Cluster Development and the CAC (PWGSC): Facilitator or Competitor?

Posted on October 13, 2007

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The original intent of my research for this posting was to determine how the global reach of Consulting and Audit Canada (now called Government Consulting Services under the PWGSC banner) could be used as a vehicle to develop strong domestic clusters that could then be leveraged to deliver products and services internationally.

After all, the CAC provides a “full range of services to national governments and international organizations.”  The CAC also “enables SMEs, working on CAC projects, to gain knowledge and experience from working in a government context, thereby enhancing their marketability and future value to government clients.”  (Note: I have provided a URL link to the CAC web site under the PI Blog Role.)  While the CAC focus is on public sector clients (both domestically as well as internationally), the diversity of contracts such as accelerating e-government throughout the Bahamian public service (http://www.bahamas.gov.bs/bahamasweb2/home.nsf/vContentW/7F142208917A71BB852571CA004B4BB6!OpenDocument) to developing Botswana’s national information and technology strategy (http://www.ccafrica.ca/events/ccaf/finance/Compendium_of_Success_Stories_04-05.pdf) could provide SME-centric clusters with the reference base/creditability that may very well open the doors of opportunities to other regional organizations in both the public and private sectors.

For those of you who may be unfamiliar with the term, clusters (which are mostly comprised of Small to Medium Enterprises otherwise referred to as SMEs), are a group of independent companies with complimentary products and services who team-up to collectively deliver a solution to an end customer.

NASA provides just one example of how clusters can be utilized by public sector organizations in North America.  In accord with the U.S. Federal Government’s recent shift in contracting practices (which now favor small businesses), the agency has recently begun “unbundling” a number of their mega-contracts into more manageable opportunities for small businesses and small business teams.  An important byproduct of this practice is of course the development of strong domestic clusters.

Given the importance of being able to participate and compete in the emerging global economy, domestic cluster development is a critical first step in establishing a viable model.  For a more in depth understanding of clusters, including how governments around the world are assuming the role of “lead” firm, refer to my August 28th post “Public Sector Procurement Practice and the Principles of External Economies, Clustering and the Global Value Chain.  (Note: you can access the post through the “Procurement Trends” link under the Categories section of the PI Blog.)

The litmus test

As is the case with any promising idea, I wanted to see if a Canadian-based strategy could stand the test of objective research and frank, expert feedback.  Specifically, I wanted to see if I could poke holes in it.

Based on the initial comments I received from various leaders in both the public and private sectors, it did not appear that the Government of Canada (GoC) would be inclined to follow the lead of other nations.  Certainly the SME community as a whole was not confident.  Specifically, if the government hasn’t demonstrated a tangible interest in purchasing products and services from SMEs domestically, then why would an organization outside of Canada feel compelled to do so?  While somewhat extreme, it was still a fairly reasonable question.  A question to which I did not have a clear answer!

And it was at this point that my research took an interesting, and somewhat unexpected turn.

As I shifted my focus from an exciting, forward looking concept to one centered on historical understanding, I began to ask the most basic of all questions, why?

Why, when reports clearly show that governments throughout the world are not only recognizing the importance of SME engagement domestically, but are also proactively cultivating competencies (re clusters) to compete on the international stage is Canada stuck in neutral?

One senior industry executive offered the simple explanation that “post Gomery,” procurement policy is “viewed as an administrative necessity that has to be managed and not an asset to be developed.”

Other comments went so far as to suggest that the GoC “may not think of procurement in that kind of context” but instead view it as a process that needs to be managed so as not to “end up on the front page of the Globe.”

While the feedback was interesting and to varying degrees even accurate, I still did not have the sink your teeth into it answers that would part the clouds of learned opinion and reveal a clear and definable reason.

After all, the CAC seemed like the perfect vehicle to coordinate and launch a program centered on leveraging the myriad strengths of what I believe is a dynamic SME community.

The CAC site actually highlights this as one of the Agency’s key elements.  And I quote, “CAC does not serve the private sector directly, but does provide Canadian companies, principally small and medium enterprises (SMEs), a single window to a wide range of consulting and audit assignments throughout the federal government.”  Sounds to me like there is a focus on developing domestic opportunities! Where then, is the disconnect?

Mosquitoes and hot summer nights

Growing up in Winnipeg, there were a number of things I knew that I could count on; cold, crisp days in February in which the temperature was measured by wind chill factors (i.e. how long it would take exposed skin to freeze) or, hot and humid August nights where the relative tranquility of a prairie town evening was shattered by the incessant and high pitched wine of a mosquito buzzing around your ear.  (So as not to get into trouble with the local tourism office, Winnipeg is a friendly and safe city that offers the best hot dogs in the country – Keleckis, and birthday cakes that are second to none – Jeannie’s Bakery.  In fact the latter is so good, the cakes used to be sold to departing Winnipeggers at the airport.)

That said my reference to buzzing mosquitoes, and the resulting aggravation is comparable to the high level of cynicism and ill-will that persists as a result of the Way Forward initiative.  Despite significant changes in personnel at PWGSC (including at the ADM level), one would still be hard pressed to find anyone with a modicum of confidence in the GoC’s go forward strategy.

Even PWGSC’s establishment of a Small and Medium Enterprises office, in which the importance of developing a broad and diverse supply base is a core objective, has done little to assuage stakeholder concerns.  (Note: given the success of Virginia’s eVA initiative, which saw the Commonwealth’s supply base grow from 20,000 in 2001 to 34,000 in 2007 – mirrored by an equally impressive increase in the overall distribution of Commonwealth business, this change in direction on the part of the GoC is promising.  However, only time will tell if this seedling of promise will grow into something tangible and enduring.)

There are of course many reasons for the high degree of stakeholder mistrust both within and external to the government.  And while sessions involving industry leaders such as the October 19th, 2004 meeting between the Hon. Walt Lastewka (Parliamentary Secretary to the Minister of PWGSC at the time), and the Canadian Federation of Independent Business’ (CFIB) Garth White (Executive VP) and André Piché (Director, National Affairs) attempted to bridge the gap through the introduction of key research data, it ultimately did very little to establish a true “collaborative” relationship.  (Note: if you would like to receive a copy of the 2004 CFIB report, send me an e-mail at procureinsights@rogers.com with “CFIB Paper” in the subject line.)

Collaboration versus numbers

In a research paper I prepared for a public sector client in the U.S., I opined that successful programs are almost always the result of a strong collaboration between key stakeholders versus the perfunctory management of numbers.

I believe that we have been inundated with statistical findings and projected savings (remember the Way Forward’s $3.5 billion target?) to the point that we may actually tune most of the information we receive out.  (Looking at Virginia’s eVA program once again, I do not remember any reference to projected savings.  While I am certain that savings estimates were part of the overall program, it seems that a greater emphasis was placed on the creation of a transparent and more efficient process that would benefit all stakeholders.)

So while I am not suggesting that data is not an important element of a sound strategy, what I am saying is that it is in the broader application of data combined with a solid understanding of stakeholder objectives that true and relevant gains can be identified and realized.  I do not believe that the CFIB report, while compelling, was able to accomplish this.  That is one of the reasons why nearly 3 years later we are collectively no further ahead.

Moving forward?

While the term Way Forward is not unique to the GoC (a UK government report from 2005 also used the term in the context of introducing a low-dollar management strategy), stakeholders nonetheless from all sides of the table have to find a “way” to identify and remove the obstacles to true collaboration.  Otherwise another 3 years will pass without any discernible progress being made.  (I am certain that the parties involved in the PWGSC and CFIB meeting of 2004 expected to be further along the road than we are today.)

The best way to begin the process of moving forward is to ask pointed questions.  And even if my esteemed colleagues are correct in their assertion that there is a great deal of hedging going on within the halls of the public sector, it doesn’t matter.  We still need clarity in terms of answers involving direction.

For example, in a September 2006 presentation to attendees at the CIO Summit in Ottawa, the subject of FOSS was introduced as a potentially key element of a GoC strategy.  Almost a year later, a presentation to the Information Technology Association of Canada’s (ITAC) Public Sector Business Committee (PBSC) made no mention of FOSS (at least not in the materials with which I had been provided).  Given the potential impact on the ICT industry, one would naturally wonder why?

Another question involves the CAC itself.  Under the heading “Selling to Government” in the FedNor section of Industry Canada’s web site PWGSC is listed as a service provider offering “innovative, cost effective services to government through new business solutions.”  Take out the reference to PWGSC and one could be reading the advertisement for a private sector company.

With the advent of organizations such as the Ontario Education Collaborative Marketplace (OECM) and National Education Consulting Inc. (NECI) whose lineages can be traced back to the public sector, I am reminded of the early days of industry specific application development.  Back then, organizations went through the sometimes painful and usually costly process of automating their businesses.  Once completed, the software and related experience prompted many to establish “spin off” branches in which their “expertise was sold to other organizations within their specific industry.”  Sound familiar?

With the recent realignment of the original CAC organization in which the agency’s consulting arm is now under the PWGSC umbrella, it is not a significant leap to think that PWGSC is attempting to establish a “business model” in which it is the preferred service provider to public sector organizations including GoC departments.

If this is in fact the case, then the implications have to be understood by all stakeholders especially those within the SME community.  For example, if in fact the CAC were to become the conduit between the private sector supply base and other government customers, what is the qualification and engagement process for interested vendors?

In this context, the KPMG audit which found irregularities in the handling of contracts awarded by CAC (i.e. Abotech and Casey Computing) would certainly be cause for some concern.

As a small business I am not certain that I would be comfortable with having to rely solely on CAC as the main gateway to public sector opportunities.  Neither do I relish the prospects of having to compete against CAC in terms of going direct to the end customer.  A task made even more complex with the level of control PWGSC would have over the departmental decision-making process.

Taking all of these factors into consideration (and I am certainly open to any comments from my readers relative to the points raised within this post) it is the conflicting messages as demonstrated by the above examples that have hindered the collaborative process, including the development of domestic clusters.  Until this has been addressed (including a confirmation of the PWGSC platform) it is very unlikely that any measurable gains will be made either domestically or globally.

Conference Notice:

The Canadian Business Information Technology Network (CABiNET) will be hosting a breakfast and presentation on October 22nd from 7:30-9:30 AM at the Hampton Inn on Coventry Road near Riverside.As the featured speaker I will be sharing my research on and assessment of the GoC procurement model and how it compares to those of other public sector organizations from around the world. In particular, I will focus on the current GoC model’s impact relative to SME engagement.  This session will be a good complement to today’s post as I will expand on the NPM concept.

There is also a direct link to the “CABiNET” web site under the PI Blog site’s Blog Role.

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