Navdeep Bains was speaking about how to support Canadian clean-technology companies during the global race to address climate change when he brought up the prospect of a policy lever that Ottawa has long stepped carefully around.
“How can we use government procurement in a strategic way?” the federal Minister of Innovation, Science and Industry said in a recent interview. “How can we be a customer to validate a lot of these solutions, to enable these companies to be able to succeed not only within Canada, but globally as well?”
His musing about how government wields its purchasing power seemed to be inspired by his experience this year working with Canadian companies to produce medical equipment necessitated by COVID-19, amid global supply-chain shortages. “I think in the current crisis we’ve seen how quickly we’ve been able to mobilize,” he said, and that “sense of urgency” and nimbleness should be brought to government investment in Canadian innovation around emissions reduction.
But when it comes to tying longer-term procurement strategy to clean-economy transition, what Mr. Bains was publicly wading into has for years been a contentious behind-the-scenes debate involving the amount of risk that government should take on.
On one side are clean-tech advocates, who argue that Canada needs to follow the lead of other countries – including many in Europe, and even to some extent the United States – by structuring procurement policies in ways that reward comparatively environmentally friendly bids for government contracts. That ideally involves the use of homegrown low-emissions technologies, not just for specifically climate-focused projects, but whenever possible in government purchases ranging from construction materials to vehicles to military supplies.
Their case is that doing so would help address a “valley of death” phenomenon in which early-stage companies struggle to commercialize their innovations, which is common everywhere but especially acute in this country, where investors tend to be relatively risk-averse. Governments have the potential to de-risk new technologies by being early adopters of them, not only providing some revenues but giving confidence to other customers. Failing to do so arguably places Canadian companies at a competitive disadvantage, as would-be foreign clients are put off by what they see as a lack of domestic uptake.
But while outside groups pushing for such policies sometimes find receptive audiences within ministries such as Mr. Bains’s, they typically run into a wall when green-procurement ideas reach departments more focused on the government’s bottom line, such as the Treasury Board. And there tends to be a high degree of caution across the bureaucracy around inserting policy goals beyond short-term value-for-money into the process, lest it result in perceived boondoggles, not to mention trade-law violations.
“There’s a certain level of small-c conservatism when it comes to procurement in the public service,” says Mike Moffatt, a climate-minded economist who recently spent a year as the federal government’s Chief Innovation Fellow. While he’s always agreed in theory with using public purchasing to support domestic innovation, he says, he witnessed first-hand “how hard it is in practice.”
In the interview, Mr. Bains touched upon two ways the government could get past that conservatism, in the months and years ahead, to “level the playing field” for Canadian clean-tech companies.
One of them is an existing program, Innovative Solutions Canada, which he spoke enthusiastically about. Launched by his ministry in 2017, it provides up to $100-million annually for departments across government to launch “challenges” in which early-stage companies compete to show that their “novel solution” could solve an identified government need. Winners can be eligible for a little over $1-million in public funds to get their products ready for market.
The program has thus far seen very few challenges involving clean tech specifically, other than finding alternatives to plastic packaging, and has underwhelmed environmental groups. But if Mr. Bains wants to do more in that regard, there are ways it could be modified. Sarah Petrevan, who has researched procurement options as policy director for the think tank Clean Energy Canada, suggested the government could “apportion off” a chunk of the funding specifically for green products, and could expand the scope to include larger-scale challenges that would do more to advance commercialization.
Mr. Bains seemed to have larger projects in mind when he dropped his other hint. “When I’m talking about procurement, I’m also looking at a lot of the big investments that we’re making in infrastructure,” he said. “Around public transit projects, for example.”
That potentially aligns with the suggestion, made by some clean-tech advocates, that Ottawa could help the domestic sector – without changing procurement rules or running afoul of trade laws – by simply directing coming stimulus spending toward contracts for which emerging Canadian companies are well-positioned to compete.
The most popular example is funding to provinces and municipalities for electric buses, which several promising domestic manufacturers are now producing. And Analytica Advisors president Céline Bak, a leading expert on the Canadian clean-tech sector, flagged contracts for construction materials such as low-carbon cement as others that innovative domestic firms would be well-positioned to win and then leverage to expand.
But advocates for green procurement tend to want more structural policy changes, too, that would give clean-tech sectors a wider and more reliable boost.
That could mean changing the criteria by which all bids for government contracts are evaluated. One way to do so, increasingly adopted in Europe, is to give “life-cycle costs” (which can take into account environmental impacts over the course of a product’s usage) more emphasis and the upfront price somewhat less.
While that would help lower emissions, it would not necessarily do much in itself for domestic startups, since larger and international bidders could dominate. But it could be paired with another mechanism that Ms. Bak, Ms. Petrevan and others favour.
As the U.S. government (among others) does, Ottawa could set aside a certain share of all public procurement for small businesses, which would probably help early-stage clean tech in particular if government spending was generally going green.
Of course, that’s exactly the sort of tinkering that the federal civil service has generally resisted, for fear of increased costs and unnecessary complication.
Both politicians and bureaucrats may be especially wary of any of these options for the next while, since the mess that Justin Trudeau’s Liberals have gotten themselves into with the WE scandal probably hasn’t left them with excess credibility to take risks with how contracts are awarded.
But a common refrain from people who have lobbied previously for green procurement policies is that there’s been a lack of political leadership within government. Many ministers have a piece of the file, and even those who periodically express some interest when approached on the issue haven’t really taken ownership of it.
So it was interesting that Mr. Bains chose to raise the subject, unprompted, during the interview. Whether he was merely thinking aloud, or seriously signalling a way that he’ll try to prove himself a champion of Canadian clean tech, should become clearer as his government’s economic-recovery plans take shape.
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.