies, through mechanisms such as Requests for Information and supplier consultations; and
  • The development of an e-procurement strategy, which includes a “single-window” portal for suppliers to access information on procurement.

Currently, for opportunities posted on GETS, all questions received from potential bidders and answers provided by procurement officers are posted on GETS electronically. This is to ensure that all interested suppliers have access to the same information throughout the process.  Therefore, the Government will continue to use procurement officers to provide answers to suppliers’ questions in a consistent, fair, open and transparent manner.  These officers also have access to technical expertise when required.  Furthermore, prior to posting RFPs, the Government uses mechanisms such as Requests for Information and industry consultations to ensure that businesses have a chance to provide input on the requirements and that they are fair to everyone.

The Government has already eliminated the financial costs associated with accessing federal procurement opportunities on the GETS. Other initiatives that are ongoing, which help reduce the cost of bidding on an RFP include the existing free training seminars offered by the OSME on how to do business with the government offered to suppliers throughout the country and continuous efforts to standardize and simplify procurement documents. The Government will continue to offer these services to assist SMEs in bidding on RFPs.

GOAL 2: The federal government’s services and programs for SMEs must be coordinated in such a way as to actually assist SMEs in their ability to access federal contracts.

  • Give the OSME a stronger mandate that includes advocacy on behalf of SMEs with respect to procurement; and
  • Ensure the OSME has the appropriate funding for the tasks that are necessary to improve the level of service it provides SMEs; or
  • Establish the OSME as a single-window entity that can coordinate all the federal government’s services and programs for SMEs.

Response:

The Government is ensuring better coordination amongst Departments and Agencies who have SME programs, and is investigating any gaps in the services provided to SMEs.

The Government will address GOAL 2 by clarifying existing roles and responsibilities through a government policy (led by the Industry Canada and PWGSC) that underlines the importance of SMEs in the Canadian economy and identifies the OSME as the entity advocating on behalf of suppliers in procurement across government. The development of a policy will occur throughout 2009-2010. The Government will also ensure that the planned Treasury Board directive governing Crown procurement contracting will reflect the need for coordinated support among departments of socio-economic objectives, including those relating to small and medium-sized enterprises.

Since its creation, the OSME has conducted outreach activities, provided information to suppliers, and advocated on behalf of SMEs in the procurement process. The OSME mandate has been to encourage and assist SMEs to participate in the federal government procurement process, influence change within government acquisitions and provide business intelligence on suppliers to the procurement community. As examples of success, in the fiscal year 2008-2009, the OSME directly assisted over 22,500 business representatives; a number that increases yearly. The assistance provided by the OSME includes offering advice through seminars, a national information line, presentations and numerous special events.  PWGSC will continue to utilize the funding for OSME received through the Federal Accountability Act for regional operations while continuing to strive for efficiencies in order to fund the PWGSC Headquarter operations through internal PWGSC re-allocations.

Furthermore, the Government, through PWGSC and Industry Canada, will strengthen horizontal relationships with other departments through an inter-departmental Assistant Deputy Minister coordination committee on procurement-related SME concerns.  Members will be drawn from departments who have policy responsibility for procurement, departments responsible for the majority of procurement and any other interested departments or agencies. This Committee will ensure that SME procurement concerns are identified and shared among departments and agencies, and serve as an opportunity to discuss ways to reduce the impact or their occurrence in future procurements and to share best practices. The Committee will have its first meeting before the end of the current fiscal year (2009-2010).

GOAL 3: The federal government must ensure that due consideration is given to small and medium enterprises when considering the bundling of contracts and standing offers.

  • Provide ample opportunity for SME consultation about contracts that are to be bundled; and
  • Require any department or agency who wishes to put a bundled contract up for tender to submit a business case justifying the need for bundling that responds to the Treasury Board Secretariat’s definition of business case and as requested by the Office of the Auditor General in its November 2006 report; or
  • Establish contract size limits wherein a SME subcontracting plan for the life of the contract must be submitted as part of the bid.

Response:

The Committee heard testimony to the effect that contract consolidation was an issue for SMEs.  The Government is committed to ensuring fair, open and transparent access to competitive processes. These values could be captured in a definition of contract consolidation. Current information on contract consolidation is anecdotal.

As part of the development of a framework of governance and processes in the management of commodities (Commodity Management Framework), the Government will develop a definition of contract consolidation and review best practices related to the consolidation of contracts. The framework will serve to ensure that the use of contract consolidation is properly justified and that the concerns of SMEs are addressed. The Government will conduct its review of best practices and consult with internal stakeholders throughout 2010, with the development of a definition for the consolidation of contracts to be finalized in 2011.

In addition, through the Commodity Management Framework, PWGSC will establish an approach for industry consultations when contract consolidation is being considered.

PWGSC consults with industry on a regular basis. Currently, requests for information (RFIs) are the most commonly used form of consultation. PWGSC will specifically address the needs of SMEs as they relate to contract consolidation and the management of commodity procurement opportunities through improved consultation with industry.

The Government does not support the Committee’s proposal to establish contract size limits which would require SME subcontracting plans to be submitted as part of the bid.  Applying this requirement to contracts would impact the complexity of bid evaluations, the cost and complexity of preparing a RFP, and the reporting burden for both the prime and subcontractors. 

GOAL 4: The federal government must establish a system of fairness to encourage departments and agencies to use small and medium enterprises. However, set-asides, though useful in other policy areas, are not the preferred system of fairness.

  • Establish goals for procurement with SMEs, such as the U.S. SBA [United States Small Business Administration] system described above; and
  • When defining contract requirements, include a section to be filled out on whether SMEs would be suitable to fulfill the contract; or
  • Offer training sessions to procurement sections of federal departments and agencies to advocate for SMEs

Response:

The Government does not establish goals with the exception of the Procurement Strategy for Aboriginal Business. SMEs have also indicated that they would prefer the Government take an approach of reducing barriers to ensure fairness throughout the procurement process instead of the establishment of goals. 

The Committee has recommended that the Government adopt goals similar to the model used by the United States Small Business Administration (U.S. SBA). The United States Government has had difficulty in achieving its established small business procurement target of 23%. The Government of Canada, on the other hand, already has greater SME participation.  Since 2006-2007, SMEs located in Canada, on average, account for a significant portion of government contracting (more than 43% of the total value of PWGSC contracts).

Additionally, the Government will investigate the possibility of increasing the directed contracting limits for service contracts through consultations with SMEs, industry associations and Treasury Board Secretariat. Presently, service contracts valued under $25,000 can be directed. This limit has not changed in over twenty years. Exploring the option of increasing the limit up to the NAFTA threshold (currently $76,500) will allow the Government to determine if this could improve access for SMEs and reduce the cost of doing business with the government on lower dollar value service contracts.

The Government has already, and will continue, to take action with respect to: considering SMEs when defining contract requirements; and providing training to procurement staff regarding SME concerns.

PWGSC, when defining requirements, will include tools (for example a contracting guide that includes SME concerns) and training to assist procurement officers in determining whether SMEs are suitable to fulfill the contract. These procurement tools will help ensure that SMEs are not arbitrarily excluded from procurement opportunities, as a result of overly prescriptive or unnecessary requirements.

The Office of Small and Medium Enterprises (OSME) will continue to conduct reviews of PWGSC issued solicitation documents, as well as participate in the development of commodity management strategies to ensure that SME concerns are taken into account. The OSME is influencing change within government acquisitions by providing strategic recommendations to procurement officers, giving feedback to government departments on matters of procurement policy and ensuring a coordinated approach to supplier engagement. 

The Government, through the Canada School of Public Service, offers training on procurement that is mandatory for procurement staff across Government. The Government will explore the possibility of amending courses in 2010-2011 to include a module outlining barriers and issues that limit SME participation throughout the procurement process. 

PWGSC also provides specific training to its 1,600 procurement officers. The training curriculum includes a module outlining the role of OSME, its activities and the barriers that may impede SME participation. 

GOAL 5: The federal government should ensure that innovation and quality are key determinants in the evaluation of bids and the awarding of contracts.

  • Consider the merits of legislating the use of [Quality Based Selection] QBS as the required procurement process; or
  • Rework the RFP process to be less prescriptive and to allow for innovative alternatives from SMEs.
  • Response:

    The Government recognizes the importance of innovation and quality in the procurement process and the contribution of small and medium enterprises in this area. In its evaluation of bids and awarding of contracts, PWGSC is committed to ensuring that innovation and quality are considered, while ensuring maximum value is achieved for Canadians.

    The Government recognizes that innovation drives business competitiveness, quality and productivity improvements and ultimately economic growth for Canada. In the past, the Canadian government has used different procurement programs to support innovation in high technology sectors.

    Through the modernization of the procurement process, the Government will work towards making the procurement process less prescriptive, improve considerations of quality and favour the incorporation of innovative goods and services.

    The Government recognizes that the incorporation and evaluation of quality is different for every industry. The Government will explore how federal procurement can be less prescriptive and support innovation as part of its ongoing work. The Government will continue to use an evaluation methodology that heavily emphasizes quality over price, while ensuring compliance with relevant procurement policies and trade obligations.

    There are currently two initiatives at the federal level that offer some support to innovation-related activities through the leveraging of federal procurement; the Industrial and Regional Benefits (IRB) Policy, and the Chemical, Biological, Radiological-Nuclear, and Explosives Research and Technology Initiative (CRTI). 

    The IRB Policy requires the winning contractors of major defence related contracts to generate new business opportunities with leading Canadian companies, including SMEs, in an amount equal to the contract value.  The IRB Policy is a market-based instrument, which ensures that these new business opportunities are driven by market requirements, which in many cases leverage innovative technologies and services of Canadian firms. Since its inception in 1986, the IRB Policy has helped hundreds of Canadian companies access significant contracts related to domestic and international defence.

    The CRTI provides funds to Research and Development (R&D) projects to multiple entities including SMEs in science and technology (S&T), primarily in the realm of security research, technology development and technology acquisition.  The initiative is designed to enhance Canada’s security infrastructure and address gaps in Canada’s ability to respond to Chemical, Biological, Radiological-Nuclear, and Explosive (CBRNE) threats.  The CRTI program has proven to be an effective model for bringing together Canada’s national S&T and security communities to innovate and develop emerging technologies in the program’s priority areas.  CRTI projects have moved from R&D to commercialization, and have been implemented in Canada and abroad.

    The Government has discussed Quality Based Selection (QBS) with professional associations in the past, and it has been explained that the Government cannot follow this specific methodology as a result of existing trade obligations.  A key requirement of trade agreements is that, once the scope of work is defined, all suppliers have the opportunity to submit a financial bid. As QBS is based on the premise that only one firm will determine the full scope of work and negotiate a fee in isolation, all firms do not have that opportunity.  

    PWGSC does, however, recognize that price is not the only determining factor in selecting a firm and has built its procurement evaluation process accordingly. For example, following consultations with industry, PWGSC modified the evaluation process for architectural and engineering services, so that it is heavily weighted on technical experience and capacity of firms (i.e. 90% technical – 10% price). PWGSC has developed contracting templates for architectural and engineering services, which are employed across the country and include the standard evaluation breakdown of 90% technical and 10% price. For heavier engineering contracts, including bridges and roadwork, the evaluation breakdown is 85% technical and 15% price.

    CONCLUSION

    The Government appreciates the efforts of the Standing Committee and the Government is committed to taking action on the goals and suggested actions of the Committee. The Government recognizes that Canada’s SMEs form the backbone of our economy and the Government is committed to ensuring they have fair and open access to government procurement opportunities. The Standing Committee’s goals and suggested actions are meant to help the Government improve Federal Procurement.

    As previously mentioned, the Government takes great interest in the health of SMEs and is making it a priority in wanting to "cut the red tape faced by the private and not-for-profit sectors when doing business with the government [and fixing procurement]" (2008 Speech from the Throne).  The Government is proud that it has done much in improving SME access to government contract opportunities by reducing procurement barriers, simplifying the contracting process, improving training and education to SMEs wishing to do business with the Government.  The Government also believes that it can do more and will do so as outlined in the Response. 

    Additionally, through the OSME, the Government is committed to creating an ongoing dialogue between the Government and SMEs to create a better understanding of SMEs’ concerns and to ensure these concerns are continually addressed by the Government in the future.  

    The Government would like to thank the Standing Committee for their valuable efforts in pursuing these issues.