Ottawa turns to U.S. tech giants too often: internal memo

Ottawa has long come under fire by Canada's domestic tech firms for spending too much IT money on U.S. tech giants. Now an internal memo that documents for the first time Ottawa's IT spending suggests the criticisms are valid, and that Ottawa should be giving home-grown firms a leg up.

'This may indicate that not enough innovation is being developed in Canada,' memo says

Dean Beeby · CBC News · Posted: Nov 24, 2017 5:00 AM EST | Last Updated: November 24, 2017

An internal federal government report suggests Ottawa is turning too often to foreign IT firms for procurement, leaving domestic firms in the cold. (Justin Sullivan/Getty Images)

Canada's home-grown tech companies have long complained that Ottawa keeps turning to giant American firms like IBM for its information-technology needs — and an internal federal report suggests they're right.

"There is a large concentration (almost $10 billion) across a small number of large international companies," says the study, which examined federal IT spending for the last nine years.

"This may indicate that not enough innovation is being developed in Canada, and is not sufficiently diversified across Canadian Small and Medium Enterprises."

"It may also indicate that our IT procurement processes favour incumbents, and don't foster enough new entrants into the process."

Those comments are from Alex Benay, Canada's chief information officer, who was hired to shake up Ottawa's troubled tech policies and procedures.

Benay was previously with OpenText, an information-management firm based in Waterloo, Ont., rising to become vice-president in 2011. He became president of the Canada Science and Technology Museums Corp., which runs three federal museums in Ottawa, in 2014 before becoming chief information officer for the federal government in April this year.

Public servants protest problems with the Phoenix pay system, which the federal government hired IBM to manage. A new pilot project has suggested Ottawa should be supporting home-grown tech companies. (Justin Tang/The Canadian Press)

In an Aug. 14 memo, Benay reported on a pilot project that created the first government-wide database of federal procurement, billed as part of an "open government" initiative.

CBC News obtained the document under the Access to Information Act.

Ottawa's previous proactive posting of contracts was a mess because the "use of various data sets and standards makes it virtually impossible to paint a government-wide picture of departmental spending on a vendor by vendor basis," Benay wrote.

Disparate sets

His office hired Toronto-based ThinkData Works Inc. in late June to knit the disparate data sets together and produce reports. The results of the sole-source contract, worth $24,860, revealed the heavy use of big international firms for major IT projects, such as the wildly over-budget and dysfunctional Phoenix pay system.

Federal procurement rules do not always give contracts to the lowest bidder. A points system also takes into other factors, including track record and qualifications of staff.

The Council of Canadian Innovators, founded in 2015 and chaired by Jim Balsillie, formerly with BlackBerry, has been pressing Ottawa to steer more tech dollars to Canadian firms rather than rely on Google, Netflix, Amazon and other foreign tech giants. The council counts more than 75 CEOs of Canadian tech firms among its members.

Ottawa's high-tech innovators build wish list ahead of budget

Asked to comment on the memo, executive director Benjamin Bergen said: "Far too often, Canadians watch IT contracts get handed out to foreign multinational companies when highly qualified domestic companies here in Canada are overlooked because the current procurement process favours incumbents and doesn't foster enough new entrants into the process."

IT procurement could be better distributed across the country- Alex Benay, Canada's chief information officer

"This doesn't align with Canada's goal of increasing its innovation outputs and helping domestic partners scale-up," he said.

The Benay memo also noted when Ottawa does spend IT money domestically, it doesn't spread it around. "… there is a large concentration of IT procurement in firms based in Ottawa and Toronto. … IT procurement could be better distributed across the country."

Alex Benay was appointed Canada's new chief information officer in April, partly to get Ottawa's IT policies and procedures back on track. (CBC)

The pilot project also revealed that Ottawa spent some $2.7 billion on IT staffing agencies, to bring in professionals on contract rather than relying on trained public servants – long a complaint of the Professional Institute of the Public Service of Canada (PIPSC), representing those public servants.

"This data may indicate that more investment is required in better preparing internal IT staff to address the needs of the GC [Government of Canada]," Benay said.

PIPSC president Debi Daviau welcomed the finding.

"We've been saying for years that more investment in internal government IT staff — our members — is required," she said.

Technology a $6B annual cost

"Now, Canada's CIO seems to be saying it too. We could not agree more. This work should be kept as much as possible in house, with the government's own IT specialists."

"We've seen what happens when there's an over-reliance on external suppliers — the email system consolidation and Phoenix fiascos immediately come to mind."

Benay said in August the federal government spends more than $6 billion annually on technology, and has about 17,000 employees in the sector.