Good morning everyone. It's a pleasure to be here.
I'm Lisa Campbell, assistant deputy minister at Public Services and Procurement Canada.
Governments around the world spend a lot of money on goods and services to meet the needs of their citizens and Canada is no exception.
The amounts paid by Canada's provincial, territorial and municipal governments combined total over $100 billion a year.
Federal procurement spending contributes close to 1% of Canada's gross domestic product annually. Over the past decade, the federal government has issued more than 500,000 contracts on average per year, worth about $18 billion annually. This spending is used to acquire a vast array of goods and services, ranging from office supplies to information technology, to military equipment such as aircraft and tanks. About half of the federal spend is on defence spending, and the other half is on everything else the government needs to function, such as bridges, infrastructure, nuclear facilities, and vaccines.
A little-known fact that I want to share with you today is that over 80% of federal contracting is done by government departments themselves. At Public Services and Procurement Canada, we only handle 12% of the contracts, but that represents 80% of the money. We focus, I think appropriately, on the most complex procurements. That's where we put our specialized contracting expertise.
Our basic precept in Canada, based in law and policy, is that federal procurement should be fair, open, and transparent, and provide best value to Canada. We have heard from industry—and we engage with them regularly through supplier advisory committees and a recently formed defence industry group—that it's overly complex and administratively burdensome. We agree. Our minister has a mandate to modernize procurement, and that, quite frankly, is a business priority for us.
Let me spend a moment on some of the complex dynamics at play in procurement. Buying things, in and of itself, isn't complicated. It's what we try to do during the process that makes it complex. Canada is part of several trade agreements that require that we open up procurements to the world for fair competition. At the same time, we're also trying to achieve industrial and socio-economic benefits for Canada. There's a natural tension between those two dynamics, and this is perhaps most marked in the defence procurement area.
We have a mandate to modernize the Government of Canada's procurement practices so that they're simpler, so that they deploy modern controllership, and that they support economic policy goals, including green and social procurement. As part of this modernization, we started to look at our contracting processes. We're not just looking at our counterparts around the world. We're actually going to the private sector as well to see how businesses have made it simpler to streamline the basic contract forms; and we're also looking at our standing offers and supply arrangements to see if they can be streamlined. It would make it easier for business to sell and for government departments to buy.
Also, and this is a really important piece, we now have out on the street a request for proposal to acquire a new web-based e-procurement solution. I'm not saying it's going to become like Amazon, but that's where we're headed. Essentially, we want to move the Government of Canada procurement function to an e-business model, leveraging industry best practices, and reducing cost and process burdens for federal department and agencies and for suppliers.
Small and medium-sized businesses in Canada get about half of our contracts, and we want to make it easy for them. Ideally, they would eventually be able to do a lot of this off their smart phones, connect with their suppliers, find out what opportunities there are, advertise, and really be able to check contracts and how things are going.
We're also working with my colleagues at National Defence; and also Innovation, Science and Economic Development Canada; and representatives from industry associations, to improve our overall approach to contracting for the maintenance and repair of military equipment. There's a lot of focus on the start of contracts, but quite frankly increasingly a lot of work is done in service support and repair of military equipment, because, once you buy it, you have it for about 30 years.
In the old days you would put a contract in place and then let it run for 30 years, but that doesn't work anymore because in-service support means that the procurement life cycle is shorter and more complex. We're actually looking at our existing stock and flow and refreshing some of those contracts to make them, for example, performance-based. Where perhaps we had a fixed price and that worked in the past, now we're saying to companies, we're going to incentivize you. If you perform in the next five years, you might get the next tranche of work, but we're going to see how you do.
We're finding that to be really effective, both from industry's perspective, and also ours. It gives us better value.
Taken together, in our view, some of these initiatives will help modernize the federal procurement function, foster competition and innovation, and also allow us to better leverage procurement to advance economic, social, and green-policy objectives for the benefit of Canada and Canadians.
Thank you very much.