Our government is damaging the future innovation in the health and medical industry with “Ontario Buys”, which encourages institutions to buy in bulk as a means to save money. At first sweep, it seems sensible to purchase from fewer suppliers--the Walmart model of “buy in bulk and save” proven to save money by simplifying processes and consolidating costs of doing business.
Unfortunately, this well-meaning government program shuts out large numbers of smaller Canadian companies because they do not having the size or product breadth for this bulk game.
As an example of how the Ontario Buys program works, a medical device manufacturer under $40M in revenues is refused even an appointment with the several buying groups tasked with following this new initiative for the health care industry because of their small size.
This same medical device supplier is peppered with calls from the government offering all manner of programs to help the business, from R&D tax breaks to government experts to build better online catalogues, and so on.
But if there is no buyer, these government initiatives are pointless. The bulk of orders go to large corporations.
You may think: Wonderful, these large corporations produce Canadian jobs through their Canadian offices, but they are actually American multi-national corporations with subsidiaries that have been set up in Canada. They do create jobs, but profits are more than likely invoiced back to the American Parent as management fees to avoid our higher Canadian Tax Rates. The goods are imported into Canada from American manufacturing parent corporations, avoiding any manufacturing in Canada, keeping the benefit of manufacturing or higher paying jobs in America.
Ironically, the US has implemented a minority owned mandate under the Federal Initiative “Minority Owned Contract Opportunities” which forces buying groups to ensure that a percentage of the products purchased are from Minority Corporations, inclusive of SME companies.
Our politicians are keenly aware of the importance of small and medium sized companies. Research by Glaeser and Kerr, in a recent Harvard Business Review article, show that a gnat like cloud of small companies buzzing around larger companies will be a far better boost to job growth than incentives for large companies. Even adjusting for variables such as tax or industry, Glaeser and Kerrobserve say "the relationship between small firms and job growth rate stands."
In order to protect our future, Ontario Buys needs to be modified to require a small percentage of purchases be from SME Canadian businesses. I do not support gender or skin colour as a reason to buy, but companies with revenues under $500M should be factored into the purchasing decision as this would ensure a fair and open process at the table for Canadian manufacturers.
I will end here but am happy to discuss with you in more detail as I get frustrated hearing about innovation and R&D grants or financing programs. That is not the problem - it is the buying end. Why give all our support to US owned companies who have a branch office or corporation in Canada, but shut out our SME’s? , in a recent Harvard Business Review article, If you ask health care industry people about the Buy Ontario program, they approve because, generally, they are working for these large companies.
As Glaeser and Kerr’s research show, small companies lead to big companies. It’s alarming that the Government buys from big suppliers as it is already crushing small companies. Then, where will be future innovation or competition. Maybe a question to get more of a response from government would be to ask, “What companies will still be around for all those government experts to help”