Madam Speaker, I move that the seventh report of the Standing Committee on Government Operations and Estimates, presented on Wednesday, June 17, be concurred in.
I rise here today to draw the attention of the House to the danger facing small and medium-sized businesses that sell their goods and services to the federal government.
This danger was explained in the seventh report of the Standing Committee on Government Operations and Estimates, which was tabled in the House in June 2009.
Federal government procurement is big business in Canada. The government buys approximately $14 billion worth of goods and services each year from thousands of suppliers. More than three-quarters of these suppliers are small and medium enterprises, or SMEs, in Canada and Quebec, and they are also the main driving force of our economy.
SMEs account for 45% of gross domestic product, which is crucial to the country's economic growth, 60% of all jobs in the economy and 75% of net employment growth. That is significant.
Thus, small and medium-sized businesses are a crucial part of the economic fabric of Quebec and Canada, and they play an extremely important role in federal government procurement, since they accounted for 65% of all procurement transactions in 2007 and 2008.
In committee, what started with a study on the bundling of information technology contracts quickly became a study on how small and medium enterprises try to access federal procurement.
We know that small and medium enterprises want to do business with the federal government for a number of reasons. We were very impressed by the desire they showed to do business with the federal government, but we were also struck by the challenges they talked about having to overcome, in order to do business with the government.
A few years ago, to help SMEs, the government implemented a system, an electronic tendering service, that posts government contract opportunities to potential bidders. This service is called MERX, and it is used by SMEs.
Over the next few minutes, I will speak about two things: one is the bundling of information technology contracts, which led us to examine a much broader subject, my second topic; how small and medium enterprises access the federal procurement process.
Until now, small and medium enterprises received between 65% and 70% of the value of federal government contracts for professional information technology services. The total value of the contracts awarded by the federal government for this type of service was very recently estimated at more than $600 million a year. It is SMEs that provide these services.
SMEs won the vast majority of these contracts because they were able to meet the needs of the federal government; they had the abilities and the knowledge; and their overall costs were relatively low.
They are flexible as well. They can adapt easily to what is asked of them and their solutions are very innovative.
The government has tried in the past to bundle several contracts and develop large IT projects. For the most part, the contracts failed to deliver on expectations, went over budget and became unmanageable. The Secure Channel project is a good example of going over budget.
When the government contracted for services in small, manageable projects, those projects succeeded 99.9% of the time.
The shortcomings of the large bundles contracts were made clear in reports from the Auditor General and the House of Commons Standing Committee on Public Accounts. The Auditor General of Canada even raised a red flag and said that we should review contracts of this kind because they did not necessarily provide much of an advantage.
Despite this red flag and the Auditor General's reluctance about bundled contracts, this government's new bright idea is to award even bigger contracts.
In our opinion, the government intends to bundle IT professional services together in order to issue four basic contracts, each valued at roughly $1 billion annually. That is quite something. Four $1 billion contracts annually is $4 billion a year. Over what period? We do not know. There was talk of 20, 15 or 12 years, and then they came back to 15 years. It is up in the air. Why would they do this? It seems they want to save money.
Most services included in the large contracts the government would award are provided by small and medium enterprises. A manager of technology strategies at Treasury Board told the industry, on January 15, 2009, that he was not sure of the savings potential of these large contracts. He presumed that they would save approximately 20% but he did not provide any figures to back his claim. He planned to do some tests, but he did not know what the savings would be.
No business case has been prepared and that is very serious. It means that the contract tendering process of Public Works and Government Services Canada is being completely changed. Contracts currently awarded to small and medium enterprises are being awarded to very large companies, without knowing exactly what the result will be. That is serious.
In other words, the government hopes to bundle information technology contracts because this will supposedly result in savings. I repeat that this is a supposition, as no business case has been prepared. The supposed savings would be achieved to the detriment of SMEs because they do not have the capacity to bid on megacontracts.
The Standing Committee on Government Operations and Estimates studied the issue at the request of a number of small and medium enterprises from various sectors. They sent us letters stating that something was happening at Public Works and Government Services Canada. That is how learned of these bundled contracts.
We must add that this will also lead to a lack of competition because these megacontracts will be awarded to one, two or three large companies. In the case of information technology, it may be Bell, Telus, or CGI. There are three or four major companies that could carry out these bundled contracts worth $1 billion per year. The committee members are quite certain that this will increase the cost to taxpayers.
At present, when a request for proposals is issued all companies, including SMEs, can participate. They know that one significant factor is quality, of course, but so are project costs. Bids are close. Bidders compete, which reduces the cost to the taxpayer.
By excluding all small and medium enterprises from the tendering process, the government will give two or three major information technology companies the ability to dictate all prices. In the past, this type of situation has always made prices go up instead of down. It is a matter of supply and demand.
What worries us most now is whether SMEs have access to federal government contracts. For example, in the government enterprise network service initiative I have been talking about, it is very clear that small and medium enterprises will be excluded from the process and will be relegated to subcontracting.
Committee members were told not to worry, that small and medium enterprises will still be able to operate. But what about the big companies, the big box corporations, the multinationals? The committee was told that the big multinational corporations did not necessarily have the competencies that small and medium enterprises have. As a result, they will recruit and steal employees from the small and medium enterprises by making promises of better working conditions, better salaries and better contracts. The SME that was raided will then have to shut down, since it can no longer offer the service. Inevitably, the owner will beg for a job from the multinational, where he will often be hired as cheap labour. This was demonstrated and spoken about in committee. I thought it was important for my colleagues in the House to be aware of what happens when these megacontracts are awarded.
If we had seen a business case, as the Auditor General of Canada requested, perhaps the members of the Standing Committee on Government Operations and Estimates—of which I am a member—might have a better understanding of what is behind this. They might have a better idea of the real reason Public Works and Government Services Canada is awarding these megacontracts and weakening small and medium enterprises in Quebec and Canada. Unfortunately, we do not have any numbers. They did not give us anything. They testified before the committee and gave very vague answers to our questions.
I believe that the situation is extremely serious, especially since the told us not to worry when he testified before the committee. He said that everything would be fine. I think that he may not have known all about the issue at that point. I do not believe he deliberately or knowingly meant to deceive us. In my opinion, he was not aware of what was going on, because he told us that there would never be megacontracts for professional services.
Yet this past summer, Public Works and Government Services Canada issued solicitations of interest and qualification, continued going ahead with these megacontracts and even changed the terminology. There is no longer any reference to “professional services”. The term “managed services” is used now, to fool people.
We want the minister to be aware of this. If he did not act deliberately, then he may, perhaps, have been deceived, but I wonder.
The study by the Standing Committee on Government Operations and Estimates began with the specific issue of how information technology contracts were handled, but went on to examine a much broader subject—access by small and medium enterprises to the federal procurement process—and culminated in the report we are discussing today, which is entitled “In Pursuit of Balance: Assisting Small and Medium Enterprises in Accessing Federal Procurement”.
The seventh report of the committee suggests the following:
|| The federal government must ensure that due consideration is given to small and medium enterprises when considering the bundling of contracts and standing offers.
There were a lot of recommendations. The committee worked very hard on this report and asked Public Works and Government Services Canada to be fair and honest, to explain the situation to us and to help our small and medium enterprises.
Two recommendations in particular appeared in the report. The first reads as follows:
|| Provide ample opportunity for SME consultation about contracts that are to be bundled.
So far, they have not been given that opportunity. At the very least, the government should ask them what they think. And once it asks them, it needs to take actually their thoughts into account. We realized that it was not taking these ideas into account.
The second reads as follows:
|| 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.
They have definitions. Unfortunately, Public Works and Government Services Canada has not done this. It tends to proceed haphazardly. The Auditor General asked for this in her 2006 report. Bundling contracts is not a new issue. We have been talking about it for some time now.
In its response to the report, the government called the definition of contract consolidation anecdotal and claimed that it does not really happen. But it also said that its definition of contract consolidation would be finalized by 2011. It was very evasive in response to the explicit request for business cases and more or less avoided the issue.
Is that because government officials are tired of dealing with small contracts and would rather hand everything over to multinationals so that they do not have to manage it themselves? There may be other factors at play. Maybe some individuals have insinuated themselves into the federal government and have lobbied for megacontracts. Members of the committee have to look into that possibility as well. This is about justice and honesty.
I mentioned four other contracts. The committee examined the free-standing office furniture contract. People complained about it. That was exactly the same thing.
Today, I would like to draw the House's attention to what is currently going on with federal government procurement in terms of the small and medium enterprises that are the cornerstone of the Canadian economy and the Quebec economy. They are the ones who keep the economy running. Yes, there are big multinational corporations, but we need small companies too. Right now, the government is committing a kind of genocide with respect to our small and medium enterprises because the SMEs no longer have or will no longer have access to federal government contracts.
Beyond a protectionist policy, that is not even—
Madam Speaker, I appreciate the opportunity to speak, and maybe during my time I can rebut some of the information that the member opposite was trying to put forward.
I notice that this is a concurrence motion. It might be of some interest to members of the House and people who are watching to know that this motion was unanimously brought forward by our committee. All parties were in agreement.
If the hon. member were to read the committee's report, which she voted for and agreed to, she would find that there is a difference in terms of what she said this afternoon and what she actually agreed to in the report. The numbers that I have spoken about are in that report. This report was voted for by the hon. member, and the numbers are there for all to see.
I am disappointed that the opposition has decided to take this time to pull away from an opportunity to speak about Bill , which is the free trade agreement with Jordan that is being proposed by the government. It is going to make a significant difference for many of our companies that continue to try to find access into markets for products that are being produced here in Canada. This is something that a lot of Canadians are concerned about.
Obviously, since we started this debate this afternoon, we are going to discuss the access that small businesses have to government contracts. I am pleased to have an opportunity to join members in the House in debating this because I think there is a really good news story to be told as it relates to our government and the work that we are doing and as it relates to what all parties in committee recommended.
The committee did bring forward a report entitled “In Pursuit of Balance: Assisting Small and Medium Enterprises in Accessing Federal Procurement”. There were a number of recommendations that all parties agreed to, because we all understand that small businesses are integral to this country, that they are very important to the economy. Our economy will recover only when small businesses are doing well, and we all understand that.
Our government is working very hard on all fronts to create a positive business environment for all small and medium-sized businesses. One of the most important ways we can help small and medium size businesses is to get overall benefits as well as access to government contracts for them.
As the government's chief purchaser, Public Works and Government Services Canada is responsible for approximately 85% in dollar terms of the $12 billion to $18 billion spent every year by the Government of Canada on goods and services.
Since 2006 this department has awarded on average more than 43% of the total value of these contracts with businesses located in Canada to small and medium size businesses.
In 2008-09 the value of the contracts awarded by public works to small and medium size businesses and enterprises here in Canada was increased from $4.8 billion to $5.5 billion, which represents a 14.5% increase in absolute value.
This government has recognized for some time the need to make it easier for small and medium size businesses to do business with the Government of Canada. Our government has taken a two-pronged approach in doing this: on one hand, by reaching out and having a direct dialogue with the companies that want to do business with the government, to hear their concerns and lend support in any way that we can; and on the other hand, by streamlining the procurement process to ensure that procurement and renewals are done in a way that is conducive to small businesses and that ensures they have access to this information.
As a government, we strongly endorse what the committee has brought forward, the first goal of which was the improvement of the procurement process in order to facilitate small and medium size businesses' awareness of federal government contracts. We know that if small and medium size businesses are not aware of contracts, it is very difficult for them to access them.
First, we want to reduce the procurement barriers for small and medium size businesses.
Second, we want to simplify the contract process so that small and medium size businesses do not have to spend, in some cases, thousands of dollars to hire analysts and people to write their contracts. We want to simplify that so that small and medium size businesses have an opportunity to actually bid on these contracts.
Third, we want to provide training and education for small and medium size businesses that wish to do business with the government.
Fourth, we want to collaborate to improve procurement policies and practices.
Finally, we want to ensure that the concerns of SMEs are heard.
Under the action plan that relates to procurement within the government and the Federal Accountability Act, the office that gets the information out to small and medium size businesses was expanded and has six regional offices across the country. I know my hon. colleague actually did, in fact, admit that there was this office, that it was in place, and that there were six different offices across the country to ensure that every region has representation and the ability to go to this office to get information.
This office has done a number of things, including accumulating a pretty impressive group of statistics. It has directly assisted, in this year alone, 23,000 business people. When the hon. member states that people do not know about this office, that small and medium size businesses do not know about this business, I can assure the member that there are at least 23,000 Canadian businesses that are acutely aware of this office because they have actually been assisted by this office. It is important that Canadians hear this, that they know this, and that they are aware that this in fact is happening.
Speaking on the recommendations of goal number one, Public Works has already made a number of improvements to make the procurement process even more user friendly for suppliers, such as covering the fees of MERX. For those people who do not know what MERX is, it is the computer system that allows companies that want to engage in government procurement to see the types of things that they can bid on.
In addition, the government is developing a comprehensive e-strategy for improving the web presence for procurement that will incorporate 24/7, one-stop access to information on how and what it can sell the government. The first stage of this strategy will be launched this spring, so members can see that things continue to improve and our committee has played an important role in that improvement.
This winter Public Works is expected to launch a new seminar for suppliers on how to complete solicitation documents. Furthermore, the Office of Small and Medium Enterprises will be developing a governance process framework for the management of commodities that will make it easier for small and medium-sized businesses to provide comment to the government as well.
Our committee had a second point in the report, and it is to encourage further coordination of federal services and programs for small and medium size businesses to assist them in their abilities to access government contracts. To address this, the government will, among other measures, clarify roles and responsibilities in the forthcoming policy that will ensure OSME as the entity advocating on behalf of suppliers in procurement. That is an important and remarkable change and it speaks to some of the concerns my hon. colleague across the way has brought up.
Similarly, a planned Treasury Board directive governing Crown procurement will reflect the need for coordination among departments in support of the government's socio-economic objectives, including those that relate to small and medium-sized businesses.
I know that this was an issue that the hon. member, as well as my fellow colleague from who sits on the committee as well, had brought to our attention as a concern, and so the government is addressing these things that the hon. members of our committee actually brought forward. This is good news.
The formation of an interdepartmental committee on SMEs' concerns related to procurement, comprised of senior executives from relevant departments, will provide assurances that these matters are brought to the attention of the highest levels of government.
The concerns of small and medium-sized businesses are not going to just stay at the lowest level of the bureaucracy. They are going to be brought up to the highest level of government. This is because our committee has brought forward recommendations that were supported by all members, and activity and movement is happening.
Again, I think it is a little bit premature for the hon. member from the Bloc Québécois to be bringing this issue forward today. I am concerned that this is just a diversion from what we should be discussing in the House this afternoon.
The third goal of our committee's report states that the government must be mindful of SMEs when considering the bundling of contracts and standing offers, and the definition of a contract consolidation. We as a committee had some concerns about what we were hearing in the field. We were hearing from people who were saying that they were concerned about the possibility that bundled contracts would cut out a number of people from being able to bid.
We heard from people and we brought forward this recommendation that there be a clarification of what the government was going to do. The government has come forward and has said that it is going to create what will be a definition of contract consolidation and a review of best practices relating to the part of this policy and how it develops going forward. The government is responding to this.
The framework that it is talking about and establishing at this point will serve to ensure that any contract consolidation is properly justified. Different departments will not be able to bundle contracts simply because it is expedient. We as a committee have brought forward the concern that many people could be cut out if these contracts are bundled and only large companies can bid on them.
Clearly, the government is responding and saying that it is not going to do that. It is going to create a justification process. If departments want to do this, they are going to have to consider the small businesses, and they are also going to have to justify why they are bundling before they bundle. This is good news.
The fourth point that we had within our report applied to concerns about the system of fairness to encourage departments and agencies to use SMEs, but we specified that we were not going to go down the American experience and use just set-asides. We did not believe that small and medium-sized businesses needed a set-aside.
Again, we know that 43% of our contracts given to Canadian companies are given to small and medium-sized businesses. The United States has quite a different situation, where 23% of its contracts go to small and medium-sized businesses as it relates to government contracts. We as a committee decided that we did not want to replicate the American system, where it needed set-asides. As a matter of fact, even though it was being contemplated, the reason that we said that we would not have set-asides is because industry rejected it 100%. I am talking about the small and medium-sized business.
They said that they could compete with the best of them. They said that if they were given a fair and even playing field, they would compete fairly and win contracts. I strongly believe that. I think that colleagues from the other parties believe that, too. That is why we said that, if small and medium-sized businesses did not want to create set-asides, we would not do that.
We also recommended that departments were fair and that they had fairness monitors to ensure that they were contemplating the needs and concerns of small and medium-sized businesses. Another concern that we heard from some small and medium-sized businesses is that the way in which the call for proposals was brought forward, sometimes limiting a small or medium-sized business that had a very innovative product.
We heard from a computer company here in Ottawa that said that it had a program that would be much more efficient than the systems that are here today, but because its system was so much better than the other ones and because the call for procurement was for a different system, it could not get on it, even though if the system were replaced, it would be much more efficient and a lot better for the government in the long run. Our committee brought forward that recommendation and the government is responding. We can see that from what it has done in a number of different areas.
Finally, our committee recommended a fifth goal. We called on the government to ensure that innovation and quality are key determinants in the evaluation of bids in awarding contracts.
We heard from a number of groups. I just mentioned the computer company that had an innovative product it wanted to bring forward and highlight its qualities and the things that were so good about it, but it said that there was resistance because it was not like the systems in place right now. We as a committee said that, in fact, this should happen, and I think there was agreement all around the table.
We heard from engineers. We heard from people who said that the government should consider not only the price but the quality. Where a product might be cheaper than another product, if the quality of the second product is much better, in the long run the government might save money if it went with the more expensive but higher quality product.
We saw in the Speech from the Throne of 2008, it could not have been more blunt in terms of the response. There was a number of different things within the Speech from the Throne that addressed some of these concerns in terms of cutting the red tape to allow for these innovative products to be brought forward and a number of other things.
I get to the end and kind of wonder again aloud, why are we discussing it this afternoon? Clearly, the government is responding to all five concerns that were addressed in our committee. The hon. member has a legitimate interest and we should be discussing these types of things in our committee. We have an opportunity in the next number of weeks to have new things brought to our committee. If we want to build on this report or if we want to review successes or see if in fact these things are moving along, we have opportunities.
I do not know what benefit it is to bring it to the House this afternoon because clearly all five recommendations within our report are being addressed by the government. All of these are moving along and clearly things do not change overnight in government, we recognize that, but I am quite frankly shocked that the hon. member would consider what has happened as not being a major success. I am at a little bit of a loss.
I just came from the industry committee. I actually ran over here to speak to this issue. I had an opportunity to speak to the analyst. It was on a different subject, but it was just fortuitous that I was speaking to him. He told me he has a colleague in the industry department who is actually working specifically on this. They are actually streamlining the process to ensure that high tech companies that are not necessarily big companies can bid on government contracts. There is a whole process. He was telling me his colleague is working in industry to do this, but he says there are colleagues in every department who are undertaking these policies as to how they might reduce the access to government contracts.
Number one, there is a cut in the MERX fee, so these small and medium-sized companies do not have to do that. Number two, these companies do not have to hire people to write these long proposals. He explained to me that in some cases companies have had to spend over $150,000 to write these reports, and clearly, many small businesses cannot do that so they are actually re-writing the policy so that the contracts are simple and much easier to fill out.
Clearly, we see it even today, having spoken to an analyst within the industry department, that these things are happening, they are moving along, and the only thing left to say is congratulations to the minister. He is doing an excellent job and we are looking forward to even greater things coming out as he continues to respond to the concerns brought forward by our committee in a report. I am certain that if my colleagues from the committee are interested in continuing this dialogue, we will have an opportunity to expand on this report in our committee.