In July 2010, the federal government completed its public consultations on a digital economy strategy for Canada. Open access to government information and programs through digital tools and solutions emerged as the dominant recommendation arising out of the consultations; in short, Canadians expressed a yearning for improved online access to the information that they believe belongs to them.
Over a year later, the Review of Federal Support to Research and Development, commonly referred to as the Jenkins Panel, is completing its review of federal support for R&D activities in Canada. It is argued here that the need for more centralized information and improved access to Canada’s R&D support programs is almost as important as changes to the programs themselves. One may increase, decrease or change R&D support programs, but applicants need to know how to find the information on these programs and how to apply for them using secure efficient online channels in order to optimize the return on Canada’s investment in industrial R&D support programs.
My co-author, Kevin Goheen, and I have spent many years assisting Canadian businesses to achieve their R&D growth objectives through access to these public support programs. An adjunct professor in the Mechanical and Aerospace Engineering Department at Carleton University, Kevin works with businesses to assess their eligibility for Scientific
Research and Experimental Development (SR&ED) tax credits and assist them in qualifying for and receiving these tax benefits. I have spent 30 years within Canada’s National Research Council, serving as executive director (operations) of its largest R&D funding program, the Industrial Research Assistance Program (IRAP), and as secretary general of the NRC at the time of my retirement last year.
Our experience embraces the two principal types of public R&D funding programs that exist in Canada — tax incentives, commonly known as SR&EDs (pronounced “shreds”), and grants and contributions, or Gs&Cs. We strongly agree with the recommendations arising out of the digital economy consultations that more open access to government and, in particular, to the rich array of tax incentives and grant and contribution programs is an important part of improving Canada’s R&D infrastructure and growing our innovation economy.
In this article, we address why this funding is important, the current obstacles for the applicant community and, finally, the digital solutions for making program information and application processes more accessible to eligible applicants.
There are three reasons why this funding is important. First, Canada needs to invest in R&D to remain competitive. The European Regional Science Association reports: “Innovation grants are a ubiquitous feature of industrial support regimes across the industrial world.” We agree.
Second, government-funded R&D complements and serves different purposes than privately funded R&D. Commercial R&D is overwhelmingly focused on the near-commercialization stage for new products or solutions; the objective of this research is to develop proprietary solutions that drive competitive advantages of commercial benefit to the corporation. By contrast, governments sponsor collaborative research projects, with a longer and less certain path to commercialization, with both costs and benefits expected to extend well beyond the scope of a single corporate interest. In short, commercial R&D is driven by shareholder returns, and government-funded R&D strives for industry-wide benefits and growth in GDP. Each plays a critical role in supporting and stimulating an innovation economy.
Third, government investment in R&D is widely used as an instrument for stimulating economies more broadly: “Seeking to put the nation back in the lead on an important technology, the Obama administration awarded more than $2 billion in grants on Wednesday for manufacturing advanced batteries and other components for electric cars,” said a recent media report. These grants were part of the overall stimulation measures the US used to try to tackle the erosion of its economy in the wake of the international banking crisis.
Nevertheless, some suggest that in a tight economy with conservative public policy values in place, industrial funding programs are disappearing or likely to significantly decline. There is no empirical evidence to suggest that Canada’s public funding programs are in decline. Rather, when private venture financing is a scarce resource, as it is in Canada today, the business case for financial collaboration between governments, investors, financial institutions, the research community and the innovation sector has seldom been stronger.
Accepting then that industrial support programs are ubiquitous and, in our view, here to stay, what are the current obstacles for the business community in navigating the world of public funding and support programs? John Reid, President of CATA, Canada’s Advanced Technology Alliance, comes quickly to the point: “Our members report significant challenges identifying the public funding programs that exist and in complying with the application processes.”
Commercial R&D is overwhelmingly focused on the near-commercialization stage for new products or solutions; the objective of this research is to develop proprietary solutions that drive competitive advantages of commercial benefit to the corporation. By contrast, governments sponsor collaborative research projects, with a longer and less certain path to commercialization, with both costs and benefits expected to extend well beyond the scope of a single corporate interest.
CATA’s findings are certainly grounded in fact. There are more than 2,000 federal, provincial and municipal funding programs in Canada providing tax incentives or grants and contributions to applicants in the business and non-profit sectors. Each program has its own Web site and prospective applicants have to journey from site to site, combing for basic information on the funding, some of which is posted and some of which is not. The application processes are similarly diverse, with each source requiring different information on different forms, and applicants required to file their often confidential and sensitive R&D project information by way of photocopies delivered to the shipping and receiving desk at a government agency’s back door. The consequences of these highly disparate decentralized old-economy practices are enormous inefficiencies both for the applicant community — generally early-stage venture companies and fast-paced technology leaders — and for funders, with each inefficiency requiring that more program funding be allocated to overhead and less disbursed to the community for which it was intended.
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Which brings us to solutions. What are the digital solutions for making industrial support program information and application processes more accessible to eligible applicants?
When I retired from the NRC last year, I decided to use my newfound leisure time to answer exactly that question. There is no doubt that digital economy tools can improve the administration of SR&EDs and Gs&Cs for the applicant community. There are constructive examples in Canada of Web-based portals beyond the world of Gs&Cs that have transformed complex decentralized government processes and rendered them more transparent, accessible and efficient. The best example, in our opinion, is MERX, the Canadian Public Tenders service.
Launched some 15 years ago, MERX consolidates public sector purchasing activities in Canada by posting bidding opportunities for the vendor community — some $35 to $40 billion per year — on a single portal. No, MERX was not built by government. It was built by business, for business. The MERX example demonstrates that there is an important role for government in enabling these kinds of public-private partnerships. As part of a commitment to open government and open data, governments can facilitate the participation of departments and programs in initiatives that improve access by Canadians to important tax payer-funded programs. And business, by contrast, is better equipped than government to incorporate new technologies as they emerge, provide 24/7 help lines and operate the portal within digital economy standards.
This collaborative public-private approach is, in our opinion, the optimal model for a public funding portal. There is no doubt that the MERX portal has transformed the previously murky and highly inefficient area of public tendering into a much more modern, effective and transparent business information service. The time has come for a similar digital platform for centralizing information and facilitating online access to public funding programs in Canada.
In July 2011, my co-author and I participated in the launch of a new portal that seeks to do for public sector funding programs what MERX has done for public tendering. The Funding Portal (www.TheFunding Portal.com) is a new comprehensive national bilingual portal developed by an experienced Canadian venture corporation that aggregates more than 2,000 federal, provincial and municipal funding and tax incentive programs, representing over $4 billion in annual funding distributed to applicants each year. Georgina Steinsky-Schwartz, a former deputy minister in the Government of Canada and retired business executive, serves as chair of the national advisory council for the Funding Portal. She says, “For me, this portal is like a dream finally coming true: throughout my career in the federal government there was always talk of the need for this ‘single window.’“
Kevin and I have served as advisers to the portal as it developed its business model and invested in technologies that eliminate weeks of manual search time, allow applicants to complete their application documents within secure online workrooms and let applicants submit their drafts to a rigorous scorecard review process. This process is intended to reduce the number of noncompliant and poorly written submissions, which represent such a waste of time for funders and applicants alike.
Now that the portal is launched, we are serving as the inaugural chairs of the Funding Portal’s expert review panels, which provide oversight and services related to the two principal types of industrial support programs, tax incentives and grants and contributions, respectively. We work with other experts to ensure that the portal serves as the single centralized online source for all government-funded R&D and industrial support programs; that applicants have access to expert advisers to assist them in complying with complex application processes; and that the portal subscribes to the highest standards of integrity, privacy, transparency and accountability in keeping with our system of public administration. Our personal objective is working toward the day when John Reid can rightly say, on behalf of his CATA members, “Our members now report that they can search for and find the optimal public funding program in seconds, not weeks, and can quickly identify and comply with new streamlined application processes.”
As in the MERX example, government has an important role to play in ensuring that the portal is a success. Treasury Board operates a Centre of Excellence on Grants and Contributions that could play an effective role in securing the participation of departments and funding agencies, not just federally but at the provincial and municipal levels as well. Governments can develop best practices for their funding agencies and programs, such as standardized application forms that can be supplemented by program-specific sections and more consistent approaches to turnaround times for applications, which can often be eight months or more — an eternity for fast-paced companies trying to stay ahead of the market.
There is no doubt that there is pentup demand for this new centralized online information and services portal, which is so responsive to the calls of Canadians in the digital economy consultations. Over 500 businesses were following the site’s daily tweets on funding news and views within 10 days of its launch date.
We have argued here that tax incentives and grants and contribution programs are an enduring and important instrument of industrial and economic policy in Canada, and in developed nations around the world. At last, we have a national bilingual portal to improve business access to these programs. Although the portal’s business model does not require government assistance or support, governments have much to gain from posting their programs and program updates on the portal and collaborating in other ways. There is no doubt that this is excellent outcome from the digital economy strategy consultations and has an important role in improving transparency, openness and access to the R&D infrastructure in Canada.