At the 2020 Annual General Meeting of the Ontario Chamber of Commerce, to be held in Timmins ON from April 24 – 26, the Thunder Bay Chamber of Commerce will present the following resolution:
ISSUE:
The Government of Ontario is moving forward with a centralized procurement model across the Ontario Public Service and the broader public sector which may adversely impact small- and medium-sized businesses and regional economic development across the province.
BACKGROUND:
On March 28, 2019, the Treasury Board of Ontario announced that it would be leading an initiative to transform how goods and services are purchased by the Ontario Public Service and the broader public sector. The initiative will leverage the government’s buying power to develop economies of scale and centralize all provincial procurement in Queen’s Park. While the Treasury Board develops this new procurement model, it has restricted long-term procurement contracts by the province’s various departments. This initiative by the Treasury Board is projected to save the province $1 billion per year.
The government’s goal of creating efficiencies through centralized procurement is well-intentioned, but it risks leaving small- and medium-sized businesses unable to successfully bid on provincial contracts Large provincial contracts cannot effectively be fulfilled by regional suppliers, which could result in large contract awards being made only to national or multinational distributors, thereby damaging regional suppliers & economic development. A centralized buying model puts businesses outside of the GTA at a disadvantage, and impedes the ability to build capacity throughout the province.
Rather than focusing on centralization at Queen’s Park, regional hubs offer an alternate approach that concentrates on deriving the greatest total value and achieving savings objectives while also supporting regional economic development. Provincial initiatives to centralize procurement would be administered by regional hubs and through regionally awarded contracts with support by provincial/national agreements for commodities which are not tied to a regional supplier base. The procurement hubs would be established and administered within the regions they represent, enabling effective supplier/buyer relationship development to occur.
The government would mandate public buyers to use a blended portfolio of national, provincial, and regional suppliers to select a contract which derives the greatest “total value” for that agency where total value is defined as the balanced consideration of price, regional economic impact, and other important factors including but not limited to sustainability and cultural inclusion.
Positive models of this approach are demonstrated by the Lakehead Purchasing Consortium and other successful regional broader public service cooperatives and provide proof that regional contract awards are as, or in some cases more effective than, singular large provincial agreements. As an example of the strength of regionalized procurement, the City of Thunder Bay recently closed a procurement for confidential waste paper shredding services where a local company provided a price lower than a provincial agreement. Bigger is not always better!
Investing in regional procurement hubs can also support investments in Indigenous businesses, which have long been neglected in Canada’s economy. The Ontario Chamber of Commerce’s report on regional economic development, The Great Mosaic, recommends that the provincial government prioritize economic reconciliation with Indigenous communities. Part of the solution is to encourage more Indigenous involvement in provincial supply chains, either by incentivizing those with government contracts to include more Indigenous suppliers in their own supply chains, or by including Indigenous suppliers in those contracts directly.
Implementing a regional approach to procurement centralization with a focus on achieving the greatest total value provides opportunity for small- and medium-business, Indigenous suppliers, and regional economic development.
RECOMMENDATIONS:
The Ontario Chamber of Commerce urges the Government of Ontario to:
- Implement regional procurement hubs that mandate public buyers to use a blended portfolio of national, provincial, and regional suppliers to derive the greatest total value for purchases; and,
- Define total value as the balanced consideration of price, regional economic impact, and other important factors including but not limited to sustainability and cultural inclusion.