CABiNET chair Mike O'Neil. (Photo by Darren Brown, OBJ)

Local firms say requirements prevent SMEs from submitting bids

Representatives of Ottawa's IT professional services providers scored a small victory last week, when they argued before a parliamentary committee that the government's plan to bundle IT contracts into billion-dollar tenders favours large companies over small and medium enterprises (SMEs).

While federal politicians went as far as asking Public Works bureaucrats to produce a business plan before moving forward with its IT shared services initiatives, the committee was told of the "disastrous" effect the procurement policy would have on SMEs by CABiNET chair Mike O'Neil. He represents 20 capital-region IT professional service providers with a combined $100 million in sales.

Appearing before the House of Commons standing committee on government operations and estimates last week, Mr. O'Neil said measures preventing SMEs from bidding on government IT contracts would create a situation where two or three large IT companies would be able to dictate prices.

"We're not here to divide and conquer, we're here to work together for the best interest of Canadian companies and Canadian taxpayers. We feel we have lots of talent and innovative ideas to offer. We just want to be able to share those with our government clients," he said in an interview following the committee meeting.

Mr. O'Neil said Public Works and Government Services Canada's IT services branch, ITSB, has mused about increasing the number of shared IT services between government departments for several years.

While Mr. O'Neil emphasized he's not opposed to the government trying to save money by consolidating networks, he said he objects to requirements contained in a notice of proposed procurement for enterprise network services that he said prevents SMEs from bidding.

Not only would many SMEs lack the capacity to handle such large contracts, but they would be unable to respond to common RFP requirements to show references of contracts of a similar size and scope, he said.

In a presentation to the Ottawa Centre for Research and Innovation (OCRI) this past March, ITSB chief executive Steven Poole estimated the inefficiencies of running 124 separate networks and related IT infrastructure costs up to $500 million annually and said the government wants a single-managed service network. In the same presentation, a slide on the government's implementation plan said a potential contract would run for 15 to 20 years at a cost of about $1 billion annually.

While Public Works has only released procurement documents related to network services, Mr. Poole's presentation identified three other IT infrastructure areas where increasing the amount of shared services could create efficiencies.

Consolidating the government's data centres and standardizing desktop PCs would each cost an estimated $1 billion annually, while a common secure channel service is projected to cost around $100 million each year.

The government's plans follow a pair of parliamentary reports in recent years critical of large-scale federal IT projects.

In 2006, the office of Canada's auditor general said in its annual report that "We are concerned that although research clearly indicates that small IT projects are more likely to succeed than large ones, departments and agencies are again undertaking large IT projects."

In response, the House of Commons standing committee on public accounts issued a report on large information technology projects this February. That report recommended all new IT project submissions include the possibility of breaking large projects into smaller, more manageable projects.

At last week's committee meeting, Mr. O'Neil said MPs grilled bureaucrats for not having a comprehensive business case for its billion-dollar shared network service plan and unanimously voted to request more details before the contract moves forward.

Mr. O'Neil said he hopes this motion will allow more time for Public Works to consult with SMEs through industry associations such as the Canadian Advanced Technology Alliance and the Canadian Federation of Independent Business.

In an e-mail sent the day before last week's committee hearing, Public Works spokesperson Lucie Brosseau said the government has been involved in discussions and consultations with the industry on the new IT shared services initiative for the past 22 months and will continue to do so in the coming weeks.

She added the government's new IT standing offers and supply arrangements will ensure SMEs have access to government procurement for IT professional services.

Indeed, a notice of proposed procurement for government enterprise network services published earlier this month highlighted requirements for a SME subcontracting plan within bid submissions, as well as collaboration services.

However, OCRI board member and serial entrepreneur Andrew Moffat said these types of forced business relationships are less than ideal.

"If we see the ability for us to integrate our applications together or we have a really good synergy in terms of the services we provide, that makes sense ... (But) the reality is (the partnerships) have to be strategic in nature. They can't be tactical in nature," he said.

Mr. Moffat suggested a permanent joint task force of industry associations and members of the federal government be established to examine procurement procedures and act as a first-level review on any issues that arise.

But he said there also needs to be a change in government thinking about procurement that would increase the opportunities for SMEs to work on federal projects and submit unsolicited proposals for innovative ways to make the government run better.

"Don't tell me what the solution is. Tell me what the problem is and let me come up with a creative way to solve that problem and find a way to create value."

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IN BRIEF

Shared IT services initiative

The issue: The government intends to bundle contracts in the IT professional services sector to save costs and rationalize contracts.

Background: Up until now, the federal government dealt with a number of companies and requests for proposals were, for the most part, open to all bidders with requirements not precluding SMEs or a coalition of SMEs from bidding.

What's new: In March 2008, the CEO of the Public Works Information Technology Services Branch stated contract bundling would occur in the IT professional services sector with the intent of awarding national contracts for core IT services worth around $1 billion each annually for 15-20 years.

Impact on SMEs: A local industry group expects the majority of SMEs presently providing IT professional services will cease to exist if this policy is implemented. They would be prevented from bidding on these contracts because they lack the capacity to take on projects of this size or are unable to show references of contracts of a similar size and scope.

Source: CABiNET fact sheet