Canada’s technology companies are crying foul after the federal government signed a sole source contract with IBM Canada Ltd. worth $500 million – the largest non-competitive contract in federal procurement history.
The Liberal government of Prime Minister Justin Trudeau signed the $500 million deal with IBM Canada Ltd., a subsidiary of the U.S. technology behemoth, without any competitive bids — a move now being slammed by Canada's technology firms. The massive deal with IBM runs until 2021 and includes $289 million in optional additional spending, putting the potential total cost of the contract at almost $790 million.
"This is yet another example of how the government's procurement process favours large, multinational companies and doesn't give highly qualified companies even a fair shot to bid for these projects," said Benjamin Bergen, Executive Director of the Council of Canadian Innovators.
The deal follows more than a year of controversy over the dysfunctional Phoenix payroll system, created through a separate contract with IBM Canada. The system has been criticized for paying some civil servants too much, some too little and others not at all, as well as mishandling vacation and retirement payments. Many federal civil servants have had trouble completing their taxes because of all the problems with their pay.
The original Phoenix deal has been amended 44 times, and increased in value this year alone by $36.5 million to $277 million. The latest contract signed with IBM Canada is unrelated to Phoenix. It tasks IBM with delivering 16 new mainframes, along with maintenance and support for existing hardware and software, to at least six federal departments. The $500-million deal consolidates four contracts that were to expire in 2017 and 2018.
“Owing to intellectual property issues relating to proprietary hardware and software, IBM is the only supplier capable of performing the work,” says a November 2017 memo to Ron Parker, President of Shared Services Canada (SSC) that was obtained by CBC News.
The explanation provided by senior executives in Ottawa did little to satisfy high-tech leaders at Canadian firms who point to a recent report by the federal Chief Information Officer that noted the federal government’s information technology procurement processes favours incumbents and doesn't foster enough new entrants into the process.
A study commissioned by the Chief Information officer last summer concluded that IBM Canada is Ottawa's top vendor, with contracts valued at $3.1 billion in the 2016-2017 fiscal year.
