IT industry outraged by Feds’ procurement strategy

Canadian technology companies and IT associations said they felt shocked and betrayed by proposals from Public Works and Government Services Canada that could see major changes to the way the government procures products, including reverse online auctions that would limit the public sector’s list of preferred vendors to a handful of firms.

PWGSC started convening meetings among members of the IT community late last week with details on the proposed procurement reforms, which are part of a more over-arching overhaul of federal business processes dubbed “The Way Forward.” According to a Public Works slide presentation obtained by ITBusiness.ca, the strategy would do away with the multiple national master standing offers (NMSOs) that are used to designate who gets government business and issue only two per category. For example, the many different printer models used in parts of the government would be recategorized, and only two standing offers issued to supply those types of printers.

“We are considering an approach whereby suppliers pass a rigorous set of qualifying screens to win the opportunity to accept call-ups within a defined period,” the Public Works presentation materials say. “Standing Offers would be issued (1 year period + 2 option years)to a limited number of technically compliant suppliers on the basis of Value Factor.”

The vendor of record would be determined by the use of an electronic reverse auction, where firms would have a limited amount of time to submit the most cost-effective bid for government work. Reverse e-auctions have been used by the U.K. government among others.

Public Works has not released concrete details on any timeline for when these changes might take effect. Spokespeople for the department did not respond to requests for an interview at press time.

IT associations such as the Canadian Advanced Technology Alliance (CATA) and the Information Technology Association of Canada (ITAC) have been in consultation with Public Works for the last two years about their procurement reform concerns. Members of these groups were worried, for example, about proposed changes that would force small businesses to work through a selected list of large national firms for government work, rather than dealing with the public sector directly. Last year, however, CATA said it had received assurances from then-PWGSC Minister Scott Brison that small businesses would not be cut out of procurement opportunities.

“I have spoken to a lot of vendors, and every one of them was totally caught off-guard,” said CATA president John Reid, who said there had been a number of committees and consultations struck between Public Works and CATA members to discuss procurement.

“It doesn’t validate the process. It’s going to be very difficult to get private sector people to sit down again when they’ve been intercepted like this.”

“The disappointment is that government has been voicing the view that it wants to collaborate with industry,” echoed Howard Grant, who runs a consulting firm in Ottawa called Partnering and Procurement. “Then they come up with something arbitrarily and it’s like, ‘Screw you, we’ll do whatever we want.’”

Not all reverse e-auctions are run the same, warned ITAC president Bernard Courtois, and there should be more detail about the software which will be used and how the process would be managed. No matter what the answer, Courtois said, the procurement changes would not necessarily provide value to the government.

“It’s like buying a car by going to Canadian Tire and buying a battery, an alternator and an engine,” he said. “You can end up with a great deal on each part, but at the end the car will cost you twice as much.”

Over the last five years, Treasury Board’s IT staff has grown 70 per cent, according to Courtois, while spending on outside consulting has gone down. “That’s a very disturbing trend, because it’s the reverse of what’s really happening out there,” he said.

Reid said CATA asked for more details about the research Public Works put into its strategy, only to be told it was confidential. The reverse e-auction idea, he said, works on the assumption that the government can effectively aggregate its purchases, which isn’t necessarily true.

“It’s one thing to have lower cost. It’s another thing to have expertise available to get the best use out of the technology,” he said.

Recently a group of Ottawa-based value-added resellers formed an association of their own, the Canadian Government Information Technology Providers Association (CGITP), to address procurement issues. Chris Coates, one of the group’s board members, said the proposed changes entices vendors to sell below cost and white box vendors, in particular, will be unable to compete.

“When you are obsessed with pricing, vendors will do whatever they can and when you lower the price that much, what is left for the partner?” he asked. “Do they get an agency fee or will it be some service points?”

The government’s desktop standing offer is currently composed of seven suppliers, Coates said, of which four are white box vendors, along with well-known firms such as Lenovo, Dell and HP. “The rumours are that it will go down to two or maybe four,” he said.

Courtois said distribution channels play a large role for buyers, even when dealing with commodity items such as PCs and printers. “It’s about how things are configured, delivered when needed where needed – all that gets broken down,” he said. “Buying is not simply (a case of) pressing a button and truckloads of product appear on your doorstep.”

Grant said the government was squeezing rates instead of addressing the consumption of products and services.

“They’re not looking at the business outcome, they’re looking at the line of least resistance: if we buy on everything cheap, how can we be criticized on wasting taxpayers money?” he said. “In fact, the procurement process is grinding to a halt. It’s taking longer and longer.”

Late last year, Public Works had attempted to streamline its procurement by creating an online database where SMBs could register to be considered for government opportunity.

Comment: info@itbusiness.ca

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