The embarrassing spectacle of the ArriveCAN hearings. The discovery of a fraudulent billing scheme totalling $5 million. Billions in job subsidies that created no jobs.

After recent bad news about federal government procurement policies, it’s not difficult to see why Public Service and Procurement Canada (PSPC) and the Treasury Board have announced a sharp pivot.

A series of reforms – including the creation of a new office of supplier integrity and compliance as well as better fraud prevention and detection mechanisms – are being rolled out with an unfamiliar sense of urgency.

While these are welcome changes, the fact that they have come about only after repeated failures is a clear indication that the government’s procurement problems go much deeper than those attention-grabbing headlines.

Anyone who has tried to compete for a federal government contract knows that its procurement strategy has for decades relied on a complex web of ”preferred vendor contracts,” which often limit access to insiders who know how to navigate the murky waters of RFPs and grant applications.

The current government – elected in 2015 on a platform that included massive spending alongside an overhaul of how that spending would occur – has promised repeatedly to change the way procurement functions. However, those commitments have largely gone unfulfilled.

There are allegations that some programs aimed at levelling the procurement playing field for underrepresented communities, especially for Indigenous communities, have instead been misused by the same established contractors they were meant to overturn.

Significant barriers remain

PSPC’s work impacts every other government department and sets a tone for efficiency. If a culture of inefficiency becomes pervasive in such an essential department, that has ramifications for the entire public service as well as the Canadian economy.

Take, for example, the government’s policies and procedures on IT and technology procurement.

Recent reports indicate that significant institutional barriers are keeping smaller, more innovative technology companies in the health tech and cybersecurity sector locked out of the billions available in federal procurement contracts.

In good economic times, these inefficiencies and barriers are cumbersome and unfortunate. But with a crawling economy and productivity rates dropping to what the Bank of Canada called “emergency levels,” they are starving Canadian businesses seeking vital capital lifelines and eroding the hope for broad-based growth.

While not wholly the fault of PSPC or even necessarily the current government, this has become an endemic problem.

As the Council of Canadian Innovators stated recently, it is the twin forces of lagging innovation funding and challenging economic times that are feeding off each other to create a hostile environment for innovators.

However, instead of responding to the crisis of productivity and innovation, the recent federal budget doubled down on some of the government’s more troubling policies and put up new barriers for entrepreneurs and innovators.

Canada lags behind every other OECD and G7 country in research and development (R&D) investments, which are widely considered to be an effective tool to boost competition and innovation. However, the expanded capital gains tax will result in Canada further losing its competitive edge and hampering productivity.

So, while a government procurement review strategy is a welcome pivot, the government should focus on identifying all the problems and on prescribing effective, workable solutions that utilize the powerhouse of the Canadian economy – its small- and medium-sized businesses.

PSPC should develop alternative procurement options that are more accessible for smaller innovative companies.

By doing away with the maze-like procurement processes that new suppliers either don’t know about or don’t have the capacity to navigate, the government can unlock a new cohort of innovative, agile procurement partners that can provide the best products and solutions for Canada.

One example from which the federal government could take inspiration is the recent report from the Ontario Chamber of Commerce, Power of the Purchase Order: Modernizing Public Sector Procurement in Ontario, which sets out 23 practical recommendations for improving innovation and competition in the provincial procurement process.

Outdated procurement rules hindering digital government

Indigenizing procurement policies must move beyond token gestures

A scramble and scrutiny of the public service not seen in more than 20 years

Among its most salient recommendations is the proposed shift toward value-based procurement, which uses a long-term model and emphasizes outcomes rather than prioritizing short-term cost-saving goals.

Adopting such a model would allow the federal government to expand the overall aim of procurement to include things such as quality, innovation and economic development.

Value-based procurement can also help give the economy the kickstart it needs. By encouraging governments to consider the economic benefits of competition, innovation and job-creation – areas where small- and medium-sized businesses thrive – more of them will be able to compete successfully for more contracts, thereby reducing the stranglehold that large vendors have.

By focusing on solutions that empower innovative businesses and reduce bureaucratic overhead, the government has the opportunity to change the channel on the bad-news headlines that have plagued its procurement process for years.

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Diego Matute
Diego Matute is the CEO and founder of Cyphercor Inc., an Ottawa-based cybersecurity company with clients worldwide, including the federal government.

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