Feds expected to help Canadian startups in budget by becoming bigger customer

Feds expected to help startups by buying more

OTTAWA — The Trudeau government is expected to announce plans in next week’s federal budget to ensure Ottawa uses its massive buying power to help deliver a boost to the country’s emerging, high-potential companies, The Canadian Press has learned.

The changes would open the door for the government, which spends $7 billion annually on basic goods and services, to become a far bigger customer of new technologies developed by young Canadian startups.

A government insider, who was not authorized to speak publicly, said the modifications in the March 22 budget are expected to make the existing Build in Canada Innovation Program far more ambitious.

The program has awarded a total of about $78 million in contracts since it was created in 2010.

But there’s much more procurement money available.

The expected adjustments under a program expansion will significantly increase public-contract cash accessible for innovative companies — but it remains to be seen how much.

The modification would mostly result in a reallocation of how government money is spent, so it isn’t expected to add significant costs.

The Liberal government, scheduled to release its budget March 22, has been searching for ways to help smaller, high-growth firms scale up, so they can create jobs in Canada and provide a lift to the country’s economic growth.

Several industry sources have said they’ve received signals from Ottawa that a strategy to enhance procurement opportunities for startups will likely be in the budget.

The revamped Build in Canada Innovation Program is also expected to invite companies to produce innovative, customized solutions designed specifically for the government’s needs — rather than the current approach that sees Ottawa seek off-the-shelf options.

The changes would make the government a testing ground for new technologies, which firms can later sell to other customers.

Economic Development Minister Navdeep Bains has spoken frequently in public about the need for government to use procurement to become a key customer for startups.

“Often I hear from many businesses that were having challenges with regards to accessing the government and having difficulties with procurement,” Bains said in a December interview with The Canadian Press.

“So, how can we really create a government-wide initiative to use procurement as a means to create opportunities?”

Last month, Bains said the feds were looking at how the Build in Canada Innovation Program could be expanded “in a more meaningful way.”

“When a company says we’re doing business with the government of Canada it really validates their product and service,” Bains said in Ottawa following the release of the latest report from the government’s economic advisory council.

The advisory council’s report called on Ottawa to adopt clear policies to use procurement as a way to support technology adoption and help speed up the growth of small, innovative firms, so they can build credibility to become integrated in global supply chains.

“Young companies need access to customers — commercial and government — to grow quickly,” said the report from the influential council, which is chaired by Dominic Barton, managing director of global consulting giant McKinsey & Co.

Heading into the budget, many industry groups have been lobbying the government to help small- and medium-sized innovative companies access procurement dollars.

In its pre-budget recommendations, the Canadian Manufacturers & Exporters suggested the government leverage procurement funding to foster research and new product development. It said there are opportunities to maximize economic benefits for the manufacturing sector and to drive innovation beyond current levels.

The group also called on Ottawa to set aside one per cent of all its procurement spending to finance an innovation fund that would support private-sector-led research in specific areas that would benefit the country.

Canadian Manufacturers & Exporters and the economic advisory council both pointed to the U.S. Small Business Innovation Research program as a potential approach for Canada.

The council said SBIR offers research grants for innovative firms to develop products and services that are later purchased by the U.S. government. It added the program is viewed as a “global model for best practice.”

— Follow @AndyBlatchford on Twitter

Andy Blatchford, The Canadian Press

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