[Recorded by Electronic Apparatus]
Wednesday, June 12, 1996
.1539 
[English]
The Chair: I see a quorum.
Last December the Canadian Federation of Independent Business shared with the government operations committee a number of concerns relating to small and medium-size firms about the government's contracting process. Today they have come back to us with recommendations, which we welcome, because it's been the objective of this committee under the previous chair, and under myself, to look for ways to support small and medium-size businesses through the contracting process.
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We look forward to your recommendations.
Mr. Brien Gray (Senior Vice-President, Policy and Research, Canadian Federation of Independent Business): Thank you, Madam Chair. CFIB welcomes the opportunity to reappear and to share with you some of our findings with regards to access to federal contracts.
I would like to take the opportunity to thank Diane Diotte and Eric Adams of your staff. They've been incredibly supportive and very professional. They have been of great assistance to us.
The Chair: Thank you. We always share that viewpoint about our support.
Mr. Gray: With me is Pat Thompson, our associate director of research. She has been very heavily involved in the work that has resulted in this report today.
[Translation]
First of all, I would like to apologize for not having had the time to translate this document prior to our presentation. If I may, I would like to table the document, and we will then comment on the key aspects of the report.
[English]
As the chair said, we were here last December. We raised at that time some perspectives we had, but we couldn't document them with figures. We mentioned that we were about to do a survey of our membership. We're pleased to return today with the results of what we believe is the most comprehensive examination of the system from the perspective of the small firms themselves. We are confident the results will provide insight as to where the system is working well, where it's working poorly and where opportunities for improvement may lie.
I should really accentuate the fact that we find the work of the committee is and has been extremely timely and important. From our perspective it's appropriate, when one considers the size and potential of government contracting opportunities, that the policies, processes and practices of the system be put under the microscope to maximize the fairness and the opportunities for businesses of all sizes and for the federal government itself.
An essential element of this process is to understand just how large the market is. There has been much discussion before the committee on this subject. Many small business people feel that government procurement may well provide the business opportunity if only they could find the key.
The problem is, the opportunity may well be a mirage for many of them. What's in? What's out? What's biddable? What's not biddable? Is there access to some government departments but not others? What about crown corporations? What about other government or quasi-government agencies? What about contracts related to the UN, NATO and the like? What about opportunities supposedly inherent in the industrial regional benefits contracts? Does small business have a real crack at this? What about the impact of unofficial barriers such as amendments of policies? Who has the power? Who decides? How does the system work?
CFIB raises these issues again because the market issue is at the base of the entire puzzle, in our perspective. The importance of useful, reliable statistics is key. Without such a database, developing appropriate small-business access policies will be suboptimal, because they will be developed just as they have in the past - guesswork as to access, needs and opportunities the small business community may have. You have to understand and assess the problems before you can find solutions for them.
At this time I would like Pat to talk a little bit about the methodology of the survey and some of the results.
Ms Pat Thompson (Associate Director, Research, Canadian Federation of Independent Business): Thank you, Brien.
I'll deal first with the survey methodology. The questionnaire itself was developed in conjunction with Industry Canada. We sent it by mail to a selected sample of 15,000 voting members in November of last year.
We constructed the sample very carefully to ensure that we focused on sectors and subsectors where opportunities do exist for sales to the federal government. We actually were guided by information we had on the actual value of the contracts in fiscal years 1993-94.
The overall break by sector was: manufacturing, 4,500; wholesalers and retailers, 3,600; and business services, 3,000. We also went to firms in construction, primary agriculture, transportation and hospitality.
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Where possible, we ensured representation of the main subgroups that sell to the government, and we went down to three-digit CIT codes. For example, in manufacturing we included our manufacturers that we have on own database of commercial printing, refined petroleum products, aircraft and aircraft parts and so on and so forth. We're talking to the people who really know what it's about.
The sample also gave us very good representation by region, and we received a total of nearly 2,800 questionnaires by early February of this year. The survey results and the comments we got from the members were unique. We have an incredible database here. It's very valuable. We've taken the time to do full justice to these results, and you see our efforts in the report you have in front of you today.
With regard to the survey results, I'll just touch on a few of the first questions. First of all, to set the scene, we asked which levels of government they'd sold to in the last two years, and only a quarter of the respondents had not sold to any level of government. And while firms are more likely to sell to municipalities and to the provincial governments, over four in ten sell to the federal government. That's about 43%.
But before going any further, we wanted to know why over half of the firms do not sell to the federal government. We asked them this. The number one reason, which you'll see in figure 2, was the lack of information on what the government wants to purchase. Forty percent said that.
One of our members commented on this rather nicely, I thought. He said ``In this region the federal government's requirements of procurement procedures are in my opinion the best kept secret in government''.
It's a matter of deep concern that four in ten of those who don't sell to the federal government just bow out from the very outset because of lack of information.
Other reasons for not selling included concerns over the poor process. About three in ten had difficulty contacting the purchaser. There were concerns about the complexity of the process, with one in four saying the tendering procedure was too complex. There were concerns over the paper burden. Again, a quarter said there was too much paperwork for the value of the contract. And about one in six mentioned various other concerns that really boiled down to a lack of confidence in the system.
Next, the survey went on to focus on those firms that do sell to the federal government. First of all, we asked them about the departments that were involved. The largest procuring department was, not surprisingly, Public Works and Government Services, which was named by about three-quarters of all the firms. This was followed by National Defence, Transport Canada, crown corporations, Correctional Services and Environment Canada.
We were interested to note that some large departments were mentioned relatively infrequently. For example, Industry Canada was mentioned by only 12% of those who sell to the federal government.
We also asked the firms whether they had any problems in dealing with the departments and then we put together an informal report card on these departments. The members have the greatest problems in dealing with National Defence and with External Affairs. One in six of those people who dealt with those departments had problems. In the case of Revenue Canada it was one in seven. The members had the fewest problems in dealing with Agriculture Canada. Only one in fifteen of the members who dealt with Agriculture Canada had problems.
Brien is going to tell you more about the survey.
Mr. Gray: I think in many respects the part where we asked them where the problems lay proves to be the grist of what we were looking at. I really encourage the committee and the government itself to look carefully at the results contained in figure 4, because figure 4 sets out those areas that members felt were the problem areas.
First, and not surprisingly, the issue of late payment of accounts was identified by 62% of the members. We recognize the work of the committee as well as the joint forum on paper burden reduction in terms of making recommendations to get at this issue, and we applaud the government for having moved swiftly on that. We are convinced, however, that more things can be done and ought to be done to hurry up the process of payments.
The other problems that were identified had to do with 60% having difficulty getting on the bid list for local contracts. Again, it reflects a little bit of what we found out from those who didn't get in, with 59% saying there was too much paper burden, and 58% didn't seem to know what the federal government wanted. There was a widespread suspicion the selection process favoured insiders.
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I might also say that 53% said the bidding or the tendering procedure seemed to be complicated. More than half said they had difficulty competing with larger firms as competitors. One in four said they found the bonding and security requirements were pretty restrictive.
Next, we took a look at the OBS system, because after all, the OBS system is in many respects the centrepiece of the government's computer-based bidding system. What we wanted to get at was whether they were using it and if they weren't, why; what were the reasons why they were not doing that.
Incredible to us, because it really shook us when we saw it, 66% of the respondents to the survey said they did not use the OBS system. We find that important in its implications, because this, after all, is a key part of the strategy of the federal government for helping small firms.
As for why they didn't, 43% mentioned there was a lack of awareness of the system's availability - a communications issue. You can have the best system in the world, but if nobody knows about it, then it's not going to help too many people.
Beyond that, we had suppliers that didn't have the time to go over all the information provided, 34%; they didn't have a computer modem or a computer to get on the system, 25%; OBS was viewed as too expensive, one in five; and 12% didn't really believe it was an effective system for matching the services or products provided and the needs of the government.
From our perspective, these are seriously high figures. The OBS system represents a serious obstacle for too large a proportion of small farms, it appears. The system needs fundamental restructuring or it needs to be replaced by a more effective and efficient model, perhaps based on the Internet or a combination of different strategies.
Then we asked about concerns about lost bids. One in four said they were concerned about lost bids. Then we said if you are concerned about it, what was the issue here? Fully two-thirds had never received a debriefing from the purchasing officer on why they lost the bid. This is extremely important. Beyond that, almost half had never been notified by the purchasing officer or whoever was responsible that they had not won the bid.
These results point to a significant problem with the procurement process and the people who deliver it. This is particularly vexing inasmuch as it's our understanding the debriefing is a normal procedure that should be occurring. Without the information, these people who are trying to supply the government are likely to continue to be on the outside looking in, because they're not learning from the experience of where they've gone wrong or where they can improve.
We then asked, finally, how could you make it easier? How can the system be rendered easier for the small business constituency? The highest response was that 56% said they needed sufficient advance notice of coming contracts to provide the time to prepare. Wedded to this response was 51% who felt a need for simplified contracting processes and forms. Easy on-line computer access of government requests for tenders was important for 47% of respondents. Many, 40%, said getting some sort of subcontract position with large government contracts was very important.
We talk a bit about the implications of ISO 9000. I won't touch on them here, but in the recommendations what we are trying to get at is getting to the fundamentals, getting them right. We think we've come forward with some practical recommendations to enlarge the small business portion of the federal government pie. We emphasize that we think it should be a fair and open system.
First of all, the issue is access. In that regard, the market has to be opened up. After all, that's the raison d'être of this committee. Steps must be taken to remove the overt and non-overt barriers to entry. Too much of the action is non-biddable for small businesses, because it's under the $25,000 threshold now, because of contract splitting, because of the urgency of the contract, and the list goes on.
Although I know it's not your mandate right now, we also would encourage the committee to look, or have another part of the government look, quickly at the opportunities afforded by crown corporations. It's simply an opportunity that must be examined.
We get into the issue of the statistical database. The federal government must establish a full and credible statistical database in order to establish, understand, and track the access of small business to government contracts. Further to that, we believe each department should keep statistics on their procurement activities. They should be required to report on their progress. The data on a department's and agency's performance should be made public. Finally, each department or agency should keep track of complaints on a database such that they can learn where the system's going wrong. Colgate-Palmolive does have an 800 number for that purpose, to try to figure out where a system is going wrong. They learn from their mistakes and they render it better.
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In terms of process clean-up, there must be major simplifications to the entire request for a proposal and bid process. Severe limitations must be placed on the use of sole sourcing. All procurement policies, processes, and practices must be examined to remove any discrimination against smaller suppliers. If OBS is to be kept it must be simplified and made less costly, more user-friendly, and more effective, and it must list all government opportunities. Departments and agencies should give much more advance notice of contracts that may be listed.
With regard to late payment problems, we are very much of the view that the government should track and make public those departments that have chronic late payment records, penalize them through their spending envelopes, and in that way get better behaviour out of the departments.
Beyond that, we think it's useful - and frankly, this is something that the joint forum on paper printing reduction is looking at - to try to establish that threshold at which it's cost-efficient for the government to pay the bill now, immediately. Kodak and big firms all over North America pay upon receipt of invoice and they do their audits on an exceptions basis. That's normal practice, it's cost-effective, and it's good business.
In addition to that we have some concerns, and we've had concerns expressed by some of our members, where there are subs to a prime contractor. The prime gets paid and the sub never gets paid. I think there have to be ways to try to ensure that somebody who's doing fair and open business with a prime contractor ensures that they're getting paid if the prime has gotten paid.
We talk about measures to lend a helping hand. Each department and agency should be required to establish a small business supplier development strategy. There should be greater use of regional agencies as a means of helping small firm suppliers navigate the procurement process successfully.
Last December we talked about the idea of a code of conduct for government suppliers. We recommend that you initiate it. If this is something that is useful for banks in terms of them explaining why somebody wasn't successful on an application for a loan, it seems to me that it makes all kinds of sense in a process like this, where the opportunity for business contract success is so vital. It seems to me to make good public policy sense that the person understands and can make good the next time in terms of the next opportunity.
Each department and agency should have a person of authority designated as the small business procurement official. We think there should be some consideration given to listening, perhaps on Strategis. Private sector companies are groups that can offer entrepreneurs assistance.
Finally, the government should look at means to facilitate small firms grouping together in terms of teams for joint bids.
The last of the recommendations has to do with the concept of a federal government procurement ombudsman. The idea of that effectively is that if there is a real problem in the system they have somewhere to go and somewhere to complain to and not feel that if they complain they'll get hammered by the procuring processes or procuring agent. That is the last of the recommendations.
In conclusion, the federation congratulates you, the committee members, on your important work. It has put the spotlight on a critically important and neglected instrument of economic development for small firms and diversified economic development throughout Canada. At a time when governments are focusing on deficit and debt reduction, opening up procurement opportunities to small business represents a high-potential, low-cost form of stimulus to the economy while greatly assisting SMEs.
In closing, we would like to thank the committee for inviting us to reappear before you on such an important subject matter. A positive action-oriented response on the part of this committee and the government would do much to enhance small business development, economic activity, and job development throughout Canada. To that end CFIB remains committed to continuing to contribute to the development of appropriate policies and strategies to enhance small business procurement opportunities with this committee, the government, Public Works and Government Services, Industry Canada, and any other departments or agencies that would like to do so.
Thank you.
The Chair: Thank you for your helpful insights. We'll begin with our questions
[Translation]
with Mr. Crête.
Mr. Crête (Kamouraska - Rivière-du-Loup): Thank you for your presentation. It was very interesting. It includes what contractors have been telling us spontaneously in our ridings, but here we have a survey with some scientific value.
I find that very interesting. Did Quebeckers respond and were they given the opportunity to respond to the questionnaire in French?
Mr. Grey: Yes. The questionnaires were available in French and in English. I apologized earlier for not having had the time to translate the presentation, but Ms. Diotte has a copy of the survey in French. I hope that will help you.
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Mr. Crête: Okay. Some businesses in Quebec have contacted me regarding a problem that is not identified in the survey. After the first stage of a call for tenders, they have trouble obtaining contracts in French and especially documentation in French from the various departments, particularly the Department of National Defence.
Did your survey bring that out?
Mr. Gray: I must say in all honesty that we started off by trying to more or less identify the problems. Later on, we will perhaps have the opportunity to examine them in greater detail.
For example, we know that there are problems at the Department of National Defence. In Quebec, we could perhaps identify those who had problems with the Department of National Defence as well as the types of problems they had to face.
Mr. Crête: You said that 66 per cent of the respondents did not know the OBS, the computerized open bidding system, existed.
Mr. Gray: That is correct.
Mr. Crête: In your view, what would be the best way of reaching these people? Over the next three years, with the right tools, what percentage could be reached and what tools would be required?
Mr. Gray: It is difficult for me to answer that. The government itself does not know how to do it adequately. In my view, there has to be better communication, based on contractors' needs.
It is a bit like banks that offer services without understanding contractors' real needs. Here, it is sort of the same. SMEs are thought to have certain problems, and there are certain things to be proposed to these contractors, but often, there is a gap between the need and the available services.
This gap must first of all be identified and bridged, and then the existing opportunities must be effectively communicated to these contractors.
Mr. Crête: Can you do the necessary cross-tabulations to determine whether this lack of knowledge of the system is more prevalent in the West, in Quebec and in the Maritimes that it is in the Ontario region? Could it be said that the farther the contractor is from Ottawa, the less likely he is to know about the system? Is there a geographical breakdown for this lack of knowledge?
Mr. Gray: I'd like to say yes, but I cannot. Our sampling...
Mr. Crête: You cannot say it because you do not have the answer or because it is...
Mr. Gray: That was not one of the questions. There seems to be some fear or distrust of the system, but we did not ask people if they were wary of the procurement system in Canada.
Mr. Crête: That is quite the action plan you are proposing. In your view, can these changes be made by way of an administrative decision, or would they require legal changes?
For example, you say that each department should have a person of authority designated as the small business procurement official. Can these recommendations be implemented simply by changing procedures officials use or does the legislation need to be changed?
Mr. Gray: In my opinion, we can make a lot of these changes at the administrative level. We tried to come up with recommendations that made sense, which were clear, relatively easy to adopt and relatively easy to implement.
Mr. Crête: I agree with you about most of the recommendations. You have provided us with some very interesting information that gives us feedback from the contractors. I would like to know whether you intend to push this further in order to get something more in-depth for each purchasing sector. I know that it is not your job to replace the government and this is not what I'm getting at.
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In my opinion, this is a very good first phase step. In the light of all of your recommendations, what would you like the government to do?
Mr. Gray: First of all, I would begin by identifying the real market, namely, the market that really exists for small and medium-sized businesses.
To a certain extent, governments give contractors the impression that there is a lot of business potential with the government, but when you take a look at the statistics, either ours or the government's, this is not quite the picture you get.
In my opinion, we must first of all be honest with contractors and tell them what the market is. Secondly, we must create a reliable database so that we can determine whether or not government policies are effective and having an impact. For instance, a few years ago, we had some contact with Industry Canada, which was supposed to be amending the Small Businesses Loans Act. There was no data bank about this program, which could have given us some indication as to whether or not it was working, whether it was efficient, whether it was useful.
The Federation could conduct a survey to help create this database, but that would not be a good thing, because the minister would at that point have to rely on statistics that are not necessarily under government control. In order for a system to be effective, these two things are essential.
Mr. Crête: There's one statistic that I don't see in your data and I understand why, but I will ask you the question all the same.
As far as lost bids are concerned, did anybody indicate to you that they didn't submit a bid because they felt that the decisions had already been made?
I have some very clear examples where the proposal is so complicated and technical that pretty well only one firm was able to submit a bid. I've heard this story often. Do you have any data on that?
Mr. Gray: Not specifically, but figure 2 provides several responses indicating that the system is complicated, difficult and a bit intimidating.
Mr. Crête: Therefore, you feel that figure 2 indicates that people feel that it is not easy to go through the process and that one of the reasons why could be that the bidding process is very restricted.
Mr. Gray: That is my interpretation, however, it is only one interpretation.
Mr. Crête: Thank you very much.
The Chair: Thank you.
[English]
Mr. Gilmour.
Mr. Gilmour (Comox - Alberni): Thank you.
This really is a comprehensive report that ties everything together, from what we've been hearing.
One of the comments you made was on opportunities provided by crown corporations. Can you expand on that?
Mr. Gray: In the survey we asked them whether they were bidding on a crown corporation activity, and I think 56% said they had bid on crown corps. That figure is funny, because it lumps together virtually all crown corps, so you don't know whether it's CBC or whatever else. You don't know where that activity is.
It seems to me that when I was co-chairing the small business working committee there was a chart in that report that indicated activity related to crown corps could be as much as, I think, $23 billion worth of business. That's pretty substantial. That's more than what you've been asked to look at so far. If that's the case and if that business is potentially there...
We did a little bit of focus-grouping around this too. We didn't just go to the survey members. We tested back afterwards against some of them, asking ``What do you think people meant by some of these things?'' Some of the stuff that came out was UN contracts. They're there, but we don't know how to find out about them. There's no way for us to find out about them, whether it's UN, NATO or any of these other intergovernmental kinds of contract opportunities.
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So in answer to your question, I believe - and I think it's pretty well indicated in the comments from the members, although we didn't specifically ask that question - they would really like to get a better handle on how to access, get into and take full advantage of the opportunities that may be there in the crown corporations.
Mr. Gilmour: Okay, thank you.
What do you mean by discrimination towards smaller suppliers? Give some examples of where the larger firms have the advantage.
Mr. Gray: I might ask Pat to come in after me on this.
We're giving you the results of the surveys, and that was a result. In order to get the story behind the story, you have to count on the comments offered on these survey returns, where they say ``This is my impression''. The fact is I don't like saying there is a fix in on these contracts or for sure the purchasing agents have some sort of deal going. I don't like to get into that. But if there is a perception in the system that this is going on - and it seems pretty established that there is a perception that way - then I think it's extremely important, in the interests of transparency and fairness, to address that issue, try to discover whether in fact there is any problem in there and address it.
Ms Thompson: What came out of the comments was that there is a tremendous frustration. They feel the contracts are there. They hear when contracts go to other firms. They don't understand why it is, when they have followed the specifications and they are within the cost limits, that the contract is awarded away from them.
There's a total lack of confidence in the system. This came out very clearly time and time again. People are confused by it. Many of them feel it's a waste of time.
Mr. Gray: I might just add that's one of the reasons we put so much emphasis on the fact that you have to get back to these people and explain the decision, the rationale for the decision and how these people can do better next time. I'm convinced that if you adopt a policy that's truly effective in that regard, then you'll start to take care of some of this distrust factor. There's no question in my mind, because then at least people have an idea.
But if you have one in two of the people who've been dealing with government saying ``I never got any kind of feedback; I wasn't even told I didn't get the bid'', then it's left up to a whole bunch of suspicion as to what might have happened. I don't think it's useful for the government, and it's certainly not useful for those small business people.
Mr. Gilmour: That goes back to your comments on some of the communication that needs to be put forward so people are aware of the system, but also to the ombudsman aspect and just running it like a business.
Mr. Gray: That's right. And in terms of the communication, it's communication on how the system works, how to get bids ready, how to deal with the system once you're in it, how to deal with purchasing agents - how to do all those kinds of things. You can say it's businesses' business to try to find that out, except this system is relatively Byzantine.
Mr. Gilmour: Thank you.
The Chair: Mr. Jackson.
Mr. Jackson (Bruce - Grey): Madam Chair, I'm continually amazed, after all our meetings that occur here in the bowels of Ottawa... It reminds me of a philosophical course I took some years ago. A person would go to a university and they would walk around and go to the faculty of education, the faculty of music and the faculty of law, and then they'd walk out and say ``But where is the university?''
I've sat here - and I'm a relatively new member of this committee - and I've heard answers to a lot of these questions. I don't know why these answers never get out. So in our reporting back, I think some of these questions should be in there for the staff doing the writing of the report. The questions and answers should be there.
My question to the reps from the independent business community is how would they disseminate and communicate with their people once they get our results? That's where the problem is. I don't think the problem is with the government. The problem is that people never get together.
They say people make all these excuses, but when the government people were here, they had an answer for every one of those things: the quality wasn't right or whatever it was. For the most part, what I've heard from the officials is not exactly what I'm hearing your people saying, such as just because they didn't get the contract, somebody was crooked or what have you.
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So you have to get the information and they have to get the information, and then I think it will be a better process.
The process breaks down when we have these discussions and we get a report and we put it on a shelf someplace. So the information you got from your surveys should be in the report and there should be questions and answers. If not all the questions are answered, then you can come back to us. That's the best way, I think, for us to do something.
I'm a practical person. It's great to talk about things, but you also have to give concrete examples when you're making accusations.
My question is how you will communicate this back, because if it stops with you, if you get one report and you keep it in your office too, then the process is never going to work. Or are you asking us to build up a bigger bureaucracy and do more stuff?
The one thing you said that I liked was that common sense should prevail over legislation. We can pass a lot of legislation. Sometimes I wonder why we pass so much damned legislation, because it all starts there and then you have to go through it. So we need common sense - or are we going to go through some more legislation and it's stuck there but we still don't solve the problem.
The Chair: I just want to assure Mr. Jackson that as chair of this committee I'm not interested in any dusty tomes. I think I'm on safe ground when I say that I think most of the committee members here are interested in concrete recommendations and solutions to problems that are currently in existence.
Mr. Gray.
Mr. Gray: You shouldn't short-change yourselves in terms of how much effect you can have on the system. I've seen evidence in this city where good solid committee reports have had huge impacts on government policy and, in net terms, in their effects on the day-to-day lives of entrepreneurs.
One that quickly comes to mind is the work with regard to small businesses and the banks. You can be darned sure that had the industry committee not examined closely the relationship between the banks and small business, many of the things that are now in place - and there's much further to go - in terms of accountabilities, at least, in the system, would not be there.
So I tip my hat to the parliamentarians who take the time to do good solid reports, and I think it's incumbent on the government to look at the reports, take what is usable and effective, and try to implement it.
With regard to our responsibility as an organization, I agree with you. We have to communicate with our members what we know about the system. We're going to communicate what our findings are here, what we've discovered, what we think would help the system, and if there's stuff that we can do to help, then, as I offered at the end of the presentation, we're willing to work with the government to solve the issue.
It doesn't do us any good to come here and identify problems. We've tried to suggest solutions, but to do nothing thereafter doesn't help our constituency. They wouldn't be saying anything good about us if we left it there.
So I take your point. I think it's dead-on. But I also wouldn't accept...just as we, as an organization, didn't accept from the bankers that we were doing all we could for small business. I don't believe that government officials are doing all they can in the procurement area to enhance employment opportunities, economic development opportunities, and job opportunities in the small business sector in this country.
Mr. Jackson: The point I want to make is on communication between both groups. I've heard a lot of answers to your questions, yet your people say that they don't have those answers. I have got that only since I've been here. So I don't know if we have the cart before the horse here.
We want to make sure that the communication happens. I'm a practical guy. Let's get something through. If we're going to do a report here, when our report comes out, it should answer your questions, and when you get the report, make sure you get it to your people. If not, we'll be right back at the same point next year, doing the same thing.
Mr. Gray: I would be willing to bet you that the federation distributed more copies of the small business working committee's report than of any other single entity across the entire government.
Mr. Jackson: And I hope you people read them.
Mr. Gray: Well, they do - hopefully.
[Translation]
Mr. Crête: I have a more specific question. Personally, I'm very impressed by your report. I find it very helpful and I think that it provides the government with a fantastic message. If the government does not seize this opportunity now, it will never do so.
It is a message from small business to the government and the bureaucratic machine. It is very important. This is a very positive contribution.
Mr. Gray: Thank you for the compliment.
Mr. Crête: In figure 7, which deals with ways of making it easier for firms to contract with the federal government, you talk about the need for longer advance notice.
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Do you have any idea about what type of notice these people want? Right now, are we talking about notification of from two to three weeks for registered people? In certain cases, would they like to have several months' notice?
Mr. Gray: I can't answer your question specifically. I apologize. It depends on the contract and on the department.
Mr. Crête: All right. Do you have a list of departments that could be viewed as poor corporate citizens in comparison to other departments where, according to your clients, the bidding system has been implemented more effectively and more acceptably?
Have troublesome areas been identified and, if so, where are they?
Mr. Gray: Figure 1, on page 7, indicates that more problems were experienced with certain departments in comparison to others. But once again, it must be noted that departments such as Public Works and Government Services Canada...
Mr. Crête: That is general.
Mr. Gray: ...are very big. the Department of National Defence is also very big. So, to a certain extent, it is to be expected that more problems would be encountered with these departments.
Mr. Crête: We must have less control over Crown Corporations, because they have more independence than the departments. Theoretically, they should be more effective because they have fewer obligations. Do your statistics provide any data on these corporations?
Mr. Gray: We did receive certain comments, but they were not based on anything scientific and I can't rely on these observations.
[English]
The Chair: Mr. Harvard.
Mr. Harvard (Winnipeg St. James): Your comments have been very interesting, Mr. Gray.
Mr. Gray, it's a fact of life that the nature of a federal government of a country of this size is sprawling and bureaucratic. If you had taken the opinions of your membership vis-à-vis the procurement policies of a large private corporation such as General Motors or Bell Canada, do you think the results would have been any different?
Mr. Gray: I have no way of knowing that.
Mr. Harvard: No hunch?
Mr. Gray: I suspect they'd have a better idea as to how the system worked.
Mr. Harvard: You were complaining about the federal government - perhaps not in all instances but at least in some instances - not providing debriefing to your members and notification of loss of contract. Would that be a common practice of say General Motors or Bell Canada?
Mr. Gray: I don't know the answer to that. Perhaps the committee can find that out.
Mr. Harvard: You also mentioned that subcontractors to general contractors working on behalf of the federal government are often left exposed. Would that be the case in the private sector as well?
Mr. Gray: It may well be. The purpose of our survey was to look at what you're examining, and that's what we confined it to.
Mr. Harvard: Yes, that's a good point. I think it's beneficial to us, though, to find out what's going on in the rest of the world. I think one of the reasons it would be beneficial to us - and I don't say this in a derogatory way at all - is that we in government are told over and over again that if we want to look for good examples, if we want to find good examples of leadership, all we have to do is just look to the private sector. They're the aggressive ones; they're the smart ones. As I say, I don't say that in a facetious or sarcastic way. That's why I raised the question.
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Mr. Gray: Maybe I could intervene and say that perhaps it's worth pursuing by the committee. You could engage some consultants to check out that very matter: what are the firms that do it best, what are their practices that make it best, and can we learn anything from it. I think that's an excellent idea.
Mr. Harvard: Don't your members come to you and say they have all these problems with the federal government, and they never have those problems with the private sector? Do they not tell you that?
Mr. Gray: Not in this context, simply because the intent of this was to find out about what the government was doing with these people. Had I been tipped off last December that the committee would have loved to have this comparator then perhaps we could have done it; unfortunately, we're after the apple-cart right now.
Mr. Harvard: I deem myself a supporter of small business and I'd like to see you people get as big a part of the action as possible, but if a small business seeks a contract or finds it difficult to break into the federal government market, for whatever reason, whose fault is that? Is that the fault of the small company that failed to penetrate or is that the fault of the federal government? In other words, if I go, as a politician, to a door and fail to make a sale, is that the voters' fault or is it my fault?
Mr. Gray: I'd liken it to what I've often said about the education system in this country: everybody likes to complain about it, everybody likes to point fingers at each other about it, but I think it's important that everybody assume responsibility for their respective share. I take your point. I think there very much are obligations on the part of the entrepreneur himself, or herself, to do as much as they possibly can - these are what I call factors controllable by them - to ensure that their business is smart enough to do the appropriate research and to find out everything they can. By the same token, particularly when you're talking about a government that's there for the public good, and one of the public goods presumably is to help the economic development of all segments of the business side, for example, it's important that they do their part by doing everything they can to make sure from their end that the thing can function well.
What I was saying to Mr. Crête just a minute ago was that the perception from this survey is that there is one set of needs out here, which we're hearing about from our membership, that are X, and there are a bunch of deliverables over here that are from the system that are Y. What we would like to see is a closing of that gap on both sides. Our people...and here I talk about how do you get those people in the system who are expert as brokers, for example, in helping small and medium-sized firms through the process, because it is a maze. How do you team them up, maybe through Strategis, through the Internet, however you might do it, with those firms that simply never will have the sophistication or the expertise to do it themselves. That's a private sector solution. I think it's doable. I think it's one where again there's a responsibility on the part of the entrepreneur. I've been trying to give you a sense of where the gap lies and where the possible solutions may lie.
Mr. Harvard: I'm not a business person. I'm very much a layman in this area. But I would assume that when the government invites bids it is in the interests of the government and ultimately in the interests of the taxpayer that the more bids the government receives the better it is for all concerned. So naturally I would not like to see any barriers, intentional or otherwise, that stand in the way of small businesses entering into the procurement market. I think it's in the interest of the government.
When small firms are encountering these barriers, for whatever reason, how would you quantify the impact on the taxpayer? How is the taxpayer being hurt by a system that does not serve either the small-business community or the government as well as it should?
Mr. Gray: It's hurt in two ways. On the one hand, you're not necessarily getting best value for the dollar in terms of the way you're spending your money at the government level. On the other side, you're missing economic development opportunities, largely in the regions, I emphasize, because there are an awful lot of people who run firms out there who are very well qualified, very professional, and I think they can take advantage if the connection gets done.
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So I think from both sides there's a real opportunity, and that's why we've entitled this thing Opportunity or Opportunity Lost? I think this is one that can tip either way, and I really encourage you to do everything you can to tip it in terms of the opportunity.
Thank you.
[Translation]
The Chair: Mr. Crête.
Mr. Crête: On page 18, you state that greater use should be made of regional agencies such as FORD-Q. In East Quebec, these agencies are, to some extent, carrying the load. They're asking businesses to co-operate and to give them an opportunity to pick their way through the maze. Do you not think it would be a good idea to give these regional agencies the mandate of reporting on the way that their clients, private businesses, are treated by the government apparatus?
If the agencies were allowed to do some critical analysis of the way that the departments assessed their... For instance, FORD-Q could recommend that the bidding system be bilingual and that the people be dealt with in French more often. In the Maritimes, the agencies could ensure that better information be provided. These regional agencies could forward these reports to our committee or to the proper government authorities. Would that not help us obtain better results?
Mr. Gray: I would first of all take aim at the departments before adopting that approach. i think that this would be more effective at the start.
In Quebec, there is a program restricted to these regional agencies. I would really like it if we could broaden this pilot project.
Mr. Crête: We could implement a similar program for the other regional agencies or broaden this program to some extent.
Mr. Gray: If that proves to be useful. As you know, contractors are not necessarily in favour of significantly expanding programs.
Mr. Crête: I am fully aware of that. You are faced with a significant problem. Even though we do not need cumbersome systems, we must ensure that they are effective.
Mr. Gray: That's it.
Mr. Crête: This is not always obvious. In the past, we have often come up with solutions that made the bureaucracy more complicated where in fact, we sincerely believed that we were helping to find a solution.
Mr. Gray: When we have all the money in the world, we have a great deal for the programs, but when we are faced with a tremendous deficit, we have to fight to get funding.
Mr. Crête: Thank you.
[English]
The Chair: Mr. Bryden.
Mr. Bryden (Hamilton - Wentworth): I have a couple of questions. May I ask how you did the survey? Was it a mail-out questionnaire?
Ms Thompson: Yes, it was a mail-out questionnaire. You got the questionnaire at the back of the report. It was a full-pager.
We actually worked in conjunction with Industry Canada to get the right questions, and it was mailed out in November of last year. We got the responses back in February, and we spent a lot of time working on the survey analysis because we thought we had good results. Also, the comments were very, very valuable. They were good comments.
With regard to the sample, as I said in my earlier comments, we focused on those sectors where we knew there were contracts. In other words, we were going to people who could benefit from this so that we were really getting their experience. When you hear that such a large proportion didn't even hear from the purchasing officer that they hadn't got their bid, that is really very worrying. There's a lot to be done to tidy up the system.
Mr. Bryden: Why didn't you send the survey out via Internet? Why did you use the mail? Why didn't you use the electronic highway?
Ms Thompson: Why didn't we use that...?
Mr. Bryden: Yes, particularly if you sent it out to people who you thought would benefit...
Mr. Gray: That's a very good question.
Mr. Bryden: Why didn't you do it?
Mr. Gray: I'll tell you why. First of all, at the time we sent it we weren't on the Internet. We are now, but we weren't back then.
Mr. Bryden: I see.
Mr. Gray: You'll be interested to know, Mr. Bryden, that it's an extremely good question, because Internet today has its limitations. However, a recent survey of our members with regard to the user technology indicates that although there are something like 13% to 15% that are on it now, the intention was that it was going to go to about 35% within a year and extrapolate massively the year after that. So the potential for it in a year or two is going to be massive. At the current time it's fairly limited, but I think you really have to look carefully at the opportunities afforded by the Internet from many perspectives. Cost is not the least of them.
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Mr. Bryden: You picked up on exactly where my question was going. I noticed that in figure 5, 25% of the people who didn't take advantage of the system didn't have computers.
Mr. Gray: Yes.
Mr. Bryden: I would suggest to you, particularly if you screen them -
Mr. Gray: Just a second. Is it computers or modems?
Mr. Bryden: Modems.
Mr. Gray: They may have had computers but not modems.
Mr. Bryden: All right. Yes, I stand corrected. That's a point. But what does a modem cost? It's about $90, or whatever it is.
Mr. Gray: All I'm saying is that the person understood that with a modem they could get into this system. That's one thing. Once into the system, they knew they could get into it in a user-friendly way, and that's another issue. I think I've raised some of those issues here that are not mutually exclusive.
Mr. Bryden: No, I'm not trying to go around the corner here on this, but it does point out to me that one of the weaknesses in the survey is that two years from now the survey with the same questions could come up with an entirely different result.
You could also get quite a different survey if you sent it out by modem than you would right now, because right at the outset that pre-selects the types of businesses out there that are sufficiently advanced in their thinking to be, shall we say, good bidders on the system. I just have a feeling that if a business doesn't have a...
Sorry, are you having trouble following that, Paul?
[Translation]
Mr. Crête: You are saying that while the businesses are not all there yet, we must not eliminate those that have not yet come far enough. We must give them a chance to get there.
[English]
Mr. Gray: Listen, next time we do it, we'll try to do it multi-dimensionally.
Mr. Bryden: Let me just change the point, then, because I was curious about that. I'm going to go off in an entirely different direction, if you'll forgive me.
Is there any potential, or has it been discussed in this committee or otherwise, for using the OBS system to access foreign markets like the United States? I'm thinking of NAFTA. I would have thought that the potential for the OBS to go beyond Canadian frontiers is quite high. Is that something that falls within the purview of your organization?
Mr. Gray: The report does list that there were a number of... This wasn't through a survey response. It was more like a comment from the members, and some of these are fairly substantial firms. Not all of them are smaller entities that are not sophisticated. This particular person has a sophisticated manufacturing operation in Montreal and made the point that there are opportunities in the UN and in NATO, in these sorts of agencies that we have a linkage to and for which we ought to have access to the contracts. NAFTA is a similar thing.
But I think we should get Canada right on the OBS, and then we can worry about these others. That's not to say we shouldn't worry about the others, but let's get Canada right. We haven't got all the provinces up, for example.
Mr. Bryden: I would be very interested - and I imagine the other members of the committee would be as well - in seeing the copies of the actual written responses from the people you surveyed, if that's at all possible. Your group regularly now sends me the survey results that have people's comments. I'd be very interested in actually seeing the copies, because it is very useful to talk to the people who are directly concerned with some of the...
Mr. Gray: I'll answer you by saying that the communication we have with our membership is predicated on confidentiality. One of the reasons we get such good data is because... For example, if it's Revenue Canada, if it's the banks, if it's anything like that, they want to be assured that in no way can this detailed information be used against them. For example, if we were to give original questionnaires to the banks to take a look at, I'm not totally convinced there wouldn't be repercussions.
And with regard to you, when we sent this out we didn't say ``By the way, we're going to make your name and all your comments available to the individual MPs''.
Mr. Bryden: No, I don't want the names. I just want their comments.
Mr. Gray: We'd be happy to give you a list of typical responses. How's that?
Mr. Bryden: Okay, if that's all you can do. It's just that it is... It's not difficult for individuals like us to -
Mr. Gray: Do you know how many responses we have? We have 2,700 responses. Perhaps we can do it all, but -
Mr. Bryden: It would take me an hour to go through, I'm sure, to find the -
Mr. Gray: I've gone through them, John, and I can assure you it's not an hour, but I'll give you what I can.
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Mr. Bryden: Well, it's just a thought. You may feel that's difficult, but I often find it's an advantage to have the comments. The survey is very good. I'm not dissatisfied with it, but sometimes the comments are very useful to us. Just give us whatever you feel is appropriate.
Mr. Gray: We've tried to give you the flavour of that and I'll give you what I have.
Mr. Bryden: Okay, that would be very good.
Ms Thompson: I would just like to make a point here. I have worked on surveys for some considerable time whilst I've been at CFIB and I have never come across a survey with so many comments on it. If you look at the questionnaire at the back of our presentation, we have a section for comments after just about every question.
Mr. Bryden: Where I'm coming from on this is that I regularly get the questionnaires, the ballots, from my riding with comments on them. I can tell you that the actual results from the particular questions don't interest me half as much as the comments because the comments usually represent an individual out there faced with the problems in the marketplace and responding directly.
Now, you will categorize them and present a survey, but I as an individual will also react separately. So it's whatever you can do in that. I'm just suggesting that it is a useful tool for us as well. I am most interested.
Mr. Gray: I will endeavour to make available to you and all the committee members what I can.
With regard to what you get regularly, that's a mandate ballot that comes in. All members know when they fill out that ballot that it's going directly to you and your counterparts. They're forewarned and forearmed. They know what they're sharing with you. I promise you I will do what I can to give you good commentary.
The Chair: Thank you.
Mr. Malhi.
Mr. Malhi (Bramalea - Gore - Malton): Thank you, Madam Chair.
There are many small businesses that are looking with considerable anticipation at the proposed changes to the government's contracting policy and process. Please outline for me the three or more, if you have more, top selling points of your proposed initiative that would make contracting easier and more efficient for everyone, especially for small businesses.
Mr. Gray: If I go through these recommendations, I would say that the most vital ones are that you have to open the market, you have to provide the statistical base, and you have to improve the OBS system because it's such a vital part of the system. I think you really have to look at the entire process of how you go from here to success and understand whether it's understandable to the people who have to access it. In a nutshell, that's what I think the four things are.
Mr. Malhi: In your opinion, should the open bidding service be discontinued or should it be maintained?
Mr. Gray: Our view is that it is currently not working as well as maybe it could or should and that if if it can't be made to work in a way that's efficient and effective, they should look at scrapping it. But I'm not ready to say scrap it right now. If it's cleaned up and made better, I think it could be used in conjunction with other tools, including the Internet.
Frankly, the appeal of Internet for the small business constituency is that you can get more information at any hour, more cheaply, and so on. I know the OBS is going the Internet route in steps, but I think it's a true opportunity for the small business constituency and I think we have to look at that.
There's no magic pill here. There are a number of steps that have to be taken and we have to review the thing from stem to stern and ensure that when we're looking at solutions, we're looking at solutions that meet needs that are identified by the people who are using the system.
Mr. Malhi: From your research, which are the most difficult barriers to access currently faced by small business?
Ms Thompson: Well, they're lack of knowledge, lack of information, lack of confidence in the system. People are finding many difficulties and they just give up. They don't continue. They say that is it. They're concerned that their bills will be paid late. They're concerned over the paper burden.
There's a general lack of knowledge. We've talked to small business people who have had members of their staff working on OBS for several days trying to follow through on various possible contracts. They've told us they would need someone on the system every day in order to keep completely up to date. So cleaning up OBS is another problem, as Brien mentioned.
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The Chair: On behalf of all members I'd like to thank you for appearing again and for presenting us with what I consider to be a very comprehensive brief. A special thanks for doing a follow-up encounter with this committee and for doing such a thorough job.
It's been my experience as chair that officials of Treasury Board and Public Works are working in cooperation with this committee, and I'm confident that they're awaiting your recommendations with bated breath. Please rest assured that your recommendations and advice will be reviewed more thoroughly by this committee. We're really not interested in producing another dusty tome to put on a shelf.
Thank you very much for your time.
Mr. Gray: Thank you, Madam Chair. I share your view that this should not be and will not be a dusty report. I think you have a true opportunity here to help a great many firms.
I don't think the answers here are horribly complex. I think some of them are pretty straightforward. As I said at the conclusion, this is a relatively cost-effective way of providing stimulus in the economy at a time when there's not a whole lot of money to throw around. I wish you well on your deliberations, I wish you well with the report you're going to produce, and I certainly hope the government acts upon it.
The Chair: Thank you very much. The meeting is adjourned.