How Canada’s governments procure goods and services is inefficient, report finds
How Canada’s governments procure goods and services is inefficient, report finds

How governments across Canada procure goods and services is not serving the interests of Canadians and is falling behind other countries in terms of efficiency.

These were the conclusions made by a new report authored by the Council of Canadian Innovators, a non-profit led by more than 150 CEOs of Canada’s biggest companies. The report, Buying Ideas: Procuring Public Sector Innovation in Canada, was released on Wednesday.

Research revealed that procurement, the process of sourcing, acquiring, and paying for goods and services, accounted for 14.6% of Canada’s GDP in 2021, amounting to hundreds of billions of dollars. 

“The fact is that the current culture of government procurement — both federally and provincially — is not serving the Canadian economy, and it is not serving the government’s own purposes,” wrote analysts.

The failure of government procurement was amplified in technology services, revealed the report. Approximately one-third of 1,480 “mission-critical” government digital applications—critical to Canadians’ health, safety, security, and economic well-being—are considered to be in “poor health,” according to a recent Auditor General report

On top of that, the Auditor General found that nearly two-thirds of applications used by departments and agencies “were reported as being in poor health and in critical need of modernization.” The Auditor General noted it was a conservative estimate given that departments and agencies were not providing accurate, timely, or complete information about the health of their systems.

The Auditor General’s report mentioned high-profile procurement scandals like the Phoenix payroll system and military procurement contracts. However, the report made no mention of ArriveCan — the Liberals’ most recent large procurement scandal that the RCMP is currently investigating.

The Council of Canadian Innovators claimed that the government’s procurement failures fall into several categories. 

Right from the outset of the procurement process, the council says that there was an overspecification and lack of ongoing dialogue with vendors. The process is “long and cumbersome,” discouraging innovators from committing their time to an outcome which is uncertain and may take years to execute. 

The council said that capacity and expertise are lacklustre among public servants to “meaningfully engage with vendors.” Lastly, a “risk-averse culture” was a result of institutional culture and career incentives which led government buyers to pursue the “safe choice.”

Benjamin Bergen, President of the Council of Canadian Innovators, said that Canada’s innovation economy has been undermined by the governments’ inability to buy innovative technologies successfully.

“When the government disproportionately relies on large foreign technology service providers to offer sub-par solutions, that impacts Canadian companies’ ability to compete and succeed globally,” he said.

Canada can take notes from various countries, according to the report. The Small Business Innovation Research program has been successful for a long time in the United States. The Forward Commitment Procurement model implemented in the United Kingdom in the 2000s has been adopted worldwide. A network of agencies from Finland has also created an ecosystem for government procurement that leads the European Union.

“While no one can simply snap their fingers and fix Canadian procurement with a single agency or policy change, we can learn lessons from all of these countries. We can imagine policies which bend the curve, score tangible wins for government innovation procurement, and create a culture of success that we can build on,” read the report.

Canada’s federal government IT procurement spending has increased from $3.5 billion to $4.5 billion between 2018 and 2022, the report notes. Canada ranked sixth in the UN’s E-Government Development Index in 2003, sliding down to 32nd in 2022 — the only G7 country to rank lower than Canada was Italy in 37th place.

The Council of Canadian Innovators offered six recommendations to Canadian government leaders as a first step to tackling the issue.

The council recommends setting a target for small and medium enterprise procurement. It suggests that a framework for forward commitment procurement is created. An “innovation procurement standard” should be developed and recognized. Commercialization should be prioritized in procurement programming. The Industrial Research Assistance Program should be empowered to drive innovation procurement. Lastly, the council recommends that the government create a federal procurement concierge. 

“The stakes are high. Public procurement of innovation is an important lever on Canada’s innovation performance and contributes to correcting our historic innovation underperformance,” read the report.

The report concludes that governments use more than one dollar of every four they spend buying from the private sector and almost one dollar in every six spent in the entire economy.

“We should want that spending to create real value for the public,” concluded the report.

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