AIAC’s Presentation to the Standing Committee on Government Operations and Estimates

December 6, 2017

On December 5th, AIAC President and CEO Jim Quick and Executive Vice President Iain Christie testified before the House of Commons Standing Committee on Government Operations and Estimates as part of the Committee’s study on Small and Medium Enterprises (SME) in Federal Procurement. In their presentation, Mr. Quick and Mr. Christie discussed the opportunities and challenges that small businesses experience when participating in government procurement processes. They also highlighted government programming and initiatives that have facilitated small business participation and provided recommendations on areas for improvement. A full copy of their remarks is available below. A transcript of the meeting is available on the OGGO Committee website.

Good morning, and thank you Mr. Chair, honourable members, for the opportunity to speak with you today about small businesses and the procurement process.

What can we be doing to ensure that small businesses benefit from the procurement process? What is working? What should we be doing better?

Those are the questions I will try to answer during my remarks this morning. And they’re questions that are very important to us and to our members. Of the 700 aerospace firms across Canada, 93% are small businesses that employ less than 250 people. As an association, we therefore spend a lot of time talking with those companies about procurement and how it can best work for them as small businesses. I’m looking forward to sharing some of those insights with you this morning.

Very simply, the most important thing you can do to help small business do business with the federal government is to understand small business. Know what they need to succeed and thrive, and make sure that government policies, programs, rules and procedures take their unique nature into account.

So, let’s start with what small business isn’t.

First, small business isn’t “big business that hasn’t gotten big yet”. In important ways, small businesses function differently from large corporations. They succeed and thrive because of, not in spite of, those differences. As a result, one-size-fits-all policies simply do not work for small businesses and large ones in equal measure.

Also, small business is neither inexperienced or unsophisticated. Small businesses in our sector are specialized, highly innovative, suppliers to customers throughout the global supply chain. And they are owned and run by skilled businessmen and women who have dedicated their considerable training and experience to building profitable companies in extremely competitive business environments.

So then, what is small business really?

For one thing, small businesses are short-term focused. While small businesses can, and do, make investments for their future and their future growth, those investments can only be made once short-term risks have been taken care of. This affects the way that they deal with the government as a customer and the way they consume government programming. The key thing to remember when dealing with a small business person is that they are someone who has to make payroll for 20 or 76 or 143 other people this Thursday. Every Thursday.

The other thing to remember about small business is that they do not have a lot of specialized staff. There are no contract, or legal, or even HR departments in small companies. Well, there are but it’s usually the same person doing all of those jobs. In this context you can understand why simplifying the bid and proposal process is not just desirable but directly related to the problem of getting everybody paid. Every Thursday.

But, this also leads to the great strength of small business. Small businesses are lean and customer-focused. They know how to maximize limited resources. And they are focused on maximizing those resources for the benefit of their customer – because a happy customer is a return customer, and a return customer means stability and growth.

That focus on serving customers also means that small businesses are innovative. That doesn’t necessarily mean massive R&D spending – but it does mean always thinking ahead of the market and being able to provide agile, thoughtful solutions to what the customer is going to really need. It is this kind of thinking that allows small business to grow, innovate, and scale up.

With those general observations as our foundation, what are some specific practices and recommendations that would make procurement easier and better for small businesses?

Let’s start with what works and what the federal government should do more of.

In terms of government programming two things I’d like to recognize right off the bat are the Build in Canada Innovation Program, or BCIP, and the Office of Small and Medium Enterprise, or OSME, which administers it. BCIP is a great opportunity for small companies to access procurement opportunities in Canada, and OSME is very effective at understanding small business needs and advocating for that in the procurement context.

Innovative Solutions Canada is another program that, although it’s still in its early stages, also holds a lot of promise. Modelled on the United States’ highly successful SBIR program, it is designed to leverage procurements to fund and purchase innovative new products and services from small businesses, providing them with valuable “first buyer support”.

Lastly, rated and weighted value propositions can help by encouraging large bidders to incorporate small businesses directly into successful bids as partners; however, this could be leveraged further.

There are also some things where we would like to see some work done – and so I’ll conclude here, with four recommendations to consider as you develop your report.

Our first recommendation is simply this: be aware of small business needs when you’re developing policies and processes. Reduce the complexity of contracts and contracting processes. Also, nothing presents a bigger problem to small businesses than struggling to collect payment for services already rendered. So, making sure that contractors are paid, in full, on time, every time, should be a top priority of every procurement officer in the federal government. Period.

Second, we recommend the development of a vendor management system that rewards good performance with more business. Allowing procurements to take into account previous performance (something the current process specifically prohibits) allows small business to employ their people where they are most productive – working for customers. That’s what will allow them to plan, invest and grow.

Third, we recommend that government find more ways to work directly with small businesses through the procurement process. Expanding BCIP and implementing Innovation Solutions Canada, both of which I mentioned earlier, are excellent places to start.

Finally, value propositions can and should be used to leverage the inclusion of small businesses in negotiations with large manufacturers and bidding teams. Currently, winning bidders are left to decide how to work with small companies once a contract has been awarded and is in the execution phase. Giving weight to a value proposition that included small business partners would strengthen small business growth and achieve the government objectives.

I’ll stop there and would be happy to answer any questions you might have.