Canada's Plan to Consolidate Computer Services Leads to Clashes Between Large and Small

(MoneyWatch)  Canada's Government is planning on using a multi-billion contract to build a centralized shared network to handle common business applications for the entire government. Departments would contract with the Public Works department to use the Government Enterprise Networks Services (GENS). The goal is to reduce duplication and costs across the government agencies.

As The Montreal Gazette describes this has led to a fight among the small and medium businesses with the larger contractors. There is a belief that due to the size of this contract and the requirements for standardization that it will go to one of the large companies and the smaller contractors who currently do a great deal of work with the government will be cut out.

To make matters more interesting this is the first of four major IT contracts the Harper government hopes to award all with a goal of reducing duplication and costs across all facets of the national government. The total value of these contracts could be $80 billion or more. Many of the smaller companies have unique contracts that provide consultants and support personnel to discrete government parts. These contracts would be replaced by the large GENS one.

The government could avoid this problem by requiring the winner to have a comprehensive subcontract plan that uses the small companies. This, though, would increase the cost of the contract as there would be pass through fees and other issues related to using different subs on aspects of the contract. There would also be problems if proprietary software is planned to be used by the prime to meet the goals of the contract. Sharing this with certain companies may be difficult.

The U.S. government faces these kind of issues with most of the contracts they let as Congress has levied requirements to use a certain amount of subcontractors and also disadvantaged businesses. This may be good social policy but does also have the chance of increasing the cost of the contracts to the government.

All-in-all this is another example of a government trying to balance cost, performance and what is best for the country's economy and industry. Sometimes one of the three needs to be given up to help the other two.