On 31 October 2017, the House of Commons Standing Committee on Government Operations and Estimates (the Committee) undertook a study of federal procurement on how to improve access to small and medium enterprises (SMEs) and Indigenous businesses. In the course of its study, the Committee held 16 meetings, heard from 70 witnesses and received 13 briefs.

The Committee’s study reviews the federal government procurement process and outlines the main challenges of the current procurement process along with the principal barriers preventing SMEs, women-owned and Indigenous businesses from accessing federal contracts.

In this report, the Committee makes 40 recommendations to improve the federal government procurement process. The Committee points to five main challenges with the current system:

• the complexity of the federal procurement process;
• the use of misaligned procurement approaches;
• the focus on price, to the detriment of qualifications and quality when selecting contractors and suppliers;
• the need to make federal procurement more inclusive for SMEs, women-owned businesses and other socially disadvantaged groups; and,
• the failure of the Procurement Strategy for Aboriginal Business to live up to its potential and its need for improvement.

The Committee’s recommendations address these challenges by proposing the following:

• simplifying the current procurement process;
• modernizing the Government of Canada’s policies and procedures for contracting, including streamlining requirements and updating terms and conditions, taking into account the findings of the Office of the Procurement Ombudsman;
• ensuring that the right procurement approach is used for each procurement;
• implementing strategies to encourage and promote procurement officials and suppliers to place greater emphasis on best value for Canadians, by including value-propositions that give greater weight to qualifications and quality rather than primarily focusing on price;
• establishing targets for the dollar amounts and the number of federal procurement contracts that the federal government awards to SMEs; and,
• improving data collection to track and evaluate the impact of the Procurement Strategy for Aboriginal Business on Indigenous business activities in order to provide greater accountability.

Highlights for Small and Medium Enterprises

The Committee encourages business owners and, in particular SMEs, to take advantage of government procurement opportunities by:

• frequently consulting the federal government buyandsell.gc.ca website for tenders;
• using the resources of the Office of Small and Medium Enterprises to increase SME access to federal procurement contracts, reduce barriers, simplify the contracting process, and take advantage of opportunities available to increase their chances of doing business with the federal government; and,
• accessing procurement opportunities in other countries where Canada has signed international trade agreements, such as the World Trade Organization Agreement on Government Procurement, which offers Canadian suppliers preferential access to procurement activities worth several trillion dollars annually.

It is important for SMEs to note that the primary objective of international trade agreements is to provide Canadian businesses, including SMEs, with access to government procurement in foreign markets. Moreover, most trade agreements include transparency provisions with information on procurement opportunities and details about the award of a contract, such as evaluation criteria and rules on qualification of suppliers.

The Committee recognizes that the federal procurement process is very complex and can be difficult to navigate for most Canadian business owners, especially SMEs and Indigenous businesses. It is concerned that the majority of SMEs in Canada do not consider the federal government as a potential client, and those that do, are often discouraged with the process. As such, the process could be greatly improved for SMEs. The Committee acknowledges that the federal procurement process needs to be simplified for SMEs by reducing red tape, ensuring that requirements are tailored to the procurement opportunity, and shortening the length of the process.

In its study, the Committee observed that the federal procurement process is disjointed and would benefit from better coordination among federal departments and agencies. It also observed that the federal government’s approach to procurement is inward looking with processes that are not geared toward suppliers and do not take into account the needs of SMEs. Federal procurement should be easy to navigate and supplier oriented. As well, procurement materials should be written in plain language and English and French versions should be consistent. The Committee encourages the Office of Small and Medium Enterprises, the Procurement Ombudsman and the Canadian International Trade Tribunal to continue outreach activities, and to work collaboratively to improve federal procurement.

The Committee acknowledges that data collection and analysis is an important step in evaluating federal procurement and identifying opportunities for improvement. This includes measuring the proportion of procurements that are awarded to different types of SMEs and gathering gender-based and industry-specific data. It is also important that all Canadians, including business owners and suppliers, have access to reliable federal procurement data in a timely fashion.

Finally, the Committee encourages the federal government to consider implementing a simplified procurement process specifically for SMEs or for contracts below a certain threshold. The Committee believes that a diversified supplier base populated by SMEs would encourage innovation and benefit the federal government in delivering value.