April 5, 2017

New ‘Innovative Solutions Canada’ program, a positive starting point for a procurement marketplace for Canadian tech: Towards a Full adoption of SBIR model best practices

procurement

The federal budget brought down on March 22, 2017 may have had few surprises, but it was filled with exciting new initiatives that show the government is listening to key stakeholders. (Read CATA’s budget commentary)

Ottawa, ON…CATAAlliance (cata.ca), Canada’s One Voice for Innovation Lobby Group, is calling on the federal government to adopt the United States’ Small Business Innovation Research Program (SBIR) best practices as part of its new Innovative Solutions Canada program.

CATA CEO, John Reid, said, “Ideally, we would like to see more features that fully parallel the SBIR, which the budget cites as a procurement model for Canada.”

He added, “ The SBIR, created four decades ago, features multiple phases of government funding without the need for separately raised funds to match as well as  percentage set asides for government purchases.  Countries such as the United Kingdom, Australia, Japan and Sweden have modelled similar programs after the United States’ approach.”

dan-wasserman-570Dan Wasserman, Procurement Modernization Advocate (view video)
Innovative Solutions Canada

The proposed Innovative Solutions Canada – a new procurement program allocates a portion of funding from federal departments and agencies to early‐stage research from Canadian innovators and researchers in exchange for access to the latest, most innovative products and services. De‐risking occurs by having a “client” ‐ the government, who pays for a firm’s early stage development.

It is anticipated that there will be two parts to ISC. The first is a Canadian version of the extremely successful US Small Business Innovation and Research (SBIR) program, and second, our own adaptation of the “set-aside” that has been effectively used by the UK, Sweden, Australia and numerous others in addition to the US.

The former is a grant, while the latter is a mandatory procurement requirement for all federal departments and agencies.

Comparing Innovation Solutions Canada with SBIR

In the US, typically small companies receive a significant amount of their early stage funding through SBIRs. Where these differ from IRAP is in both overall dollar volume (e.g. $250,000 for an SBIR-1 and $1 million for a follow-on SBIR-2), plus the fact the money can be used for commercialization purposes, no matching funds are required, and multiple awards are possible simultaneously.

However, there is no real mandatory purchasing requirement in Canada. We do have the Build in Canada Innovation Program (BCIP), which is effectively a “purchase for testing” mechanism. It isn’t an absolute requirement based on a percentage of a ministry’s overall budget.

Small American businesses, which determine their government is a target market, can look forward to every federal department and agency being required to set-aside 23% for purchases from small business for all contracts over $500,000. Additionally, there are three other considerations:

  1. There is a set-aside of 23% for all contracts over $500,000 that must be spent with small businesses. Additionally, a further government-wide requirement is that certain groups, such as; women-owned businesses, small disadvantaged businesses, firms located in HUBZones, and service disabled veteran-owned businesses, receive 5%, 5%, 3% and 3%, respectively.
  2. The set-aside dollars are tabulated based on direct purchases by the department or agency, PLUS the amount(s) procured from small businesses through large companies. These large companies have executive level management personnel dedicated to ensuring they meet the necessary requirements. Typically, they are called small business liaison, or diversity, or compliance, officers.
  3. The annual outcomes are reported on a scorecard every year by the Small Business Administration (SBA) https://www.sba.gov/contracting/finding-government-customers/see-agency-small-business-scorecards

Most of the procurement is coordinated through the General Services Agency (GSA).

The GSA provides workspace to more than 1 million American federal civilian workers, oversees the preservation of more than 480 historic buildings, and facilitates the federal government’s purchase of high-quality, low-cost goods and services from qualified commercial vendors. Their acquisition solutions offer private sector professional services, equipment, supplies, and IT to government organizations and the military. 

GSA Schedule 70, for Information Technology (IT), is the largest and most widely used procurement tool offered by the federal government. It’s an indefinite delivery/indefinite quantity (IDIQ) multiple award schedule, which provides direct access to products and services from over 5,000 certified industry partners for – federal, state, local, and tribal government groups. It is managed through a series of Special Identification Numbers (SIN).

Reid pointed out, “ The irony of the American system is that the US Trade Agreement Act of 1979 allows companies from all 124 participating countries (including Canada), to be listed on the GSA. Moreover, small foreign companies can also retain that designation (although not any of the more specific ones listed above) and be counted within the 23% set-aside.”

References:

https://www.sbir.gov/
https://www.sbir.gov/birth-and-history-of-the-sbir-program
https://docs.google.com/document/d/1fDKTBJDTWN0nTm_QujgixGvcnaZWvkUCjX6rmHAeIMQ/edit?usp=sharing

Distinguishing Features

A C-SBIR program would expand on the existing IRAP offerings. However, to be effective, it too should permit a portion of the funds to be used for commercializing purposes. These would include such things as the development of a website, search engine optimization (SEO), attending symposia, exhibiting at conferences (including travel expenses), etc.

Reid commented, “ Setting aside a percentage of all Canadian federal purchases on behalf of small companies would create a huge market opportunity for those companies. It could be phased in based on a smaller percentage to begin with and then grow over time. This is what the UK did going from 25% with a target of 33% by 2020.”

Outcomes & Benefits

C-SBIR

  • More development funds
  • Money to truly start commercialization
  • Faster market acceptance of Canadian innovations

Set-Aside

  • A significant-sized reference customer
  • Increased wealth to incrementally grow early stage investment
  • Creates true clusters

Reid concluded, “ To be truly successful, Canada has to stop being the “prototype country” and become more like Israel’s “Startup Nation.” Successful models already exist elsewhere in the world, and with countries much smaller than Canada. It is time to start emulating these and grow our economy! ”

engage++ Action Item

Mobilization & Engagement: If you have an individual or organizational interest in collaborating with CATAAlliance to advance Canadian procurement modernization, please contact CATA CEO John Reid at jreid@cata.ca

Please socialize this communique to your network of social and business contacts, including media.

cataimageAbout CATAAlliance

Interact with your Innovation Peer Group Now http://www.linkedin.com/groups/Canadian-Advanced-Technology-Alliance-CATA-37239/about

The Canadian Advanced Technology Alliance (CATAAlliance) is Canada’s One Voice for Innovation Lobby Group, crowdsourcing ideas and guidance from thousands of opt in members in moderated social networks in Canada and key global markets. (No Tech Firm Left Behind)

Contact: CATA CEO, John Reid at jreid@cata.ca