Passing on Public Works
By Peter Kovessy, Ottawa Business Journal Staff
Mon, May 4, 2009 12:00 AM EST
Firms selling abroad, but abandoning efforts to sell to Canadian government
Its proponents say it's arguably the fastest computer ever built.
Kanata-based Liquid Computing calls its LiquidIQ unified computing system a "data centre in a chassis" that integrates servers, networking and storage, allowing users to cut their power consumption and floor space requirements.
"It is the first of its kind," said Pat DiPietro, a company board member and managing general partner at VenGrowth Asset Management Inc., which has more than $20 million in venture capital invested in Liquid Computing.
"This is an emerging product category that no one else has yet."
But the innovativeness and uniqueness of LiquidIQ can be a pitfall when it comes to selling to the federal government, he said.
Mr. DiPietro said despite making "very good inroads" with Public Works, government officials told Liquid they could not directly buy the company's product. Instead, they would have to issue a request for proposals so other firms could bid.
The problem, explained Mr. DiPietro, is no one else has a product like LiquidIQ. Public Works would have to "dumb down" its requirements if it wanted other firms to submit a competing bid, robbing Liquid of its innovative advantage, which Mr. DiPietro estimated could save the federal government hundreds of millions of dollars.
So, even though Liquid has sold its flagship product to the U.S. army, the company has now abandoned attempts to sell to the Canadian government for the time being.
"Liquid is a small company. It can only spend its resources on things that are going to bear fruit in the short term," said Mr. DiPietro.
"It is not like we are going to ignore Public Works, but we are not going to be pursuing it aggressively because there is nothing there for us to pursue."
It's a refrain heard both in Ottawa business circles and on Parliament Hill, where a committee of politicians is wrapping up a study of the federal government's procurement policies. For months, MPs have heard a message repeated by representatives from a variety of sectors: the hassles that come along with selling to Public Works is discouraging small and medium-sized businesses from doing business with the Canadian government.
"It's not worth the effort and investment to bid on a federal contract," Corinne Pohlmann, vice-president of national affairs at the Canadian Federation of Independent Business, told the House of Commons standing committee on government operations and estimates in February.
In her presentation, Ms. Pohlmann said many small businesses seem to have little trust in the federal procurement process. She cited a survey where CFIB members said they had difficulty finding contract opportunities, contacting the government purchaser and learning why their bids were rejected.
Late last month, Charles Duffett, a senior vice-president and chief information officer at the Canadian Advanced Technology Alliance, told the same committee his members believe part of the problem with procurement is that managers within Public Works are afraid of exercising their delegated authority.
He added CATA members feel the government's procurement process is needlessly slow and complicated, which disadvantages small Canadian companies, particularly R&D firms.
Several industry and political observers have commented that a local firm's inability to sell to the Canadian government hinders their efforts to sell abroad. Foreign governments can be reluctant to buy goods from companies that can't sell to their home country, a point senior Public Works officials seemed to acknowledge.
"I keep reading and hearing examples (of how) our Canadian SMEs are leaders in developing innovative technologies," said Liliane Saint Pierre, an assistant deputy minister in Public Works's acquisitions branch, during a committee appearance in late April.
"As such, it is very important for the government to buy those (innovative technologies). That is very good marketing for them to either export or sell to other businesses."
Ms. Saint Pierre said it was her understanding that Industry Canada is looking at ways of advancing and promoting innovative technologies within the government and the country at large.
The challenge with public purchasing of cutting-edge technology is that governments are, by nature, risk averse. That's according to Chris Warkentin, a Conservative MP from Alberta who sits on the government operations committee.
When Public Works issues a tender call, it asks for proven technology, not innovation, he added.
But Mr. DiPietro said the challenge runs much deeper than tweaking bid requirements. The problems with government procurement are actually indicative of the lack of a Canadian industrial strategy to support indigenous technology, he said.
"We have to have a much broader strategy to leverage our intellectual knowledge, our intellectual capital, in this country ... (improving public procurement opportunities for small businesses) is just a tiny fraction of what needs to be done in terms of leveraging all of those intellectual assets we have grown over the years," he said.
As it stands, said Mr. DiPietro, Canadian companies are forced to find other markets to grow in and are ultimately bought by businesses in those other markets.
"That is a repeating story in Canada, and in Ottawa specifically."