Federal contracts a ‘lost opportunity’ 
for too many SMEs, Telfer study says

Most small Canadian firms don’t see government as a potential client, according to new research from University of Ottawa professors
Barb Orser
Telfer professor Barb Orser co-wrote the new study. (Photo courtesy the University of Ottawa)

A new study that shows fewer than one in 10 small and medium-sized Canadian enterprises does business with the federal government should be a wakeup call to companies looking for avenues to grow, the report’s co-author says.

“Being in the nation’s capital, to me this represents opportunity,” said Barb Orser, a professor at the University of Ottawa’s Telfer School of Management. “A lot of small businesses, they don’t see the feds as a prospective client. What we see in the data is that once small businesses do business with the federal government, they seem to be able to overcome some of the classic, stereotypical challenges that have been well-identified.”

The study found that just 9.8 per cent of Canadian SMEs sold goods and services to the federal government between 2012 and 2014, and more than 80 per cent of smaller firms said they don’t see the government as a potential client.

"When close to 13 per cent of our GDP relates to federal, provincial and municipal procurement, that’s a big chunk of our economy that represents opportunities for small businesses.”

“That’s a lot of lost business opportunity for Canadian small businesses,” Ms. Orser said. “I’m hoping one of the things that this study does is alert small businesses to the opportunities that government provides – at all levels. It’s not just the feds. When close to 13 per cent of our GDP relates to federal, provincial and municipal procurement, that’s a big chunk of our economy that represents opportunities for small businesses.”

Many SMEs also buy into the belief that doing business with government requires navigating through never-ending reams of red tape. More than four in 10 enterprises that do sell to government cited the complexity of the contracting process as a major obstacle.

Ms. Orser says many firms aren’t aware of government agencies that help companies seek out government contracts, such as the Office of Small and Medium Enterprises.

“It’s really important for Ottawa businesses, because we’re in the nation’s capital and we’re close to the federal procurement epicentre,” she said.

The study also found that most SMEs that did obtain contracts tend to be older, have a fairly large number of employees and are run by men.

MediaPlus Advertising president Don Masters has done deals with a host of government agencies and Crown corporations since launching the firm in 1984. He said he checks procurement sites such as buyandsell.gc.ca and MERX.com first thing every morning – and suggested any company looking to win government business should do the same.

“I think all of the opportunities are there,” he told OBJ. “Sure, if it’s a big multimillion-dollar contract, (governments) are probably going to look to bigger firms first. But that’s not the nature of everything that they post by a long shot. There’s opportunities on there for everyone from people that know how to build fishing piers to repairing roofs – you name it, it’s on there. If people are finding they’re not succeeding at it, maybe it’s in the approach that they’re taking more than the process itself or any bias toward large firms.”

Melissa Pinard, who founded Kanata-based tech firm InitLive four years ago with her mother Debbie, said the 12-person company registered with buyandsell.gc.ca in 2014 but found it difficult to get on the government’s preferred vendor list.

Labour-intensive process

“We found the tender process to be time-consuming, complicated and usually not specific enough to a small company’s product,” she said in an e-mail.

Eddy Abou-Nehme, CEO of local digital marketing firm seoplus+, has landed a couple of government contracts since launching the business in 2012. He said many fledgling startups would love to do business with the federal government, but bidding on contracts is labour-intensive and comes with no guarantee of success.

“The problem is, it’s oftentimes a very difficult and long process to apply,” he explained. “You get into a situation where you literally have to put in like 50, 60, 70, 80, 90 man hours, even longer. Sometimes, small businesses just can’t support that, whereas you can go meet a couple of small businesses, in a couple of hours turn (deals) around and be done.”

Gabe Batstone, co-founder of Ottawa-based artificial intelligence startup Contextere, has been selling to the federal government for two decades. While he argues the government could do a better job of simplifying the procurement process for small companies, he also says many businesses aren’t doing enough to take advantage of the opportunities available to them.

“I think it’s just a reality of a bureaucracy and a large company,” he said. “In fairness, it’s not that much easier to deal with a Fortune 500 company. When you deal with big organizations, whether it’s a government or a multinational, it takes time. If you can have the patience, if you can have the maturity and are willing to take the time, there are benefits. I think that a little bit of (being in) business is you have to figure it out.”

Mr. Masters agreed.

“If you consider spending some human resources to develop a proposal as fighting red tape, I guess that’s your choice, but that’s the way the process works,” he said. “In an organization that’s doing billions and billions of dollars of procurement a year, how else are they going to do it?”

Ms. Orser said the federal government is aware of the perception that it can be difficult to do business with and is working to streamline its procurement systems. In fact, she said it was two senior managers at Public Services and Procurement Canada, Quang Duong and Jerome Catimel, who proposed the new study.

“It’s really easy to fall back on being critical of the government, and that’s sort of the norm,” she said. “But in my mind, this is a bit of a good-news story because they’re trying to inform their policy with quality evidence-based insight. That’s what motivated (the report).”

The study did not break down results by region or city, so Ms. Orser said the authors aren’t sure yet if Ottawa firms are more likely to do business with the federal government or see it as a potential client than companies in other parts of the country.

She said that type of analysis will be done in future reports, adding Telfer researchers are already working on the next in a series of studies that will examine topics such as the link between procurement and innovation.