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Potential Job Losses in the Ontario SME IT Staffing Industry

Posted by Peter Sundiata on Tue, Jul 04, 2017 @ 10:05 AM

frustrated young business man working on laptop computer at office.jpegThere is currently an issue that is tearing through the small and medium IT Staffing businesses in the province of Ontario. The provincial government has put a draft Request for Bid (RFB) for replacing the current Task Based VOR arrangement. These changes are likely to have devastating effects on SME’s in Ontario, with potentially significant job losses and an increase in the frequency and magnitude of project failure risk.

The government is proposing a change in procurement approach that favours 10 very large firms to provide IT Staffing Services to the Ontario Government while eliminating approximately 300 small and medium sized firms from competing for that business.

The reason is believed to be for one, an attempt at cost savings, with numbers bandied about as 4% of total IT services spend, and for two, to address the Auditor General’s report on the need to increase efficiencies in the government’s IT staffing vertical. I, and a host of others, don’t believe that will be the long-term result, however. From a few different sources, here’s a few reasons why:

  • Rate Stacking: Reducing to 10 vendors will result in further sub-contracting to SME firms (likely where specific resources are needed). Naturally, this will result in compounding the overhead costs of the Vendor Management System (VMS), the prime vendor, and the sub-contract company. Obviously, this will result in unnecessary additional costs to the Government of Ontario versus a direct engagement of the SME VOR approach currently in place.

  • Elimination of Competition: The OPS already has other procurement vehicles for procuring services from the Big Name Vendors – i.e. the Solution Based and Management Consulting and, of course, open RFP’s. By reducing the number of vendors to ten it is limiting its own procurement options by eliminating an entire procurement genre and 300 vendors from which to buy smaller, short term, and lower risk services.

  • Irreparable Damage to the Vendor Community: Concentrating the OPS technology spend on such few suppliers will cause unprecedented damage to the vendor community – many smaller firms will be forced out of existence entirely. This will affect not only the SME owners and their families, but also their employees and their employees’ families. This flies against the principles of “Government” which typically are expected to spur small business growth and encourage technical innovation in its own community.

  • Unintended Negative Consequences: SME Vendors will focus their attention and valuable time and resources outside of the Government arena in future since there will be significant barriers to doing business. This will result in the best expertise being deployed to other areas and not to the Government of Ontario. Secondly, it is an acknowledged fact that IT expertise will still be desperately needed by the Government going forward as it moves towards a more modern IT infrastructure, hence they will still engage SME IT Expertise. This expertise will now be as a sub-contractor and result in increased costs due to rate stacking described above. This is a known flaw in these types of consolidated procurement approaches that is common in large procurement exercises such as in the banks and insurance sectors.

  • No Technology Displacement: We are aware that nothing lasts forever, and many industries face disruption and displacement. We agree that it is bad for the economy and the province to prop up dying industries. But that is NOT what is occurring through this RFB and is not the problem. The recruiting activities we do are not being replaced with some sort of software or advanced technology, it is simply a shifting of access to the work from SMEs to Big Business, organizations that are not currently set up to do this sort of work with the same quality or dedication that firms like ours have been providing.

There are many other reasons why this RFB is bad for Ontarians. But to talk about what is needed there are a few things that should be done right away:

  • Postpone: Postpone the implementation of the RFB immediately for further review

  • Extend: Extend the expiry date on the current VOR arrangement for at least 12 months for consultation by all parties impacted;

  • Evaluate: Provide time to evaluate effective alternatives to the current changes proposed in this renewal of Task Based I&IT VOR ‘ON-Demand RFB’ that will enable our Government to reach its cost savings and quality goals without destroying small and medium sized Ontario businesses 

Hopefully common sense will prevail. The Government of Ontario and the SME community have been great partners over the years. With enough goodwill, I believe common ground can be found here for the benefit of all Ontarians.

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Topics: Employers, Industry Trends