The trouble with Canada’s move towards IT contract bundles

The accepted wisdom was that, as corporate enterprises suffered through more and more painful outsourcing relationships, the contracts would get shorter and the deals much smaller. Leave it to the largest corporate enterprise in Canada to refute that wisdom.

“PWGSC has stated that it intends to bundle contracts in the IT professional services sector – awarding national contracts for core IT services worth over $1 billion (annually) for periods of 10 to 15 years,” said a note from the Canadian Advanced Technology Alliance that reached my inbox today. This plan is certainly in line with the government’s previous decision-making but continues a lamentable trend in ignoring – in some cases stifling – the growth of the small business sector that makes up the bulk of Canada’s high-tech industry.

It’s possible that small firms and startups – you know, the companies that tend to become the Microsofts, Dells and Sun Microsystems of the world – will still have some chance to eat a slice of the federal government pie. But to do so they’ll likely have to be subcontractors to a handful (or maybe just a palmful) of heavyweights who will do the hard work that governments no longer want to do, which is manage vendor relationships. I wouldn’t blame the government, because nobody wants to manage vendor relationships, but the public sector should be one place where firms of all sizes enjoy increased opportunities.

It’s interesting to see how cyclical this kind of situation has become. I found an abstract to a report from that looked at how the U.S. federal government was approaching technology procurement. It was a familiar story. “A report released in Aug 1999 by Boles Knop & Co confirms that federal spending on information technology (IT) is slowly increasing, but less of the money than previously is going to small businesses. That IT contracts are being bundled into larger contracts within agencies is cited as a reason,” it says. “An official with the Small Business Administration (SBA) says the trend is toward larger contracts, and small businesses are being negatively impacted because of bundling.” No kidding. And that was before the dot-com bubble really burst.

You also have to wonder at the length of these contract bundles. I’m sure the legal teams involved aren’t stupid, and there are bound to be checks and balances over the life of the deal, but it’s still a long time to harness yourself to a particular supplier. The norm in the private sector, even among the largest players, has been more on the order of a five-year contract with an option to renew. What CIO wouldn’t want that kind of flexibility? Apparently not Canada.

The idea behind these Shared Service programs, as the government calls them, is to save money. It also means narrowing your options and streamlining the decision-making. These are all things taxpayers should want, but we also need the government to make the best decisions, the ones that not only benefit the government but the vendor community on which the economy in some measure depends.

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