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EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, November 21, 1995

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[English]

The Chairman: It's a little late, but nonetheless I'm very pleased to welcome to our committee the assistant deputy minister of the supply operations service branch, Alan Williams; the director general of the supply program management sector, Barry Lipsett; and Luci Dove, an OBS contract manager. Welcome to our committee.

I believe there will be a presentation. Opening comments have been circulated.

Mr. Williams, it's your fifteen minutes. You can do with them as you wish. I know colleagues are very interested and have some questions. We don't have a Bloc member here today. Mr. Harris is anxiously moving up the line here, now that there are some changes in Quebec. He wanted a minute of silence. Actually, he wanted a minute of celebration.

Please proceed, Mr. Williams and Mr. Lipsett.

Mr. Alan Williams (Assistant Deputy Minister, Supply Operations Service Branch, Department of Public Works and Government Services): Thank you very much, Mr. Chairman.

Given the constraint in time, I hope people have had the opportunity to review my opening comments that were circulated. If we have only fifteen minutes, then I would suggest we perhaps focus on the presentation so you'll get a good overview of the system. That would allow time for questions afterwards.

With that I turn to Luci Dove, who's been with us for over twenty years. In fact, she joined the department when she was twelve or thirteen, she tells me. In any case, she really is an expert on the whole bidding process. I think she'll have distributed some slides that will pertain to the presentation. They might make it easier for you to follow it.

[Translation]

Ms Luci Dove (OBS Contract Manager, Department of Public Works and Government Services): Good morning. I'm very pleased to present the Open Bidding Service to you here today.

[English]

I'll be providing an overview of the system for you this morning and demonstrating the features available to subscribers. First of all, I'll run through the system as a normal subscriber would see it.

The first item they would normally see is an announcement screen, when they first sign on the system. It contains short messages, items the OBS or the government...that are using the system want to highlight for their subscribers. Also included is the number of new notices posted today.

I'll go over the main menu briefly to give you an idea of the items contained in the open bidding service. The first section is the opportunity.... These are live notices of upcoming procurements that are available on the system.

There is a section for information. This includes information libraries from the different organizations that post notices on the OBS, standard terms and conditions the subscribers can refer to, and a historical database of contract awards and former opportunities.

Mr. Bryden (Hamilton - Wentworth): What's ``Canadian newspapers''?

Ms Dove: ``Canadian Newspapers'' is a feature ISM offers subscribers. It's an area where they can go in and zone in onto ten national newspapers, with specific articles highlighted. There's an extra fee for this service.

The Chairman: I'm going to allow questions in the middle of this, because I think it makes more sense. Does everybody agree to that? If you see something that just doesn't.... It's just easier than going back. We'll treat it accordingly. Is it all right? Agreed?

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Ms Dove: The system operates in both official languages. To change the language, the user simply has to click on ``set up'' and ``language'' and change it to the other language,

[Translation]

and realize that the system is available in French. All the key words in the text are then in French.

I will explain the purpose of all the buttons that appear on screen. The first one is used to begin communicating with the system or to cut off communication. This one is used to access a text that appears on screen.

[English]

This feature is where the historic search strings are captured and saved. To save the subscriber time, they can save a number of search strings. In a moment I'll be talking in more detail about searching.

[Translation]

Here we see the documents that were requested. This is the button that will be used most frequently.

[English]

This is where the subscriber goes to search for the opportunities. It's the activity that is most commonly used.

Mr. Murray (Lanark - Carleton): Excuse me. May I ask how much cost is attached to the search if they ask for just one item or a whole bunch? Could they get trapped into a huge expense by not understanding the limitations on what they are asking for?

Ms Dove: No. The prices are based on usage time and the rate is 40¢ per minute. So it doesn't matter what information they retrieve; they still pay the same rate.

Mr. Williams: Towards the end of the presentation we'll show you how someone who's familiar with the system can in fact keep the costs down by getting all the information, putting it on the database, getting out of the line, and then reading the material. There are ways of keeping the costs down, and I think we'll show you that towards the end of the presentation.

[Translation]

Ms. Dove: This button is used to get back to the main menu.

[English]

The ``Canadian Newspapers'' are here, to go back to the announcement screen, and this final button is for the subscriber who wants to access international opportunities.

The most commonly used feature is the searching. I'll return to English. I think most people are more comfortable with the English.

Opportunities are classed on the system in three main areas: under goods, services, and construction. The goods and services categories are further divided into sub-categories, and a subscriber can access a specific category and look at what opportunities are listed in those. Another way of searching is by GSIN. Every item posted on the open bidding service has a goods and services identification number attached to it. A subscriber might be more comfortable searching in this way. They can search by key word or by solicitation number.

I think the most commonly used search feature is the key word search. To save time, the subscriber can search only the new notices that have been posted since the last time they signed on, or since a specific date. If they want to make sure they haven't missed anything, then they can search the entire database.

I will go through a search history that I've already captured, searching by the key word ``computer''.

Your handouts have screen prints of most of the screens I'm showing you. The system retrieves the notice and the bottom right-hand corner identifies how many notices it has found. There are 14 notices with the word ``computer'' somewhere in the text.

It presents the list of the opportunities that are found under this key word.

In this list the first date that is shown is that on which it was posted on the open bidding service; the second date is that on which it will close; and then there is a brief title describing what the item is about.

The items that have been posted since the last time this user signed on are highlighted with an asterisk, so the vendor can tell whether or not they've seen it.

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To see a notice, they click on the items they're interested in viewing and retrieve them into the database. By zooming in, subscribers can get more details on the opportunity. They will get a full-screen description of what is contained in the notice.

This is an EDP hardware-software purchase. This is the category it would be found under. The solicitation number is shown, the closing date, and the goods and services identification number.

The tendering procedure identifies what trade agreement this purchase is subject to. The letter ``I'' stands for the agreement on internal trade. The number ``1'' indicates who can bid on the opportunity. The number ``1'' means everyone can bid on this opportunity.

What follows is a description of the item or items to be purchased, and it should contain enough information to allow the subscribers to determine whether or not they want to purchase or order the bidding package. They can also tell who the customer department is. In this case, Correctional Service Canada wants to purchase these computers.

At this point subscribers can save this description to their hard drives, diskettes, or print it to view at a later time. There is another way to capture the text, and I'll show you that in a moment.

Before ordering the bidding set they might wish to take a look at the list of subscribers who have already ordered the bidding package. This gives the subscriber an idea of who his competition is. In some cases, it will help him determine if there are some subcontracting opportunities available to him.

This entire list identifies the subscribers who have ordered the bidding package. There are quite a few. The information they get is the name of the company, the city it's located in, the telephone number, and the name of the contact person in the company. Again, they can save this or print it. If they decide to order the bidding package, they click on ``order''. It presents them with a screen showing the different options for delivery.

As you can see in the bottom left-hand corner, there's a warning message that the bid closes in three days. In case the subscriber hasn't noticed the closing date, any time there are five days or fewer left to bid, they are warned that the time is getting close.

This bidding package is available by mail, pick-up, fax or courier and the prices are indicated. The price for all options and services is identical regardless of where the subscriber is located in Canada except for the courier charge, and that is determined by the subscriber's location. So in this case, the system knows that the delivery address is in the national capital area and the courier charge is $11.40.

This document at $4.20 is fifteen or fewer pages. I can decide whether to order it. It asks me to confirm if I am sure. The order is placed and it will be processed within four hours of the order being placed in the system. The system knows I'm just giving a demonstration, so it won't complete the order.

The other area you might be interested in is the international opportunities. This is another menu item that a firm interested in exports might want to see. The first one is the United States opportunities from the Commerce Business Daily, which is provided to the OBS by the Canadian Commercial Corporation.

The Mexican opportunities that are subject to NAFTA are posted, as well as some opportunities from CIDA and information on the CanadExport magazine.

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Now I'll show you what subscribers who are familiar with the system would do to retrieve information, get in and out and pay the least amount for their search. I've already signed on to this system. I connected through the modem. Before signing on, users would go into the software and click on ``search'', because that's available on their PCs. They would go into the search string they want to do the searching on and select it by clicking on ``search''. They've done all of this without being signed on to the system. Once they click on ``search'' the system then logs in. I'm already logged in, so it's not going to do it, but it would take a few minutes. There's a script file that is saved to disk and the subscriber just has to wait until it logs on. When it logs on it brings them to the list they searched on.

From this point, they just have to capture the text, exit the system, and read the notices from their hard drive. Every notice they've identified will be saved to their hard drive. They can exit the system and read the opportunities on their own time. Once they've identified the ones they want to order, they can sign back on to the system or call a 1-800 number and place the order by telephone.

A user will typically spend five to seven minutes on line to retrieve information. We find from our statistics that on average the users sign on once a week and the sessions last between five and eight minutes.

This concludes the demonstration. Do you have any questions?

The Chairman: Mr. Williams, do you want to make some other comments?

Mr. Williams: No, Mr. Chairman. I think I'd prefer, with the time available - if people hopefully have read my opening comments - to allow you the time to address any questions you may have to myself or any of my colleagues. Thank you.

The Chairman: Mr. Harris, we will begin with you.

Mr. Harris (Prince George - Bulkley Valley): Thank you. I just have one question. I guess I missed it in the beginning. How does Joe Smith out in Moose Jaw, Saskatchewan get hooked into this? Is it through the Internet system?

Mr. Williams: There are a number of ways. Internet is now one. We found in a recent survey that our subscribers wanted us to allow them to enter it through Internet, so that's a recent amendment. If they have a PC and the software, they can hook on as well without the Internet system.

Mr. Harris: Just through a modem?

Mr. Williams: Yes.

Mr. Harris: What kind of cost-benefit analysis was done in the replacement of the old system with this new system? How much money do you expect to save? How do you expect the efficiency to go up, and things like that?

Mr. Williams: First of all, the key point to remember is that the system was put in place in order to support the government's main objective of openness and transparency. This is the ideal way, it was felt, to allow access to opportunities within the Crown, especially by small and medium-sized companies, which I know is a key focus of this committee.

In terms of the cost benefit, first of all I think it's important to note that this was tendered on an open basis with very clear specifications about the kind of service, delivery and standards we wanted to achieve, as part of this. Each bidder had to provide fixed cost estimates for the five years of the contract.

The winning bid by ISM was, of course, compliant and gave us the best cost estimates. By putting this in place we expect to save up front about $1 million just in set-up costs and about $3.5 million on an annual basis in printing and advertising savings. The costs are borne by those bidders who are interested in taking advantage of the products, so the taxpayers, at least directly, are saved from these costs.

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Mr. Harris: Is there a model used by some other government that's in place that this was based on, or is this inventing a new wheel here in the way we're going to do business? Who has been using something like this before?

Mr. Barry Lipsett (Director General, Supply Program Management Sector, Department of Public Works and Government Services): I think this is an area in which Canada has a ``first''. We were the first country to set up a bulletin board like this. A number of countries are following us. The Australians have been over to see the system. The Mexicans are very interested in picking it up. The Americans are setting up a system quite similar to this. The EU has also just recently put in place a system based upon the specifications we had issued for the OBS. But this is a Canadian product.

Mr. Harris: Thank you.

The Chairman: Thank you, Mr. Harris.

Mr. Bryden.

Mr. Bryden: I have a couple of questions that actually arose from the last meeting we had.

Incidentally, I'm very enthusiastic about the OBS system. I think it has great potential and is a great idea.

As I understand it, this has replaced the need to place newspaper advertisements. Is that correct?

Mr. Williams: It certainly eliminates the great majority of advertising required for these same kinds of procurements, absolutely.

Mr. Bryden: I have some reservation about that. I wonder whether or not, particularly in the area of the small business in the various communities, such as my own community in Hamilton, small businesses in Dundas would be aware about, say, a contract for cleaning coming up at the airport at Hamilton.

So my question to you is: have you done any analysis indicating any negative side to eliminating the majority of contracting advertising? In other words, do you know whether or not small business, or any business, for that matter, is losing opportunities to bid simply because you are no longer advertising other than through this mechanism?

Mr. Williams: We do conduct regular surveys via telephone conversations. In fact, we recently did a very major survey, which has just been completed. We survey the users of the system to ascertain their degree of comfort with it.

I believe the figures, since the first time we did this, have jumped dramatically to more than 80%, in terms of those who are very comfortable with articulating that it's good or very good in terms of their comfort level and in terms of being able to access the information.

We didn't detect from the survey that kind of negative concern on the part of the subscribers. They did offer other areas in which we could further improve the system, but that in particular wasn't a major focus of their concern.

We also tried to buttress that by a lot of overt information sessions in which we go out to try to make aware as many suppliers as we can throughout the country by distributing kits and having forms on these kinds of sessions. So no one is missing out in terms of the knowledge base.

I think we even tried to distribute them to you and others to see whether you could distribute them within your constituency.

Having said that, certainly, if we became aware of any particular organization or part that needed more information, we would make an overt effort to get it out.

Mr. Bryden: Let me phrase the question even more directly, then. Have you actually studied the problem, or even considered studying it? That's in the sense of a problem existing in the sense that I describe it?

It's one thing to survey the users of the system, but they're already converted. But have you actually gone out in any way, maybe in a case study of Hamilton, say, or some community like Moose Jaw, to examine whether or not people are aware or whether people are negatively affected and they're not having the opportunity? When you eliminate something like advertising, you create a great void.

My problem with this system, much as I am enthusiastic about it, is that if you don't know about it, or if you don't know about a contract coming up at the airport in Hamilton, you're not going to do it.

So you may be eliminating whole swaths of potential -

Mr. Williams: The answer, frankly, is that we are in the process now of setting up a formal evaluation on the effectiveness of the OBS system. Part of that will be to try to do some case studies of the sort you're alluding to.

Mr. Bryden: Can I urge, then, that you -

Mr. Williams: Absolutely.

Mr. Bryden: - specifically look at the negative effects? To me, the system would be perfect if you continue to advertise. I'd be confident that you would be getting everyone. But I'm just afraid you may have made a cost saving here that is actually working against us.

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Just very quickly, I have another question that came out from the previous meeting. As I understand it, this is our data - government data - but private enterprise actually owns the system. Is that correct?

Mr. Williams: We own the data. The private sector runs the system on our behalf for a fixed period of time. In this case, it will end on May 31, 1997.

Mr. Bryden: Here's my question: do you have mechanisms in place guaranteeing that this private sector organization managing the system for you is acting in a way that is above board and honest and has the appropriate security checks? This is not to disparage any supplier you may be dealing with, but this type of data, if there isn't proper scrutiny, could be manipulated in ways that are harmful to the public interest. Have you systems like that in place?

Mr. Williams: We do have some. I would never guarantee any kind of misuse; however, in order for ISM to do that, they would clearly have to violate the contract. In the contract we have specific standards of service.

For instance, the day after we put something out, it has to be in the system. We periodically will go out to check whether or not those kinds of standards have been adhered to.

Mr. Bryden: That's precisely the point. So you're telling me that you are able to and do police the system then to make sure it is -

Mr. Williams: Yes, I just don't want to guarantee -

Mr. Bryden: No, we don't do guarantees against malfeasance.

Mr. Williams: Absolutely, we do ensure that's taken to a reasonable degree.

Mr. Bryden: That's good. Thank you very much.

The Chairman: Thank you, Mr. Bryden.

Ms Chamberlain, then Mr. Murray.

Mrs. Chamberlain (Guelph - Wellington): Mr. Williams - goodness, I can hardly even believe I'm doing this - I want to talk to you about an article that was in the paper. As we know, all articles are not factual, so I need you to comment on this and tell me a little bit about it.

By the look of you, I think you know the one to which I'm going to refer. It's the article of October 18 in The Citizen by Greg Weston.

He talks about the fact that an investigation found that a series of untendered contracts were given to relatives of two senior bureaucrats in the Department of Public Works.

I'm just going over this because everybody will not be familiar with the particular topic I'm talking about here.

The code, as I'm sure you are aware, states that public servants must avoid even the appearance of conflict of interest and, among other things, ``must not accord preferential treatment in relation to any official matter to family members or friends''.

I really would like to have your comments on this to know, first of all, whether this is factual. Then, from there, I would go on to ask you to specifically address how you prevent this kind of activity. Do you want to do it? I guess that's the first question. If the answer is that you would like to prevent it, then how do you prevent it. What is the deputy doing? Is it still happening in Public Works?

The Chairman: Good question.

Mr. Williams: Thank you. I believe the article is essentially factual. The situation did occur. These situations should not ever occur, especially in a department like ours whose own business is dependent upon reliability and integrity. It's even more so in our department, I would argue.

I think senior management took it with the degree of seriousness that it deserves. The individuals, in fact, were disciplined appropriately. The organization itself was transferred from one organization to another. In fact, it now reports to me.

We have instituted very rigid staffing processes within our particular sector or branch, such that every hiring made - contract, permanent, indeterminate, casual, or term - gets reviewed by a special committee that I have to ensure that there's no more use of this flagrant kind of situation.

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Can I guarantee you this will never occur again? Again, probably not. But I will say we have made it explicitly clear to all of our managers and to anybody who does any staffing. We've strengthened it in our training program so that when people come into the department they understand the rigour, and that's done periodically throughout their careers.

I would like to say this will never happen again, but based on recent statistics we have over 3,000 hires from the outside into the department, so it's always possible something like this could happen, although I would be disappointed and surprised if it did.

Mrs. Chamberlain: First, I would like to thank you for your honesty. I appreciate that and it is refreshing.

Why was this happening?

Mr. Williams: I think you would have to talk about the culture of our organization. In this particular organization a number of years ago, a culture grew where this was not a practice that was to be viewed negatively. I think when we examined these two cases we gained a much better understanding of the kind of culture that was set up in an organization. As we all know, once the value system or the culture is integrated or inculcated into an organization, it just continues to thrive on itself.

We had to uproot this kind of value system and make it very clear we wouldn't be tolerating this any more. I think we have.

Mrs. Chamberlain: I don't want to put words in your mouth, but on that point I would ask very clearly if you see this as a change in direction from that of the responsible Liberal minister? Is there a definite change of direction from what has occurred in the past?

Mr. Williams: I think so. There's a much stronger recognition of the importance of integrity within our department. I hope that message has been received by each and every manager. If we find out it hasn't, there will certainly be severe penalties.

Mrs. Chamberlain: I appreciate that and I appreciate knowing that we are indeed carrying through in a different direction.

The Chairman: Thank you.

Mr. Murray, may I ask you to let Mr. Bélair jump the queue because he has to make a speech in the House? So it will be Mr. Bélair and then Mr. Murray. Is that all right?

Mr. Murray: It's fine with me.

[Translation]

Mr. Bélair (Cochrane - Superior): Thank you for being here with us today, Mr. Williams and Ms. Dove. I'm referring to the text of your presentation. On page 2, you state:

First of all, what does the word ``optional'' mean? According to Ms. Dove's presentation, the service is quite clearly transparent. However, some things tend to be less transparent or less publicized. So for the benefit of the committee and anyone listening, could you explain what the word ``optional'' mean?

Mr. Williams: According to Treasury Board Policy,

[English]

departments are not obligated to use contracting professionals within the Department of Public Works and Government Services for services. If they wish, they can contract for services on their own.

In contrast, with respect to any goods over $5,000, they are obligated to come to Public Works and Government Services in order to procure the particular goods.

Mr. Bélair: My second question is about the communications aspect of the public works department. You mention on page 4 that there is a publication available for procurement and for advertising the services. What is Public Works' strategy to diffuse this information, or, if you wish, who is receiving this publication and is there a possibility of increasing the coverage?

Mr. Williams: Bidders who do not have computer facilities can access the same information via a print publication distributed three times a week. This is another means by which they can access the information.

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We're working constructively now, I think, with both provincial governments and the private sector to try to see how many of these other organizations would come aboard with us in order to make more effective use of their resources and our resources.

Mr. Bélair: Are you saying it's only those who are part of the management information service system who are actually receiving the publications -

Mr. Williams: No.

Mr. Bélair: - or can anybody obtain them?

Mr. Williams: That's exactly right. You can be, if you want, computer illiterate and still access the opportunities available to you through this other publication.

Mr. Bélair: I see. So how does he go about this? Write to Supply and Services or Public Works?

Mr. Williams: That's exactly right. They can get on a distribution list for a fee, indicating they want to receive the Government Business Opportunities publication. That will be sent to them three times a week, or as often as they want. They want it less frequently.

The Chairman: Mr. Murray.

Mr. Murray: On that point, have you seen the number of requests for the Government Business Opportunities publication drop dramatically?

Mr. Williams: I'm not sure.

Ms Dove: They have dropped significantly.

Mr. Murray: Anyway, my real questions come back to the first page of the presentation.

By the way, I was very impressed with what we saw. It was a very clear presentation. The program seems very user-friendly and will be extremely helpful.

I noticed on the announcement page you mentioned that New Brunswick has recently begun using OBS, then in the next paragraph that the Quebec government is now using OBS. How does it work when other levels of government want to tap into the system? Is there a return to the federal government? Do they contract with you to be part of the system?

Mr. Lipsett: Perhaps I'll go back to the inception of the OBS in 1992. When we developed the system it had always been our intention that we would eventually have a single window for suppliers on the Canadian federal government market. As a consequence, provinces participated in the development of the original RFT. They participated in the evaluation that eventually led to the award to Information Systems Management. Over time a number of provinces have joined the system, such that currently Alberta, Manitoba, Ontario, Quebec, and New Brunswick are using the system.

We expect several other provinces will join the system very shortly. In fact, under the agreement on internal trade, provinces must advertise their opportunities on a readily accessible system to be compliant with their obligations under the agreement. By far, the open bidding system is the fastest, cheapest, most accessible way of meeting their obligations. So we're confident that in the very near future we will in fact have that single window.

Mr. Murray: But do they pay a fee to the federal government to belong to this system?

Mr. Lipsett: No. The contracting is done directly between the participating jurisdiction and ISM Corporation.

Mr. Murray: Is there anything to prevent this from being expanded to include municipal governments? It could be a huge database.

Mr. Lipsett: Yes, absolutely. In fact, there are a number of what we call MUSH-sector organizations on the system right now; several community colleges, for example. I think one or two municipalities are using it. Again, under the agreement on internal trade, over time the provinces and the federal government are to negotiate municipalities, academic institutions, hospitals, etc., coming within the obligations of that agreement.

Mr. Murray: Have you noticed the number of requests for the bid documents increasing as people use the system more and more?

Mr. Lipsett: Obviously there's a critical mass in this kind of thing. The more opportunities you get on the system, the more participating jurisdictions, the more worthwhile it is for any one subscriber to log onto the system and go to that trouble.

With our own bids, one of the fears was that the number of responses would go out of sight, that we wouldn't be able to handle the level of interest. I think self-regulation goes on. Suppliers can read the number of companies that have ordered a bid set and they'll make their own judgment on whether it's worthwhile for them to compete. We haven't been inundated with an unwieldy number of new bidders.

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Mr. Murray: I would think that ability to see who else has the documents is one of the more interesting aspects of the system.

Again, congratulations. I think it's extremely useful. I'm very impressed.

The Chairman: Mr. Duhamel.

Mr. Duhamel (St. Boniface): I'm somewhat familiar with the system because previously I was the parliamentary secretary to Mr. Dingwall and I had an opportunity.... I was positive then and I continue to be.

I want to ask a specific series of questions. Perhaps you could give me the response at the end.

You might have mentioned whether or not foreign governments can tap in or whether or not there's a market there for us. I didn't hear that. I'd like to know.

My understanding is that the perception of those who are familiar with the system who have used it is really quite good. But a lot of businesses have not. In talking with these people, I get comments such as, ``It's extremely complicated''. I suppose that's relevant. ``It's costly''. ``Overall, not a lot of small businesses are profiting from it''. ``It's not particularly useful''. By that I would assume that you don't get a lot of business from it. ``There's a lot of government business that does not appear on that''.

I'd like some comment on that.

In particular, are there creative ways in which to avoid using the board? For example, you probably have thresholds.

I could pretend, I suppose. Maybe that's not the best wording. I don't mean it maliciously. Say that I've got a small contract and I give it out to someone without going through the board. I really like the work, so later it doubles or quadruples or whatever. Are there mechanisms for avoiding the board, if you wish, the transparency?

Have any partnerships been formed, with a few small businesses getting together and deciding to have the service and make it available to others? They might be in different sectors, not necessarily competitors.

It seems to me the small town city hall might want to buy into this system and make it available to the small businesses, or perhaps the local chamber of commerce.

There are a lot of questions there. If you can respond to those, then I'll be most appreciative.

Mr. Williams: I'll do my best, and I trust that my colleague will fill in the gaps.

As Luci indicated to you, in terms of foreign governments you can see that on the system we have the opportunities under NAFTA for both Mexican and American opportunities. They are on the system right now.

Mr. Duhamel: So it's a two-way street. That's what I didn't understand quite as well. We can theoretically bid into their services and products and vice-versa? Okay.

Mr. Williams: In terms of the feedback about complexity and costliness, I guess it's a question of perception, frankly. We have over 27,000 subscribers now on it.

Mr. Duhamel: Out of how many who are possible?

Mr. Williams: That's a good question. I don't know if there is -

Mr. Duhamel: I'm told it's a million.

The Chairman: According to the CFIB, there are 800,000 businesses in Canada.

Mr. Williams: Certainly, in the feedback we've got from all of our surveys - maybe it's because I've got a unique population here that's already on the system - they haven't complained to us in terms of improvements to make the system less complex.

You were given a presentation on it. I don't know if you found it to be complex.

Through our evaluation we will find out from both users and potential users whether or not there's room to make it simpler.

In terms of costliness, again it's a question of relativity. You're talking about probably $300 to $400 for an average user during the course of a full year to use this system. If they get one or two successful bids out of it, then that's a pretty good return on investment.

Perhaps that's a cost that a small firm doesn't want to bear. There are other means, by bid-matching services and keeping their costs down, potentially to keep some costs lower. That's the order of magnitude. I guess you'd have to debate with each company on whether or not that's a problem.

On your question about not appearing on the system, the open bidding system is a key mechanism when one wants to contract openly and competitively. Certainly within our department we use that extensively. Irrespective of the amount of the particular contract, be it under $30,000 or over $30,000, we demand fairly high justification from anybody as to why this kind of competitive process should not be used.

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Officially, however, the Treasury Board policy distinguishes between competitive and non-competitive. If a particular department has a contract under the threshold, basically under $30,000, not subject to any international agreements, they can in fact decide to sole-source it. Even if they were going to do it competitively, they could solicit bids from three or four or five companies as opposed to using the OBS.

I think it is fair to say that the system is used, but the rules allow many opportunities not to use the system, especially if you're below a particular threshold.

Mr. Duhamel: Might the kind of creativity I suggested be possible?

Mr. Williams: Yes, it's possible. I would only say that the very preliminary figures we saw from within our own particular department, the contracting we do, would suggest that we haven't seen a dramatic trend that way. I know you've seen reports from the Treasury Board that amendments have in fact been rising dramatically. From our own internal, very cursory look at it, they've remained relatively stable. But I think you're quite correct. If somebody wants to play a game, there are opportunities to play a game.

Mr. Duhamel: Finally, what about partnerships?

Mr. Williams: I'm not aware of any.

Barry, I don't know if you can comment about groups getting together in partnership arrangements.

Mr. Duhamel: City halls, chambers of commerce, stuff like that.

Mr. Lipsett: Our agreement with ISM Corporation permits third parties, such as Hill and Knowlton, chambers of commerce or trade organizations, to undertake value-added services, essentially bid-matching.

It is the case in a number of communities that these organizations have been set up. They have a membership. Each member gives a profile of the kinds of contracts they're interested in, and then the organization, the chamber of commerce, and the local construction association will do bid-matching. They'll run the profile of the companies' capabilities against the opportunities that are on the system for that day and alert those businesses of ones that match.

For small companies that means they don't have to spend the time and resources in reviewing the system themselves. I think it's also important to realize that although there are 27,000 subscribers on the system, there are probably many more thousands that actually learn about opportunities through these bid-matching services.

Mr. Duhamel: That's a good point.

The Chairman: Thank you, colleagues.

Mr. Harris, please.

Mr. Harris: I have just three quick questions, Mr. Williams, about the system and the company itself, ISM. Did the government initiate searching for someone to do this or were you approached by them?

Mr. Williams: This was a government initiative. A competitive tender process was enunciated with a request for a proposal. We specified 68 different products we wanted to see delivered, with fixed costs associated with each, and due process was followed. They were the compliant and winning company.

Mr. Harris: What's the value of the contract with them?

Mr. Williams: Do you know what it is, Barry?

Mr. Lipsett: We estimated that the total value of the contract over the five-year period would be $20 million. The actual value of the contract, of course, is a function of the success ISM has in marketing it to subscribers and of course the success they've had with marketing it similarly to provincial jurisdictions.

Mr. Harris: I'm not familiar with ISM, but could you tell me if they are connected in any way with some larger, more familiar name that all of us here would recognize, a company that's been around for a while?

Mr. Lipsett: At the time we contracted with them, they were a wholly-owned Canadian corporation. A majority of shares was acquired by IBM just about a year ago.

Mr. Harris: Thank you. That's all I have.

The Chairman: Thank you, Mr. Harris.

Mr. Bellemare.

[Translation]

Mr. Bellemare (Carleton - Gloucester): How many of the 27,000 odd subscribers are small businesses? What is your definition of a small business?

[English]

Mr. Williams: Well, 75% have fewer than 50 employees. That's a profile of our subscribers. The official definition that we would use is probably the one that was promulgated by Industry Canada, I believe, in the late 1970s, which suggested that small and medium businesses are those that have organizational structures you wouldn't really find in large companies.

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I don't know if there's a more precise definition, but that's essentially how we look at it.

[Translation]

Mr. Bellemare: What percentage of the overall contracting activity do the 27,000 subscribers represent?

[English]

Mr. Williams: I have to distinguish between competitive, first of all, and non-competitive. We don't have hard figures because when you award a contract you don't necessarily know whether the contract was awarded as a result of someone getting the contract through OBS. We just indicate whether it's competitive or non-competitive. So I can't tell you that a percent, say, of our $8 billion business came from contracts won through OBS or not.

I can tell you that roughly 60% of the contracts are competitively bid and 40% are not. Of the 60%, how much came through OBS and how much came through just someone accessing six different firms and picking one? I can't differentiate that for you at the moment.

Mr. Bellemare: Do you have the numbers of enterprises or companies that...? I don't know how many activities you have in a year. Perhaps I should start with that question. How many activities do you have in a year? A million, maybe?

Mr. Williams: We normally talk about processing, say, 110,000 to 120,000 contracts - in that order.

Mr. Bellemare: Okay. Let's assume it's 100,000. Out of that, have you checked to see if the same companies are always the ones getting the same contracts over and over and over again?

Mr. Lipsett: We don't track whether one company is getting more or less. We essentially put an RFT out on the street and the best bid wins. It's not been a concern that one bidder may consistently win in a particular type of procurement. The key factor, again, in an award is that they have the best bid, and if they do, they win.

Mr. Bellemare: Your answer, though, begs this comment. If you have 27,000 and there are approximately 800,000 enterprises or businesses, then the 27,000 only represents 3% of the potential number of people or organizations that could bid.

What effort is being made to try to augment...? I would immediately suggest that never will you get more than 50%, because probably a good 50% to 60% would have no interest in doing this type of financial activity or business activity. But surely the ordinary person would say that there must be at least 10% of the business community that would be interested in bidding. Therefore, there's a shortfall, between 3% and 10%, of 7%; in other words, at least 250% more should be on the system. What effort have you made to try to figure out how to get them on?

Mr. Lipsett: When we launched the open bidding service, quite honestly we felt that the market would be saturated at about 10,000 subscribers. The fact that we have 27,000 right now, and probably several more thousand who have access to the database through bid-matching services, means that it has clearly exceeded our expectations.

I think you have to bear in mind that if you look at that 800,000 figure, once you sort out the self-employed professionals who are in that area, the corner stores, you're looking at a much smaller population than 800,000. Bear in mind as well that we issue about 100,000 contracts a year. Many of those, of course, are very small dollar value contracts that don't appear on the OBS because it's not the efficient way to tender very small dollar amounts.

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We issue contracts to about 15,000 companies a year. At least 15,000 companies a year receive at least one contract valued at $25,000 or more. So bear in mind that this has probably exhausted the market, at least for federal contracts, at 27,000 subscribers.

I think the scope for increasing the subscribership to the OBS really lies in getting more jurisdictions on the system, provinces and municipalities. That's what's going to drive greater participation not only in federal contracting but for provinces and municipalities.

Mr. Bellemare: Are there more businesses now involved with the OBS system than when you did not have it?

Mr. Lipsett: Prior to using the OBS, we essentially used source lists. Companies would come to the department and register with us.

When we had an opportunity, a contracting officer would say, I think the appropriate level of competition for this requirement is three companies. He would go to the source list and choose the three companies that would have an opportunity to bid. We would send out the document and wait for them to bid.

That's the way it was done in the old days. Now, when we put it up on the OBS, there are potentially 27,000 bidders who can bid on that requirement. I think arguably it's much more open and accessible to a larger number of bidders than the old way of doing it, the source list.

The Chairman: Mr. Bryden, did you have a question?

Mr. Bryden: Yes. I'd like to build on some comments made by Mr. Duhamel and Mr. Bellemare both. I point out to Mr. Bellemare that the last questions in regard to reaching beyond the 25,000 pertains to the question of newspaper advertising.

Apart from that, can I or can I not get on the OBS system and call up Utopia Inc. in my riding and find out how many awards it's had in the last three years? Can I do that?

Mr. Williams: Using the OBS system, you mean?

Mr. Bryden: Yes. Can the OBS system be used as a research tool for someone trying to find out what is going on in the business of the awarding of contracts?

Mr. Williams: One of the icons has ``History''. If you use that, you can in fact see what the history has been for a particular firm or area.

Mr. Bryden: Fantastic. Taking another step, can I get a similar list for all the firms that have been awarded non-competitive contracts?

Mr. Williams: The non-competitive contracts, of course, would not be on the system.

Mr. Bryden: This is what I understand.

Mr. Williams: Unless, as my colleague said, there was an ACAN where we put it out and we listed a notice that we were going to select someone in particular and give other companies an opportunity.

Putting that aside, the only way you'd be able to get that kind of information now is by going department by department and seeing if within their contracting department they had that kind of a list.

Mr. Bryden: That's precisely my point. Is there an opportunity to expand the utility of the OBS system by requiring departments to put precisely that kind of data on the system?

When it comes to public accountability, in my mind, much as I respect your department and the people who work for you, the ultimate public accountability is the ability of the public to access crucial data.

I would be very interested in knowing who and how many people have received untendered contracts of under $30,000. I would want to know them by name, because this is a way of perhaps isolating abuse. Have you considered actually expanding the OBS system in that sense?

Mr. Williams: My initial reaction would be that this is obviously a legitimate question that ought to be explored. The accountability for making those kinds of policy decisions obviously rests with the Treasury Board as opposed to a particular line department.

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My initial reaction would be if that kind of information were necessary, one could design systems to try to capture that information. Whether or not to use the OBS for that is a question that you'd have to examine. The OBS was designed with a particular purpose in mind.

You're asking other legitimate kinds of questions that clearly ought to be explored. I'm just not sure what the best, most efficient and effective means would be to provide you with that kind of information.

Mr. Bryden: I'm just presenting this, because I see the OBS system as a fantastic opportunity. But it's an opportunity for government accountability as much as it is for contracting out. Thank you.

The Chairman: At page 7 of your presentation, Mr. Williams, you talk about the fact that you've consulted widely with industry associations regarding perhaps a definition of moneys that would be set aside within government for small business. You say that you held extensive consultations. What industry associations did you consult with?

Mr. Williams: We have a complete list of them, and I'd certainly be happy to either read them out to you or to leave the table with you, if you'd like.

The Chairman: The tables would be great.

You say that the clear message was that Canadian business did not want a program of procurement; preference is for small businesses.

Mr. Williams: Yes.

The Chairman: If our committee were to decide that 10% of all government contracts clearly had to go into small and medium-sized business - and my definition would be for firms that had employees of 50 or less - how would you as a government agency respond to that?

I'm looking for your input because we're trying to put new markers out there, to make sure.... One aspect of what I think our study would be is to make sure that small and medium-sized business has its fair share of this very large - $8 billion to $10 billion - government business that's there.

Mr. Williams: Certainly if you were to direct us in any way, shape or form, we would follow the directions.

The Chairman: Of course, but -

Mr. Williams: If you're asking for some initial comments, certainly our focus right now is more on what I would call fair access as opposed to fair share. I think it would be important for the committee to decide whether or not it wants to...I won't say ``distort'' the normal procurement process, but certainly that's in fact what you'd be doing, and to decide whether the merits of doing that would outweigh the disadvantages.

I think part of what you will need is better information about what percentage is now going to small businesses and whether or not they are getting acceptable access and whether they feel they're getting their fair share. With those pieces of information, undoubtedly the committee would come to the right conclusion.

The Chairman: Just for your interest, I know we were bandying about numbers. I think the universe is about 80,000 small businesses. I see one of your colleagues nodding in the back. I think I'm right. Isn't it about that? A ratio that we should be looking at is 27,000 of the 80,000, just so that.... The 80,000 includes doctors and dentists - every independent business out there.

Mr. Duhamel: Clarification. Do we know that for certain? Clearly it's not 800,000. But why is it 80,000 as opposed to 86,732?

The Chairman: I understand that information came to us by virtue of one of the other meetings, but I'm not certain. If you could get us the information of what the number is, that would be helpful, so that the committee will have the right universe of numbers to deal with.

The regional breakout - colleagues, I'm just trying to do a clean-up here of things that have come out of this. Do you track regions? If you track names, could you not track regions?

Mr. Williams: We don't. We cannot tell you what region received the economic benefit from a particular contract. We do know what was the latest point of distribution of the particular good, but that may or may not bear any resemblance to the company that designed and developed and got the economic benefits.

The Chairman: Take, for example, the frigate program in New Brunswick. They've tracked every economic benefit that came from that contract so that our region of Atlantic Canada was to have received a certain number of benefits. But, for example, 200 people are working in the aerospace industry in Mr. Duhamel's riding or in his area, in Manitoba, from the frigate program of New Brunswick. If the frigate program can track those, why can't you as a government agency do that?

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Mr. Williams: I would distinguish between -

The Chairman: Is that a special project?

Mr. Williams: - a major crown project.... Yes.

The Chairman: Okay.

Finally, how would you respond to lowering the competitive contracting threshold in the government contracts from the $30,000 threshold to $25,000, or in fact to zero; all going? What would your response be as a government -

Mr. Williams: You're talking about competitive versus non-competitive?

The Chairman: Correct.

Mr. Williams: Again, I think the proper answer should come from the Treasury Board as the policy directors on that. What you're balancing off is clearly that as you lower the threshold and require more to come through the OBS, you're increasing the costs. The higher it is, you allow for perhaps better client service and more efficiency. Where you want to draw the line I guess is the debate here.

The Chairman: My last question came out of something Dr. Duhamel mentioned about amendments. I think he was the one. Anyway, we'll source him as the credit for this. You said you don't have information that leads you to believe contract amendments are going up. Treasury Board gave us information for the year 1993-94, and if we're to believe the numbers the increases in amendments are alarming. They alarm me. Perhaps you're going to tell us that 1994-95 contract amendments are going to go down, but the statistics we have show that for the last three fiscal years the value of splitting contracts has gone up by an alarming 1,000%. Do you have a response to that?

Mr. Williams: I was trying to distinguish between the Treasury Board's information, which reflects all government departments, and the preliminary statistics we have from the contracting we do within our own particular department. The point I made is that we, because this is our line of business and our raison d'être, require a fair degree of accountability, irrespective of the level of the contract, as to why it should not be competitively tendered. Just because something is under $30,000, or in our case $25,000, doesn't obviate the need for the organization to justify the sole-sourcing it does. Unless it can be justified, we will go ahead and procure the good in a competitive environment.

That's why our costs have not been rising that dramatically. In fact, in the last year they've gone down; average cost and total cost for amendments.

The Chairman: So you're saying you're not the offenders.

Mr. Williams: What I'm saying is that this is our line of business. For many other departments it's a sideline. We take this thing very seriously and try to uphold the rigour and integrity of the process as best we can.

Mr. Duhamel: Could I get a clarification on something you've raised, Mr. Chairman?

The whole idea of tracking to province or region is somewhat interesting, but it's fraught with potential pitfalls, I think. I could own a company in Winnipeg, have a manufacturing arm in British Columbia, and do implementing of that manufactured product or sell it in the Atlantic provinces. Where is the activity? It's probably even more complex than that. Am I looking at it from the right perspective?

Mr. Williams: You certainly are articulating the complexity of the problem should you wish to do it. Of course the preface I would make is that right now our approach is fair access, which would not require us even to get into that information.

The Chairman: I would like you to know, Dr. Duhamel, we're keeping people in his province working...from Atlantic Canada. We sent cod out a hundred years ago, and you used it to shingle your roofs.

Thank you, colleagues.

Especially I thank our presenters. We appreciate your sharing your information with us today.

We're adjourned until tomorrow.

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