Leveraging the Buy

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

Economic Club of Canada
Ottawa, Ontario
April 24, 2012

Check against delivery

Thank you, Cindy, for that kind introduction.

Thank you all so much for being here this afternoon. And thank you to the Economic Club for the opportunity to address you today.

It’s great to see so many familiar faces in this crowd.

I am always surprised how many of you are interested in what Public Works and Government Services Canada is doing to change the way we buy goods and services.

Most people think we fix potholes and are constantly asking me if I can look into their roads.

Anyway, with the expectation that you know about Public Works and Government Services I am going to share with you how we are transforming the way we do business.

I’ll try to keep it interesting. I also brought pictures, just in case.

I know some of you don’t always have a good impression or experience with Public Works.

We are very big. We are slow sometimes. We make you work very hard to get a contract. I am very mindful of these criticisms. And many are legitimate.

Since accepting this portfolio it has been my aim to transform the way Public Works does business and to not just think of government procurement as a burden or a necessary evil anymore.

I believe the Government of Canada, through Public Works, plays a key role in the economy. And that is the focus of my speech today.

Public Works is responsible for 55,000 procurement-related transactions worth almost $17 billion per year.

We are the largest purchaser of goods and services in Canada and therefore strategically positioned to make an impact on the economy.

For comparison, Bombardier, which ranks number 15 on the FP 500 list, does almost the same amount in sales as Public Works—a little more than $17 billion.

Canadian Tire, which ranks 43rd on the FP 500, does about $9 billion in sales annually.

However, private sector companies have a much greater ability to buy what they want, when they want it, and from whomever supplies it.

We don’t have just the bottom line to think about.

As an agent of the Crown, we must ensure that when we buy goods and services, we do so in a manner that enhances access, competition and fairness.

We must also try to get the “best value” for the Crown. We have to comply with international trade agreements. And we must try to execute federal policy objectives such as greening government operations.

We must also make a concerted effort to buy from small- and medium-sized businesses from every corner and every coast.

On top of that—we are risk-averse and rules-based.

However, like you, we want to create a better, smarter procurement system. We want to:

1. engage our suppliers;
2. leverage our buy to create jobs and foster innovation; and
3. provide a more efficient and effective way of governing our transactions.

Yes, I believe Public Works is transforming. Let me illustrate how we are doing these three things better today.

We are engaging our suppliers through programs like the smart procurement initiative.

Through this initiative, we’re asking industry and our clients to review how Public Works buys goods and services in an initial 15 key areas.

This includes items like technology, food and communications services. Once we have completed this initiative, we will have revised 31 categories of goods and services.

One of the first areas we’re improving is how we procure research and development.

Public Works has engaged suppliers and government departments in developing a proposed R&D procurement strategy, and a proposed national strategy is being posted on the Government Electronic Tendering System, or MERX, for review and comments.

We’re anxious to hear what industry, academia, and government departments have to say.

Their views will be incorporated, as appropriate, in the finalized strategy—which will also be transparently posted on MERX.

The feedback we receive will help us better respond to the needs of both our clients and our suppliers.

Engaging suppliers matters because we want the interface between government and business to be simpler and more streamlined.

We do business with thousands of small and medium enterprises and we want to ensure this experience matches their reality.

For instance, I can give you the example of eggs.

National Defence likes to feed the troops—it’s a reasonable thing to do.

And they like a little flexibility. If they are on the west coast, they want to buy Pacific salmon. If they are on the east coast, they like to buy Atlantic salmon.

They also like to buy eggs—a lot of eggs. As we all know, eggs are usually available from local suppliers at good prices.

But we discovered that when Public Works did a call for egg suppliers for National Defence, that request for proposal was 26 pages long.

You heard that correctly. 

Local farmers had to sift through 26 pages of requirements for eggs.

Clearly we were not using anyone’s time wisely.

The Smart Procurement Initiative seeks to correct these errors and simplify the interface between the government and businesses.

The second way we are changing is how we leverage our buy.

When I arrived at Public Works there were $240 billion in military acquisitions to be made over the next 20 years. And, as I’ve mentioned, each year Public Works procures $17 billion in goods and services.

How can we leverage this buy to benefit the Canadian economy?

For example, we have developed the Canadian Innovation Commercialization Program.

The Canadian Innovation Commercialization Program was launched in 2010 and in fact it was the only new program in that budget.

This program has already shown encouraging results. Tom Jenkins’ research and development panel praised it and encouraged us to expand it.

This program connects small- and medium-sized enterprises with pre-commercialized products with federal departments and agencies that have a need for innovative products and services.

It is the first time the government has acted as a first buyer of Canadian innovation.

By selling to the federal government, businesses can demonstrate the value of their products and services, increase the scale of their operations, and generate future sales to non-federal customers.

This program is not a subsidy. Instead, it fills a business need and provides a first contract with the government and instant legitimacy for those trying to sell products to others.

We are putting innovation at the core of our procurement and this program.

In line with Tom Jenkins’ recommendation to build on the early success of this program, our recent budget proposes to enhance support for the program and thereafter to make the Canadian Innovation Commercialization Program permanent.

The program will also now include an added military procurement component.

Finally, the third way we are changing our business model is through the way we govern our big purchases.

And for this example, I must, of course, turn to the National Shipbuilding Procurement Strategy—or the NSPS.

I am a big believer in good governance and the NSPS was for me the test case to establish a new way of governing complex procurements.

In the end, we believe the NSPS buy will be worth more than $30 billion to the Canadian economy.

So it was important to me to get the process right.

The secret of the NSPS success is much more than a process that took place outside of politics.

There are two key features that made the NSPS different.

The first was the decision to use only Canadian shipyards.

Why does that matter for innovation? Because innovation happens on the shop floor.

The second was the way we governed the process to select the shipyards.

Public Works created an innovative process to ensure a fair result.

A Deputy Ministers’ Governance Committee was created to oversee and validate the process and its results.

Treasury Board Ministers approved the general terms of the Umbrella Agreements before the results were known.

The bidders were informed of results first.

Final scores of all bidders were released publicly.

Multiple layers of oversight, and full transparency and engagement with suppliers at every step of the process, ensured that when people look back at the entire NSPS process, they will discover how it embodies all three principles that are changing the way we do business at Public Works.

First, we engaged industry stakeholders.

We consulted on the terms of the Umbrella Agreements, we consulted on the proposed schedule, and stakeholders helped to create the scoring systems for the bids.

Second, we leveraged the buy. We kept the jobs in Canada by choosing Canadian shipyards.

In addition, we required that the winning yards develop value propositions that will contribute to continuous improvement in areas such as skills and training, infrastructure, capabilities, and long-term supply chain development.

Third, the NSPS launched a new framework for governing major procurements.

We established a Secretariat that developed a non-political approach to procurement. Bids were scored on their merits, using a system of evaluation that was shaped by the shipyards themselves.

The shipyards were assessed by an internationally recognized third-party expert, and the entire process was overseen by a Fairness Monitor.

Let’s face it—big procurements are usually the most difficult. And they are often unique.

But we know we are a key player in the Canadian economy and we are rolling up our sleeves and are steering in the right path.

Public Works and Government Services is changing the way it does business—not just by trying to reduce the paper burden, but also by trying to drive innovation and investment in the Canadian economy.

That’s the bottom line.

Thank you.