:
Thank you again, Mr. Chair.
Good afternoon. My name is Jeff Lynt. I'm the past president of the Canadian Business Information Technology Network, also called CABiNET. With me is Cathy McCallion, also a fellow CABiNET board member.
Our CABiNET may be slightly less influential than the other one that meets here on Parliament Hill, but nonetheless, we're here to speak today.
We represent about 100 small and medium-sized businesses in the IT professional services sector. Most of the companies are based in Ottawa.
I own a small business in Ottawa, and we employ people, provide innovative solutions, and retain a very satisfied group of clients in the government and private sectors. A couple of years ago we were also named the fastest-growing IT business in Ottawa by Ottawa Business Journal.
CABiNET is not here to criticize. We feel that there are a lot of things OSME is doing well. However, as with any organization, there are opportunities to improve, so we're here to present solutions to what we see are some issues with the way OSME presently functions.
There are many challenges SMEs face. Those that offer products and services to the government want something simple: fair access to government contracts. Let us compete, and we'll be happy. Let us have the chance to prove we can do the job, and we'll be satisfied. Give us an opportunity to help the government be more effective and save money, and we'll do so. Simply put, that is what we really need.
Let me be clear. We do not want set-asides for small companies. We do not want special deals. We're not looking for made-for-SME solutions. We want to compete with large companies. In most cases, SMEs win contracts against large companies based upon their lower prices, innovation, flexibility, and capacity to adapt. To do this, we have to be allowed to compete, and on occasion, contracts are bundled in order to stop SMEs from being able to compete.
There are other ways to exclude SMEs, such as the request for references going way beyond the level of the contract. A lot of excuses are used, but for the real fact, it is the intent to stop SMEs from competing, because some bureaucrats mistakenly believe that it is easier to deal with one organization than a few companies.
It doesn't hurt that hundreds of lobbyists representing large companies spend their time meeting with senior bureaucrats to convince them that only they can be part of the solution. We don't have these resources.
We need OSME to be more effective when it comes time to convince senior mangers that SMEs can provide them innovative solutions at lower costs. We don't want it to be just an advocate for SMEs, or a public relations effort for the government. We want it to be a real proponent for SMEs. It should facilitate contacts. It should help us to be present when senior officials plan for large projects in order for us to provide them with information on how we can help. It should be more active. It should be independent from the procurement side of Public Works and Government Services Canada.
Big changes in government departments are happening today with the creation of Shared Services Canada. The plans are being drafted, actions are being taken, and large companies are jockeying for position.
We would like to see OSME facilitating meetings with SME associations and the leadership of Shared Services Canada in order to make sure that contracts are structured in a way that SMEs can provide their services to this new agency. We're not interested in a few token contracts, but rather, in the ability to provide real solutions to this great initiative. Again, we want it to be a fair, open, and transparent process for SMEs.
As for OSME'S role, we know they're trying, but they need to have a louder voice. When we talk to senior procurement officials and senior IT officials, they tell us OSME is not on their radar.
Mr. Chair, some people may view this as an Ottawa-centric issue, with which they're tired of dealing. We heard that comment last time this committee met, while someone was getting coffee. At that time, one of the members of the committee mentioned that he was tired of dealing with this Ottawa-centric issue.
If all contracts are given to large integrators, then yes, Mr. Chair, this will become a very Ottawa-centric issue. There won't be any of us left to make presentations and no small companies to provide solutions to Service Canada offices in Winnipeg, which is the riding of the chair, who is not here today. The small businesses in his riding will not be successful in winning contracts, and in that riding, they won't be able to defend themselves either.
They may not be as vocal as we are, because they're far from Ottawa, but the impact on their operations will be as serious if contracts are bundled and OSME isn't there to make a strong case for SMEs.
We want to continue to employ people in all of your ridings. We want them to continue to be part of the regional economic development framework.
Thank you.
:
Mr. Chair, my name is Cathy McCallion, and I also own a small business here in the Ottawa region. I also hope to have my company continue to grow, prosper, and do more for our country.
We are known for the quality of our work, and our team quickly gains respect from our clients when we win a new contract. We commend Shereen Benzvy Miller and her team at OSME for the work they do. This is not an attack on their office; however, their mandate is too small, and they report to the wrong people to be effective.
In the brief we presented to this committee, we made several recommendations designed to strengthen OSME and make it more relevant.
OSME should be moved from Public Works and Government Services Canada and placed at Industry Canada so the head of OSME can report directly to the Minister of State for Small Business and Tourism.
The new OSME, as we see it, should be given real powers and tools to effect changes.
The new OSME should help the SMEs to foster relationships with senior government bureaucrats in the various branches of government to allow them to understand the role that SMEs can play.
OSME should be a real advocate, not only with PWGSC procurement officials, but also with the senior bureaucrats who work on the development of projects, to make sure they will include SMEs in their plans at the early stage.
We also believe that government should attempt to enhance the senior leadership at OSME by choosing individuals with a small business background.
Finally, OSME should attempt to build a group of advisers comprised of organizations representing only SMEs to help it shape its annual plan on activities and research.
OSME should not be a public relations agency. It should be a real agent of change. It should be a positive influence on the government decision-making process when it relates to SMEs.
Mr. Chair, we believe that OSME has a role to play--a greater role. At this point, it is not working for SMEs.
This week is Small Business Week. Small businesses are a powerful driver of our economy and employ millions of Canadians. Their contributions are more important than ever, given the fragile state of the global economy. This isn't me saying this. This is the Prime Minister saying this, on Sunday, October 16.
If SMEs are important to Canadians and to this government, let's make sure it proves that by making the necessary changes to strengthen the organization that it created to help these SMEs.
Thank you for your time.
:
My name is Sue Abu-Hakima. I am the CEO and co-founder of Amika Mobile Corporation. This company in its current form was founded in 2007. This is my second start-up, my second company, and my second SME. The first one was built up as a compliance company. It was acquired by Entrust and had 18 patents behind it.
My companies have contributed over $18 million to the local economy in investments and revenues and have created approximately 200 high-tech jobs. According to OCRI, that resulted in four spin-off jobs per high-tech job for a total of 800 service jobs.
My current company is self-funded, funded by angel investment, and focuses on emergency mass notification. It has had approximately $3 million worth of investment since its inception. Members of our current team are all angel investors, so our team are committed to the company. We are raising $1.5 million in this poor investment climate and find that there is definitely an absent venture capital market. Only 4% of companies ever get venture capital, and female-led ventures get 0.1%. That's very little, but that's another story altogether.
We've had an excellent channel to market in the United States through the PSA Security Network, with over 300 system integrators in the United States focused on security, as well as our recent integration with the UTC-Chubb-Lenel folks and their OnGuard system for access control, fire panels, etc. That allows us to receive direct sensor input so we can save people's lives.
At a recent U.S. security trade show, over 80 customers came up to us, from a lot of blue-chip companies looking for our capability, and 120 channel partners have asked to sell our products. Of course, we can't deal with all of this, because after all, we're but an SME.
We've won 12 awards. We've won four for innovation in security over other international players. One was judged by FEMA and emergency management folks in the United States. IDC has named us one of their 10 companies to watch, and we're part of the Branham 300.
We have innovative and unique technology. With this company, we now have 12 patents. I'm happy to say that our second U.S. patent has been granted.
What we can do is automatically discover wired and wireless people. For example, we can discover your mobile devices in this facility without having your e-mail addresses. So if there is an emergency at the airport, a shopping centre, in a hospital, on a campus, etc., we can reach you and save your life.
Let's talk about government programs. We've benefited from government programs, of course, such as SR and ED, Precarn, and IRAP. IRAP has been a godsend. So has SR and ED.
We have supported universities and colleges through collaborative research funded through the Ontario Centres of Excellence and NSERC to help train students and make professional research more relevant. I'm on the boards of both. I'm actually the vice-chair of the board of directors of the Ontario Centres of Excellence, and I'm on NSERC's private sector advisory board. I really don't have time, but I do this because I'm trying to help the community.
Over the last 12 years we've responded to at least 30 RFPs from the Government of Canada. We have not won a single one. Even in our first company, which was a compliance-based company with content analysis, our products were always selected as the top technical innovative products in an RFP. However, we were never awarded the contracts. The reason for it, I have to tell you, is that we're an SME. It's that simple.
Once Entrust acquired our compliance business, where we were selling a compliance server that can look through your e-mail and tell if your secrets are being sent out, the Government of Canada then bought the product and bought a site licence for over 250,000 government users for several million dollars. But they did not buy this product from us as an SME. The technology was obviously good enough for the government, but not from an SME.
Last year we found out about OSME--and thank you very much for setting it up--and we immediately signed up for their excellent training. They then announced the CICP. I've spent 13 years being an entrepreneur and, in my opinion, CICP is a fantastic idea. It is the natural next step in getting innovative technology into trials in government departments, especially for a company like ours that has leveraged IRAP, SR and ED, and other government grants.
While in trial with the testing departments at CRC, our product for emergency mass notification was able to successfully evacuate buildings in a haz-mat type of emergency at Shirley's Bay. There's no better proof that this is a good product. This product has given us our first customer and what would be considered our first significant revenues. It'll also give us feedback on the product so we can improve it for all these other customers who are asking for it.
The other thing about CICP is that it has also really helped to us understand the PWGSC process for contracting, which in itself is a full-time job. I spent four months, full time, working on the CICP contract. In any case, in round one, over 375 companies applied. Amika Mobile was chosen as one of the 26 that was awarded. With a pool of only $4 million, this is a very small amount of money from a government procurement perspective when the government spends billions and billions of dollars annually on large companies like IBM and CGI.
The CIC program, which I understand is $40 million over three years, should be expanded, in my humble opinion, to at least $250 million. Canada has over one million SMEs, small and medium-sized enterprises of our size, that contribute a good chunk to the country's tax revenues, and they need to be better leveraged for Canada and the government departments to become more innovative.
CICP at OSME should become the gateway program for innovative SMEs to enter the federal government and be guided to various departments that can procure their products.
Thank you very much.
:
Good afternoon. My name is John Rivenell. I arrived in Canada at the age of 35. It is therefore difficult for me to speak to you in French, and it would be even more difficult for you to understand me. That is why I will speak in English. I apologize.
[English]
I'll introduce you to my company, a little bit to me, and to our experience with the CIC program, or CICP. This will set the context for any questions you may have, so you can better understand our answers.
My company, SageData, which is my second company, has been in business for 20 years. We're based here in Ottawa. Up until some years ago, the majority of our clientele was with Nortel, Alcatel, JDS, and so forth. When they disappeared, it was a bit of a bump for us.
But we survived that and we're still here. Our major clients include pretty much every part of the federal government. In fact, the TVs in the corner have my bar codes on them; we're tracking your assets here. We have a couple of other projects going on with the House of Commons and the other place, as I believe you call it, which also uses our kit. DND, RCMP, and Atomic Energy of Canada use our systems.
What are our systems? We build on three base technologies: mobile hand-held computing, bar code technology, and radio frequency identification, i.e., the magic chips that tell you where you are. This business naturally leads to materiel management applications. Within the federal government, that would be IT tracking. When Nortel was here, we had a bar code on every computer in the national capital region.
To move on, for the RCMP, we supported them through the Olympics and through the G-8 and G-20. As well, our systems are in Kandahar with the troops. We have a wide range of systems everywhere from Agriculture Canada through the alphabet to the Wheat Board, with hundreds of government installations. That's a little bit about the company.
The thing we found, especially with the high-tech sector disappearing, is that we're okay. We're a company that can survive and we're profitable. This year has actually been a good one for us.
But there's been a problem of breaking out. A lot of clients come to us with specific requirements, and we think that if only we had the time and the money, we could make some changes and sell to a wider audience. We're a small company and totally self-funded. I started the company on a cash advance from my VISA card some 20 years ago. It's difficult for us to find the time and money to move out. That's why this program is very attractive to us.
I'll tell you little bit about me. I would be a professional engineer in Canada, but I was educated in the U.K., so I'm a chartered engineer. I'm also a member of the Institute of Quality Assurance. In addition, we're members of the Institute of Asset Management. In fact, I'm a contributor to their national magazine. That's a U.K., European, and Australian concept that has not yet come to Canada. I think it's coming. My background covers all of those areas. I guess my prime job is running the company and making sure we have the funds for the new projects.
Let me turn to CICP. GTEC was yesterday, as we've come straight from GTEC. Our first contact with the CIC program was about one year ago. The big-picture story is that I'm quite happy. I think this is a good program. It's excellent. We found out about it one year ago. We had to move quickly, because we found out about it a little too late, so we moved very quickly to get our application in. I think we first heard about the program in October and put in an application in November. We got a verbal say-so around January or February, or maybe in February or March, and I think the final documentation was cleared by July.
So yes, there's a lot of paperwork, and yes, it was kind of a horrendous process. If I'd had to do it, I think I wouldn't have done it, but I have someone in my company who enjoys doing this sort of work, so he ran with this project and ran it through. We've had excellent support from the small business office, from the folk on the other side of the wall, and a lot of conversations with PWGSC. I think there were some bugs in the process, but first time around, that's to be expected, so I have no criticism. We also have very good feedback, in that people are asking us to tell them how it went and what they can do better next time.
So kudos to the people who are running the program. I think it's very good.
Where are we now? Our first test department, as it's called under this program, is the Correctional Service of Canada. I'm going to jail next Thursday, I believe, to install one of our systems there. We'll make sure that all the folk who are our guests—is it still “guests of Her Majesty”?—are served food that is safe. That's part of the program.
Where do I think it's going? I'm very pleased about this because it does give us the opportunity to break away from the sort of hand-to-mouth existence a lot of small companies have, and it gives us a little bit of strength to plan for the future and to make some investment.
What practical difference does it make on the ground? I have more people working for me today, I am paying wages, and I guess you guys are taxing these folks, so you get a little bit of money back as well. That's all working well. We look forward to good things in the future from the program.
In listening to this today, there was one extra thought that occurred to me after I arrived. With regard to government funding of business, I would not be here were it not for the Canadian government's attitude towards business and its support. I worked for a British multinational. We had a vendor in Ottawa that was in trouble. We came across.... We didn't know whether to pull the plug and walk away or quite what to do.
We had the Foreign Investment Review Agency, which some of you may remember, and without wishing to poke fun, I had two meetings, one in the morning when the Foreign Investment Review Agency said, “We're not going to let you support this company because you're foreigners and we don't want your money”, so I was ready to go back to England. But in the meeting in the afternoon, Industry Canada said, “If you don't save them, no one else will, so here's a quarter of a million dollars”. If Industry Canada hadn't coughed up, we wouldn't have saved that company. We saved 30 jobs. And as for what was supposed to be a three-day business trip…you still have me here all these years later. I would not be here today if it were not for government support for industry.
Thank you.
That might not be a good thing, of course.
Voices: Oh, oh!
:
Mr. Chairman, ladies and gentlemen, allow me to begin by thanking you for inviting me to take part in the work of this committee.
I will begin by introducing myself. I have a combined background in engineering and economics. I have been teaching economics at the University of Sherbrooke since 1971. I am currently retired, but I am still active in the area of research, which I supervise and which is carried out by my students.
I am a regular member of the Interuniversity Research Centre on Science and Technology, which goes by the acronym CIRST. I was a member of the Advisory Committee on Science and Technology Statistics at Statistics Canada from 1992 to 1999, that is, for a period of seven years. Since 2006, I sit on a similar committee at the Institut de la statisque du Québec.
As a professional, my main area of interest in research is the economy of technological change, focused more specifically on two interconnected subjects: the evaluation of the economic repercussions of research and development, innovation and the dissemination of new technologies, and the evaluation of public support for research and development and innovation. I imagine this is why I have been invited to appear before the committee today. Again, thank you very much for having invited me and for the confidence you have expressed in me.
Before answering your questions, I cannot resist the temptation to yield to my instinct as a professor, and to say a few words which, I hope, will help put the Canadian Innovation Commercialization Program into the context of a policy supporting the creation and dissemination of new technologies.
From an economic point of view, the main justification for public support for the creation and dissemination of technological change is based on the fact that if left to market forces alone, individuals and businesses would not invest as much as would be desirable for the good of society. Why?
First, these are very risky activities. It is impossible to find insurers who would insure the risk inherent in innovation. It is therefore difficult, if not impossible, for small enterprises to find financing on the financial market.
Second, even if small businesses manage to market their new product or process, innovators do not get the full benefit of their innovation for at least two reasons. In fact, there are several reasons, but the two main ones are that, first, they are often pre-empted by competitors, which drives down price and allows the imitators to grab a share of the innovator's profits; and, second, consumers, who may be other businesses or households, benefit from the situation by paying less than the real economic value of the invention. The other reason is that society as a whole benefits from the dissemination of new technologies, which increases everyone's productivity, well-being and general standard of living.
Therefore, public support for innovators closes the gap which exists between the benefits to innovators and the greater benefits for society.
Depending on their objectives, there are two types of programs to help support innovation.
The first one seeks to stimulate the offer of innovations by subsidizing part of the innovation. In this case, there are two categories: subsidies or other means of paying for direct costs, and indirect support in the form of tax incentives, such as the Scientific Research Experimental Development Tax incentive Program.
The second one seeks to stimulate demand, which leads us to the subject at hand.
One of the objectives of this type of program is to encourage the government to buy, which has at least two main advantages. The first objective is to reduce the risk for eventual buyers, who could be from the private sector or from the public sector. The second objective, perhaps more important, is to show that the new technology has lived up to the promise of its creators.
Since the 1980s, Canada has gradually reduced its subsidies and instead implemented tax credits, perceived as being more neutral and less subject to often misinformed bureaucratic decision-making. The actual result of this policy choice is that Canada leads all industrial nations in having the most generous tax credits. Indeed, tax credits reduce the after-tax cost of each dollar spent on research and development to about 50¢, and this figure can be even lower for small companies.
However, this policy, which aims to stimulate the offer of new technologies, has not met its objectives. Our business sector has fallen to the 20th place in world rankings for spending on research and development. The common diagnosis is that there is not enough demand for new technologies and innovations in Canada. The Canadian Innovation Commercialization Program seeks to stimulate demand for innovations through government buying. Similar programs with far greater resources have proved their mettle long ago in the United States under the Small Business Administration, as well as in Japan, Germany and other countries.
The Jenkins report, entitled “Review of Federal Support to Research and Development”, which came out on Monday of this week, on October 17, recommends a fundamental reorganization in the way Canada supports research and development, and innovation. As you probably already know, one of the recommendations says:
Make business innovation one of the core objectives of procurement, with the supporting initiatives to achieve this objective.
More specifically, the report recommends making the CICP permanent, and increasing its resources to stimulate demand, thus making the government the first entity to use new technologies and products.
I completely support this recommendation.
Thank you for your attention.
:
Thank you, Mr. Chairman.
First, let's just remind ourselves of the context. As members of the opposition party, one of our important roles is to ask whether programs are doing what they are supposed to be doing, and what can be done to improve them. It is in light of this context that I will ask my questions.
My first question is for the representatives of the Canadian Business Information Network, CABiNET.
First, thank you for being here. I am very pleased to hear from you. What you have said is very interesting.
You explained how the office could do more to encourage SMEs. Ms. Shereen Benzvy Miller testified before the committee, I believe it was last week. I asked her a question with regard to the definition of a small and medium size enterprise. She replied that an SME was defined as being a business with 500 employees or fewer, regardless of business revenues.
Do you think that the government should change the definition in order to reach more SMEs?
:
We've been in business for 20 years. Probably half our business is with the federal government and half with the private sector. We've learned from the university of hard knocks how to deal with the federal government.
We first had contact with OSME around 18 months ago and we've had a couple of sessions where we've had questions that were addressed to them. But the CIC program is the first time we've had any real interaction, so there's not a lot that we've had before, in answer to your question.
We were also involved with SR and ED, which ran for many years, and IRAP, which we only recently became involved with.
One general point I would make is that dealing with these programs with the federal government is extremely complex. We looked at IRAP some years ago, got some incorrect information, and concluded that there was nothing in IRAP for us. So we probably missed out on seven to ten years of IRAP support on the basis of that first incorrect information. There are a lot of good programs out there. It is very difficult, from our point of view, to go digging.
To put it in a different sense, if I have a potential client over here with $25,000 in his hand, and over here there is someone in the government with whom, if I spend time, I may be able to get something from, my natural instinct as a businessman is to go for the business client and take the money there.
So it would be good if we had a better means of getting information out, and OSME is probably going to do that.
:
Okay. I have a lot to say and not much time to say it in.
I love OSME. They're very helpful, but they are guides. There's a jungle out there, terrible stuff is going on, and they will help to guide us through, but they can't do anything about the bad stuff that goes on.
I'm here and I don't wish to sound impolite about the federal government, but the procurement is a total mess. I mean, we have a DISO program, and for most of our clients, we, as a private sector company, are explaining to them how the DISO program works. We actually had a situation yesterday where we had a DISO in and it was filled out all wrong. We go back to the clients and say that they didn't fill it out right, and they go, “Oh, yes, we did, we have authority for $500,000”. I go, “Yes, but not for DISO”. Well, I don't do that, but I got one of my people to say it.
OSME are very sympathetic. They're a bit like the therapist who sits down and goes, “Yes, it's awful, isn't it?” I go, “Yes, it is awful”.
Voices: Oh, oh!
Mr. John Rivenell: But there's not much they can do, because they don't have the power to change stuff.
Don't get me started, but when HST came in, I took a pay cut. Why? Because my clients will not buy anything for $26,000. They will buy up to $25,000 and above $100,000.
Above $26,000, we have NAFTA. We have to do all this paperwork. It will take two years. The first thing we have to do is get an expert in to help us write the RFP, and that's going to cost us $23,000. It always does, because he has this magic $25,000 thing.
So I got a client a little while ago. I said: “You've got a problem, I've got the solution, it's $40,000, and you can't buy it. You cannot buy it.” I've had a DISO for 10 years. I've only once got it through, and it took me three years. I don't even try to sell stuff for $40,000. I just say, “You can only spend $25,000, this is all I'm going to sell you, and don't waste your time”.
Now OSME is great, and I go, “Maybe you can do it on a service contract”. I meet a typical client who has a problem. They explain the problem to me. I have the solution and I say, “Here's the solution”. That takes 10% of the time. They have a problem, I have a solution, we're going to do it. Now, 90% of the time, it's how the heck do we get this through PWGSC? Because it ain't going to fly. Let me just give you one example in the brief time I have.
:
Thank you very much. Now it's my turn.
I really appreciate your honest, direct comments about the problems with these agencies, but I want to ask you a more general question. It doesn't mean that I haven't absorbed your more specific points.
As you know, earlier this week, the report of the expert panel on federal support for R and D came out and made a number of recommendations.
Just today--and this relates to the earlier discussion about Canada's poor level of R and D--one of my colleagues proposed that we have a goal for business expenditure on R and D that the government adopt, and then it could use these expert panel recommendations to help figure out how to achieve that goal. Right now, Canada's business expenditure on R and D is extremely poor. It's 1.0% of GDP, whereas the average for the OECD is 1.6% of GDP.
My colleague suggests that Canada should have a goal to get to the average of the OECD by 2015. It's extremely ambitious to go from 1.0% to 1.6% of GDP in four years, so never mind the exact goal, but I have two questions I'd like to ask each of you.
Do you think it's a good idea to have a stretch target goal on increasing business expenditure on R and D? Second, if so, partly in light of this expert panel, what tools or mechanisms do you think would be best for the government to use to try to achieve such a goal?
Who wants to go first?
:
I'll start; I have the letters
a and
b in my name.
Certainly, I think stretch goals are always excellent. In business, the way you incent salespeople to make sales is usually to dangle carrots in front of them, right? So from the point of view of trying to get a small business or an SME to spend more on R and D, there have to be incentives.
I think programs like IRAP--unfortunately, John had early bad experiences--have been tremendous. I think IRAP understands how to get SMEs to spend on R and D and do innovative stuff. Kudos to the government for giving them the $200 million two years ago. The problem with IRAP is that their funding is cyclical. It's never reliable. So that's where there should be a fix.
The other one is SR and ED. The more people who leverage that, hopefully, the more innovation you will get. As for whether or not you need to create another program, I read the Jenkins report. I read the recommendations of the Jenkins report. I spent 11 years at the NRC before deciding to become a crazy entrepreneur, and I can tell you, I have lived research, and I don't think it's a good idea to cancel NRC, start a new institute, and move IRAP somewhere else. Keep IRAP where it is and just change your spending in terms of what you're doing: move that budget over.
I would certainly like to echo the comments around the table about Small Business Week and the Year of the Entrepreneur. As for the economic engine that drives our economy, 98% of the businesses are small businesses. I represent an area in the Okanagan in the interior of British Columbia. It's very vibrant and it is small businesses that keep our community that way. We have some larger businesses--some aviation and forest industry--but small businesses are the backbone.
I was at one business last week for their second-year anniversary. Their sales have grown 44%. It's aviation electronics. They commented about their appreciation of SR and ED, but about the complications, again, of having to hire a consultant to get through the bureaucracy.
I would like to follow up on the chair's comments about the Jenkins report. He said it was an expert panel. I think we heard from Sue about her successful business and her experience.
I'd say you're an expert, Sue, so let's define what an expert is.
There is the aspect that it's people who have experience on the ground. I've heard similar comments about putting the money into BDC and government going to venture capital, which just seems like an oxymoron, to my mindset.
I'd like to hear a bit more of your perspective on how we can particularly improve the process of procurement.
Also, Jeff and Cathy, you might not have the specific information right now, but perhaps you could provide to the committee an example of how the SMEs have been basically prevented...or discriminated against by having procurement refused. If you have any specific cases, I'd be interested to hear about them.
:
One suggestion I would make with respect to improving the procurement process for an SME would be to take a little bit of a different strategy.
I believe the reason that IRAP is so successful working with SMEs and getting the money that you want to get deployed out to SMEs is that they have the notion of this ITA, the industrial technology adviser, who works directly with a group of SMEs. Ours, for example, works with hundreds of SMEs. He has a very big group of companies that he has to work with. They're all SMEs. What I've seen from their attitude or their approach is that as soon as the government announces an IRAP fund, they start working extremely actively with all of their SMEs to try to get them to benefit from this.
So I would say try to bring that over to procurement. You need ITA-like people in the OSME office who become more than our guides; they become almost our champions. They help us cut down the process and the paperwork and the reporting.
We still have to do it all, because we know that everything is going to get audited, etc., and we do all of the time sheets. We do all of that stuff. But when you have somebody there who says to you, “This is the template, you have to work in this, and everything has to fit in here”, it becomes less of an unknown when you're dealing with these contracts and people.
With respect to RFPs, I think there has to be almost a mandate that says x amount of the Government of Canada budget has to go toward SMEs, or, if you win a contract as a large company, you have to bring in SMEs, and this is how much of this contract is going to be awarded to make sure that there is SME involvement. The United States does that, but we don't do that.
I thank all the witnesses for being here.
I am going to try to cover questions for most if not all of the panel.
Ms. McCallion, I'll start with you.
This came up through Monsieur Blanchette's question to you. In your comments, you recommend that OSME should perhaps be under Industry, not under PWGSC. I heard Ms. Abu-Hakima say that she probably doesn't agree with that, and I'm not sure that I do either.
The role of OSME, of course, is to advocate for SMEs within the federal procurement process. PWGSC is responsible for federal procurement. It would seem to me as if that's the right fit. If it moved to Industry, would the mandate remain the same or would it change? The second part of the question is, would you be concerned about a potential dilution of the mandate with a move out of PWGSC?
:
Thank you for coming in today. I appreciate your input.
We're conducting these sessions in the spirit of learning, really, and of gaining a better understanding of the problems. In my former life, I was a business consultant. We always said that there are no problems, only opportunities.
I hope these are opportunities to improve the procurement process and open up opportunities for your companies to participate, not just because it's good for your companies, but because it's also good for the Government of Canada, and therefore for the people of Canada. You've talked about some of the innovative solutions that you've come up with, and there are always needs out there.
I want to follow up on Mr. Cannan's point about the $25,000. Just to clarify, where did that come from? Why is that the threshold? Could you explain to us the DISO process and why it creates this barrier that prevents companies from bidding?
:
It's quite simple. Up to $5,000, you can buy stuff with a credit card fairly easily with a certain level of management approval. Beyond that, up to $25,000, there's a higher level of approval needed.
I referenced earlier that there are different approvals with DISO and everything else, which is poorly understood, so we're often correcting that. I would suggest that less than half the DISO orders we receive are correct. We have to return them to federal government for correction.
Beyond $25,000, I'm not sure what the rule is, as I've not looked at it lately, but it gets into NAFTA, so it has to be offered, and there's work done with the Americans. We're talking about a two- or three-year delay in procurement. I reckon the turnaround time in the federal government is typically two years from the time we say hello until the time we get a purchase order and start running on something.
I really have given up trying to sell anything above $25,000 to the federal government, unless it's more than $100,000. I had one contract for $10,000. We solved the problem fairly quickly, then we had to get their IT approval, and then there was security, and then there was the threat risk assessment. We had to go through all the different departments, and all had the power to veto the system.
Ultimately when it's done, it goes off to PWGSC, and someone we've never spoken to looks at procurement. In one case, a clear case, we spent two years working on a project. We got the equipment, surveyed the market, picked the best stuff, loaded the software, gave it to them to trial, and they wanted it. Actually, we got the software contract, but they gave the hardware contract to two guys in a basement with a fax machine and a reseller agreement.
The deal was that the person making that decision had never met us and knew nothing about us. He was just asked to procure this at the best possible price. So he goes out with a detailed list, which I provided, and asks everybody for the pricing. I've already quoted my price, which builds in our time and effort, plus the support we promised, and the stuff just gets shipped in, in a box, from God knows where. The guys make a 5% markup, and my client is stuck, because he's asking me to support a hardware product that I've not been paid for. That's not an unusual circumstance.
:
Well, you're talking to somebody whose company is called inRound Innovations.
I'll tell you what really drives innovation, from our perspective: it's access to opportunities.
I suppose to a certain degree we believe that the government has a certain socio-economic responsibility to help small business, but as I said earlier, we're not looking for special treatment. What we're looking for is continuing to have access, and we think that bundling contracts is something that stymies innovation in the Canadian government.
I don't buy into the notion of economies of scale, because I think innovation comes through niche companies like ours. I do have experience with the big guys, and I know that in my service management practice, when I worked for Compaq HP, it was still five or 10 guys sitting around in a particular section. That was the extent of the experience we had in that company. We just happened to sell under a broader label.
As I said, it's important that there not be initiatives that prevent us from continuing to have access to government contracts.