Laurent Carbonneau is the vice-president of policy and advocacy at the Council for Canadian Innovators (CCI).
Government buying is big business. At between 12 and 14 percent of Canada’s GDP in any given year, it’s comparable to the economy of Alberta or the turnover of our natural resources sector. It also accounts for just over 30 cents of every dollar that governments across Canada spend.
“Taking a pan-Canadian approach that builds on the foundations the federal government has laid down is the right move for Canada.”
This moment of economic turbulence is an opportunity for Canadians to be its own best customers like we never have before.
Canada has not historically used public buying to drive economic growth. Instead, governments have adopted a lowest-bidder policy that hasn’t exactly delivered on its promise of efficiency: lowest bidders brought Canadians the Phoenix pay system, the Ottawa LRT, and Santé Québec’s troubled digital rollout.
The lowest bidder is a fine way to buy staplers, but it hasn’t worked so well for big projects, such as tech and IT, nor has it created a market for solutions where there isn’t already an existing product—in a word, for innovation.
We can do better at buying innovation and using public buying to deepen our home market for Canadian firms. Other countries do this all the time.
The US has for decades operated the Small Business Innovation Research program that requires agencies to work with the private sector to contract research and development (R&D). Korea has the innovative G-PASS program that helps companies leverage contracts with the government as a formal mark of quality. Finland has a groundbreaking Innovative Public Procurement program that de-risks innovation for government departments and municipalities.
All of these countries are innovation leaders; they use public buying as a tool to deepen markets, build scale, and develop new technologies. Even Silicon Valley, despite the garage-and-bootstraps origin myths it believes about itself, would not exist without firehoses of public dollars building up the semiconductor industry.
The federal government’s new Buy Canadian policy is a promising start, and an opportunity to course correct, but we can and should do even more to make sure that it has a real domestic economic impact.
We don’t need to make this about protectionism and locking others out. Instead, we can build a “Buy Canadian” policy across the country that recognizes and rewards authentic contributions to building a more prosperous, innovative Canada.
The federal Buy Canadian policy reserves 25 percent of the value of every procurement over $25 million for “Canadian content,” alongside technical and financial scoring. For physical goods, this can be easy to track—we know how much Canadian wood is in a two-by-four, or how much of a manufactured-in-Canada product was built here.
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But how do we track Canadian content for services, and for novel products built with know-how or intellectual property (IP)? This is where policymakers across Canada can be creative in looking at the total value add to our economy.
For example, we know that investment globally in intangibles has grown 3.7 times as much as tangible investments since 2008, and that the value of corporate intangible assets is closing in on $100 trillion.
That’s where the real value is. So when we’re scoring bidders on Canadian content, we should reward investments in R&D, how much they pay for and earn revenue from Canadian-owned IP, or control of critical data.
In the intangible economy, entrepreneurship is also more important than ever. When assets are infinitely scalable, and markets are global from the get-go, the best entrepreneurs and managers make the difference between companies worth millions and companies worth billions. Assigning a small but meaningful proportion of Canadian content to genuinely Canadian management and entrepreneurship is a way to bake that into our policies.
We don’t need to go into full-on protectionism to do this—a lesson our neighbours to the south could stand to learn themselves. The United States’ Buy American policy kicks in on contracts over $10,000, and security requirements restrict foreign firms from bidding on all kinds of contracts. By focusing on the value that bidders add to the Canadian economy instead of just on where companies are located, we can ensure we get the most value for public dollars without creating unnecessary trade tensions.
Taking a pan-Canadian approach that builds on the foundations the federal government has laid down is the right move for Canada. We should learn from countries good at growing innovative companies and take real steps to become our own best customers.
The opinions and analysis expressed in the above article are those of its author, and do not necessarily reflect the position of BetaKit or its editorial staff. It has been edited for clarity, length, and style.
Feature image courtesy Unsplash. Photo by Jason Hafso.