July 10, 2006

High Tech Industry Proposes National Growth Strategy Based on Public Sector Procurement


Positive approach is in "stark contrast" to federal procurement department's anti-growth policies

-- Ottawa Business Journal Coverage (July 10, 2006)
-- Connect IT Coverage (July 12, 2006)
-- CATA to PWGSC Deputy Minister (July 12, 2006)
-- MPs Speak Out on Procurement (July 12, 2006)
-- Un "Wal-Mart" de la fonction publique fédérale (July 13, 2006)
-- Une initiative des libéraux en 2005 (July 13, 2006)
-- The 2.5 Billion Balancing Act (Ottawa Citizen, July 14, 2006)
-- Small Business to Get Bigger Piece of the Pie (Ottawa Citizen, July 14, 2006)
-- PWGSC procurement reforms baffling industry experts (InterGov World, July 18, 2006)
-- Public Works $24-Million Solution (Globe & Mail, August 17, 2006)
-- Secret report angers federal suppliers (Ottawa Citizen, August 18, 2006)
-- Public Works Scraps $24M Procurement Plan (Ottawa Citizen, Sept. 08, 2006)

Ottawa, July 10, 2006….Canada's largest high-tech business alliance will release a blueprint for national growth later this summer that is in "stark contrast" with the narrow policy approaches to the use of Public Sector procurement by the federal department of Public Works, according to industry spokespeople. The blueprint, called "Partner for Prosperity -- Prosperity, Global Supply Chains, and the Role of Government Procurement" -- links strategic Public Sector spending to the expansion of Canadian economic development. It advocates a "painless" way to use Public Sector funds and leadership to drive growth.

In development for six months, the blueprint has been circulated among and vetted by industry leaders. It contains case studies of Canadian and international best practices in the use of Supply Chains for economic growth.

The blueprint intends to move debate from narrow focus to broad taxpayer interests in jobs and value, industrial development and export success; it follows on the heels of the recent announcement by the PWGSC (Public Works and Government Services Canada), Minister Fortier of a freeze on changes to procurement policies, changes that would have potentially eliminated Canadian content and shut out Canadian companies, according to industry sources.

"The Minister's freeze appears to put on hold PWGSC's implementation of arbitrary decisions running counter to Canadian interests and the policies advocated by stakeholders," said CATA President John Reid. "They have abandoned the deal-breaking and secrecy that have characterized their recent campaign. We regret that the department, for reasons unknown, turned away from an eighteen month public-private sector consensus process, and instead turned to a secret report that was created by a third party (A.T. Kearney) who is receiving $20 million for their expertise (see below for details)**. To the best of our knowledge, the contract was not tendered in the usual manner. This is moral bankruptcy as well as bad policy and poor use of tax payer dollars."

"While we are encouraged by the Minister's announcement, we have been led down this path before, only to be disappointed with the end results and lack of stewardship in managing the change process in the context of an industrial strategy for Canada."

Public Works' 'Way Backward' Agenda

"Over the past number of months PWGSC changed their "Way Forward" into a "Way Backward" policy directly against the grain of measures being taken by Canada's global competitors to enhance their innovative sectors," added Mr. Reid. "Preliminary assessments by vendors and industry experts point to substantial negative impact of the changes PWGSC were proposing to procurement methodologies and now we are totally up in the air as to where the government is taking us."

Impacts based on cross Canada Survey work and consultations by CATAAlliance are detailed in: http://cata.ca/Media_and_Events/Press_Releases/cata_pr06130601.html

Vendor Survey Speaks to the Level of Concern

CATA has opened its Vendor Survey to provide a vehicle for executives to express their concerns and interests in Procurement Changes. Notable comments so far include:

-- GoC
GoC had 8,000 employees in the CS (computer scientist) category in 2000 and now has about 18,000 such employees. GoC is growing its own. The delta of 10,000 has created no capital - structural, HR, financial, or intellectual. If those 10,000 had been organized into say 10 firms of 1,000 each (or 50 firms of 200 employees each) what level of innovation would have been produced? Would we have had another Cognos, Corel, or CGI? How do the above costs get reflected in savings to the Crown?

-- Reverse Auctions
In terms of Reverse Auctions (a subject upon which a significant portion of our research energy has been centered) numerous studies including a 2003 report by CAPS clearly identify the reality of the challenges associated with this tool, especially when combined with an ill conceived vendor compression strategy. Traditional auctions are negatively viewed by suppliers for a number of reasons including the perception that the decision-making process is reduced to a best-price versus best-value mechanism. This is especially true when the technology (re auction tool) is misaligned with the commodities being purchased.

-- Centrally Negotiated Contracts
Why is PWGSC continuing to cling to the centrally negotiated contract consolidation of all commodities when every study and case history shows this approach to be seriously flawed. The broad application of this methodology for all purchasing activity will not work. What will work is a more strategic approach recognizing the unique characteristics of individual commodities. This is what should govern the process and therefore the tools that are ultimately utilized to achieve tangible savings in a transparent environment that maximizes supplier participation.

-- $20 Million Study
I don't care how much expertise one has - it does not cost $20 million to conduct any single information gathering/stakeholder consultation study - these amounts are reserved for (the smallest of) clinical studies or extensive longitudinal studies - talking decades, not one or two years.
No thought leadership company in the world is worth $20 Million for their expertise that doesn't result in more than a report on findings - especially when it seems not one iota of consultation was done outside of the bureaucracy. For that type of money, one would expect to see a cross-country series of focus groups, extensive surveying or one-on-one stakeholder consultation.
I would like to see the original RFP details - and see why this needed such significant funding levels and so many extensions. I also would like to see the $20 million dollar report!

--Job-Growth Engine Cancelled
"The Industry Minister is spending $10's of millions to promote the job-growth engine in Canada while his Cabinet colleague is neatly undoing all this good work by making Canada's largest buyer unavailable to thousands of Canadian business. Where are the Industry and Finance Ministers and other relevant Ministers during this procurement reform debate? Jobs, exports, the tax base, industrial development and innovation are at stake."

A New Procurement Strategy Central to Economic Growth

"Partner for Prosperity" proposes a way to use the federal government's $18.5-billion in annual spending on goods and services to strategically embed Canadian companies in Global Supply Chains (GCSs).

"Global Supply Chains are today's 'supernovas' of business growth," said Mr. Reid. "GSCs are becoming critical because today's services and products are so intricate and interwoven, and facing so many competitors from all parts of the world, that teams of specialist companies are needed to produce them efficiently.

"By stimulating the entry of Canadian companies into strategic "Global Supply Chains", Public Sector Procurement can supercharge our economy by plugging our companies into the world economy -- without an increase in government spending. This is the approach and mindset that we wish the Minister to adopt, in coordination with all other federal Ministries and agencies, in particular, Industry Canada."

According to "Partner for Prosperity", Canada can painlessly create the conditions that encourage the "attachment" of companies to the vital Global Supply Chains, by:

  1. Aligning national procurement to a strategy that requires bidders on government contracts to show how their bid helps Canadian companies enter Global Supply Chains; By aligning its programs like IRAP, IPC, and PEMD, into a strategy that encourages companies to enter Global Supply Chains, the Government of Canada can leverage its spending and catalyze a world-beating business sector; and

  2. Spearheading the creation of industrial teams to approach global Supply Chain opportunities with a Canadian solution. The case of the Joint Strike Fighter program is perhaps the best illustration that Canadian companies can punch above their weight in international competitions.

The CATA blueprint will note that with a slight change in emphasis in public sector procurement, the Canadian Government can stimulate the formation of Canadian Supply Chains, and supercharge every element of the Canadian innovation and commercialization process. It can do so without spending any additional funds.

"We need a global and positive vision at this point in our evolution," said Mr. Reid. "Far from serving the common good, Public Works is embarking on the opposite course -- a narrow course conceived in secrecy, and one that will corrode Canadian capacity and fritter away our resources. We deserve better than this -- we need a vision as broad as Canada. We need 'Partner for Prosperity'. We are encouraged that Minister Fortier is freezing changes and hope that we can count on his leadership to develop a vision as broad as Canada."

** A.T. Kearney Contract # EN578-048049/001/ZG - 000 $ 1,750,000 Nov 24, 2005 EN578-48049/001/ZG - 001 $ 3,470,240 Dec 22, 2005 EN578-048049/001/ZG - 002$ 530,765 Mar 06, 2006 EN578-048049/001/ZG - 003 $ 9,407,440 Mar 29, 2006EN578-048049/001/ZG - 004 $ 2,053,266 Apr 14, 2006 Total as of April 14th was $17,211,711.00 and we are confirming another amendment for $2.x million, not yet posted yet.

Background to $20 Million Contract:

In Sept, 2001 IBM and Ariba responded to the RFP for the Government of Canada Marketplace initiative. When the Patriot Act came into force in the US, it became difficult for Ariba to stay in the project and they dropped out, leaving IBM. The plan was that the "marketplace" would launch in April 1 2005. April came and so did the new procurement process with announcements, such as the 10% letter and the mandatory standing offer list, but no marketplace details. In fact, when demonstrated, the system did not work. The listing of commodity categories also came out at this time or shortly after. Last fall, there was some shifting in PWGSC and Mr. Pitfield became head of the marketplace initiative. In the November/December period the stated position was that he could not entertain a new track because he did not want to jeopardize the government's position in terms of the contract with IBM. Notwithstanding in January/February 2006, IBM was no longer engaged in the same way, and A.T. Kearney was in and the RFP process was unique in that the focus was on an oral presentation.

ACTION ITEM:
We require your immediate assistance in sending this communiqué to your local MP and media and then requesting a meeting or phone interview to discuss the issues raised regarding federal government procurement practices.Contact information for MPs can be retrieved at:http://www.parl.gc.ca/common/SenatorsMembers_house.asp?Language=E&Parl=37&Ses=2&Sect=hoccur

 

ACTION ITEM:
As a Second Action item, please contact businesses in your area that sell or wish to sell their goods and services to the federal government, forward the communiqué and then request that they provide input into CATA's Vendor Advocacy Survey, the basis of the next stage of the Campaign.
Refer to: http://www.e-penso.com/survey/s?s=vendoractcam

 

Please copy info@cata.ca with all correspondence and feedback, with VendorACT as the header.

VendorACT Campaign:
Since 2005, CATAAlliance, the largest high tech association in the country, has been directing a VendorACT Campaign on behalf of the ICT vendor community to present its issues and concerns on the government-wide review of procurement and shared services initiative. The Campaign has included survey and research work, meetings with vendors, briefings of government and political representatives, media relations and development of communications materials.

Contact:
Barry Gander, CATA's Communications Director, at 613-220-1368 or bgander@cata.ca to arrange interviews or for further background materials.