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EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, December 5, 1995

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[English]

The Chairman: Order, please. Good morning, ladies and gentlemen. Welcome to the Standing Committee on Government Operations.

Today we are continuing our study of the government contracting process and its systems and procedures, including the open bidding system.

As a committee we are concerned that the government procurement of goods and services is fair and equitable to all Canadian suppliers, including small and medium-sized businesses in every region of Canada.

We are also concerned that the contracting process is accessible and transparent so that all suppliers, large and small, feel they have been able to compete fairly for the $8 billion to $9 billion in government contracts.

At the same time, this committee must assure itself that value for money for goods and services is being achieved and that the federal government is providing a high quality of service to Canadians.

Today, as colleagues know, our committee is hearing from small and medium-sized businesses, so it's called ``Small and Medium-sized Business Day''.

We would like to welcome Mr. Brien Gray, from the Canadian Federation of Independent Business.

We want to begin with your association and hear your views about government contracting and about your experiences with the open bidding system. We want you to share whatever experiences you may have encountered and we especially want your suggestions for making the system more accessible. There are some excellent opportunities for Canadians across this country and this committee is determined to find ways to improve the present system.

I understand that after Mr. Gray we'll be hearing from a series of witnesses who will be presenting opening statements for approximately two to three minutes each. Then we will have an opportunity to question the witnesses.

Please begin, Mr. Gray. Welcome to the committee.

Mr. Brien Gray (Senior Vice-president, Policy and Legislative Affairs, Canadian Federation of Independent Business): Thank you, Mr. Chairman and hon. members. The Canadian Federation of Independent Business welcomes the opportunity to appear before the House of Commons Standing Committee on Government Operations to discuss the issue of small business access to federal government contracts.

While this is not a subject that at first glance would appear to be a major area of concern for small business, government procurement is indeed a big issue for the small business community. Government procurement policy embraces all of the issues that small firms face in the economy as a whole: lack of information, process obstacles, financing problems, paperwork and opportunity loss.

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Government, big business representatives and economists have said for some time that the job creation Canada so desperately needs will have to come from small business. Smaller firms - those with less than 20 employees - currently represent about 93% of all firms in the economy. Current estimates are that the federal government spends approximately $14 billion a year, of which small business receives anywhere between 30% and 40%, depending on who's counting.

The work of this committee is extremely important in getting to the root of the problems or the obstacles small firms face in successfully obtaining a fair share of the procurement pie. Success in this domain will provide small firms with further opportunities to provide the economic growth and job expansion in a troubled economy.

The subject area for this committee - examining various aspects of contracts for goods and services by the federal government - is timely and important. Increasingly over the past months and years, CFIB has been hearing complaints about the way in which government procurement operates at all levels of government - federal, provincial and municipal. CFIB has pursued the issue in discussions with Industry Canada, Public Works and Government Services, and other departments, focusing on ways to improve the present system.

In mid-November we mailed a survey to approximately 15,000 members that we felt were positioned to sell goods or services to the federal government. The purpose of the survey is to help advise the federal government on the procedures necessary to improve access for small and medium-sized business to the procurement opportunities offered by government. We believe that the information we derive from this survey will be invaluable in terms of getting to the core issues that affect small business success in accessing government contracts.

As we approached the survey we were increasingly hearing of the problems and frustrations of independent businesses in every part of the country in terms of doing business with government. The problems are many and varied and will be familiar to the committee members: The government takes far too long to pay its bills. The contracting system is incomprehensible; it's bureaucratic, confusing, and complex. The paperwork for bids and contracts is excessive. It's impossible to get information on business opportunities. Bid specifications are written very narrowly and are often very complex. Identifying the user and/or the purchaser of the goods and services is often difficult, so it's very difficult to understand what the real need is. It is difficult to get on the bid list for local contracts. The government selection process seems to favour insiders. The automated systems are not user-friendly and are seen as very costly. It is difficult to compete with larger firms for contracts. Finally, decision-making seems to be arbitrary, and it is difficult and often impossible to find out the reasons why a bid was unsuccessful.

As mentioned, the survey is in the field right now. You will see from the samples I have brought that we are seeking a number of important data from the members.

The survey seeks to determine whether the member sells to the federal government, and if not, why not. Next, we ask the members that have sold to the government whether they have encountered problems, and if so, with which departments. We will also be able to cross-reference the results by whether the procurement opportunity occurred in the Ottawa area or beyond its rarefied borders. We asked members to indicate the importance they attach to resolving certain problems - for example, late payments or bid specs - encountered when selling to government.

As governments move increasingly into an electronic means of doing business, it is very important to understand whether small business is using the federal government's open bidding service and again, if not, why they are not. Further, we asked about the potential for matching services and on-line bulletin boards. It is important to gain information from those who are unsuccessful in bidding on a federal contract. If they have problems, what are they?

We also asked about ISO 9000. Are small firms currently certified, and if not, why not? Many members have expressed concern in the past about the advent of ISO 9000. They understand the issue of standards when government contracts are set, but they are fearful that the cost and the complexity of getting certified may amount to an effective barrier to entry and opportunity.

Finally, we asked the members for their views on how to make it easier for small firms to contract with the federal government.

As I said before, the CFIB believes that the results to the survey, broken down by province, sector and size, will constitute an irreplaceable database that should do much to develop understanding among policy-makers in government and procurement agencies on the unique problems and needs of the small business community in successfully accessing government contracts.

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We anticipate that we will have an important story to tell based on these results early in the new year and we would welcome the opportunity to meet with the committee again at that time to share our findings. In the interim, I thought you might find the comments of some respondents of interest. These comments do not replace scientific survey data, but they are very important to give you a flavour of the nature and the extent of the frustration for many in dealing with the federal government. I've broken these out by topic areas.

With regard to payments:

Other quotes with regards to payments:

Finally:

With regard to complexity:

With regard to process:

With regard to the open bidding service:

With regard to access:

With regard to the decision-making process:

With regard to information:

With regard to contacts:

Finally, with regard to ISO 9000:

As you can see, the concerns of the small business community with respect to fair and open access to federal government procurement are varied and, because of their small size, unique. Systems geared to large established suppliers are not necessarily those that ought to be used for small firms. Small firms are not ``little big firms''. They do not have the human or financial resources of their larger brethren.

At the end of the day we need to understand: Are small firms getting access to the contracts? Does the present system understand small business? Is it open to doing business with small business? Would procuring agencies rather deal with large firms in the interest of cost and efficiency? Is there a cultural fit between the bureaucracy and small business? What are the true numbers on small business's share of market? If they are not available, we need them to properly effect intelligent, relevant, small business approaches. Finally, is the system accountable?

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The good news in all of this is that the issue of fair access to federal government procurement and contracts by small business is being closely examined and those who operate the system are being held accountable. The work of this committee is extremely important in this regard. In addition, I should note that the federal public-private sector forum on paper burden has passed a strong resolution on the issue of prompt payment of government contracts. Treasury Board is currently preparing a policy response, and we look forward to an early and positive resolution of the matter.

There is a need for the federal government to establish procurement policies that effectively ensure that small business has fair and open access to the action. Our members are free marketers by philosophy. There are, however, no free markets if the road is strewn with impossible obstacles. There is a need to balance the need for government efficiency and cost control with the opportunity to grow firms and take on new entrants.

The small business working committee report spoke specifically to the opportunities that procurement policies can provide, particularly in international markets, and I quote:

In the coming months, there are a number of issues that we believe the committee should continue to pursue. The first is the need for usable statistics. Just as in the banking committee, where we demanded and needed usable statistics in order that banking consumers could be informed and thus better consumers, we feel that it's really important, from the perspective of those working with government and contracting with government, as well as you yourselves and policy decision-makers, the statistics be usable.

The issue of accountability for procurement policy and process is very important. Late-payment policies are extremely important. And the opportunities provided by crown corporations, out-of-country contracts, and major procurement subcontracts should be looked at in this regard.

Finally, I would like you to consider the adoption of something akin to the bank code of conduct but applied to procurement. Where a firm is unsuccessful on a bid, it is most important for the agency to explain why it failed and where the bid could have been improved. In so doing, the firm would be better positioned to succeed in the future.

In closing, I would like to thank the committee for the opportunity to appear today to speak about the unique problems of small firms in doing business with the federal government. I would also like to thank the committee for the leadership it has taken on this issue. I look forward to an opportunity to reappear before you in the new year to share our survey results.

CFIB has the belief that by encouraging the small business sector by providing it with fair and open access to a greater share of federal government contracts, you can unleash a flood of opportunity. At a time when the government is taking money out of the economy through downsizing, policies such as these can, at little cost, provide much-needed stimulus to the economy and thereby provide economic growth and jobs.

Thank you very much.

The Chairman: Thank you very much, Mr. Gray, for your refreshing and stimulating presentation. We appreciate it very much.

We'll begin with my colleague from the Reform Party, Mr. White.

Mr. White (North Vancouver): Thank you, Mr. Chairman.

Mr. Gray, first I would like to ask you a couple of questions to get a feel for your organization. Can you give us an idea of the total number of member companies?

Mr. Gray: Yes, Mr. White, we are an organization that represents small, independently owned and operated firms throughout the country. We currently have a membership of approximately 85,000 members.

Mr. White: Do you have a feel for what percentage of those may have 25 employees or less?

Mr. Gray: As in the economy, 93% of the firms have 20 employees or less. Our membership would pretty much reflect that. In fact, I would say that probably 95% of our members would have20 employees or less.

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Mr. White: Good. Thank you for that information.

I think you would agree it would be unreasonable to expect government to have to perform in a way that doesn't happen in the private sector. For example, in the private sector, quite often a purchaser will favour an insider. Would you agree with that?

Mr. Gray: Yes.

Mr. White: So is it reasonable for government to have a different type of person who wouldn't become friends with suppliers from certain companies and therefore wouldn't favour a particular company's items? Perhaps I didn't express that very well, but if you have a purchaser in a corporation and that purchaser is constantly being approached by a salesperson from, say, Canon copiers, it's not unreasonable that eventually that purchaser might decide the corporation needs a copier. He's then probably going to favour the Canon salesperson. Is it not reasonable that the same sort of thing should happen in government?

Mr. Gray: I don't think too many of our members would argue with the view that in the private sector procurement officers do have their favourite people from whom they continually source if they get quality, timeliness and price. Those principles are still understandable with the government, particularly at a time when we have to watch our costs. However, I think there's a broader issue.

In the case of government, all of the taxpayers are effectively paying the freight. If you have a business out there who can bid successfully in terms of time, quality and price, it seems to me that to exclude that business from the process arbitrarily.... I certainly understand that if you've been well served by a supplier, you'll have a tendency to go to that supplier. But if somebody else is able to come through the door and bid as well as, if not better than, that supplier, it seems to me it's in the interests of the taxpayer.

As a broad instrument of public policy, we talk - and I said this in my remarks - about the need to grow Canadian firms and competence. If you don't use a major lever such as procurement policy as an assist in that endeavour, it seems to me you're going to cut off your nose to spite your face.

Mr. White: Do you think the problem could be addressed by improving access to those who make the decisions about purchasing so that small businesses at least have an option to come in the door to explain what their products are?

Mr. Gray: The thrust of our presentation today has in fact been access. Our view is that access is a differential thing for firms, depending on their size, their reputation, their ability to lobby. A number of factors come to bear.

If I'm a major international supplier of photocopiers, for example, I have many more resources that I can bring to the table in terms of convincing that procurement official or agency to take my product. It seems to me we have to make sure the doors are open for small and medium-sized firms that have fewer financial and human resources to be given a chance to bid. They don't feel they have that at the moment.

Mr. White: Okay. We obviously can't change government policy here in this room, but in -

Mr. Gray: I'm hoping that you'll be able to influence it.

Mr. White: In New Zealand, where I'm originally from, there have been some major changes in the way the government does procure. One thing government has done is it's tended to give a global budget responsibility to certain departments, giving managers within those departments the freedom to meet their mandates by sourcing local products and services.

Do you think it would be helpful to move in that direction, to structure the government more like branch offices of a company and to allow a certain amount of purchasing to occur at the local level?

Mr. Gray: If the principles of open and fair access are maintained, I don't think it matters much whether you're allowing the branches to operate separately or are doing it as a centralized deal. The issue is open access.

Mr. White: Okay. In terms of the government explaining why a particular bidder has failed, my personal opinion is that this puts an unfair paperwork burden on the government that isn't experienced in the private sector. If you apply to supply products to a particular company in the private sector, it's not obliged to explain to you why you didn't get the contract. If you called the purchaser, you could certainly get access and ask, why didn't I make it this time, Mr. Smith, and he'll give you some sort of verbal reason over the telephone.

Again relating it to improved access, surely it would be more reasonable to allow the small business access to the decision-maker via telephone or letter rather than having the government establish some sort of paperwork process to explain itself.

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Mr. Gray: The concern I've expressed is a feedback loop of some usefulness. At the present time many of our members have expressed the view that they didn't get the bid and heard nothing. They also don't know who to contact.

Mr. White: Is that not the key?

Mr. Gray: Certainly it's the key.

The third issue is that a phone call may not get real information. I have no trouble with a phone call if it is going to be complete in terms of the information given to that bidder or supplier. But too often, whether it's a banker or a procurement official, the explanation will be that you simply didn't qualify. That really isn't achieving the purpose that many of these people need.

If we want to try to use procurement policy as an instrument for growth in the economy, I think it's really important for unsuccessful bidders to understand why or where they were unsuccessful beyond ``you didn't qualify'' or ``your price wasn't quite right''. I think it requires something more than that. Yes, it may well mean a bit more paperwork, but I think we can certainly reach a compromise in terms of not overburdening the system with paperwork while giving useful information to the suppliers in order for them to understand how they could succeed the next time.

Mr. White: I'm not sure you've convinced me on that one.

However, I'll ask you one last question. Right at the top of your list is that the government takes far too long to pay its bills. If you had to rate that on a scale of one to ten as an important reason why small business doesn't even try, is it a nine? Even though the paying of the bills happens after the product is finally sold, you're telling us that's a disincentive to even start the process. I'm just wondering where on a scale of one to ten you would place that.

Mr. Gray: I'll be in a better position to tell you where on a scale of one to ten it will be once I have the statistical returns on this survey. However, based on what our members have told us to date, it is an extremely serious issue. I'd say it's among the top five issues.

As I pointed out before, small firms, particularly in the last five years, have been squeezed to the last drop by the banks, and if you have a government that's doing business with a customer.... This is happening throughout the economy. The last person in the chain, the smallest, most vulnerable party, the small business person, is the person who gets hurt the most severely. It's one thing for big businesses or medium-sized businesses to be squeezing the small firm - I find that unacceptable in the private sector - but for the government to be doing that to taxpaying, contributing firms in the economy is simply unacceptable.

Mr. White: I will just make a comment that may help your cause here. I did own and operate a small business with 10 employees prior to becoming an MP and had done so for a decade, and I can tell you that this was the major disincentive for us to ever apply for government contracts. We could go out and sell to six private sector companies, make more profit and collect the money on delivery in the time it would take us to sell one item to the federal government and wait three months for payment. So it was a major disincentive for us. I agree with you on that, and although it's not directly related to the procurement procedure, I think it probably is one of the most serious things this committee should address.

Thank you, Mr. Chairman.

The Chairman: Thank you, Mr. White. I see a lot of your colleagues nodding, and I share your intervention that it's a serious matter.

I'll now invite Mrs. Chamberlain, please, to begin for the Liberals.

Mrs. Chamberlain (Guelph - Wellington): Thank you, Mr. Gray. I'm really pleased to see you here today. I have been a big advocate, have worked a lot with small business and have been a small business owner.

I want to make some comments and then ask some questions. First of all, I want to concur with several things you said, such as that government takes too long to pay its bills, because of the cashflow problem you had experienced. That's one thing I hope this committee and the chairman would take to heart, because I think that's a very serious problem this government has to address.

The paperwork: we are currently doing a study on that and changing a lot of things. I think you're aware of that. As you indicated, you are involved in that as chair, did you say?

Mr. Gray: Yes, I am the chair.

Mrs. Chamberlain: I think there will be some good things coming from that, from what I've seen, but I would say to you to hold tough on that, because I think that has been one of the main complaints by small business, no question.

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You talked about the difficulty of getting on the bid list, which I want to explore a little bit more with you, and why a bid was unsuccessful. I think, again, anybody who is refused should have the right to understand where they went wrong, what happened and how they could better that the next time.

The first thing is that I would like a copy of your brief for my own records, if I could. If you could send that to me, I would be really pleased to have that. Secondly, I would like a copy of the survey when it's ready.

To the chairman, I would like to ask that we consider having Mr. Gray back once this survey material has been collated, because I think that's really important with where we're going.

The Chairman: I agree.

Mrs. Chamberlain: I think everyone here has expressed a great deal of interest in small business, so this really is key for us.

You touched on the rotation basis, and you said that's not good. Can you tell me where we're going wrong?

Mr. Gray: On that particular one I was quoting the experience of a member. A number of the quotes I used in referring to various aspects of the process were what I'd call near-survey results. We don't have the hard data yet, and I wanted to give you a taste of what some of the members were saying in the comments at the bottom of their survey. That comment came from a consultant who quite clearly had real frustration. He accessed the system, a system that worked on a rotation basis, and apparently was overlooked every time. When he or she decided to ask the system if they could get something, there was really very little response.

So in terms of my specific understanding as to where it's falling down, I can't give that to you today. I'm sorry.

Mrs. Chamberlain: I think it's fine that we put this out, but obviously if we're going to make a claim, we have to be sure it's a valid claim. If one firm has experienced a problem, I guess it's valid to them, but here we have to address the bigger picture, which is that if we have a real problem in that somebody isn't in the loop at all times, then we have to talk about that. So for me that's sort of the bigger picture.

Mr. Gray: My purpose in throwing the quotes at you today was that certainly some of these may be unique to a given firm, but if you're hearing this repeatedly through testimony before you, then I think that adds a legitimacy to it that my own remarks individually would not have.

As I say, we've had some returns, not a whole lot, but if I start seeing a repetition of the rotation issue, I'll be back to talk to you about it again.

Mrs. Chamberlain: That's great.

Is there anything available to small businesses, such as brochures, to help you understand how to bid? What do you have at your disposal? Is there anything?

Mr. Gray: My understanding is that some departments offer seminars on how to access the system. In fact, one of the people quoted today mentioned that he or she had accessed the system that way. There is brochure documentation as well, but my sense is that there is nothing that's all in one place and comprehensive that gives somebody a clear understanding, first of all, with regard to the entire process and also with regard to the complexity of each step of the process. My experience from talking to members is that they entered into it and then found it was so horrendous that they just backed off.

I think this again is an area that is worth asking the officials about in terms of whether they believe their process is complex - we've certainly been hearing that it is - and to what extent they give people fair warning that it's going to be complex.

Again, it's interesting that I keep referring back to experience with the banks, but as you can understand as a small business representative, we've had a lot of that experience in the last while. Many small businesses that were thrown into a forbearance agreement, for example, have no clue as to how difficult and complex it is. It's almost like the living dead being in special accounts in a bank and not being able to get out.

I think to some extent the process of bidding on government contracts, unless you've had some experience, can be much the same thing. You get into a web, and you don't where to go or how to move, and it's Byzantine really. I think there's a real need to simplify the process, to make it much clearer, much more understandable, and much more accessible to everybody who is a part of it.

Mrs. Chamberlain: Lastly, we talked a lot about where the deficiencies are, and I ask most respectfully, is there anything we're getting right about it in your opinion? Are we doing anything right in the bidding process?

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Mr. Gray: I think the idea of the open bidding service and having things on an electronic system where people can go in and understand what may be available is a very good start. Remember, not all firms have the ability to get in there. Although 80% of our members, for example, have computers, not all of them may have modems to be able to access it. But that's a business decision they have to make to get onto the system.

I would say, however, it's really important to be able to figure out the match between what I have to offer and what's going on here, there or anywhere. One member, for example, in the Kingston area mentioned with regard to the key word search that he would get contracts out of Trenton and Belleville, but when there was a contract let by the penitentiary 15 miles north of Kingston, he was not informed.

That's a failing of the system, and although I think the system and the concept behind it are the right ones, I'm not convinced yet it's working in a way that's optimal for small businesses.

Mrs. Chamberlain: Thank you very much.

The Chairman: Thank you, Mrs. Chamberlain.

Mr. Bryden, please.

Mr. Bryden (Hamilton - Wentworth): I'll try to be quick, because there are several waiting here.

How do small businesses learn about federal contracts in their particular region? How does a company of under 10 employees learn that a government contract is being offered locally?

Mr. Gray: There are all kinds of ways they can find out.

Mr. Bryden: Well, name a couple.

Mr. Gray: I must confess I'm not practising, so I'm not an expert on how the various firms do it.

It can be by word of mouth. It can be because they heard through their suppliers or competitors there's a bid going. It can be because they've kept in touch with a given department. There are all kinds of ways. Frankly, we don't have data that specifically outlines that.

Mr. Bryden: The direction of my question is that a few years ago the government suspended advertising in newspapers and other media for local contracts being let. Do you have any sense of whether this may have had a negative impact with regard to small businesses finding out about government contracts?

Mr. Gray: I can't answer that question, because I do not know. I'm sure the witnesses behind me, who are actually out there practising, will be able to give you a real answer to that.

I must say our experience as an organization is that when people are seeking information or advice, generally they tend to look to what I would call trusted sources of information and advice. That would include their suppliers; their competitors; often people who are giving them credit, legal or accounting advice; or trade associations. We've often said that if government really wants to help people understand what's going on out there, work through the trusted linkages.

My own experience is that if you're experienced in the process and used to looking in the newspapers for government tenders, that's a good spot. But if you're a new entrant you may not be thinking about that.

Mr. Bryden: You appear to take the position that it does not pay to advertise. I find that interesting.

If I may make a very respectful suggestion, perhaps you should poll your members some time and ask them whether it is useful for them to have government contracts advertised in the local newspapers, because this is a very significant change in direction by government.

The Chairman: Good question, Mr. Bryden.

Mr. Bryden: The officials who came before the committee could not tell me whether this has had a negative effect on small business finding out about government contracts.

Mr. Gray: Weren't they able to tell you whether government access to contracts declined after that change of policy?

Mr. Bryden: They just suspended it, and they have no data on whether it has had a negative impact on small business learning about government contracts, which surprised me.

Mr. Gray: Excuse me, sir, it's one thing to say they don't have the data, but I think you can surmise, if there was a great decline in the government contracts let to a given firm size, that may have had an effect.

Mr. Bryden: I'm not aware that they collected any data. It hasn't come to your attention either, and I find it very surprising that this medium of informing the public of government contracts seems to have undergone a significant change, when none of the players seem to be aware of it. But that's another....

Mr. Gray: In answer to your question, we would be happy to survey our members on that.

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Mr. Bryden: I would really like to see it.

To change directions briefly, twice in your presentation you commented about insiders and lobbyists and politicking. I would like you to elaborate on that a little bit more if you can. Is there a sense out there that small business needs to politic or lobby politicians in order to get access to procurement contracts? I see other people behind you nodding; that's really interesting.

Mr. Gray: Then I'll start nodding.

I don't mean to be coy about that, but what I would say is that there is a real suspicion that there is a problem in the network that way, that if you don't play the game you're not successful; if you do play the game you're more likely to be successful.

We've asked that question specifically of our members, and I'll be much more comfortable to tell you whether it's a serious issue based on the statistical evidence rather than on any anecdotes that I currently have.

Mr. Bryden: I have one final question on that line. Do your members make a distinction between lobbying politicians in order to get contracts and lobbying bureaucrats in order to get contracts?

Mr. Gray: I think in this situation it's one and the same.

Mr. Bryden: Thank you.

The Chairman: Interesting. Thank you very much, Mr. Bryden.

Mr. Bélair, please.

Mr. Bélair (Cochrane - Superior): Thank you, Mr. Chairman.

Thank you, Mr. Gray, for being here this morning. It's an excellent presentation.

I see in your opening remarks that small businesses get approximately $5.5 billion a year of procurement contracts with the Government of Canada, yet as you go on into your presentation, it becomes quite obvious that you are painting a very bleak picture, a very dark picture of the open bidding service.

This system was implemented last year, and of course hundreds of thousands of contracts are being awarded. The system seems to be working, yet you are saying that there are so many complexities, that some small businesses feel that they are not being treated fairly, if I can use the term.

You have mentioned a survey that is presently being done with small businesses. First, did you participate in the formulation of the new open bidding service? Has your federation suggested or recommended to the government ways to have the system on the Internet? You talked about modems and providing your members with some information. Did you participate in the formulation of this?

Mr. Gray: In terms of the development?

Mr. Bélair: Yes.

Mr. Gray: I might go to one comment you made earlier, and then I'll talk about the participation.

With regard with OBS, there are no doubt many benefits about it, but there's still a system that's imperfect and needs cleaning up. As with any new system, it has bugs to be got rid of.

I can give you an example of a consultant here in Ottawa who is very familiar, having worked in Government Services Canada, with the entire system. He found that it wasn't worth his cost to get on the open bidding system, because of the up-front fee and then the per-minute cost, or whatever the per-line cost is. It was much cheaper to go through the old manual system, as needed, than to go through the more intricate, costly system of OBS.

With regard to our participation in the development -

Mr. Bélair: In other words, are you saying that he was using his contacts within government to access, in a round-about way -

Mr. Gray: No, not in a round-about way, but through what I call the older methods. And I'm not suggesting he had any specific ins or outs or anything like that. All I'm saying is, from his perspective, it didn't pay him to use the OBS system. He found it too costly and it didn't work for him. Again, I'm waiting on the data, and I've been very forthright in my testimony about that, but I'm giving you reflections on the frustrations of members.

I can give you reflections on successes, but I think by learning about the problems we can improve the system. With regard to the development of OBS, we were not asked to help them develop it and we did not participate. That's the simple answer.

Mr. Bélair: What I gathered from what you've just said in answering some of the questions is that you are now prepared, if you are invited, to improve the system - with some positive recommendations, of course.

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Mr. Gray: We certainly are, of course. I think we have a strong record as an organization in coming before government with strong, detailed research data, which helps decision-makers and policy-makers make decisions that are useful and relevant to our constituency; and we are strong in terms of giving useful recommendations that are workable.

The Chairman: Mr. Murray.

Mr. Murray (Lanark - Carleton): Mr. Gray, thanks for a very lucid and helpful presentation.

First, I would comment that this question of late payments is of obvious concern to all members of the committee. I seem to recall - and I may be wrong - that the government, some years ago, made a conscious decision to...I'll not say delay payments beyond the appropriate time, but I think it had decided to not pay as immediately as it had been paying in the past. Perhaps that was carried to an extreme, I am not sure, but it's an interesting situation. Obviously it has been looked into, as you explained.

Mr. Gray: Mr. Murray, in fact, it has become something of a strategy for larger organizations to extend payment for their own benefit. As I said before, the person at the end of the chain is the one who gets creamed.

There is no doubt the Government of Canada's current policy, as I understand it, is that although they are presumably supposed to pay within 30 days, they have a 15-day grace period within which no penalty accrues. Really, the system doesn't start to crank up until day 45, and it's not unusual for members to tell us, whereas I talked about 60 plus days here, about examples of 120 and 180 days.

It's simply unacceptable to have your own government holding out on you the way some of the toughest players in the market play with firms they'll cast aside if they don't play the game. It's one thing for large firms to be doing that - and I find it horribly unacceptable - but for your own government to be playing with you that way I find reprehensible.

Mr. Murray: No, I wouldn't disagree with you at all. I find it very ironic that our government has been trying very hard to find any way at all to help small business, and cashflow is obviously a serious problem for all small business. We are just finding out about this as a committee two years into our mandate. As I say, it's been very helpful.

I am interested in your comment again on the question of payments, that governments should consider payments to all levels of suppliers; in other words, not just pay the contracter, but get into paying the subcontracters. Is it your experience or your members' experience, as far as you know, that non-payment has been a larger problem on government contracts than on private sector contracts?

Mr. Gray: Again, that was a reflection of a member and was from that person's own experience. I don't know that this is a widespread problem. Again, I would ask the people who are in the business of dealing on an ongoing back basis. I would ask you to ask them that. However, I think it's an interesting enough subject.

One of the things about this survey is that it's given us food for thought for all kinds of what I call subsequent questions, policy decisions and questions that we ought to ask. So once you lift the rock a bit, then you have all these beetles that come out and you're trying to identify which ones really have little nuggets of gold in them for purposes of government policy. I think we're only in the first phase of this.

I think your committee's work is incredibly important in terms of getting a public focus on it. We will do everything we can, not only with this survey but with subsequent surveys that try to get to the crux of what we've learned from the first survey. It's not enough to stop there. I think we're going to have to go beyond that.

Mr. Murray: In the earlier part of your presentation, you mentioned that the CFIB has been hearing complaints about government procurement at all levels of government. I've been quite impressed with the OBS when we had a presentation to our committee. Quite frankly, I thought it seemed very user-friendly and quite helpful. I wanted to ask you if you think at least the federal system, the OBS, may be a model for other levels of government, that we're perhaps ahead of other levels of government in terms of service to potential contracters?

Mr. Gray: I think the idea of an electronic access is an extremely important one and I think it's useful, but I would encourage you to get rid of the bugs in the current system before you try to sell it to other levels of government.

With regard to other levels of government, one of what I call the information capture questions in this survey is to understand which of our members deal with which levels of government. In the future we're going to go after the problems relating to provincial and municipal procurement, not just federal.

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It's one thing to be at this forum, but a great many of our members deal more locally than at the federal level, frankly because they find it easier to access it. It's closer to them. That's not unusual, whether you're in the private sector or not. So we're going to lift that rock as well and understand what the difficulties are.

Today I've talked about some of the problems at the federal level. Undoubtedly there are as many problems or perhaps more at the other two levels of government.

Mr. Murray: Thanks very much.

The Chairman: Thank you very much.

Mr. White, I understand you have another brief question.

Mr. White: I have just one last question, Mr. Gray.

Obviously there's been a lot of discussion this morning about the tardiness of the government paying its bills. Have you given any thought to why that might be? Do you have any suspicions about why the government may be dragging its payments this way?

Mr. Gray: With a cash-strapped government, it's good business to extend your payables.

Mr. White: I think you're correct. I was wondering if there is a component there, or if you just think it's a bureaucratic - what can I say - lack of conscientious effort to push the paperwork through to get it finally paid at the other end.

Mr. Gray: There is something you really ought to look at in this regard. There is a point at which it becomes cost-effective for government to process the paper sooner, where in fact it would cost you less if you paid sooner. It's important for you to push people coming before you on what that point is.

We're trying to understand that in the paperwork reduction committee. We're going to get to the bottom of it, because we believe very strongly that prompt payment has economies for the administration of government as well as being good business in terms of dealing with your suppliers.

Mr. White: Although you of course hit the nail on the head when you realized if the government were to bring its payables forward even one month, it could amount to $10 billion that it would have to borrow tomorrow on the open market, which increases our deficit and payments on the debt. I'm sure that's what's driving it. That's my personal opinion.

I doubt whether this committee will have any success in making the government pay earlier, but I hear what you're saying.

Mr. Gray: We're talking here about a question of good public policy. It's good public policy to treat your customers with decency and respect.

The Chairman: Thank you.

Mr. Bellemare.

Mr. Bellemare (Carleton - Gloucester): Thank you very much.

Your presentation was superb. It was quite revelatory. I've been on this committee now since the first inception, and was on public accounts before then for five years. Contracting is a great interest of mine.

I'd like to start with some comments you've made.

One is that the federal government spends approximately $14 billion a year on contracts. When we first started in public accounts some years ago, we were talking about $3 billion. Two years ago the figure went up to $5 billion plus. The latest figure is $9 billion, and to support that, there was even an article in the paper this morning giving a chart on the $9 billion count for contracts.

You state the government spends $14 billion. That's quite a revelation. Where did you get that figure?

Mr. Gray: I must say I pirated it from a letter I got from Mr. Zed.

Some hon. members: Oh, oh!

Mr. Gray: You have to look at the number broadly. Can you tell me what the basis of the$9 billion is? There is the question of crown corporations. Are they included in the $9 billion? I'm not sure they are.

The Chairman: No, they're not.

Mr. Gray: Are out-of-country contracts considered part of the $9 billion? I doubt it.

If you added in those opportunities in terms of government bidding services and opportunities for small businesses, I think you'd find the number is considerably larger than $9 billion. Whether it's $14 billion or $12 billion, the issue is it's a huge number, and small business needs a better portion of the pie.

Mr. Bellemare: I would be very interested in getting a copy of the letter the chair sent you. Maybe we have all kinds of interesting items in there.

To go on further, you say you should have a bigger part of the pie. I know there's a perception out there that everything emanates from Ottawa. People seem to forget that approximately 30% of public servants and activity is in Ottawa. The rest is out in the field across Canada proportionately. If P.E.I. represents 1.5% of the population, then 1.5% of the public servants are located in that area. It's proportionate across the country.

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I would assume that the activities follow through. But that perception that if you want to buy something or sell something you can only do it with Ottawa - is that what you found?

Mr. Gray: Again, on that one, we've asked specifically the question: did you have to deal with an agency in Ottawa or outside of Ottawa? We will know that and be able to cross-tabulate it against our results. I think that will be very useful information for you.

Mr. Bellemare: You'll have to come back, that's for sure.

Mr. Gray: That's right.

I might just add that in our experience - again, this is through testimonials from members - there are some agencies that appear to do a better job than others in terms of local procurement opportunities.

For example, it's my understanding that ACOA is quite proactive in terms of that in Atlantic Canada. The question I have is: are other government agencies as proactive in the regions as ACOA may be in Atlantic Canada? I think the experience is extremely mixed, and we're trying to understand that.

Again, this is the survey. I'd be glad to hand it around to each of you. We've asked in the survey which department poses a problem for you and which doesn't. We will be able to cross-reference that data against firms that are dealing largely with Ottawa and outside of Ottawa. So we'll be able to get perhaps not perfect information, but more perfect information than what we have currently.

Mr. Bellemare: In your survey and studies do you differentiate between...? Say the total amount of contracts is $9 billion; you state it could be $14 billion. You did put a rider very properly such that you're talking about outside agencies, the National Research Council, or any activity that's out of the immediate control of the Ottawa government.

Have you divided that into, for example, services? There's so much for services, so much for goods, and so much for construction. When you talk of small business, the first thing we think of is, say, people who sell goods. Obviously there is a problem of access in both directions if it's for goods.

If you want to buy, let's say, mattresses for an army camp, even in a city like Ottawa we're flooded with mattress stores. If you go across the country, there must be a million mattress stores. Should they all have a piece of the pie in order to help them out? How would it work, in your mind?

Mr. Gray: I don't think it's practical to have every mattress and distribution outlet in the country having access to the pie. I think you have to go by a policy that talks about....

Nobody in this room would argue that you need standards for government, just as you would for a business. You need a quality product. You need to have it given to you in a timely fashion. The service related to the product or service has to be very good. And the price has to be sound.

Beyond that, I think there are some economic development policies, as I call them, that go with that. I think you have to try to be true to both objectives. Don't give away the candy store in terms of money to achieve the second objective, but don't ignore the second objective in the quest to be so efficient that you're not contributing at all to economic development.

Mr. Bellemare: We're getting to a problem that I've been watching. The question is one of encouraging or caring for the local economy versus economizing, saving money, and going to the lowest bidder.

I call it the Wal-Mart syndrome. Government could say it will buy from Wal-Mart for the cheapest price and fastest delivery. In my mind, you would ruin all the small businesses by going into that approach.

Because of NAFTA, the risks are immense that you could end up by purchasing in Mexico or the U.S. and putting everyone out of business. So the question is this: what should be the most important factor? Is it the lowest price, or caring for local economies?

Mr. Gray: My own view is that it has to be a mix of the two.

Mr. Bellemare: Thank you.

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Mr. Gray: Well, you're the people developing government policy. I think you have to remain true to both goals, because in the end you're worrying about the development of this country.

The Chairman: Thank you very much.

Mr. Bélair, please.

Mr. Bélair: I have just a brief intervention, Mr. Chairman.

You just insinuated that a certain amount of dollars should be set aside for small business. You certainly recall, Mr. Gray, that last year a survey was done with the small businesses, and the results were that there was no need to try the set-aside program. Are you saying today that it should be reinstated?

Mr. Gray: No, I'm not. I haven't at any point in my testimony talked about a set-aside program for small business. I'm talking about fair and equal access to small business. If you pursue a policy that gives people true, fair and open access, then the market will take care of itself. The problem is that there is a perception, and in many cases a reality, that access is not true and open.

In terms of a set-aside policy, our members are free marketers. They don't believe a set-aside is going to do much good in the end. It flies in the face of some objectives of the current government in terms of things like the internal trade agreement. One of the biggest problems we have in this country is the fact that we have these artificial barriers in these fiefdoms all across this country, which are presumably intended to help firms but which in fact are obstructing firms' opportunities.

So we're not saying we should have a set-aside, because we think that once you get into a small business set-aside, then you get into a set-aside for every conceivable interest group out there. I think fair and open access is the point of departure we have to go from and let the marketplace work in that manner.

The Chairman: Thank you.

In trying to conclude testimony for the record, we've been asking witnesses about the amendments to contracts that have appeared. Do you have any idea or any preliminary thoughts on why there may be so many amendments to these contracts? Is it bad accounting, is it underestimating - in other words, unplanned expenditures - or did you want to make some other suggestion?

Mr. Gray: I can't bring any greater knowledge than you've had in terms of the testimony before you up to today, but I would expect that there are a lot of add-ons to some of these contracts, and that would be one of the reasons for these amendments.

The Chairman: The other thing is that I was happy to hear in response to Mr. Bélair and his intervention, which I think was a very valid one, that the CFIB does have some interventions they want to make on OBS. I think the government itself has accepted that it's a new system and they're looking for opportunities for improvements. I think Mr. Bélair, as the parliamentary secretary, is anxious to get that information, and we're pleased as a government committee to receive your ideas on it because I think our interest is to make that system more accountable and more accessible.

Going back to your comment on set-aside, I know you've expressed your view on it, but if we can't get at government contracting any other way, are you still negative to set-asides for government procurement?

Mr. Gray: I think we'll have to face that when the system isn't working. At that point, with respect, I would go to our members, as we do on every policy issue, to ask them whether they favour a set-aside policy. To date they do not.

The Chairman: I want to thank you very much, Mr. Gray. You've certainly given our committee a great deal of food for thought, and we will welcome you back.

Colleagues, I understand that our next panel is here, and if it's agreeable, what we might do is stand Mr. Gray to the side, sort of splitting the panel, so that he might be available to also bring these small businesses forward. There could be continuing interactions. If that's agreeable, we'll suspend while we set up for the next group of witnesses.

We're suspended for two or three minutes.

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The Chairman: I call the committee to order.

We're resuming our small business day. On behalf of the committee I would like to welcome Mr. Cowperthwaite, from the Human Resource Systems Group of Ottawa; Mr. Earl Tice, vice-president of Nothing But Furniture from Markham, Ontario; and Mr. Gary Langhans, from SJM Packaging in Calgary.

Thank you for making the special effort to be here today. We also appreciate your interest in giving us your views on small and medium-sized businesses' access to government.

Before we begin, Mrs. Chamberlain has a request to make of the committee.

Mrs. Chamberlain: Mr. Chairman, there's an article today by Kathryn May of The Ottawa Citizen, who is sitting in the back. It talks about Natural Resources and contracts going to family and friends. It talks about certain areas, such as the hiring of summer students who are related to employees, and different principles that have not been followed.

Mr. Chairman, I would ask that we entertain a witness from Natural Resources. I don't necessarily believe everything I see in the newspaper, with due respect to Ms May, but it is important that we pursue this and find out if we're not following our own practices.

The Chairman: That's an excellent suggestion. I'll ask the clerk to contact the deputy minister and ask if they can appear. I think we have an opening on December 12. Would that be acceptable?

Mrs. Chamberlain: That's perfect for me.

The Chairman: If we can, we'll bring them in for December 12.

Mr. White, is that acceptable to your party? Great.

Colleagues, we would like to receive a two- or three-minute presentation from each witness. If you stay at the table, perhaps we can have a more interactive discussion.

Mr. Gray, I want to remind you that if you or any of your co-panellists wishes to make an intervention, you may do so.

Mr. Earl Tice (Vice-President, Nothing But Furniture): I'm the vice-president of both Nothing But Furniture and Ecid Innovations. Both companies are small businesses located in Markham, Ontario.

NBF is a family-owned and operated reseller of office furnishings manufactured in Canada and the United States. Ecid Innovations is a small manufacturer of items of our own design, such as the Original arm rests for computer users and the Heather line of pillows, which includes a unique nursing pillow for new mothers.

The letter I received explaining the objectives of the Standing Committee on Government Operations indicated the government's desire for competitive pricing as well as equal opportunity for small business to win government contracts. In my remarks today, I will try to offer constructive suggestions on how this can be accomplished.

The letter also indicates that goods and services purchased by the government must reflect the most economic price, which I interpret to mean the lowest price, and second, that the government looks for value for money. I see the two objectives as frequently being in conflict.

For government to obtain the most economic price, it usually means buying direct from a manufacturer in volume. If government must buy at the most economic price, it may be put in the position of buying more than it requires of an item in order to achieve that goal.

Value for money, in my opinion, means getting the correct product and the right quantity, even if on a per-unit basis the cost is higher than the most economic price. My first suggestion, therefore, is that government place value for money as its first goal, ahead of the most economic price.

I was invited to appear before this committee as a result of a letter that I wrote to New Brunswick MP, Mr. Paul Zed. One of the suggestions in the article attributed to Mr. Zed was that a certain amount of government business be set aside for small and medium-sized business. I think that is a good idea, one apparently subscribed to by the U.S. government as well. I believe there is legislation in the United States to the effect that government agencies or departments and possibly some private companies must spend at least 5% of their annual budget with small businesses or businesses owned by minorities or the disabled.

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This information only came to my attention on Thursday of last week, so I've not had the opportunity to confirm its accuracy, although I believe it is accurate. I have, however, been in touch with a small business operator in Florida who couriered information to me on Friday regarding the State of Florida purchasing policies. There is a State of Florida program known as SNAPS, which stands for state-negotiated agreement price schedule. This program can qualify a government supplier in less than one week, and eliminates the requirement for competitive quotations as prices for goods and services are pre-negotiated.

How does a small business participate in a SNAPS program? It seems there are some 40-plus agencies and departments in Florida that can buy up to $11,000 annually from the SNAPS small business supplier. I understand that this limit will rise to $150,000 per agency per supplier on 15 January 1996.

Of course it is necessary to define small business. This could be done on the basis of its annual sales volume in dollars. Perhaps small business has an annual sales volume of less than $5 million or $3 million or $2 million. This yardstick has yet to be determined.

Requiring that a specific percentage of a department's budget to be spent with small business is one way to ensure that small business and government will work together.

Dealing with the federal government is perceived to be a daunting and intimidating task for small business. I have a directory of federal government telephone numbers in my office and this directory is the size of a good-sized phone book. It's huge. I don't know where to start in trying to deal with government.

There's a group of retired private executives in the Halton region who help small business tackle problems of growth and planning. With the help of a federal grant, this group produced a manual entitled Starting a Small Business Advisory Group. Perhaps a government-sponsored volunteer group of retired federal government executives could be available in local regions to help small business get through the maze of government.

I want to thank the standing committee for this opportunity to appear today to offer some of my thoughts and ideas on how small business and government can work together.

The Chairman: Thank you, Mr. Tice. You don't know Mr. Bryden and his zeal for making sure there is very little going in voluntary groups. He'll get to your matter quickly.

Now we'll hear from SJM Packaging, please.

Mr. Gary Langhans (Partner, SJM Packaging): Thank you.

SJM Packaging is probably the smallest company up here. We supply people with protective cases for equipment that's going to be taken out in the field. Our typical customers are oil companies, oil-patch users, police forces or the military. The case I'm going to discuss today will highlight some of the problems that Mr. Gray brought out, and it concerns a contract put out by the defence department.

We initially established ourself with the CFB in Calgary, through local purchase orders. About mid-1992 we supplied them with a case for a laptop computer and a printer. They found that our product was of a strength that they hadn't seen before, it was at a competitive cost, and they liked our service. We were able to set it up so that they just opened the case, plugged it in and it was ready to go. It was all hooked up within the case itself. Over the next year we filled three more orders for them, all on a local purchase order, and this was because of their satisfaction with what we had provided.

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Through word of mouth, people throughout the military heard of us. In 1993 we got a call from Petawawa and ended up sending the fellow a sample case so he could have a look at it and evaluate. He was going to do some testing. This case ended up in the possession of a fellow in Ottawa who was going to be project manager in charge of approximately $2 million to secure about 150 to 200 laptop computers.

He called us and requested information and specifications on our case for the purpose of including it in his tender, so that he could try to direct the suppliers so they would include our case in their tenders, and in fact, he wrote up a separate annex listing the case specifications that our case had passed, and also referenced and said he liked the case, model number such-and-such, at our company.

Ultimately one computer company was chosen to supply the computer, and they had presented their product packaged up in the case we were supplying.

So we became a subcontractor. They were the main contractor. We were not dealing with government directly. This is where the problem started. We're very small, and they're a large outfit here in Ontario. They wanted to unilaterally dictate financial arrangements. Our banker didn't agree - basically they were unknown to us - and it was over credit terms. Although the tender we had originally given them spelled out what we wanted, that was okay at the time, but it all changed after the fact.

We were not concerned initially. We thought they would never get the substitution through because there's no other case that meets this specification we had quoted - and it was quoted in the tender. It's the most stringent military specification put out in the U.S. military. However, this wasn't to be the case.

Ultimately, over the course of a year, we exchanged correspondence with the Supply and Services and with the Department of National Defence. It is not within this format to go through all of what was said back and forth, but our two main complaints were improper timing and procedure on the substitution - and that was our biggest thing with Supply and Services - and also, we did not feel that the substituted case was up to specifications.

In respect of some of the case problems we ran into, the last letter from Supply and Services came back and said, in effect, that the timing was of little consequence and that perhaps they had made the substitution not quite right, because it was before a final award, but it was of little consequence to them and basically they brushed it off.

There were also people put in charge of looking into this whole thing to see if procedure was followed and see that the substitution was correct. They would go through that, and I think what they did is.... All the paper forms changed hands properly between Supply and Services and the Department of National Defence. It came back to us that the substitution was okay and actually was a superior product. At this point we started chasing this down through access to information. Actually, after the problem started we had to get all our information through access to information because we were a subcontractor, and this was to us a red tape thing. It just delayed everything.

Anyway, he made the claim of superiority of the other case. When we went to access to information and asked for the test results, we were supplied with a sales brochure from this company. That was it.

We handle more than one product line. We had 40 copies of this so-called test result on our counter because we also handle that same case line. So we went back to them, and of course, we were complaining.

Ultimately they retracted that claim of superiority, which left them with no testing done on this new case. But in one letter it was said that there was a physical assessment done by the technical consultant for this issue on these cases, and that the case would be acceptable. Again, that's against procedure. The spec quoted for this case is an elaborate spec. If you were to run the whole gamut of tests, it would take thirty days.

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The last point we want to make is the technical consultant was the project manager. The fellow was reviewing his own decisions concerning the quality and the substitution of the case.

So, as I say, we were very frustrated and disappointed, and infuriated as taxpayers, really. The end result is we ran out of steam; nothing happened. We exchanged a lot of paper, but we were unable to change anything.

The Chairman: Thank you very much for that anecdote and intervention.

Mr. Cowperthwaite, please.

Mr. Bill Cowperthwaite (Vice-President, Human Resource Systems Group Ltd.): Thank you, Mr. Chairman.

Human Resource Systems Group is a small, five-person company that offers human resource management at a strategic level in organizational development, human resource planning and selection and performance management. We reside about two blocks from the Hill in Ottawa here.

I'd like to thank you for the opportunity to offer a few thoughts on the current system of federal procurement as it affects small business.

I'd like to comment on four issues. First is the use of the advance contract award notice, or ACAN, a designation for sole-source. Second is the problems facing project managers and their preference for the use of sole-source. Third is the issue of the split contract. And finally, there's the knowledge of the consumers themselves.

May I say from the outset that I have the perspective of having been on both sides of the fence, both as a project director for large government projects and now as a small business owner competing for business.

First, on sole-sourcing practices, a lot of contracts listed on the OBS are entitled ``advance contract award notice'', or ACAN. This is a euphemism for sole-source. Many are obviously directed to a single individual or company.

For example, a recent ACAN required that a contractor be a lawyer, that the lawyer have a QC, a designation that is no longer given to lawyers, and that they have five years with a particular methodology that is barely five years old. It was obvious the contract was targeted at a single individual, even though the principal Canadian founder of the process lives in Ottawa and is a lawyer, but is not a QC.

These sorts of criteria are frequently found on the OBS, and their lack of subtlety, frankly, is an insult to the intelligence of most of us.

I've been told by Public Works and Government Services officers that they use the ACAN ``because they don't know who's out there to do the work, and they are looking for challenges to the ACAN to learn of other contractors''.

It should be noted that when I began in business, I was warned that the last thing you should do is challenge an ACAN if you ever want to do work with that department again, because it results in problems for the contracting officer as an individual and is often censured by management as a result. This causes the challenger, then, to be less of a contender in the future. Secondly, the challenge interferes with the awarding of a contract to a preferred contractor and draws attention to the problem, again causing the challenger to have less opportunity in the future.

In one of the incidents where we did challenge an ACAN, we were told we did have the necessary qualifications, but the organization decided to proceed with the original contractor because the work was already under way. In addition, my corporate documentation, my letter of challenge, was given to the competitor, who then called our company and verbally abused our president, Dr. Suzanne Simpson, to the point of the abuse being legally questionable.

Of course, not being clever enough to learn from this first case, I challenged a second ACAN because I knew there were at least five other companies or individuals able to do the work requested, including one of our associates. The challenge was denied on the grounds that our organization would not be the direct bidder, despite the fact that we were going to act as prime for our associate.

It is very easy for government organizations to discourage small business from continuing a challenge by extending the challenge process through delays and additional requests for information. The small business does not normally have the time or the resources to expend on long bureaucratic processes.

Based on our experience, I now realize that to challenge an ACAN is not in the organization's best interests and will only result in frustration and perhaps abuse. I am not likely to challenge any in the future. This of course is what sole-source awarded contracts would like to see.

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I raise these issues to point out that the ACAN system, if it is being used to find out who's out there, is not working. The easiest way to find out who's out there is to post a notice on the OBS and see who bids on the contract.

Secondly, I'm not suggesting that this is a general trend. When a challenge is issued, the corporate information of the challenger should not be sent to the competitor; this information should be treated as confidential and as the authoring organization's intellectual property.

Let me also say that I'm not against sole-source contracts. I believe that where the nature of the work is such that only a few truly qualified people exist - for example, there are several ACANs on the habitat of certain rare species of fish that may only involve one or two people who have the knowledge - this might be a good thing. Occasionally in very pure R and D this may be a good thing, but for most I think it is not a standard practice that ought to be encouraged.

I'm taking more time, but I'm going to go onto project manager pressure. As a former project manager I understand that they usually prefer the sole-source contracting method because they are under extreme time lines to complete their projects. Their masters, both government senior managers and political masters in some high-profile cases, want these jobs done and done on time. The contracting process for them is so long and so complicated and it's so difficult for them to get their work done that they prefer the sole source or contractors they know because they can get it done quickly even if the contractor may not be the best available.

I would like to suggest that in these cases of projects, there be some system between the master standing offer, which is very much related to the SNAPS program that Mr. Tice mentioned, and the open bid. This might be included where contractors for a specific project could be pre-qualified and be given a two-year term, for example, before they have to re-qualify or a new offer is sent out. They would be used for that project alone, not necessarily all the members of that particular department.

This pre-qualification could help the project manager continue to keep his time lines and yet would give opportunities for businesses to act as businesses or as bidders to a particular project rather than having them given only to friends or known organizations.

My third point is the split contract. Contracts over $30,000 supposedly have to be put on the OBS. They're frequently not and you don't see a lot of them in some departments. If they're under $30,000 they do not have to be. There is still a very prevalent practice, despite the fact that this is forbidden, that contractors get $25,000 investigative programs that can be sole-sourced and signed off at a fairly low level. They then qualify that individual to get very large follow-up contracts because - and the usual euphemism is - they are uniquely qualified to do the job.

Certainly in my business, which is services, it is not much of a difficult problem for me to pick up previous service work or previous work if it's been done correctly, understand it, and quickly carry on and incorporate it into the kind of work I could do for that department.

My next point is knowledgeable consumers. We find that very often the people who do the bidding or the contracting are not understanding well the service they're trying to contract for. For example, there is one department that contracts several contracts a year in the range of $400,000 to $500,000. In the past these contracts have tended to go to one of five major companies. In most cases the clients have wound up putting the results on the shelf because they were not useful. So this is several million dollars a year being expended, with the results virtually being used as doorstops.

The government appears to have no quality control system to determine whether they are receiving value for money or whether or not the services are being delivered and are useful to those who requested them. Contractors failing to meet quality criteria could perhaps be suspended from bidding for a set period until they got their quality control up to proper standards. If the government truly wanted to save money, the project authorities would be knowledgeable about the area they wanted to contract or hire someone who was to vet the proposals and vet the results of those proposals for quality and utility.

Finally, my experience has been that the majority of government contracts are given to those who are already known by contracting authorities. The practice makes it difficult for small businesses to win government contracts because they do not have the staff to dedicate to wandering the halls of government departments to get to know all of the contract authorities. The problem is even more difficult, obviously, for those who do not reside in Ottawa.

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The sole-source concept of ACAN to find out who's available to bid is nonsense. Simply reviewing the bids on a project would tell them that information.

There must be a middle ground between the master standing offer and the sole-source contract that would let hard-pressed project managers get their goods and services quickly so they could maintain the time lines of their projects. A pre-qualification scheme might be the answer.

Departmental staff must be knowledgeable about what they're contracting so they can tell the good bids from the bad and the good results from the bad.

I've also heard that Canada has been considering a small business set-aside. I am fortunate to have served in the United States as a Canadian representative and was able to see firsthand the U.S. small business set-aside program. This program may work for them, since the size of their ``small business'' would be a very large business to us. I understand it's companies of $50 million or less a year, which certainly includes a very large number of Canadian companies.

However, it was not a well-liked program, and as with a lot of other programs designed to redress imbalance, it was subject to abuse. I would not like to see a program like this in Canada. What I ask for is a level playing field to compete on price and quality without the concerns of a large company. They too have limits on what makes sense to them in terms of their overhead costs and the cost of preparing a bid. I can look out for the bigger companies as long as I get a fair opportunity to demonstrate my capability.

My request is that whatever the rules are, they be followed; that if they are to be posted on OBS at a certain level, they be posted on OBS at a certain level; and that I can bid on them openly and freely.

Thank you, Mr. Chairman. I'm sorry I took longer than I was allowed.

The Chairman: Thank you very much.

I'm particularly struck by your recommendations. I think they'll prove very helpful to all of us as we make some positive decisions that we can give to our colleagues in Treasury Board.

Mr. White, do you want to begin this morning?

Mr. White: Yes. Thank you, Mr. Chairman.

I have a question for Mr. Tice.

I'm really having difficulty with this set-aside program, I must say. In case you weren't here earlier, I will say I'm also from the small business community and have been an entrepreneur and in small business for most of my life.

As mentioned by Mr. Cowperthwaite and also by Mr. Gray earlier, there's a tendency for these contracts to go to insiders all of the time. If we created a set-aside program, wouldn't we just be creating another special interest group with its own budget? Wouldn't there be a tendency for the bureaucrats to call up the same people every year in order to fill their quota? Wouldn't this just create a dependency on those government funds, year after year, without really opening the process at all? Isn't the real problem the access rather than the need to set aside a specific amount of funds for small business?

Mr. Tice: Certainly access is a problem. We're located in Toronto, and we simply cannot get to the government departments in Ottawa.

I'm sure the set-aside program is not without its failings, but it seems to me it has some opportunities for us to direct some business specifically to small businesses and ensure they do get a piece of the pie. Again, I would not suggest that there are not problems with it and that there should not be some controls on it.

Mr. White: Would you agree that there might be a tendency to create dependency?

Mr. Tice: Not necessarily. If a vendor must qualify, I'm sure there would be more than one vendor within the category in which that vendor is presenting himself. So there's no reason to suggest that vendor will receive repetitive business every year, unless he has a specific service that meets the needs of that department.

Mr. White: Thank you.

That's all I have, Mr. Chairman.

The Chairman: Thank you very much, Mr. White.

Mr. Bélair, please.

Mr. Bélair: Mr. Chairman, I would also like to revisit the set-aside program, because it is really on the minds of many small business people across Canada.

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The testimony we heard from the second set of witnesses seemed to contradict quite directly the one that was made by Mr. Gray, in the sense that Mr. Gray has said that small businesses in Canada did not prefer the approach of having some dollars being set aside specifically for very small businesses, yet these witnesses are saying that there should be some dollars set aside.

So my question would be to Mr. Tice. Given that there is an agreement that 40% of the moneys allocated go to small business, in your view should this be increased by setting aside some more dollars in order for small businesses to benefit from government procurement?

Mr. Tice: I'm sure that the amount of dollars has to be increased, Mr. Bélair. I think if a percentage of a budget was allocated and the department was required to ensure that at least a reasonable percentage was spent with small business, we would get the spread of the dollars throughout small business.

Frankly, right now we don't deal with the federal government, with the provincial government, or with the municipal governments. It's simply too awkward for us to do so. The system must be simplified.

The system they have in the state of Florida can qualify a supplier in one week. So the supplier can go in, tell the purchasing people the types of products they have, the prices at which they are prepared to sell them to the state, and negotiate a deal instantly. So that supplier is qualified within a week's time. He may or may not receive business instantly, but he certainly can qualify. At that point, I believe it is the supplier's responsibility to go to the various departments and promote his products or services.

Mr. Bélair: The point is, Mr. Chairman, there used to be a set-aside program. It was in existence. Upon recommendation of small business operators across Canada, the program was cancelled.

The numbers seem to indicate today that even with the cancellation of the program, the numbers are about even, just about the same. So it comes back to the point Mr. Gray made a while ago. It is not necessary, but I can see that it is certainly not an unanimous choice or preference.

So this committee should hear more from other small businesses as to what we should do, the recommendation we should put in our report.

Thank you.

The Chairman: I think your point, Mr. Bélair, is well taken. There appears to be lack of unanimity on the subject. As a consequence, it's difficult for us to make a determination on that one point. But it's interesting nonetheless to get reactions to it.

I think, Mr. Gray, in future deliberations with the CFIB, as we talked about earlier, it would be helpful to get a reaction of your group as a whole on a set-aside for business.

Mr. Gray: We do have pretty recent data on that and they are still against it. It's not an overwhelming number against. Obviously you have differences of opinion, just as at this table.

Mr. Cowperthwaite said that from his perspective and from his experience in this area in the U.S., the small business administration program isn't a giant success. From my American colleagues, I've heard information in the same vein. So I don't know whether we should look at the American model as being a panacea for small business in Canada.

The Chairman: Mr. Cowperthwaite.

Mr. Cowperthwaite: One of the problems you can face in a small business set-aside is that you would have a large business form a small business and qualify, and support that small business with a very large number of very high regional offices across the country without anybody being necessarily the wiser, and you couldn't legislate against that.

The Chairman: It's a very valid point.

Mr. Bryden, please.

Mr. Bryden: I'll direct my questions to Mr. Cowperthwaite and Mr. Langhans. It would appear from what you say - I think this is a perception that's growing more and more upon us - that there's a great deal of low-level cheating across the departments. The rules are there, but there's cheating everywhere. I would like to ask each of you gentlemen separately: what would you recommend the government do to control this? How do we do something about it?

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Mr. Langhans: Personally, I don't know if more legislation or more rules are going to do anything. I think the rules are in place; it's developing the proper attitude to enforce them. We felt we were being controlled by these rules. The flip-flop was, in effect, that they were being used to control the public, but don't really expect the rules to work the other way.

So I don't know how you correct attitude. That really goes beyond legislation.

Mr. Bryden: Mr. Cowperthwaite.

Mr. Cowperthwaite: I think it comes down to when you're looking at the projects in particular and trying to get them done. The poor project manager gets to a certain point in his project, and suddenly he decides he needs a consultant or somebody to help him over a particularly sticky wicket that he got himself into, or something that needs to be a small purchase for trial in order to determine whether or not the specifications they're developing are okay or not. The contracting procedure that this individual has to go through is very long, time-consuming, and difficult for them. It would stretch his time line way out beyond the budget for the year that might have been allocated by that department for the project. It would delay projects. It would raise government costs enormously because of project delays, and so on.

There needs to be a way in which people who are trying to develop and produce projects can get at help fast. This could be through a pre-qualified set of bidders. This is not a master standing offer, which is a department-wide thing in which somebody who sells particular goods qualifies at the beginning of the year, two years or three years. Then they can sell it. This is a project-by-project type of thing. When you know that certain services or types of things are going to be needed, you could pre-qualify someone. You need a better method of allowing these guys to keep on their program time lines without having to go through this horrendous contracting.

Some of them don't even know that they can go out and get quick contracts through standing offers and other types of things. They're not even aware that this facility even exists in some places. I can't somehow fault them, because their careers on the line.

Mr. Bryden: Again, to both you gentlemen - I'm sorry to leave you out, Mr. Tice, but your comments were along a different vein - would it help to have better access to information?

Mr. Langhans was saying that he had to go with access to information, and he had a great deal of trouble to find out what was going on. Should this whole process be more open? Should there be more information about what's actually going on, what decisions are being made by the procurement officers, and what's available to the general public? Is that a way out of this problem?

Mr. Langhans: We didn't have a problem with getting the information with access to information. It's available; it's just the time and what have you. Also, we went from the position of being consulted on what our specifications were - this was initially the product of choice - to being relegated to.... They wouldn't tell us over the phone who was the substitute manufacturer or the model number.

Mr. Bryden: That is withholding information.

I have one last question in this vein. Would an ombudsman help? What about a Treasury Board official at arm's length who could come in and access complaints? Would that be a way out of this problem? There has to be some way to get at this.

Mr. Cowperthwaite: Yes, I think in some cases there should be a different type of appeal process than what currently exists. You can go back to ask the particular contracting officer, the Public Works officer, why you didn't get it. It is the policy, by the way, that they do give you feedback if you don't win a bid. For the most part they do this, although some of it's delayed very long in some cases.

But in response to the previous thing, I don't have trouble getting access to bids or bid information on the OBS. What I do find is a problem is that there's no consistency with the way the terminology is used. I found things that were important to me buried under names that I wouldn't even have normally looked for, except that somebody else had looked for it and told me about it.

There is no current lexicon of information in which the structure of the way you put the bid on the OBS allows you to find the things you're interested in easily. It can be any name you want. Then, underneath, there can be the detail as to what it is.

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But you still need the OBS. I might point out that the Americans use a program called the ``Commerce Business Daily'', which is a listing on a daily basis in a special newspaper. You must subscribe to it, by the way. It comes out electronically, by fax, or some other way. Or you can wait for four or five days until it's actually printed and distributed like a newspaper.

This is a difficult process as well. I don't have an access problem, but I do have problems with consistency of language and stuff like that.

Mr. Bryden: To all three gentlemen, do you think the fact that the government has discontinued advertising contracts in publications such as newspapers has made it more difficult for small business to be informed of contracts coming up in their regions?

Mr. Cowperthwaite: Again, this would depend. Say it was regional advertising. Again, there are so many contracts. I have to go on OBS on a daily basis in order to find out if there is anything for me. That's about ten minutes a day at 40¢ a minute for me, plus then anything I buy in terms of a bid contract to find out if I really want the thing or not.

Regional advertising might be helped with a paper, but I think it's going to be difficult to stuff it inside a normal newspaper. It may take an enormous amount of newspaper space.

Mr. Bryden: I'm just thinking about the old practice, which was to place ads on a regional basis when a contract came up in a region.

Mr. Cowperthwaite: It depends on how many there were and what you were doing. Maybe if it was specially sectioned so you could actually go quickly to that and get it, it might work.

Mr. Bryden: Mr. Tice?

Mr. Tice: That would be determined by whether you read the paper every day, which paper you read, and where it's going to be placed in the newspaper. Frankly, I don't have time to look for it.

Mr. Bryden: Mr. Langhans.

Mr. Langhans: I think I would prefer the idea of how the OBS is supposed to work. You can go in there and use your search words. You don't have to look at it every day. You don't have to worry about this paper and then two or three other papers, or this town or another city with two or three papers there. Is the government going to have to put ads in all these papers? I get a little worried about the cost of the advertising. I think the OBS is there so you can backdate and catch up for a week you missed or whatever. I like the concept of that.

The Chairman: You like the concept, but perhaps it just needs some tuning.

Mr. Langhans: Maybe it could be user-friendly and things like that.

Mr. Cowperthwaite: Technically the OBS is quite easy to use. Technically I don't have a big hang-up with it. It's just that you sometimes have to be very acute about what words are being used to find what you're looking for.

The Chairman: That's exactly what we're looking for: improvements. For example, our health department colleagues were here and gave us some suggestions. I know some of the witnesses are giving us some suggestions for tuning the OBS. That's what we're looking for.

Thank you, Mr. Bryden.

Mr. Murray, please.

Mr. Murray: Mr. Cowperthwaite, I have to tell you that your presentation struck a chord with me. I've been around government. I've never been a public servant, but I've been inside and outside dealing with the government for more than 20 years now.

You just reminded me of some of the things that upset me over the years. I've always felt that it was wrong for politicians to be accused of dispensing patronage to the extent we are when I believe that the real patronage that takes place in this town is mainly through the public service.

You mentioned these reports that end up as doorstops. I can think myself of reports costing more than $100,000 that were of absolutely no use. The information resided already in the files of public servants who were assigned to that area in their department. They could have written the report themselves.

I'm continually frustrated as to how we get at this problem. I recognize that it's small business day in this committee and we're trying to help small businesses, but when I am reminded of abuses, I just like to be able to ask questions about it.

It's not just a question of program management. I guess my question relates to whether you can shed some light on this as to why this happens. Is it because budgets are set, money is left over in budgets, and people have friends who can write reports and are able to direct that to them, or is it something else that goes on?

Mr. Cowperthwaite: In the particular one I alluded to, I think what they're trying to get at is probably some very useful information. It probably could be very helpful to a lot of business sectors in the city.

The problem is that the contract going out is looked at as an administrative function, whereas it really ought to be a social science function. It's been contracted more from the perspective of an economic survey as opposed to a social science investigation to try to sort it out. So the problem is that they know what they want to do but I don't think they really have a handle on the best way to go about doing it.

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It's not just a question of money at the end of the year; I don't think that's the point. There is some very good stuff that goes out all the time. But I think the point was earlier that private industry favours a particular contractor; why not the government? Yes, but private industry would fire that individual in a chop if he didn't provide quality service, but the government has no way of checking. If the service that's delivered or the product or the quality of what's delivered isn't up to snuff, so what?

I've heard of incidents where the actual company was taken to court and then was told to be put on the next bidders list. This is ridiculous, if that kind of thing is going on. If you have no way of determining the quality of what you're getting and/or eliminating that contractor for a future time, or at least telling that contractor that his quality wasn't up to snuff and that he's going to have to be left off the bidders list for the next conceivable period of time until his quality's brought up to snuff, or something like that, then what's the point? You're always going to get poor value for money offered. I think that's your problem - one of them.

Mr. Murray: Yes, I agree with you, and unfortunately I'm aware of similar situations. Perhaps this is a subject for another day; I'd like to delve into it some other time.

But I also wanted to ask the question, because I told Mr. Gray I would, about this business of payments to other levels of suppliers - rather than just paying the prime contractor, having governments be responsible for paying subcontractors. Do you have any thoughts on that subject, that it's necessary even? That's open to all of you.

Mr. Langhans: We were in the position of being a subcontractor, and I can understand why they wrote up the tender that way: otherwise they'd have to write a tender for computers and then go back out and get a tender for packaging, for the cases. So certainly it saves time, to say ``supply with a carrying case''.

It just leaves the subcontractor somewhat at the discretion of the contractor, as in our case there. The rule that they substitute under is that ``if something is unavailable or you're unable to supply'', but there's nothing in there to substantiate why you're unable to supply. You assume something happened; there's a product in delivery. But there were no physical problems; it just became a personal thing, I guess, between the two and we didn't come to agreement so they arbitrarily said, fine, you're gone. The government doesn't ask why you had these problems, you were able to supply it there, even though we could show a letter that the product was sitting there in inventory waiting for them. They chose not to deal with us, and then that was sufficient reason for them to say ``you're unable to supply that''.

Mr. Murray: Was there any suggestion that there should be an exception made in the case of government contracts versus private sector contracts? I gather your experience is rather limited, too, in terms of government contracts. Mr. Tice has suggested that his firm doesn't get involved in contracting.

Yes, Mr. Cowperthwaite.

Mr. Cowperthwaite: The government prefers to deal with a single prime contractor. It's easier; it works well; it's one-to-one; and that solves the problem. But it leaves the subcontractor in a bit of a bind if that large firm decides to make life difficult for the sub. Certainly there ought to be an appeal mechanism. Certainly the sub ought to be able to go to somebody in the government, at that procurement office, and say, look, I'm being diddled around by this particular individual; can you put pressure on him? Surely there has to be some protection.

The government prefers primes. They encourage joint ventures. They encourage prime/sub-type relationships, but if that sub is going to cause a lot of problems and has no appeal process and has no advocate or champion to go to bat for him if he runs into some problems because of this type of thing, then I think there's going to be some difficulty.

In my business I use subcontractors all the time, but I try to treat them very carefully because otherwise I won't get them back. I try to get good ones, and I like to keep them. If I treat them badly I won't get them back, and my reputation will suffer in the process. Some of the big guys may not care, but I still think there has to be an advocate system in these situations so that the sub can appeal to somebody.

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Mr. Murray: The current advocates are members of Parliament. I think we've all had calls from subcontractors. Thanks for that.

Mrs. Chamberlain: Mr. Cowperthwaite, I believe you indicated earlier that you worked with the federal government at one point in time.

Mr. Cowperthwaite: Yes.

Mrs. Chamberlain: I don't want this to be misunderstood, because it is not meant in that way, but I feel I must ask you since you raised the point. Over the course of hearings, not just dealing with contracting out but even before the life of this committee, there have been many times where the issue of public servants who worked for the government for a number of years, and then left the government for a pension or a buyout, came back in another life to service the government and be on contract. I have a lot of concern about that.

Obviously there will be some specialized areas where people can come back and the government will need their expertise, and I would never be so bold as to not recognize that factor, but we know from these hearings that there are circumstances where people who have left government employment come back and perhaps even collect a greater wage while having a pension or being on a buyout.

Could you comment on that? You have been on both sides of the fence. How do you feel about that?

Mr. Cowperthwaite: This is a complex issue. It's not easy to put a black and white face on it, but let me say one thing. If you are forcing somebody to retire, if you're telling them you can no longer use them, that they must leave.... For example, in National Defence you had to retire at the age of 55, although that may be changing. You can't tell someone at 55 - I'm 55 and feel that I still have something left - that they are at the end of the rope and can't do anything else. If you're going to end someone's employment, how can you stop them from getting other employment if they so desire? You really can't control that.

On the other hand, some people voluntarily leave or have an opportunity to get out, at which point you might be able to say something about whether they should go back in the direct area in which they were working - for example, if you were a project manager and immediately go back to work for the individual who will be supplying a product for that project. There may be some problems with that, and I think a waiting period should be put in there before that can happen.

A lot of senior public servants are getting out because of the downsizing. I'm approached on an almost daily basis by people who would like to work with us. I think that's fine. I don't see a lot of problems with some of that. I think it's okay for me because it's a competitive exercise. I have to bid on them. I have to put their names in and so on, and they're evaluated according to the system.

You have a problem. Between retirement and people who have to leave because of certain regulations and restricting their future employment, against those who voluntarily leave or leave in order to take a job and come back in.... You should restrict that, because I do think it causes some problems.

It's not an easy one and it is going to get worse. Our experience with downsizings such as the one government is experiencing now is that there will be another wave of unplanned downsizing that will be purely medical. All big downsizings have a second wave that is medical. In the next three or four years you're going to see a lot of downsizing for medical reasons.

You're going to lose your experience base, and now who's going to do the work? You'll have to call these people back. These people have the experience needed to get the projects done. So I think this problem will get worse instead of better for the next little while, until the new people gain the experience to do the projects.

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Mrs. Chamberlain: I'm not in any way suggesting that a person who leaves employment for a buyout or a pension should not enter into business. I would never suggest that. The concern arises when the person sources back to their place of original employment, perhaps collecting a salary even greater than when they left, as well as the buyout and the pension.... That is the issue I am concerned about.

Mr. Cowperthwaite: I think that's a question of timing and the circumstances of the particular individual who left. You almost have to do that on a case-by-case basis.

Mrs. Chamberlain: Thank you.

Mr. Bellemare: I'm very protective of public servants, who make up the majority of my riding. You suggested that there's going to be another wave of downsizing, and you used the term ``medical'' -

Mr. Cowperthwaite: Yes, medically related. Historically, if you look at major downsizings where you haven't adjusted the workload.... The tendency is to downsize the people and but not simultaneously downsize the workload or plan for the end result of the downsizing. This is particularly true with a lot of U.S. companies, who are well ahead of us in a lot of the downsizing issues.

If you were to study the downsizing of the Edmonton city government, which happened several years ago, or the Saskatchewan provincial government, which happened in the late 1970s or early 1980s, you'd find that a lot of people soldier on and try to get the work done. They have gone through this devastating downsizing, are still trying to do their jobs, and then start having heart attacks, ulcers and nervous breakdowns. I think that's what you still have to face, if historical precedent runs true to form.

The Chairman: Thank you.

Mr. Cowperthwaite, you mentioned the challenging of ACAN. If a bidder challenges the ACAN, is that job or contract delayed until the matter is resolved?

Mr. Cowperthwaite: The rule is that if you challenge an ACAN and successfully.... You have to submit information to show that you can actually do the work, that you're qualified to do the work that is up for bid. If you do that and you are judged capable of doing the work, then it's supposed to go to competition. For you and others, it should go on the open bid.

Some of these things are substantial contracts involving several hundred thousand dollars, and they're sole-sourced. I'm sure the people who supply products will say the same thing, but particularly in services, I can't see that you would have only one person in the whole of the country capable of supplying that service. I think that's really silly.

The Chairman: Okay.

I have two more questions. First, what do the witnesses think about the government considering an idea like a bonus or an incentive for suppliers who get their jobs done within budget and on time? One trend we've noticed is all these amendments to contracts. Wouldn't it be logical to give somebody a small bonus if they got the job done on time? Equally, what about a penalty for those companies or small businesses that are habitually over-budget?

Mr. Tice: I think the problem there is determining where the responsibility lies for the overrun. If it's a government add-on, then it must be there. If it's something the supplier has missed, then it may well be the supplier's responsibility. But who makes the judgments on this? We're now back into a referee's call.

The Chairman: Okay.

Mr. Langhans: It sounds reasonable, and I think it may have some effect. As he said, there's always the matter of determining where the cause of it is. On the flip side, you may want to take that a step further, with the government receiving a bonus or penalty for tardy payment.

The Chairman: Okay.

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Mr. Cowperthwaite: I'm in that situation right now. I'm in the middle of a contract that has twice been delayed because the department itself can't make a decision or keep up with the time lines we originally agreed to. I'm stuck with the problem of suddenly being asked to stop for three months and to keep a particular individual on standby for instant start-up again. By the time they come back and make another decision the government department has strung this contract out from the original four months to a year, yet I'm expected to be immediately available when they decide to start again.

Technically that means I'm supposed to keep an individual on the payroll doing absolutely nothing waiting for the whim of this organization, for a decision as to whether they're going to go again. I can't afford to do that, but all of a sudden I'm penalized if I don't have the individual there the day they come.

The Chairman: Thank you very much, colleagues.

On your behalf, I'll thank the witnesses for their presentation.

I see our next panel is here and we're about 15 minutes behind schedule.

I want to thank you very much for coming from your respective regions. We appreciate you sharing your inventions with us.

We'll suspend for a moment.

Mr. Bryden: Just one moment. The witnesses can be dismissed, but, Mr. Chairman, I'm going to have to leave at noon. I just wanted to put forward to the committee the suggestion that perhaps we could hear from Revenue Canada officials next week as an add-on to our regular schedule with respect to the reply to Bill C-224. I think they actually may be available on Tuesday, if that's satisfactory.

The Chairman: That would be fine. I think everyone is agreeable to that.

We'll ask the clerk to contact them and we'll add them to one of the scheduled days for half an hour.

Mr. Bryden: Yes, that would probably be earlier in the week. I think they're able to come next Tuesday.

The Chairman: We'll suspend for about three minutes.

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The Chairman: I'll now call the meeting to order. We're resuming our small business and medium-sized business day involving our government operations committee.

On behalf of the committee, I want to welcome, from Fundy Engineering and Consulting Limited from Saint John, New Brunswick, Mr. Peter McKelvey; from Bioquest Environmental Company Ltd. from Willowdale, Ontario, Mr. David Simpson; from Kaycom from Ville St. Laurent in Quebec, Brian March; and from BW Imaging from Winnipeg, Manitoba, Mr. Geoff Burton.

I think we have a pretty good cross-section of the country. Mr. McKelvey, would you please begin.

Mr. Peter McKelvey (President, Fundy Engineering and Consulting Limited): Thank you. Ladies and gentlemen and hon. members, my name is Peter McKelvey, and I am a principal of Fundy Engineering and Consulting Limited. We're a small engineering company that employs seven people. We do work in the fields of geotechnical engineering and environmental engineering, and we have project expertise in fisheries, aquaculture and agriculture.

We've done work for several government departments, and I list these here: Agriculture Canada; Public Works; Environment Canada; the Department of National Defence, and I think it would be more technically correct to say Defence Construction Canada; Canada Mortgage and Housing Corporation; the Federal Business Development Bank; the Department of Fisheries and Oceans; the Saint John Port Corporation, which is a federal crown corporation; and Revenue Canada.

We've also worked on projects funded by federal agencies, such as the NRC IRAP program and ACOA. We've also done work for municipal and provincial governments and an American federal corporation.

I'd like to relate some of our specific experiences, and I'll elaborate on what I have in my written presentation.

Several years ago we were low tender on a bid for geotechnical investigations for the construction of wharves in the Bay of Fundy area for Public Works. This work was to be done in the winter under somewhat uncertain circumstances, and we were asked to bid a fixed price. Necessarily, we had to quote a price that would cover some eventuality for the circumstances of the work.

The lowest tender, which was ours, was, however, somewhat beyond their budget and their expected expenditure. Therefore, they reassessed the project, reduced the scope of work and did the geotechnical investigation only in one location rather than in two or three. That geotechnical investigation was then let out as an addition to another contract to another company in Nova Scotia, completely unbeknownst to us. It was several months before we found out as low tender that we had not been consulted on the modified scope of work nor were we asked to quote on how we would carry out that amount of work.

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In addition, I would like to answer some of your questions in relation to subcontracting. As a consequence of what I've heard this morning, I recollect some experiences we've had.

Again, we were doing a geotechnical investigation for a public building that was being built in the winter. We were subcontracted to an architect, who asked us to quote for inspection services. As so often happens, there was some additional work on an additional sidewalk and some additional concrete work carried out, as well as additional costs incurred because of weather in the winter.

The architect to whom we were subcontracted did not go to bat for us. By the time we found out we had not been paid, we went to the government department, which was Public Works, and they said, ``It's too late to submit any claims for any extras. I'm sorry. We can't do anything''. We lost $2,500.

Similarly, another engineering firm with whom we worked closely was left in jeopardy for payment of close to $100,000 when the architect who was the project manager on that job went out of business. In fact, they had to withhold drawings for that project until the proponent was able to pay his bill directly.

We've also had experience with Agriculture Canada and projects funded through federal-provincial subagreements. These projects required a cost proposal, and we were issued a contract based on a fixed price. Irrespective of the fact that they were fixed-price contracts, we were asked for an excessive amount of documentation, right down to written receipts for individual phone calls and every single expenditure we had. Several forms needed to be filled out, which was completely redundant, especially on a fixed-price contract. It was unnecessary.

With regard to the Department of National Defence, or more properly, Defence Construction Canada, we have done work for this entity sourced through the spec system, which is a pre-qualification rotational system with post-project evaluation procedures, so you are required to produce a good job to remain on the list.

We've had good success with spec. We've talked to our competition, and they've had work with spec. We understand the work needs to be spread around. We see that as a fair and equitable system for smaller-sized contracts.

However, not all government departments that should use the system do. We were asked directly on one job to quote for the inspection services on the second phase of a large construction project in our area. There had been a competition for the initial part of the work, and that was let to another company. Then the time came around for additional work, and we got a phone call from the project manager. I asked him what he was looking for, and he said, ``Well, I'd just like an idea of what costs would be''.

We suspected that he just wanted to keep his present contractor honest at our expense by asking us to submit a price so that he would know how much would be reasonable to pay this other company. We took him to task on this and said, ``If you're going to issue a request for proposals, we'd like a request for proposals outlining your requirements and specifying a deadline for submission of proposals''. He did that. We submitted the proposals and they gave the job to the same company that had the work in the first place.

I'm not privy to the comparative proposal, so I can't comment on that.

On a more positive note, we've done work for the Canada Mortgage and Housing Corporation, the Federal Business Development Bank, the Saint John Port Corporation, Environment Canada and Revenue Canada and have had good experiences and feel we've been fairly treated.

Over the years we've also registered with a variety of federal government agencies to offer our services. Not all of these are current, but I list the ones we have been involved with: CIDA; spec, which I previously mentioned; ACCORD; the open bidding system -

The Chairman: Excuse me, Mr. McKelvey. What's ACCORD?

Mr. McKelvey: I was afraid somebody was going to ask that. ACCORD is a system similar to spec for procurement, as I understand it, of materials. However, sometimes within that there are inspection services required. We only got one job from that system.

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We have some suggestions as a company with regard to some of these. Amongst small businessmen in my community, ones I meet through professional associations and the board of trade, there is a very wide condemnation of OBS, which I've found hard to articulate. I think it's appropriate to say we feel some kind of on-line access to government information would be appropriate but that the current system is in need of major revamping.

I'd like to point out some of what we perceive as their deficiencies. First of all, OBS does not contain all of the contract opportunities because some departments do not use OBS. Secondly, many of the job descriptions are cryptic, which makes it very difficult to decide whether it is worth while to go to the expense of ordering a complete bid package.

Although the interface may appear simple, we feel the system is cumbersome and costly. Individual government departments have to prepare their requirements, provide them to the department of supply and services and then through a sole contractor divulge and distribute that information. That costs money.

The Chairman: I don't want to interrupt your presentation, but I've got three other presentations to go. So perhaps you could summarize and then conclude.

Mr. McKelvey: That's all right. I'll be brief.

We feel the government has tried so hard to be objective that the system isn't working. As well, the subscription cost is an impediment to many small businesses. As mentioned earlier, many OBS entries have already been sole-sourced. OBS seems more tailored to large businesses. The requirement for computerization, the time needed for monitoring by a qualified person, the cryptic nature of the project inquiries and the costs tend to make the system favour large companies.

Many smaller firms such as my own are questioning the value of OBS. Simply stated, we've spent a lot of money on OBS and we've had no return on investment. I feel the software interface is antiquated. I also feel the system would work better if individual government departments were to post their requirements on the Internet and allow service providers in a free enterprise environment to access that information and parcel it to those who want to parcel it in other manners.

In addition, for fair procurement below a certain threshold level, I feel government departments should be able to procure locally throughout the country. That is, if you need one mattress in Inuvik, you don't need to go to OBS. You can go to the local mattress store.

We've also had problems procuring through CIDA. We feel CIDA does not recognize the benefits to the country of small and medium-sized firms. Their contracts tend to be parcelled out in large packages. It is our perception that CIDA contracts are carried out by a small cadre of central Canadian companies - firms based primarily in Quebec and Ontario. A diverse and competent resource of expertise is available in other sections of Canada that may well be better equipped to deal with problems in the Third World countries.

CIDA staff have suggested to us that contracting to larger firms would satisfy small and medium-sized firms. This would be like a small law firm approaching a larger firm in Ottawa or Hull and suggesting they throw some business their way. CIDA does not have a grasp of the way things work and it makes you wonder if they have a grasp of what's required in the Third World. We recommend new supplier development be one of CIDA's criteria in evaluation proposals.

In the case of design professionals, we feel professional management and design services are very often procured solely on the basis of price, not totally on value. Often the cheapest design does not provide the most cost-effective solution.

Finally, I would like to make a point with respect to professional services. The ISO 9000 certification is not required for the engineering and professional service sector because we are covered under professional associations regulated by provincial acts. The ISO is an unnecessary expense, which is a proportionately high burden to small companies.

The Chairman: Thank you very much, Mr. McKelvey.

Mr. Simpson, please.

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Mr. David Simpson (President, Bioquest Environmental Co. Ltd.): Good morning, Mr. Chairman, ladies and gentlemen. My name is David Simpson and I represent Bioquest Environmental Co. Ltd. We're located in Toronto and cover all of Canada.

I'll take a few minutes to give you a brief description of our company and also outline the problems we have experienced in our efforts to acquire government projects. Bioquest Environmental Co. Ltd. was formed in 1992 to market a successful bioaugmentation process.

A Canadian company, Bioquest has developed many new methods for the application of micro-organisms that consume hydrocarbons and a number of other organic compounds that may exist in soils, groundwater, lakes or oceans. Most of these new technologies are used in in situ bioremediation, which is where we specialize.

In situ bioremediation has some tremendous advantages. Remediation is done on site - nothing is moved from the site at all. In situ bioremediation keeps the site disruption to a minimum - we can drill through buildings, through floors and so forth and innoculate under floors. It eliminates transportation costs of contaminated soils and eliminates waste permanently - no trucking of the waste to landfills.

To the best of our knowledge, we're the only company in Canada with this proprietary application methodology.

Perhaps as important, the charge for eliminating these contaminated sites is on a flat-rate basis of $23.50 a tonne, which is next year's price, 1996, and has a money-back guarantee if for some unknown reason the clean-up did not occur. These costs are significantly less than those of the current methods.

Since 1992 Bioquest Environmental Co. Ltd. has successfully completed many projects with various engineering companies and small and large corporations that have utilized our new technology and our low cost of remediation. We have put forth a great deal of effort and money to try to deal with the government, specifically National Defence, without any success.

In an effort to acquire projects from National Defence, we have done seminars for the environmental people at National Defence headquarters here in Ottawa and other projects on a test basis, which are presently ongoing.

We were informed very early about the fact we would have to have our computer connected to the OBS system to locate and quote on National Defence projects. We complied fully with this request and soon after found a project on the screen. Contact was made with the base environmental officer, who seemed to be very interested in our service. As time went on, though, through the summer, hope dwindled with regard to the possibility of doing any work for National Defence.

We were told at two different times by two different environmental officers about the fact that local contractors only would be used. When I questioned the second officer about using local contractors, he told me to call an MP and explain my problem to him.

When I read an article in The Toronto Star in which you gave several quotes on this subject, Mr. Chairman, I was happy to fax the article to your office in Rothesay.

I'm also very pleased to represent Bioquest here in Ottawa and to answer any questions you may have at this time.

The Chairman: Thank you, Mr. Simpson. We're happy to have you here.

Next on the panel would be Mr. March from Ville St. Laurent in Quebec, please.

Mr. Brian March (President, Kaycom Inc.): Good morning, Mr. Chairman, members of the committee. I wish to thank you for this opportunity to express my concerns on government procurement practices, in particular the inequitable opportunity that small business is afforded with the increase of sole-source bids and contracts. I will keep my opening remarks short as the discussion to follow with the members of this panel would seem to be very beneficial.

Kaycom Inc. is a small business that deals exclusively with government procurement and is ISO 9002 registered. Ninety percent of its workload is with the Department of National Defence in a military application. Kaycom has gained expertise and knowledge in government procurement practices over the past fifteen years. We are quite concerned that we are getting the proverbial short end of the stick with regard to government bidding practices.

Sole-source procurement is on the rise and can be viewed daily on the open bidding services as ACANs, advance contract award notices, or in business opportunity bulletins that are published. Sole-source procurement is a fact of life and in many cases may be very justifiable if proprietary rights are involved or operational needs will be affected. However, in most procurement situations competition is mandatory for government to obtain the best value.

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Over the past several years Government Services Canada and the clients it represents have found many ways to avoid competition. Each case portrays its own unique scenario and the departments in question feel they are very justified in their decision for going sole-source.

I can only provide this committee with situations Kaycom has been exposed to with regard to sole-sourcing and its experience with Government Services Canada and the Department of National Defence.

A recent situation involving a sole-source contract or ACAN led to my invitation to appear before this committee. In this particular instance Kaycom was refused the right to bid competitively on a Department of National Defence conference. To make matters worse, the products required were to National Defence drawings that were generated by National Defence and owned by National Defence. Therefore, there is no question of ownership of national rights.

The intended firm that was slated for this sole-source contract has been dealing with National Defence for many years and is tightly connected within the marketplace. Being a big business concern and backed by a large parent firm, wielding political power within the Department of National Defence and Government Services Canada is an easy task.

A small business such as Kaycom must fight for every opportunity to bid on this requirement. However, we find in most cases it is a useless effort as the contract is still awarded to the intended firm and some excuse is provided to satisfy our request to bid. Why not open the bid to competition? Even if Kaycom is not the winning firm, the government will surely benefit from a competitive price.

In closing, I feel the sole-source requirements are the easiest way for government departments to get what they want from whom they want without further evaluation. With all departments reeling from downsizing over the past several years, technical expertise has been reduced. Therefore, new ideas are put by the wayside and old and proven ways and paths of least resistance are taken. This is the reason for the increase in sole-source requirements. Small business must be afforded the opportunity on all requirements and evaluated fairly by government officials.

Thank you.

The Chairman: Thank you very much, Mr. March.

From Winnipeg, Mr. Burton, representing BW Imaging.

Mr. Geoff Burton (General Manager, BW Imaging): Mr. Chairman, members of the committee and guests, my name is Geoff Burton and I own a small pre-press design and communications business with my partner, William Beddome, in Winnipeg, Manitoba. We have a staff of 18 employees and are well respected in the industry and business community. Our company has been in business for over 35 years and our annual sales are in excess of $2 million.

The reason I'm here today is to add our company's views on doing business with the federal government.

As we've been around for many years, we have seen many changes in business and in the way the federal government awards us contracts. In the past the majority of our business dealings with government contract work was as a supplier to bigger advertising agencies that handled the more substantial government contracts. The business relationships we developed were more with the people within the advertising agencies than with the federal government directly.

Technology has dramatically changed in our industry, allowing advertising agencies to produce work in-house as opposed to subcontracting the work to companies such as ours. The advertising agencies are still getting the bigger contracts but our services are no longer required. That is a loss of business to us.

The OBS system is what you have in place today. I understand it is a cost-effective system for the government. It shifts most of the costs of sourcing the business to the private sector. This could be a burden for smaller businesses. There's an annual subscription cost and a requirement to have a personal computer as well as somebody who is able to operate it.

My major concern is that most of the work from the OBS may be too large for small businesses to handle. The work in which I am mainly interested is the non-competitive contracts, which are not subject to the tendering process. The problem is that the companies that are winning the larger contracts are developing business relationships with the bureaucrats, and when a non-competitive contract is awarded, people will naturally approach the same people in business with whom they already have an established relationship.

How does a small businessman like myself establish those relationships? This system seems to work against us. I understand the cost of tendering everything is too expensive. As a taxpayer I want the government to be economically responsible.

I would like to see a process developed that will make it easier for small businesses to obtain this government work. Opening up the work to some sort of competition would lower the actual cost of the contracts. There are many small businesses that would consider contracts of under $30,000 as significant.

The present system allows the larger contracts to be broken up into a number of smaller contracts and awarded without going through the competitive process. A system should be in place that checks the correlation between the companies awarded the competitive contracts and those awarded the non-competitive contracts to see if the same companies are getting more of the opportunities.

I think the government should help small business develop relationships within the federal government. Maybe there should be a published report that could inform companies about the types of non-competitive contracts available as well as departments and contacts distributing the work.

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Over the years, our company has written to department heads and followed up with phone calls. But without specifics about the type of work available from the different departments and specific contacts, it is a difficult process. A list outlining non-competitive contracts would help small business to target the contracts on which they would like to compete.

Small businesses are an important part of the Canadian economy. It is my belief a substantial number of government contracts are not subject to the competitive tendering system. Maybe it is too idealistic to think every contract should be tendered, but some form of competition would be cost-effective and would simultaneously help make the contracts more accessible to small business.

Help small business locate the contracts. The easier it is for small business to source the contracts, the more competitive the process will become. Thank you.

The Chairman: Thank you very much.

We'll now move to Mr. White.

Mr. White: I don't have any questions on this round. Thank you, Mr. Chairman.

The Chairman: If you think of any, we could come back to you.

Mr. Bryden, then, please.

Mr. Bryden: I'm particularly interested in what Mr. March is saying. I get the impression, as I hear the testimony here, that all we are hearing is cheating, cheating and more cheating out there. So I would ask you, first of all, Mr. March, because you brought up the defence department, where there seems to be an epidemic problem, what we can do about it. What can we do about relatively low-level cheating by procurement officers?

Mr. March: I don't think it's so much cheating by the procurement officers on a low level. It's more the system that's involved in allowing fair competition to small business.

The larger firms, uniquely with the Department of National Defence, have been there for a long time. Competition is hurting. These big firms are now looking at the smaller jobs they never wanted to go for before. But as you see within the airline defence industry, Lockheed and Boeing get together because they need those small contracts.

The government seems to be closing up the holes, allowing small business to go for that and protecting big business by the event of ACANs. When an ACAN is contested, it's just dismissed by some excuse they can find to allow that.

Mr. Bryden: It's not government, though. Surely it's not government policy we're talking about, because it's not a policy I or my colleagues here approve of and we are at least the political arm of government. Is it not really a case where individuals in the system are abusing the system?

Mr. March: Let's say manipulating the system.

Mr. Bryden: From what you describe, it sounds like it is to me. I don't mince words.

Mr. March: Small business has no mechanism to go back and contest that type of manipulation or abuse.

Mr. Bryden: Then I would put this question to all you gentlemen. What do we need to do? Do we need some sort of policeman to go in and make sure these people are obeying the spirit of the rules of contracting out? I think it is a question of the regulations versus the spirit of the regulations. Give us some direction, because you're the ones who are suffering. Tell us how we can get at the problem.

The Chairman: We'll start with you, Mr. March.

Mr. March: The problem is twofold. First, small business must be allowed to bid on every bid. I don't see why not. Even if they're technically incompetent and they're viewed as technically incompetent by the technical authorities, the firm that is competent that was the sole source will definitely look at its price much more carefully when it's in competition, which will reduce costs and provide a better cost to the government.

The second thing is really the rules that are put in place by the departments, be it Health, National Defence, saying this is the only firm that can do this. When other firms advance and come into the situation and say they can do it, they're just dismissed. Somebody should be watching that or a committee should review those ACANs. It shouldn't be the committee of the departments that want the sole-source situation, which is what's happening now.

Mr. Bryden: Thank you. That's a positive suggestion.

Mr. McKelvey: We feel we've been victims of exactly what you're saying, the cheating. Particularly in the first instance I indicated where we were the low bidder and they changed the scope of work and gave it to somebody else.

I think the solutions are threefold. First, it must be recognized there is a cost to disseminating and managing a tender process. Below certain cost thresholds, therefore, there should not be a requirement for the full tender process - perhaps less than $5,000. You pick the number. You can get one or two phone quotes, and then beneath another threshold you can have two or three letter quotes.

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Then there is the spec system, which is where we feel we were cheated. It was with government departments that we're supposed to be going through the spec system but were not.

Second, for systems like spec and OBS, when people are above the thresholds and that size of job, the use of that system should be enforced.

Third, the interface with OBS is still a little cumbersome, and along with the cost and complexity of it, is an impediment to some small businesses. That needs to be streamlined to facilitate the exchange of information.

Mr. Simpson: In our case, we don't know if the OBS system is good or bad. We're new kids on the block as far as dealing with government goes. We know that our prices are excellent. We absolutely guarantee our work or the customer doesn't pay. We also know that we're not getting any action from government. In our case, the National Defence people and environmental officers are dealing with local contractors, and that's it. So we don't see anything coming through on the OBS system for us.

Mr. Burton: It is the same for us. Business has changed and we're having to deal more directly with the government as opposed to being a subcontractor to other people. When we were a subcontractor we were still required to quote on the work we were doing, but we weren't necessarily the ones who got it. I think their mandate was to get two or three quotes on everything, and we would win our fair share.

The problem for us is that we've been shut out from that kind of work because the bigger contracts are going to other places. We want to find ways of sourcing the smaller ones, but when we look on the OBS, the projects are too big for us to undertake. That's the problem that we are encoutering, and I don't have any solutions.

Mr. McKelvey: That's our observation too. What we see in the OBS are large contracts that are beyond the scope of our firm.

Mr. Gray: What I'm hearing today is that we're talking about behaviour patterns in government. Why are so many of these contracts going to non-competitive bids? Why are so many going to sole-sourcing? Again, as is so often the case when you're talking about a big structure that has big operating procedures, I think of the banks.

When we appeared before the industry committee on this subject, we said that in order to effect change, there has to be a change in the punishment-reward system within the banking structure. In other words, if I'm a small business account manager and I am punished harshly for a bad account but never rewarded for the good accounts, the ones that grow the business, that provide employment and growth in the community - it's a question of balance in terms of the way that person is motivated.

I think we have to get to the behaviour patterns here. What are the things that are pressing people to make these decisions and the behaviour of government to go in these directions? You could probably find that out if you brought in some former government procurement officers to testify. They won't have their reputations or careers on the line, so they may be willing to speak a little more freely. I can be sympathetic with people who are currently in the system and are reluctant to talk.

The Chairman: That is a good intervention.

Mrs. Chamberlain: Mr. McKelvey, you spend a fair amount of time in your brief talking about CIDA, and it doesn't sound like your relationship with CIDA has been the best. You talk about the old boys' procurement method. Please expand on that. In the end you also talk about a review process being advisable.

Mr. McKelvey: There are some old girls too.

Some voices: Oh, oh!

Mrs. Chamberlain: Not around here.

Mr. McKelvey: We've been pursuing this type of work because of my background in small-scale fisheries and aquaculture development. I feel that expertise should be marketable in this venue. For six years we've been trying to pursue this.

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My first experience was about five years ago. I went to a regional seminar on how to get business from CIDA. You had to fill out all these forms, listing your experience and qualifications on a computerized form. We did that and it took between 30 and 40 hours of work.

Prior to doing that we had a luncheon at this seminar, and we sat around the table. All of us, including myself with a previous employer, had experience doing CIDA work, and not one of them had procured that work through the system. The system was so cumbersome that it didn't work. Inevitably, the story was that ``I worked with So-and-so on a project several years ago and he gave me a call and told me it was coming out, and made sure I got registered so that I could be considered for the job'' or ``I worked with this company or that''.

In visiting CIDA, we found a very unsympathetic attitude toward the development of small Canadian business. There's a clear preference to deal with a limited number of contractors and parcel out work in large quantities.

If this is so, that may be necessary to avoid government overhead, but CIDA evaluates proposals on the basis of a number of criteria. Two examples are environmental impact - they like projects that improve the environment of the country - and gender equity for women in development. I think they could also include small business development and small supplier development as one of the evaluation criteria for proposals.

To date, we have expended a great deal of effort and there's been no response.

Mrs. Chamberlain: Thank you.

The Chairman: I want to conclude by asking a question raised by the Canadian Federation of Independent Business regarding slow payment. Do those of you who have experience with government have a response to the CFIB's assertion, put forward by one of your colleagues in small business, on payment to small business? Does anybody have experience in that area?

Mr. McKelvey: It's the plague of our business that we have a lot of people who are slow in paying. The governments aren't the fastest, but they aren't the slowest.

The Chairman: Okay, that's good.

Mr. Simpson: In our case, we are dying to see some late payments coming from the government.

The Chairman: Your interventions have been very helpful and your presentations have given us some food for thought.

Mr. Bellemare: I have a question, Mr. Chairman. This morning has been very revealing. Are we going to have another experience like this? This is really welcome, because we're getting the point of view of the contractors and some of their concerns.

Mr. Gray says it is a behavioural problem on the part of the government. We have to find out if it's systemic and how we can correct it. So I would welcome another session with other types.

The Chairman: It's a difficult time of year to get these businessmen to come in from all over the country. As you know, the panel represents a cross-section of east to west, and it is costly. However, I thank you for your compliment. I think the gentlemen have performed well.

I don't want to leave things on a negative note. People are using this word ``cheating'', and I'm not sure that as a committee we want to condone the word. We want to focus on improving access and enhancing the systems. Mr. McKelvey, you in particular have given us some good suggestions on the OBS improvements. There are some difficulties out there, and as a committee and as members of Parliament we're trying to get to the problem, but we're not doing a post-mortem. We also want to look at how to make some positive changes.

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Mrs. Chamberlain: Mr. Chairman, I just wanted to mention that like my colleague Mr. Bellemare I thought today's session was very good. No disrespect to the people who appeared, but not one woman presented and we know that women are doing some wonderful things right now, particularly in small business. I would really point that out to the chairman.

The Chairman: We looked.

Mrs. Chamberlain: I think we have to look a little harder.

The Chairman: Point well taken, Mrs. Chamberlain.

Mr. Bryden: I have to intervene on your remarks, Mr. Chairman. When I hear testimony, as I've heard this morning, about people ignoring the spirit of regulations while obeying the regulations in practice, I deem that cheating, and I think we shouldn't mince words around here. If people like the witnesses are suffering out there because they are not being treated fairly, then that's cheating in my view, and I don't see why we shouldn't say so.

The Chairman: That's a fair comment.

Colleagues, on your behalf, I want to thank these small businessmen for coming from their various regions and giving up a day of their businesses. As members of Parliament we're trying to respond to what we are hearing in every region of Canada. We are hearing that they want fairer access, better access and improved access. With the Canadian Federation of Independent Business functioning as almost the big brother of independent businesses throughout the country - or big sister, Mrs. Chamberlain - I hope we'll get some quality interventions. We're looking for your input and advice, and it has been very helpful.

On behalf of the committee, I want to thank you. We're grateful for your contribution this morning.

We're going to adjourn until Wednesday. If anyone comes up with some great ideas in the meantime, the chair will be happy to receive them.

This meeting is adjourned.

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