May 7, 2017

A proven model for the creation of Innovative Solutions Canada: Call for Guidance & Advocacy!

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Please review the Public Policy Guidance Note below regarding desired modifications to Innovative Solutions Canada, recently announced in the federal budget, and then contact CATA CEO, John Reid at jreid@cata.ca if you have guidance or wish to help advance this community advocacy.

A proven model for the creation of Innovative Solutions Canada

The for two programs that have probably had the greatest impact on the success of American innovators and contributed enormously to the US economy: 1) the Small Business Innovation Research (SBIR) grant program, and 2) government procurement set- asides.

In the US these are jointly handled by two different, yet somewhat overlapping, agencies under the Department of Commerce.

The Small Business Administration (SBA) manages a number of functions. Firstly, they ensure the twelve reporting bodies dedicate 3.2% of their total budgets towards the SBIR program. They are also the organization responsible for an additional 23% of each department budget that is “set- aside” to be used to procure goods and services from small businesses. As well, the SBA is the body that determines the classification of various small businesses under their 8(a) program, such as woman-owned, veteran owned, disadvantaged, HUBZones, etc. All of these represent sub- percentage allocations within the 23% aggregate. Moreover, the 23% can be made up of either direct purchases or as a result of the legal requirement that any government contract award of $500,000 or more to a large company MUST be spent with approved small businesses. This action alone encourages partnering and ensures the creation of a healthy small business stratum.

On the other hand, there is the GSA. It 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) and as of August 1, 2016, it established the new SIN of 132-56 that is specific to Health IT.

Being listed on the GSA Schedule opens up government departments and agencies as new market opportunities beyond the traditional private sector, often with larger and longer term contracts. Put in perspective, in the first half of fiscal 2017 just the Departments of Health & Human Services (HHS) and Veterans Affairs (VA) alone spent almost $600 million with small companies listed under this new SIN and almost half was through large company partnerships.

On a positive note the federal budget proposes “to provide up to $50 million, starting in 2017–18, to launch a new procurement program, Innovative Solutions Canada, modelled on the very successful U.S. Small Business Innovation Research (SBIR) program.” However, it must be remembered the SBIR is a grant, and US small business procurement is through the mandatory set-asides. The intent now is to ensure our government incorporates BOTH of these into the final legislation.

Meanwhile the Ontario budget, released on April 27, included “$9B for Hospitals…targeted at new facilities, deficiencies in existing facilities, and enabling innovative models of care.”

Also, these programs cross all technology segments.

That is why it is worthwhile to compare and contrast the two with what is already available in Canada, against what could be an ideal model based on my US experience.

As you will note below, the Ontario HTF was loosely structured on the American SBIR program.

Ontario HTF   US-SBIR
Needs determined by Publicly funded health centre as lead   Any of the 12 Federal Depts. & Agencies
# Segments 3 Streams – I/II/III   3 Phases – I/II/III
Amounts ($000) $100/$500/$500   $150/$1,000/$0
Time (years) Up to 2/2/2   Up to 0.5/2/NA
Matching funds 1:1   Not required
Use of funds R&D + testing   Merit, feasibility & commercial potential

In both cases, the process starts with a formal request, has three distinct segments, and by successfully getting through the last one potentially leads to procurement. Right now, even an in-house hospital-developed innovation cannot be procured by the hospital in which it was piloted. So, the HTF is a bold move forward, although there are substantial differences.

Firstly, there is no matching fund requirement in the SBIR. In fact, many US states “double-up” on the federal portion with a “Phase 0” grant. Second, the American grant money is largely targeted towards commercialization, which can cover patents, marketing, business development, trade shows, collateral, etc. Usually only a portion of the funds are used for R&D.

Finally, if the innovator lists their company on the GSA, their products can be procured by other Departments, Agencies, State, Local and Tribal governments.

At the federal level in Canada the counterpart to the SBA is the Office of Small and Medium Enterprise (OSME), which is part of Public Services and Procurement Canada (PSPC).

As for the GSA, the closest program in Canada, also administered by the PSPC, is the Build in Canada Innovation Program (BCIP). However, it only applies to a “first sale,” is for proof of concept, and is effectively a testing facility with the goal of providing feedback. Alternatively, the GSA Schedules are multiyear contracts, targeted towards commercially viable products, and designed to encourage partnering between small and large companies. The key difference is Canada offers a one-off while the US is focused on business growth through continued, sustained, procurement.

BCIP GSA
Type of commitment  First sale & testing only   Multiple Award Schedule (MAS)
Geographic limitations  Federal gov’t     None; can also include state, local & tribal
Award amounts  $500K or $1M for DoD   Set by each contract
Funding source  2012 budget   Set-asides
Number of contracts  1   Unlimited
Encourages partnering   No   Yes

The proposed model for Innovative Solutions Canada is to mimic what has already been proven in the USA as follows:

SBIR –

  • Based on identified need
  • Does NOT require matching funds
  • Provinces CAN “double-up”
  • Targeted towards commercialization not R&D

Set-Asides –

  • 15% of all contracts over $X00,000 must go to small businesses
  • Set up a preferred vendor list for both large and small companies
  • Ministries can procure directly from small businesses on the vendor list with the value credited towards the annual total
  • Large companies will assign management to administer their procurement requirement(s)
  • Annual reporting against targets with penalties for under-performance
  • To offer a “collaborative purchasing” clause for provincial and local procurement



About Dan Wasserman, Founder & CEO, Mammoth Health Innovation Inc. & member, CATA Innovation Leadership Council
(view video interview with CATA CEO on a C-SBIR)

For eleven-plus years I lived and worked in the Greater-DC area and over 80% of that time I was involved in one form of procurement or another. You name the three-letter agency and chances are I pitched them, including the Joint Terrorism Task Force. Likewise, for a 17-week period I delivered thirteen briefings to General officers at the Pentagon. I also probably still hold the record for the fastest turn-around of a DoD contract; start-to-finish in under 10-days.

Plus, I was one of three finalists for the “2006 Innovator of the Year Award” by the International Association of Chiefs of Police (IACP) through of the work I did at the at the state and local level.

Moving back to Canada in 2010, I effectively packed up most of this experience. However, I did use some of it as the underpinning for the creation of the Healthcare Ecosphere out of ventureLAB. The good news is that program effectively caused the creation of the Ontario

Health Innovation Council (OHIC), which gave rise to the Ontario Chief Health Innovation Strategist (OCHIS), who then developed the Health Technologies Fund (HTF). Moreover, the Ecosphere itself ultimately received FedDev funding so it could become sustainable.

In the meantime, I moved on to create Mammoth Health Innovation where our goal was to establish a fund to support health innovation while providing professional project management. But, serendipity intervened with last spring’s announcement by the US government that Health IT was to receive its own dedicated Special Identification Number (SIN) on the General Services Agency (GSA) Schedule 70 as of August 1. This not only provided Mammoth a finite focus, it meant that what I did for many of those years in DC now hadrelevance in Canada.

Since my return I have advocated for two programs that have probably had the greatest impact on the success of American innovators and contributed enormously to the US economy: 1) the Small Business Innovation Research (SBIR) grant program, and 2) government procurement set-asides.

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