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My favourite question is, who is CATA? You may remember us from a few years ago. We were a little concerned about reverse options, so you know that when governments make a misstep we're fairly vocal and fairly engaged with the community, and we hope we're providing some good guidance. I think it's important to understand who we are compared to some of the other groups you've been hearing from.
In the not-for-profit sector, there are many special interest groups. I used to work for one, the Mining Association of Canada, and we addressed very specifically that vertical market in the interests of mining companies.
I would suggest that CATA is not a special interest group. We're basically a community, and our interest is to create the “innovation nation”. The innovation nation is something Terry Matthews has well defined. He's our national spokesperson, so you get a feeling for what our values are. He has created enterprises. He has walked the talk, so we really reflect everything that he understands in values within Canada.
We have to get our share of the production and distribution of goods and services. The innovation nation has many components, ranging from procurement to leadership to export sales, and that's what we're all about. We rank 14th and we're working to get us to first place, and procurement is one aspect of that.
With whom do we consult? In South Carolina right now, we have a group with BMW, Intel, and Cisco looking at the network vehicle.
What are the future technology needs, and how can Canadians supply into that market? We have a group called Women in Technology, working with the Status of Women, looking at how we can set role models for young Canadians and how we can advance the whole leadership among women professionals within the technology sector.
We're working with the National Research Council and the Canadian police forces to look at national security, not only the technologies but the methodologies, to make sure our transportation is safe and that we're a world leader in this area.
We also have Internet service providers as part of our group, and with them, we'd like to congratulate you on the spam legislation.
Many other areas deal with green technology, but it's not a special interest. We are really committed to Canada getting its fair share going forward, and that's how we're looking at procurement.
The second way we're different is that we value research. Our offices are located within the university, so when you look at us, you'll see major research projects, with PricewaterhouseCoopers dealing with performance management. We deal with the adoption of technology. We work with Microsoft on this. We have a professional research team that makes sure we follow the correct methodologies.
It's much too easy to be a special interest group and only advocate your interests. We think it's much more important to have context, in that you look at everything within context, which is what procurement is.
The next part, in addition to the research on biased approach, is that we line up experts who really don't have a self-interest, and we have, I think, one of the top CIOs in Canada. Maybe you've seen Charles's background: Alcatel, Nortel, health care industries, gold medal winner. When we do the research, we find an expert who is able to articulate that in an unbiased, clear way. I think that's good public policy direction, and that's what we're going to try to do today.
I'm not the expert in procurement, but I can say unequivocally that we have consulted across Canada. We've consulted a broad community. We've tried to be fair, transparent, and quite honest in our advice, in that we are not a special interest group.
Charles, with that background, I will turn it over to you.
Thanks very much for having us in. I hope this information is helpful.
We have the survey results, which we can go over later if you want. They are in your package with some of the information. I did not want to take up a lot of time going through that right now.
PWGSC in 2008, I guess, made a presentation and sent out a message about what they were going to do. The message stated, I think, that they had four pillars, one being GENS, and that they were going to bundle everything. That was the impression our members received. Of course, this wasn't received very well by our industry, except maybe by a few large integrators.
What followed that, shortly after, was the bundling of furniture. So they saw that the SMEs were not going to be able to compete because everything was bundled and it was so large. They really viewed this as favouring large international companies, and that was the feedback they gave us on our survey.
When we looked at the telecom network--and I have heard a lot about GENS and what is going forward--I thought it would be important for us to put our opinion forward, especially from the CATA members.
Most large companies did what GENS is planning to do years ago. It just makes sense. Look at the status quo. I don't know what the exact numbers are, but I am hearing that there are anywhere from 100 to 150 networks out there. I believe there are a large number of networks, because when I worked with the Department of Justice, I put one in myself. I knew there were a fair number of them out there then that I would rather piggyback on, but I couldn't do it at the time.
When that happens, of course, you get a lot of redundancy and a lot of extra cost, and this is a big concern for me and for our members. It becomes insecure. It is open to hackers, attackers, and other governments to come in and attack our networks. I'll tell you that when I was with GE and looking at consolidating our networks, and with Abbott, we were attacked hourly, not just by people trying to come in and take a look at what we had but by people trying to steal things from us. So it is a very big concern.
There has been some confusion, and I just want to state CATA's view of this network. I have heard lots of people before using analogies, and I'll try one.
If you're in your house and you're looking for Internet connections, really, when you go out to look for an Internet company to give you service, you only have two, three, or four, depending on where you live, to choose from. There really aren't that many that are going to bring Internet to your house. That's because they can take care of all those things outside your house. They can connect you to all the various servers out there and the various networks. Anything you need to be connected to, they do it.
They also provide something called managed services, and they come bundled with your Internet. For those of you who have Internet, and I'm sure most of you do, one of your bundled services would be your billing. They send you a bill, and they tell you how much you owe. Sometimes they tell you how much bandwidth you've used--I know that mine does--and whether I need more or less. Of course, they fix problems when they go down on their side outside the house. Those are the kinds of bundled services they have, and they give a number I can call if my network isn't up.
That's how I see GENS. GENS takes care of that part. So instead of having the people in my house--I have five people in my house--having their own connections with all the different telcos, we have one for the house.
Inside the house, however, we could have another network, and this is not part of GENS. I could have a wireless network, and I could connect my son's Xbox, my daughter's Notebook, my desktop computer, and my wife's computer inside the house. I would go to any SME I want to have that put in. They could come and set up my network for me. I could buy a PC from any of these people.
That's where I see the difference between GENS and bundling that part outside and the part inside, and again all the applications that I see as SMEs play that role as well. Of course, it doesn't eliminate large companies from also playing in that area, but that isn't their field. SMEs play very well in that area.
What we see is that large telecom providers are very well suited to provide this outside network. There are only a very few of them. It's very capital-intensive. If they do that, with SMEs inside, we see this balance working very well.
With regard to bundling networks and the benefits to SMEs, just quickly, I think it does have balance. The SMEs now understand, if we have a network outside, what they're working with. That balance is positive.
Again, as I described in the earlier slide, the large telcos deal with that outside network that we need to secure, and the SMEs deal with all the other issues inside, from providing new security applications to modernizing. There's no reason why large integrators can't play in that space, either.
I want to move on to a few concerns about bundling that our members have. Outside the network that we just talked about, they certainly view anything that will get bundled as anti-competitive. If we bundle too much, they can't compete in it. They view it as favouring large companies.
In our first slide, we said that 97% of the companies in Canada are SMEs. I'm sure that in all your ridings and your areas, they depend upon being able to do business with various organizations. But for SMEs, when you bundle things, you create a very big RFP that they have to respond to.
I have been on the other side of this. I've been on both sides of this, in fact. From an SME's point of view, it could cost them tens of thousands of dollars just to respond to a large RFP. They simply don't have the money for that. And if they lose that one, they certainly don't have the money for the next one. What that really does is lessen the amount of Canadian companies that can deal with the federal government. That is the view our members have been feeding back to us.
I want to talk a little bit about the members' issues. They wrote out in our survey some of their issues. I thought it would be important to bring them up here. Some of them were a little bit surprising to me.
The first one was that procurement is needlessly slow and complicated in the Canadian government. They really see that it disadvantages Canadian SMEs, Canadian R and D companies in particular, and that Canada should make it easier for them to do business.
The also say--I thought this was an interesting point--that managers within the public service fear exercising their delegated authority because of too many conflicting rules and regulations that impede their progress. They fear that they will get in trouble. There are too many of these conflicting rules.
I've had other members tell me that directors general would not make the decisions because of all these conflicting rules, with other organizations having to review it and somebody having a different opinion on the regulation or rule. Yet the DG was probably in the best position of anybody to make that decision.
Some SMEs have abandoned altogether the idea to sell to the Canadian government, but they've successfully sold to foreign governments. This really concerns me. I'll give you an example of a company in Kanata.
I know about this company in Kanata. I went to see their technology and what they work with. They now make arguably the fastest computer in the world. It's faster than the Cray computer, which used to be the fastest computer in the world. They have taken into account big concerns in our data centres. Our data centres are areas where we put large amounts of computers. They take up an enormous amount of power and they take up an enormous amount of space. That power now is very expensive. It shows up in all of our budgets as a very big line item, as do real estate costs. We have to buy more real estate to house this in. Of course, that is very expensive.
This company has come up with a machine that takes about one third the power. It consolidates a whole bunch of other equipment into one and makes it very powerful--very good equipment to reduce the real estate and power costs.
I was told only about three weeks ago by a VC who deals with the company that the board has given instructions to the CEO not to bother trying to sell to the Canadian government anymore. In their view, it's a waste of time. It takes up too much energy, and nothing goes anywhere. I think they've been in talks for two to three years. But they've successfully sold four units to the U.S. government.
I think that's very disturbing. That's very concerning for us. If we want to see Canadian companies grow, we have to address those issues.
Canadian SMEs also see themselves as incubators of innovation and solution. You only have to look down the street and at what they're doing in Montreal in biotech to see how well that is moving forward. In Kanata you've seen Newbridge spin out lots of companies. Despite the demise of Nortel, people have found jobs in the other companies Newbridge has spun out. We can see the benefits of that.
On my last point, I made a mistake on the slide. It says that other countries have set-aside policies. I was mistaken on that. It's the term that was used to me, and after the slides went out I was corrected on what that was. As you can well imagine, I really wanted to steer away from the “set-aside” after I understood what it meant.
What they're really talking about is an innovation policy. Other countries, including the U.S., buy innovation products from innovation companies, and they have special policies to be able to do that. Our members are asking why we don't have that in Canada. It would really help them build successful companies.
I think SMEs play a positive role, and I won't belabour that. I think they provide good value for the money. One only has to look around this room at the BlackBerrys people have. RIM started out as an SME. If I drive away from my house and forget my BlackBerry, I turn back to get it. That's quite a difference from five years ago.
As John pointed out earlier, we like to pick on the government as often as we can, but we also want to bring a bit of balance here. We are encouraged by seeing a few things. I spoke about the statements that were made in 2008, but there's new IT management in PWGSC. We've had the privilege of talking to them, and they indicate they do not intend to bundle professional services. They truly understand the need for balance and for the outside network to be something that the large telcos do. They very much understand the value of the SMEs, and that's certainly the message we're getting back from them.
Not bundling professional services seems like the right thing to do. They want to listen, and I believe they have a tough balancing act for all the people they have to please, but we would simply like a document that states that. I think that's what makes our members nervous. We saw these statements being made in 2008. We haven't seen anything in writing recently, and they would like to see something in writing that says you're not going to bundle professional services.
A balanced approach for us is the right approach. On where the telcos, large integrators, and SMEs fit, I think there's a place for everyone, and Canada sees that as the right thing to do.
Last are our recommendations.
I think it's obvious we're saying not to bundle professional services. The Government of Canada should implement better procurement practices to help our SMEs and look at other countries, if need be, because we seem to be more successful selling to them than to our own.
The Government of Canada needs to continue with network integration. We think it's very important to get that outside network consolidated to reduce our security risk and the costs. As a taxpayer, I think it's a great idea. We need to improve PWGSC's communications. From talking to them, I think they really want to do that as well. They want to get out and make it known what they want to do.
Another recommendation is to let managers manage. Keep it simple. Stop creating layers of bureaucracy, regulations, and new rules that impede the people who know what to do from doing their jobs.
Finally, buy from Canadian companies and make that easy.
Thank you very much.
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First of all, thank you for inviting me to participate. It's really an honour and a privilege to be able to discuss small business procurement and what we're doing here and how we've looked at things from inception to where we are now. I only want to give some brief opening remarks with a little bit of history and also how we approach small business procurements. So thank you again.
I am Joseph Jordan. I'm the associate administrator, government contracting and business development, here at the U.S. Small Business Administration.
As spending across the U.S. government has increased over the past several years, the dollars going to small businesses have also risen. In fiscal year 2000, small businesses received $44 billion in contracts out of the $200 billion in total federal government contracts. In fiscal year 2007, that number has grown to $88 billion out of the $400 billion total. The SBA is working very hard to see that number increase even more in the future.
One note before we go further is that your invitation had mentioned both small and medium-sized entities. The U.S. government doesn't recognize specifically medium-sized firms. We create size thresholds for small businesses, but consider every other entity to be other than small. That's one small point I wanted to clarify up front.
To quickly outline and explain the history of the SBA, I want to talk a little bit about our goals and objectives and how things are structured.
The SBA was established in the 1950s to shore up the U.S. industrial base for both national security and economic reasons. One of the key methods was to ensure that small businesses were given a fair share of access to government contracts. Over the last five decades, as government spending has increased dramatically, small business participation in government contracting and ensuring their participation is even more crucial.
In the area of procurement, having a single government entity devoted to small business is extremely important. The government has a single source for policies relating to defining the size of small businesses, what fair participation is, and certifying that certain firms in socio-economic categories do in fact belong in those categories.
The SBA has the standing to talk directly to other federal agencies about their procurement practices, and the ability to get White House involvement if there are any disagreements. The policy of the U.S. government is that small businesses should have the maximum practicable opportunity for government contracts. It is SBA's mission to foster that environment and ensure that small businesses are receiving their fair share of government contracts.
The SBA office of government contracting works to achieve those goals in five ways: first, working with other federal agencies to ensure that their policies and procedures take small business concerns into account; second, working directly with small businesses on education and training to increase their marketability as government contractors; third, educating small business and government agencies on how best to work together; fourth, utilizing technology to foster and streamline these relationships; and fifth, promoting transparency within our programs and our data.
A few of the areas I mentioned overlap, and I want to quickly detail them in my following comments.
There are several ways in which we work with the other federal agencies. First of all, in terms of creating goals for small business participation in federal contracting, the federal government has statutory goals for small business participation: achievements measured in the percentage of dollars spent by the government. The government-wide goal for small business dollars is 23%, with several sub-goals for certain socio-economic categories. The Small Business Administration is responsible for negotiating these individual goals with each agency, keeping the statutory government-wide goals in mind. Results of each agency's small business spending are reported every year in the Small Business Goaling Report, which is released to Congress and the public.
We also have a score card. The SBA produces an annual small business procurement score card, based on the government's small business achievement. Each agency is assigned a score, such as red, yellow, green, or a numerical score based on whether or not they met their individual small business and socio-economic goals. Agencies are also assigned a progress goal and given some credit for improving their achievement, even if they didn't fully achieve the ultimate goal.
SBA is also the single authority within the government for determining size standards for small businesses. There is a staff within the office of government contracting solely dedicated to monitoring and analyzing industry trends to determine the proper threshold for a small business in each of the North American industry classification system, or NAICS, codes.
This is the only entity within the U.S. federal government that defines the size of a company. There is no designation, as I said, for medium or large firms. A company is either small or other than small.
We also have procurement centre representatives, or PCRs as we call them. These procurement centre representatives are individuals who are placed within buying activities and are responsible for reviewing procurements to ensure that unjustified contract bundling is not happening, and that small businesses have maximum opportunities for contracts, both prime contracts and subcontracts.
The SBA handles company protests and determines whether a particular business qualifies as a small business or as a service-disabled veteran-owned small business, under the existing standards set forth in the Code of Federal Regulations, when an interested party protests the size status of a business responding to a government solicitation that's either a small business set-aside or a service-disabled veteran-owned set-aside. And I can go into the different socio-economic programs more, at your request later.
We also have a natural resources sales assistance program. The U.S. federal government sells large quantities of natural resources and surplus real and personal property authorized for sale in accordance with public law. The SBA cooperates with other federal agencies to channel a fair share of this property and these resources to small businesses.
The SBA also works directly with small businesses to make sure they are aware of contract opportunities and they are ready to compete for them. Through SBA's vast network of field offices and resource partners, we are able to educate numerous small businesses about the opportunities in federal procurement. Many small businesses outside of the national capital region are not as aware of how much the government is spending and that they could sell their products or services to the government.
Through that same network, SBA is also able to conduct training sessions for small businesses on topics ranging from how to market yourself to the government to how to find procurements in your industry or how to win additional work. Commercial marketing representatives, or CMRs, are SBA individuals who work with the largest prime contractors to assist them in achieving the various small business goals in their subcontracting plans. They also work with small businesses to match the small businesses' capabilities with the prime contractors' needs to create these subcontracting plans.
We also heavily utilize technology to achieve our small business objectives. The integrated acquisition environment, or IAE, is a network of several IT systems related to procurement. The government puts nearly all procurement information online now through a collection of these inter-agency systems. Everything from the original bid solicitation to vendor information to the details of the actual award is online and searchable, and the SBA is an active participant in the governance and maintenance of all these systems.
All solicitations are posted to the Federal Business Opportunities website, and any vendor is able to search by agency or type of work or other criteria to see what contracts are out there they should be competing for.
All vendors must be registered in the central contractor registry to obtain federal procurements. This system includes SBA's dynamic small business search and has all the relevant socio-economic and size standard information so the agencies can find the small businesses that can provide the goods and services they need. We also report out the information through the federal procurement data system once a procurement award is made.
Transparency is another issue that's very important. All the systems I mentioned above are available free of charge to the public, and they're all searchable, though some require pre-registration.
There has been heightened attention to procurement integrity in recent years, particularly due to the increased access to all the information in the systems I mentioned above. The press and the public have vastly more information about federal spending than they ever did before, and many more questions are being asked and more accountability demanded as a result. Increased transparency and accountability is good news for small businesses, as most of the public agrees that small businesses should get a fair share of federal spending.
Increased transparency has also increased vendors' ability to do business with the government. Vendors are able to constantly view solicitations and awards occurring in their industry, the press is able to review trends or spot inconsistencies in practices, and the public is able to see how taxpayer dollars are being spent. If a vendor does not win an award, they can seek a debriefing with the agency and have the selection committee go through their proposal with them, pointing to areas that can be strengthened or where a mark was missed.
Anecdotally, we've heard from small businesses that this process, while perhaps not pleasant, is very useful in learning how to do better next time.
I know that was a lot of information. That does conclude my opening remarks. I want to thank you again for the opportunity to speak before you all today, and I welcome any questions you may have.
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It is not centralized. Each agency has its own procurement function, with contracting officers and large procurement groups. There are actually over 3,000 buying activities. That's our phrase for places that are issuing contracts. There are 3,000 in the U.S.
How do we, then, track and monitor them? Those are some of the technology pieces that I mentioned we've been developing. This gets to the prior question of how we know whether these things are doing a good job, because we need to evaluate the metrics and say yes, it's doing the right thing, or here's where it needs improvement.
When contracting officers are issuing a solicitation for bids and are getting ready to issue a contract, they need to enter that data into a program that's fed onto a website we have called FedBizOpps, or federal business opportunities. You can go to fbo.gov, and a vendor can see and search for contracting opportunities from any agency and can try to participate.
There are a few other tools, but skipping to the end, once the agency has chosen the winner and the contract is done, we track all of that, because they must enter it into another system called the federal procurement data system, FPDS-NG—NG is for “next generation”—and through that we are able to track what they've actually purchased, whom they've purchased it from, what socio-economic programs may have qualified, all of those types of things.
The last part of your question, which is also very valid and a very big challenge for me, is how do we know they're telling the truth; or, said more nicely, how do we make sure there aren't mistakes made? That's where we come in and work with them. We can see this entire database, and when we see what we call anomalies or inconsistencies, we go back to those agencies and those buying activities and ask them to double-check a contract or piece of data and tell us that either, yes, they did it right or, no, they need to correct it and go back through.
That is a huge challenge when you talk about, as you noted, $400 billion-plus in contracts—which means many, many contracts—issued by 3,000 different places. It's quite a challenge for us to then follow up and make sure they haven't made any mistakes, but it's something we take very seriously, and that is very important when you're trying to get the metrics and the data necessary to make decisions to answer such questions as whether we think these programs are working well.