Feds shy away from issuing IT contracts under $25K

A directive issued by the federal government will put many small and medium-sized IT firms on the “”endangered species list,”” according to one Ottawa businessman.

Pending a departmental review of its sole-source contracting mechanism, Public

Works has ceased issuing such contracts worth $25,000 or less to users of its Informatics Professional Services vendor system.

The decision will have a “”big impact”” on SMEs that supply IT services to the government, according to a private sector source whose small company regularly does business with the federal government. He did not wish to be named for fear of losing business.

The $25,000 sole-source contracting route is a big “”business enabler”” for a many small players in the IT services sector, he said.

“”These contracts fertilize the seeds of creativity, innovation and increased employment opportunities.””

Discontinuing this contracting route, combined with the ongoing movement toward bigger “”all-in-one supply agreements,”” could mean “”the death of many companies lower on the food chain,”” the source added.

“”Intentionally or not, we might see the feds wipe out the middle layer of this service sector,”” he said. “”And it’s really a shame because I see a number of innovative companies and specialty niche players in the middle-size IM/IT sector market, innovations that won’t come out of the sole proprietors or the big dinosaurs.””

A contracting environment of the future may be one where only “”the big fish”” — and some independents that the big players choose to subcontract to — survive, the man added.

“”Firms like ours will soon be on the endangered species list, or extinct.””

Nathalie L’Ecuyer, a spokeswoman for Public Works, insisted her department “”strongly supports”” small and medium-sized businesses. But there is a public perception that the sole-source contracting method has been used “”inappropriately,”” she said.

Because of this public perception, the sole-source contracting method will be under review for the next several months.

“”During this period, the use of individual sole-source contracts for goods and services purchased for (Public Works) by (Public Works) with an expected value of less then $25,000 will be discontinued in favour of existing tools such as standing offers and supply agreements, or by using a competitive process.””

L’Ecuyer said she does not expect the decision to adversely affect SME,s since many are listed on the department’s supplier list, known as the standing offer index (SOI), and will still have ample business opportunities.

Procurement officers at Public Works will continue to use the SOI, as well as the government’s electronic tendering system, MERX, to conduct procurements, she added.

“”This will ensure the same level of access to federal business opportunities for small and medium-sized suppliers.””

The Ottawa businessman said he worries that the government already favours big businesses, as illustrated by the contracts, loans, bailouts, and tax breaks they frequently receive over smaller players. The playing field is not level, he suggested.

David Paterson, national director of public affairs for the Canadian Advanced Technology Alliance, said there has always been concern over whether Public Works does an adequate job of opening up opportunities for small business.

“”They tend to lean more toward large suppliers that they’re familiar with rather than taking a chance on bringing in a new, smaller vendor.””

A sub-group of CATA is working on this issue and hopes to broach the subject with newly-minted Public Works Minister Scott Brison.

The department’s IT shop is launching a new round of consultations with the information and communications technology industry this fall, noted Paterson.

“”They want to consult with a range of vendors, so we’ll definitely be a part of this.””

CATA has been asked by the department to nominate some industry spokespeople to take part in the upcoming consultations.

Comment: info@itbusiness.ca

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