Innovation and Accountability in Canada's Procurement Policy

Speaking Notes for The Honourable Rona Ambrose
Minister of Public Works and Government Services and Minister for the Status of Women

Manning Foundation for Democratic Education's National Policy Dialogue
November 24, 2011

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Thank you for that kind introduction, Preston (Manning).

Good morning ladies and gentlemen. I am very pleased to be here with you today.

I'd like to begin by thanking the Manning Foundation for Democratic Education for inviting me to join you all this morning.

I would also like to thank the sponsors of this event and commend them for their role in advancing our national conversation on this subject.

Innovation is critical to economic success. And economic success, specifically, completing the economic recovery, is our Government's top priority.

I was delighted to receive Mr. Manning's invitation to speak about Innovation and Accountability in Canada's Procurement Policy. In fact, I accepted his invitation because I know that government procurement can have a powerful impact on a nation's economy.

That is why we are aggressively pursuing improvements to procurement processes to ensure that they encourage Canadian innovation.

And that is why we engaged Tom Jenkins, Executive Chairman and Chief Strategy Officer of Open Text, to chair an expert panel to study how we can best accomplish this.

In fact, our last two budgets have highlighted innovation, committing us to developing “a procurement strategy, in consultation with industry, to maximize job creation, support Canadian manufacturing capabilities and innovation, and bolster economic growth in Canada.

And military procurement is a big part of our Government's spending. Our Government believes in supplying the women and men of the Canadian Forces with the equipment they need to carry out their important work here and overseas. We committed to that in our Canada First Defence Strategy in 2008, and we have worked tirelessly to that end ever since.

I think it's obvious that at a time of record defence procurement spending, both industrial benefits and employment should be front of mind.

And the successful announcement of the National Shipbuilding Procurement Strategy reflected one means by which we are delivering on these important commitments.

It started with our Government's decision to build our ships for the Navy and Coast Guard right here in Canada.

All regions of Canada are winners in this truly national strategy that will result in 75 million person hours of work and 15,000 jobs over the next 30 years.

Our Government delivered on our promise to create good jobs across Canada and provide much-needed ships for the Canadian Navy and the Canadian Coast Guard, all through a transparent and arm's-length process.

This is a promise made and a promise kept.

The Strategy, which emerged from consultations with the Canadian shipbuilding industry, is about using Canadian shipyards to meet our shipbuilding requirements.

Beyond providing our Navy and Coast Guard with the ships they need, the Strategy is focused on doing procurement in a smarter and more effective way.

Shipyards were consulted on the development of the Strategy, the procurement process, the evaluation methodology and the umbrella agreements.

This major procurement, while new and innovative, will uphold our fundamental tenets of fairness, openness and transparency, while providing important lessons for future procurements.

In fact, my department's commitment to improving military procurement is long standing.

Public Works and Government Services Canada (PWGSC) leveraged industry's knowledge and expertise by consulting with the marine sector on shipbuilding a year before the Strategy was announced. This work truly wouldn't have been possible without the collaboration between government and industry.

Extensive consultations characterized every aspect of the NSPS, and the results have been exceptional.

Industry told us that previous procurement strategies had led to boom-and-bust cycles. We heard that long-term planning and stable, predictable funding would produce both the ships our nation needs, and the economic benefits we all want.

These consultations have taught us that real and meaningful partnerships are invaluable, and I promise you that we will not lose sight of that fact.

You could call it our “Government of Canada team approach”—and industry is front and centre.

The positive feedback on the NSPS also reminds us that our bedrock values of fairness, openness and transparency are valued not only by taxpayers, but by regions and business as well.

Firms spend untold hundreds of hours preparing bids, and they want procurement to be scrupulously fair, just as every Canadian does. Regions have a legitimate interest in the jobs generated by military procurement. And our Government believes in systems that reward those who play by the rules.

Just as importantly, an investment of thirty-three billion dollars simply must produce multiplier effects. It must instil trust in the process and the outcome. It must be strategic. And it must create the conditions that spur innovation.

Of course, in innovation, as in life, if you want to be taken seriously, you have to walk the talk.

You can't ask your partners to devote resources to innovation while you continue to use twentieth-century approaches to achieving twenty-first century goals. PWGSC walked the talk of fairness and transparency through an innovative governance structure that will almost certainly be re-used and adapted as appropriate for future large procurements.

I'd like to give you a brief overview of the governance structure we put in place to make this possible.

The key decision-making body for the implementation of the NSPS was a deputy-minister-level Governance Committee chaired by the Deputy Minister of PWGSC.

It included participation by the Deputy Ministers of the Department of National Defence, the Department of Fisheries and Oceans and Industry Canada, as well as the central agencies.

In addition to that, there was an assistant-deputy-minister-level Interdepartmental Steering Committee that provided ongoing oversight to the work of the NSPS Secretariat, which is the Interdepartmental Working Group implementing the NSPS.

The NSPS Secretariat, lead by PWGSC, was the workhorse of the governance structure, looking after the day-to-day running of the process.

This innovative and robust structure safeguarded the process and reduced the possibility of complaints and legal action by providing additional layers of validation and oversight, a streamlined issues resolution ladder and enhanced industry engagement.

Furthermore, to supplement the process, an independent validation and oversight firm, KPMG, was engaged to assist in the development and implementation of the procurement.

KPMG's participation also ensured that selection criteria, scoring methodology and processes were reasonable and defendable.

In order to ensure fair evaluations of the bidding yards, First Marine International was hired to benchmark the capability and performance of short-listed Canadian shipyards and to define the target states required in order to efficiently build Canada's large ships.

Knowles Consultancy Services Inc. and Hill International Inc. in Joint Venture were also hired to be an independent fairness monitor to oversee all steps in the large ship procurement process.

Their reports are clear that the process has been run in a completely fair manner.

The issues management and dispute avoidance and resolution processes were all designed to eliminate the requirement to engage in lobbying.

Therefore, companies involved in the NSPS implementation were asked not to engage lobbyists.

And it paid off. The Fairness Monitor, Peter Woods, said it all: “Among the 50 or so procurements that I have monitored for fairness over the past 10 years, it was one of the best, if not the best.” I'm really proud of that.

The NSPS also saw the use of “value propositions” as a rated requirement, instead of a pass/fail element, for the first time ever. Value propositions are a mechanism by which bidders commit to long-term capacity building in areas like technology investment.

It is thought that enhancing the importance of this aspect of bidding may also be useful for other procurements—an idea endorsed by the Jenkins report.

So our task is now to ensure that the successes of the NSPS are reproduced in other parts of the economy. We want to ensure that our future defence procurement spending similarly improves the competitiveness of Canada's aerospace and security sectors.

As I mentioned at the outset, Tom Jenkins, Executive Chairman and Chief Strategy Officer of Open Text, has chaired an expert panel to study this issue and make recommendations.

I was pleased to receive their special report, Innovation Canada: A Call to Action, Special Report on Procurement, just a few weeks ago.

Mr. Jenkins reported that businesses from coast to coast to coast want government to play a leadership role, demanding more innovative goods and services.

He notes that demanding customers, combined with intense competition among suppliers, are widely recognized as driving business innovation.

The report also recommends that innovation should become a specific core objective of federal procurement.

Current federal procurement policy already has a number of worthy sub-objectives, like supporting small and medium enterprises and improving environmental outcomes. It's time for promoting innovation to join the list.

The report also makes a strong case for leveraging military procurement specifically, “because it is such a large proportion of total procurement and because state-of-the-art technological sophistication is required in modern equipment.

The Government is committed to further improving military procurement, in consultation with Canadian industries, so that we can maximize job creation, support Canadian innovation and bolster economic growth across the country.

The Government is taking a team approach to defence procurement, by working together to continuously improve procurement processes.

For example, on August 16, 2011, Public Works and Government Services Canada met industry representatives to discuss several potential procurement approaches for the Fixed-Wing Search and Rescue project.

These consultations allow our Government to create an efficient approach and set requirements to properly meet the Government of Canada's needs regarding the Fixed-Wing Search and Rescue project.

We are committed to consulting with industry while in turn helping industry experts better understand our vision and challenges.

Reaching out to the private sector for advice supports our commitment to improving and streamlining the defence procurement process. In doing so, we will help bolster Canadian industry, maximize job creation and ensure the best value possible for Canada with each defence acquisition.

That's how the NSPS emerged—from consultations with the Canadian shipbuilding industry to use Canadian shipyards to meet our shipbuilding requirements.

Industry told us that long-term planning and stable funding were essential to business growth, and we've followed through with a commitment to both.

Working with industry provides an important opportunity to assess how we can better leverage our military procurement to better enable Canadian companies to compete on the global stage.

In this context, I asked Mr. Tom Jenkins, Chair of the Expert Panel Review Board on Research and Development, to lead consultations this past summer with the defence and aerospace industries in the context of examining how military procurement initiatives can improve economic development and innovation.

On October 5th, I hosted a roundtable with industry to discuss Mr. Jenkins' draft findings, given the importance of this work.

The Expert Panel also noted that while the central tenet of federal procurement policy is value for money, “for complex procurements such as sophisticated military equipment, technical merit is often more heavily weighted than price.”

So defence procurement is uniquely positioned to drive innovation.

Because my department has put a great deal of energy into engaging with small and medium enterprises, I was particularly interested in the report's link between defence procurement and SMEs.

It argues that we have an opportunity “to develop a defence industry strategy that takes advantage of major equipment purchases, while … putting in place a complementary, more broadly based, long-term system of support for small and medium-sized enterprises …

I was very pleased to read the Expert Panel's very positive assessment of the Canadian Innovation Commercialization Program, or CICP.

Our Government has made innovation a priority, through showcasing this new approach, which kickstarts Canadian innovations.

We announced this program, designed to bridge the commercialization gap between the lab and the marketplace, in Budget 2010.

Its goal is to help Canadian companies take their new technologies, products and services from the lab to the marketplace.

The CICP, as an initiative of the Government of Canada—one of the largest buyers of goods and services in Canada—is providing innovators with the opportunity to:

  • Learn more about opportunities for supplying innovative goods and services to the Government of Canada;
  • Learn more about the Government of Canada procurement processes and services that support innovation;
  • Showcase their pre-commercialized technologies to government department representatives;
  • Connect with government representatives who can explain departmental priorities; and
  • Submit a proposal to have their innovation used by government in a live operational test.

The first round of successful innovations was announced earlier this year, and PWGSC officials have been hard at work identifying partner departments to test the products selected.

For example, Amika Mobile Corporation's Amika Mobility Server—Emergency Alerting Edition will be tested by the Communications Research Centre Canada.

The Panel's report is encouraging, and recommends that the program be made permanent.

It also suggests that it be expanded to solicit solutions to specific departmental needs.

I'm sure you'll agree that those are intriguing ideas.

I fully expect that they, as well as many specific suggestions in the Panel's report, will provide useful insights to guide us as we move forward.

We truly are continuously seeking to improve procurement through innovative solutions.

It's paying off.

Since 2006, as demonstrated by eight major military procurements, the average procurement time for military contracts has been cut in half.

A good example of this is the acquisition of 17 new tactical aircraft to replace Canada's aging Hercules tactical airlift fleet.

This acquisition took only 18 months to procure, less than half of the target 48 months.

Progress like this is not the result of one person's, or even one organization's, efforts.

As recent experience has shown, engaging all the major players is essential to real improvement.

So you can expect to see more of it; the game has changed, and your industry will benefit.

Recommendations in the Panel's report will provide insight to guide us as we move forward.

I know that industry will be a full partner with government in this effort, and that together, we will create a Canada that is strong at home, with a sturdy industrial base and high employment, and strong abroad, as we continue to defend Canada's interests and values.

The Government of Canada is committed to innovating its approaches to procurement.

Underlining all of this will be our determination to not only support innovation, but to walk the walk by innovating ourselves.

Twentieth-century solutions won't address twenty-first century issues; we have to invent and embrace innovative approaches.

We're determined to streamline processes and engage industry associations so it can keep getting better and faster.

My colleagues Peter MacKay, Christian Paradis, Julian Fantino and I intend to work together to continuously improve procurement processes, and we believe that we are on the right track.

Thank you.