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Revitalizing Canada’s Innovation Through Procurement Reform

Procurement | April 4, 2024

CCI Buying Ideas Procuring public sector innovation - Revitalizing Canada’s Innovation Through Procurement Reform

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Canada's current governmental procurement strategies are stifling innovation and economic growth

According to a reported authored by the Canadian Council of Innovators titled "2024 - Buying Ideas: Procuring Public Sector Innovation in Canada" Canada's current governmental procurement strategies are stifling innovation and economic growth. A culture of risk aversion, bureaucratic red tape, and a lack of in-house expertise in evaluating and adopting innovative solutions have led to a procurement system that disadvantages Canadian companies, particularly smaller innovators, and fails to deliver value to taxpayers. Recent reports highlight the urgent need for reform, pointing to successful models in other countries as blueprints for revitalizing Canadian innovation.

  • Government procurement in Canada (nearly 15% of the GDP in 2021) is hindered by bureaucratic processes and a reluctance to engage with homegrown innovation, leaving Canadian companies at a disadvantage.  Canada's rank of 32nd in the United Nations' E-Government Development Index in 2022, down from third in 2003, signals a decline in digital service innovation, contrasting with successful procurement models in the US, UK, and Finland.

See:  Can Canada Harvest the Next Wave of Productivity Growth?

  • Lengthy and overly specific procurement processes deter participation from innovative companies, with a significant proportion of government IT applications in critical need of modernization.
  • A void in expertise has left the public sector ill-equipped to assess and integrate innovative solutions, leading to an overreliance on large, often foreign, firms skilled in navigating the procurement process.  Further, there is a lack of dialogue, insufficient commercialization pathways, and a prevailing risk aversion that collectively creates a challenging and cumbersome environment for innovators, particularly small and medium-sized enterprises (SMEs). 

Policy Recommendations Outlined

These include the establishment of a national procurement agency or the empowerment of an existing agency like the Industrial Research Assistance Program to act as a bridge between government and innovators. Additionally, it suggests creating a Small and Medium Enterprise Procurement Target, a framework for Forward Commitment Procurement, and the development and recognition of Innovation Procurement Standards. Emphasizing the importance of prioritizing commercialization in procurement programming and the creation of a Federal Procurement Concierge is also recommended. These measures aim to encourage a more agile, innovative procurement process that is open to risk and iteration, thereby fostering a culture that is conducive to innovation.

See:  Canada’s Ranks 15th on WIPO 2023 Innovation Index

The report goes on to say that the significance of adopting these recommendations lies in the potential to drive Canada's innovation performance and correct its historic underperformance in this area. By leveraging public procurement as a tool for innovation, the government can stimulate economic growth, enhance the efficiency and effectiveness of public services, and ensure that public spending creates tangible value for Canadians. This approach not only benefits the government and public sector but also supports Canadian businesses by providing them with opportunities to innovate, grow, and compete on a global stage.

Why It Matters

Every tax payer's dollar that's misallocated for whatever reason adversely impacts Canadian innovation and productivity.  The inefficiencies and limitations of Canada’s current procurement strategies are significant barriers to national innovation and economic prosperity.

Download the 27 page PDF report --> here

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