Four Trends to Watch in the Canadian Government Contracting Market in 2022

Public sector procurement in Canada is actively changing and evolving in response to various political, social and economic factors. As the Canadian government contracting market emerges from a challenging and uncertain period, these factors will play a major role in shaping the market’s post-pandemic chapter. So far, 2022 has seen a number of procurement trends that are already affecting how all three levels of government across Canada purchase goods and services.

Data from Deltek’s GovWin IQ platform of government contracting market intelligence has shown that the Canadian federal government, provinces and MASH sector (municipalities, academic institutions, schools and hospitals) are all experiencing these trends, which include:

• A growing emphasis on social procurement policies
• A deliberate government response to current economic conditions
• The increasing use of agile procurement methods
• Expanded participation in cooperative purchasing

Growing Emphasis on Social Procurement Policies

In the Canadian market, the aim of social procurement is twofold, to support a clean environment and empower small and under-represented businesses. The Canadian federal government is increasingly using social procurement as a means to further its priorities, specifically by introducing socio-economic measures to increase supplier diversity, inclusion for all Canadians and environmental protection. To this end, the Government of Canada is spearheading efforts to create and implement programming, policy instruments, guidelines and set-asides. The idea is that these federal efforts will create a trickledown effect into provincial and municipal purchasing, where social procurement exists but is not as widespread or uniform.

One aspect of social procurement is to increase the diversity of bidders on government contracts by implementing supplier diversity programs for small and under-represented businesses. The Government of Canada has an established Indigenous procurement program but is in the process of creating more robust programming to benefit other under-represented groups, such as women, Black Canadians and other visible minorities, persons with disabilities and persons in the LGBTQ+ community. The goal is to provide suppliers in under-represented groups with increased access to federal procurement opportunities. There is an understanding amongst government officials that more work is needed to create targeted, accessible programs. Officials have discussed several strategies, including creating clear eligibility criteria, eliminating barriers to eligibility, forming strategic partnerships, implementing pilot programs and releasing more requests for information (RFIs). For instance, the Government of Canada recently issued two RFIs to solicit feedback from black-owned businesses about their experience with federal procurement and how it could be improved.

Supplier diversity programs vary at the provincial and municipal levels, but vendors will generally find that most provinces and major municipalities have at least one program to support Indigenous or other minority-owned business. Ultimately, new supplier diversity programs will not appear overnight, but vendors should expect to see more initiatives designed to broaden contracting opportunities for under-represented suppliers.

Another aspect of social procurement is the environmental side, which is referred to as green (or sustainable) procurement and is part of an overall strategy to reach the Government of Canada’s goal of net-zero carbon emissions by 2050. Under the administration of Canadian Prime Minister Justin Trudeau, green procurement became a key policy with an objective “to advance the protection of the environment and support sustainable development by integrating environmental performance considerations into the procurement decision-making process.” In fact, the 2022 Canadian federal budget includes many clean energy initiatives to improve the environment and the quality of life of Canadians. Public Services and Procurement Canada (PSPC), the purchasing arm of the Canadian federal government, is also developing new tools, guidelines and targets to facilitate green procurement to be used during the bid solicitation process.

Green procurement is an evolving policy, and more work is needed to develop resources that will facilitate its implementation. For instance, procurement officials are working to incorporate rules and guidelines on sustainability into the planning stages of procurements. This means that bidding vendors will eventually need to demonstrate their ability to meet certain environmental criteria in order to win contracts. In the near future, suppliers will also need to meet reporting requirements over the entire lifecycle of their contracts, although the Canadian federal government intends to be flexible and collaborate with industry partners on this issue. Requirements will vary by procurement, but the emphasis will be on reducing emissions and decarbonizing operations and materials. The Government of Canada will initially focus its sustainability efforts on transportation and buildings. Leading projects may include electrifying mass transit, converting to electric fleets, and building with low-carbon materials (i.e., low-carbon concrete), among others. However, the goal is to eventually ensure that all government purchasing for goods and services has substantially reduced carbon emissions.

Deliberate Government Response to Current Economic Conditions

A major concern within the procurement community is the current state of the Canadian economy. As in many other countries, Canada is experiencing high inflation, labor shortages and supply chain disruptions, factors which are impacting when and how procurement is conducted. Inflation is driving up the price of government contracts and it is becoming common for suppliers to submit cost proposals above what the government has budgeted for a project. Some Canadian governments are adopting flexible contracts over fixed-price ones, introducing price escalation clauses and are awarding shorter contracts. Since governments cannot expect to pay the same amount they used to, these types of actions will become more commonplace to avoid unfairly penalizing suppliers and to prevent suppliers from walking away from fixed-price agreements.

Along with high inflation, labor shortages and supply chain disruptions are also impacting the ability of governments in Canada to purchase goods and services and, thusly, deliver on crucial public programs. Increasingly, the good or service a government wants to buy is not available or only a limited quantity is available. For example, governments in Canada are having trouble purchasing vehicles, as they are being outbid by the private sector, they cannot get enough vehicles to complete a fleet, or they face lengthy wait times. This has led to conversations about whether government agencies should share fleets or whether they should rent fleets instead of purchasing their own. These types of discussions are happening across the Canadian public sector about various commodities. Adverse economic conditions are forcing governments to rethink how they deliver services and how their operations can become more efficient. In doing so, procurement officials are turning to the vendor community more and more in search of partnership and collaboration.

Increasing Use of Agile Procurement Methods

Agile procurement is an approach to purchasing that is open, flexible and collaborative. Whereas traditional procurement can be a lengthy, step-by-step process, time and speed are of the essence with agile procurement. Examples of agile methods include combining procurement steps (i.e., beginning contract negotiations during sourcing), having a small cross-functional procurement team, prequalifying suppliers or consulting with suppliers during the planning stage. While agile procurement is not a new concept, it re-emerged as a leading practice during the coronavirus pandemic. Since then, the Government of Canada has applied agile methods to several procurements, such as for an e-transfer system, robotic process automation and an IT service management (ITSM) system. Shared Services Canada, the federal agency responsible for IT, recently released their own Agile Procurement Process 3.0. Under this framework, multiple contracts are awarded for a requirement so that suppliers can create prototypes before a final selection is made. Suppliers are also engaged throughout the entire process, further contributing to a collaborative and transparent purchase.

In addition to these efforts, PSPC is currently developing more comprehensive tools and guidelines to incorporate agile methods throughout federal purchasing. At the provincial and municipal levels, purchasing officials are beginning to recognize the benefits of agile procurement and how it can contribute to a more strategic buying strategy. As governments across Canada embrace agility in their procurement approach, suppliers should be prepared to participate in more flexible, fast-paced procurements. Real-world applications of agile procurement may include vendor involvement in developing problem statements, anonymous collaboration sessions with vendors, provisions to more easily opt out of contracts, product demonstrations, options to evolve existing contracts instead of re-bidding and more.

Expanded Participation in Cooperative Purchasing

Another lasting trend that was spurred by the coronavirus pandemic is the increased use of cooperative purchasing, commonly known as ‘group buying’ in Canada. Cooperative purchasing has only been available in Canada for about two years, and the pandemic played a major role in accelerating its growth. Cooperative purchasing occurs when multiple government organizations pool their buying power and purchase from the same pre-existing contract. A competitive solicitation will first be released to establish these contracts and then more than one award can be made for a single requirement from multiple buyers. This type of buying allows for goods and services to be purchased quickly and efficiently, which came in handy when governments were buying masks and other protective equipment in bulk. To that end, cooperatives work well for emergency purchases, to fill gaps in contracts and to acquire vendor-specific commodities. Group buying also establishes proven solutions, which makes it a good vehicle through which to purchase new goods or services. By combining their purchasing power and resources, governments find they can save both time and money while staying in compliance with the laws and meeting the needs of their internal clients and stakeholders.

Cooperative purchasing now reaches across all three levels of government in Canada. At the federal level, PSPC created the Canadian Collaborative Procurement Initiative (CCPI), an agreement through which provincial and territorial governments and MASH sector entities can use existing federal procurement tools to purchase commonly used goods and services at reduced costs. Additionally, the MASH sector heavily increased its participation in group buying during the coronavirus pandemic. The types of commodities that can be purchased have also expanded. Whereas before, group buying was only thought of as a way to purchase well-defined commodities, it is now being used to procure things like cybersecurity, IT services and software, help desk services, consulting services and more. Increasingly, suppliers are being asked by government agencies if they are members of a cooperative purchasing contract. Established cooperative purchasing organizations like Canoe Procurement Group of Canada and Kinetic GPO, both based in Canada, are continuously recruiting more participating governments and vendor partners. Furthermore, suppliers are increasingly looking to become involved in group buying and those that are not should consider how it can help them diversify, expand and stabilize their revenue while reducing marketing costs on a per unit basis.

Understanding These Canadian Government Contracting Trends

The Canadian government contracting market is full of opportunity. From social procurement to cooperative purchasing, new policies and practices are transforming this market. Taking the time to explore and understand these trends will not only keep your business informed but will help it compete for and win government contracts.

Suppliers looking to do business in the Canadian public sector market, whether at the federal, provincial or municipal level, should be prepared to adapt their business development strategies by embracing new trends. To stay up to date on Canadian procurement, watch this Canadian Contracting webinar on-demand, featuring insights from the forward-looking market intelligence found in GovWin IQ.