Debates over GENS service delivery and its procurement approach may finally come to an end as the August 17 deadline for commenting on the draft SOIQ from Public Works and Government Services Canada (PWGSC) approaches.
With a potential value of $15 billion over the next 15 years, Government Enterprise Network Services (GENS) is the first of four projects in the Canadian federal government’s larger IT Shared Services initiative.
SMEs worry a large-scale contract will lead to job loss and less business, while large enterprises feel they are the only ones equipped to properly handle the work. Industry groups say the issues are getting confused with each other and belong in separate discussions.
The Information Technology Association of Canada (ITAC) became involved earlier this spring when the issue was raised with the committee, said Charlie Whelan, chair of ITAC’s procurement committee and president of Computer Sciences Canada Inc.
With all the activity happening in Parliament slowing the bureaurocrats down, ITAC decided to give the other side of the story and address the confusion in the marketplace around potential job loss and the risk of large projects, he said.
The trend to consolidate and standardize IT infrastructure in the private sector and government has been underway since 2003, according to ITAC’s presentation to the Standing Committee in April, and this doesn’t necessarily mean aggregation of buying, but the elimination of duplication and setting standards.
Problems small firms have with selling to the government is a whole topic of its own, according to Bernard Courtois, president and CEO of ITAC. “We want both of those issues resolved, but we don’t want them confused,” he said.
Shared Services are too big by nature for a small firm to bid on, according to Whelan. “It’s just not possible for SMEs to be as effective with the government as the integrator because they haven’t spent the time, money and energy investing in this, he said.
ITAC’s key message to the committee was what GENS is not, said Whelan. “It’s not a staff augmentation project, it’s not a high risk project, it will not reduce ICT jobs and it won’t reduce the volume of SME business,” he said.
“This whole notion of jobs going away just isn’t true,” said Whelan. One reason is the proposed procurement doesn’t talk abut transitioning government employees to the winning vendor, he explained, which is what often happens in a managed service or outsourcing.
“They are expecting the winning vendor to bring their people to deliver the service and none of the legitimate primes for this have hundreds of people sitting around waiting for something to happen. So no matter what consortium wins this, they will all have to employ SME IT professionals who are currently in the market,” said Whelan.
Another reason is linked to the upcoming skills shortage. “Over the next five years, 40 per cent of the government’s IT knowledge workers will retire and in that same time frame, industry is predicting there will be a shortage of 80,000 IT professionals,” he said.
What Shared Service will change for SMEs is who they will be selling to and the nature of how they go to market, Whelan noted. “SMEs that are now selling to the government will be selling to whatever consortium wins this bid,” he said.
ITAC is in full support of GENS and the Shared Services initiative. “[GENS] goes to the higher level objectives that we think the government has in terms of a competitive advantage in a knowledge-based economy and how government procurement needs to change in order to help move that forward,” said Whelan.
The government’s current approach on buying piece parts, he said, doesn’t drive an overall cost-effective approach to delivering solutions and services. The only way the government will be able to move the agenda forward and take that leadership position is if they take advantage of industry best practices and innovation, according to Whelan, which includes becoming knowledgeable at buying solutions as opposed to inputs.
The crown is currently acting as their own systems integration capability and utilizing skill augmentation firms to get the resources they need to deliver on projects, said Whelan. While the government is very good at buying components and driving down the cost of those components, they are not effective as a systems integrator and as a result, the overall cost of delivering systems and operating systems in government is very high, he said.
The current government business model is also not sustainable, according to Whelan, “because you won’t have enough people to continue delivering the service in the ineffective way in which it’s being delivered today.”
Shared Services addresses a lot of the very specific characteristics or behaviours that ITAC would like to see the government change, Whelan noted. This includes large-scale service transformation; a new, innovative procurement approach; a focus on outcomes, not inputs; and leveraging industry capabilities and global best practices. “We believe that this is potentially game-changing in terms of the way the government addresses IT procurement going forward,” he said.
One view ITAC has consistently held is that the contracts will save the government money, said Courtois. “We believe that when a project demonstrates considerable value, it encourages the use of IT overall and it helps our industry,” he said.
CABiNET, the Ottawa-based organization representing SMEs in IT professional services responsible for bringing the issue to the House of Commons, isn’t satisfied with PWGSC’s approach or the proposed changes.
What used to be called professional services is now managed services, but the description of the services is exactly the same, said Serge Buy, government relations consultant for CABiNET. “Everything is still there. Everything is still bundled … It’s actually even worse. They’ve bundled more stuff,” he said.
Sub-contracting to SMEs is “ridiculous, unnecessary, unwanted and unacceptable,” said Buy. “Within the document, they clearly indicate they can’t monitor it … I’m interested in actual real sound policy. This is not sound policy. This is window dressing,” he said.
The draft would contribute to job loss in the SME sector, as well as outsourcing and offshoring, according to Buy. “There’s a provision in there that says some of those contracts can be taken overseas and there’s no way for the government to enforce anything,” he said.
“GENS is the bundling of the networks. We have no problem with that … indeed they will realize an economy of scale. But within the bundling of the networks they also want to bundle all the services related to that,” said Buy.
The bundling of services is one of CABiNET’s key problems with the draft, according to Buy. “We are saying no, that’s not going to save money … you can’t bundle people and get a better price. People are people period,” he said.
Another key problem, according to Buy, is the lack of a business case. A contract with a value of over $1 billion per year over a period of eight to 15 years should have a business case, he said.
“The federal government used to be an incubator and used to be a valued client for SMEs. This is no longer going to be the case,” said Buy. The bureaucrats have decided it is easier and more expedient to just bundle the contracts, give it to large investors and forget about SMEs, he said.
Buy suggested looking at the description of services in section 1.4 of the draft SOIQ and the services they provide. The question is whether or not the services are related, he said.
In CABiNET’s presentation to the Standing Committee last February, the organization recommended not proceeding with Shared Services without an independently reviewed business plan, structure RFPs to allow SMEs to bid competitively with larger multinational companies and find ways to dissect large IT projects into pieces.
The Canadian Advanced Technology Alliance (CATA) also engaged with the House of Commons Committee. CATA’s approach to the issue was that it does make sense to bundle a service provided by a large provider, but at the same time, we have to do everything in our power to provide opportunities for SMEs to be part of these procurements, said John Reid, president of CATA.
“The point we made is yes, you can bring a big pipeline in and you might do that as a part of bundling, but that doesn’t mean you can’t connect different technologies and features to that pipeline,” said Reid.
CATA’s engagement with the committee, which reviewed the whole methodology to procurement, was very successful, according to Reid. “As a result of that, I think they’ve moved in a much more acceptable way of doing business,” he said.
The fact that there is an SME plan as part of the bid builds more fairness into the marketplace and a richer participation of large and small companies, according to Reid. “They’ve created, I think, some balance in how they are looking at these procurements,” he said.
You don’t want bundling as a methodology, Reid noted. “Anything that would exclude diversity and competition is not a good direction, but at the same time, there may be circumstances where bundling does make business or organizational sense,” he said.
It’s not one or the other, according to Reid. “You can still have a bundling for a large-scale service and at the same time keep things quite open in terms of participation and opportunity for the small- to mid-sized company,” he said.
What GENS means for the industry is a natural evolution and a stimulus to the economy, according to Reid. “Anytime you have modernization, it drives business and it gets people to think about more efficient ways of doing things, so that’s a natural technology adoption cycle of any large or small business. You’re going to have continual migrations to new approaches and new technologies and anything that can stimulate the economy now in terms of new product and services is quite timely,” he said.
The argument that every opportunity should be given to a collection of small companies is just not appropriate in every case, according to Howard Grant, president of Canadian procurement consulting firm PPI Consulting Ltd. “Government should be doing big pieces of business in certain cases if it makes sense,” he said.
Grant didn’t comment on GENS in particular, but encourages dialogue on government procurement processes in general. “We’re basically saying all big projects by government are bad because they prevent small companies from participating. The answer is no they don’t, if you set it up through a procurement strategy that forces a big company who’s successful to create those types of relationships you are looking at,” he said.
A large contract with 25 per cent deemed to small business, for example, has real value for SMEs. The larger company educates the smaller company and if the smaller company demonstrates they are bringing in real value as opposed to just bodies, the larger company will probably reach out to them again for other business because it works, he said.
“By breaking pieces of business up into smaller bits, we are in certain cases hurting small companies,” said Grant.
The other issue that is happening is a lot of the small companies complaining are the body shops, said Grant. They have no vision and no interest apart from immediately providing bodies to the Government of Canada, he said.
Government should definitely be looking at ways to engage small companies with phenomenal expertise and act as testbeds for Canadian companies developing world-leading products, but buying bodies off body shops adds very little value, according to Grant.
“On major pieces of business would you look to break up Bell Canada or Rogers? Logically, it doesn’t make sense,” he said.
Public Works documents posted on MERX are typically available at no cost with a basic account, due to funding from the Government of Canada that provides potential suppliers free access to federal opportunities. To view a copy of the draft SOIQ for GENS, e-mail [email protected]
at PWGSC or call 819-956-5015.