Following industry pushback over U.S. shortlist, Ottawa plans to work with Canadian cloud providers

Federal officials are working on a plan to direct more cloud computing contracts toward Canadian companies after receiving strong industry pushback over an existing competition to shortlist a small number of American multinationals for similar work.

 

When asked about the internal criticism revealed in government documents, Shared Services Canada spokesperson Michael Gosselin said the department “is in the initial planning stage for the development of a parallel system” to the current competition, “which would be focused on Canadian cloud providers.” The documents were released through access to information.

 

Mr. Gosselin said industry feedback and consultation is a key part of the government’s efforts to transform its IT infrastructure.

 

Craig McLellan, CEO and Founder of Canadian cloud-provider ThinkOn Inc., said recent trade tensions between Canada and the United States appear to have inspired a change in approach from the federal government that he expects will start to play out after the election campaign.

 

In an interview with The Globe and Mail, Mr. McLellan said he’s encouraged by recent signals from Ottawa that there will be additional contracting competitions aimed at working with Canadian cloud companies.

“I think that what has been happening in the U.S. is a wake-up call for the public sector in Canada, that acquiring these services domestically can result in more competitive local providers,” he said.

 

The documents reveal that technology leaders expressed numerous concerns to the public service about a competition that is currently in progress to provide the government with cloud computing services over the next 25 years.

 

The consultations took place early last year before Canada’s current trade tensions with the United States over tariffs. The levies have fuelled Buy Canada sentiment across the country and led some provincial premiers to announce that they will be shifting away from U.S. companies when it comes to the billions of dollars spent each year on government contracts for goods and services.

 

Shared Services Canada is in the middle of the multistage competition, which would result in the creation of a preapproved list of a small number of companies that departments could work with for cloud computing.

 

Cloud computing generally involves hiring an outside company to provide computing power over the internet for information storage and other needs. This is used as an alternative to government-run data centres.

 

The federal government has already shortened its list to four companies: Amazon Web Services Canada, Inc.; Google Cloud Canada Corporation; Microsoft Corporation and Oracle Canada ULC.

 

Mr. McLellan said there are some services that are better suited for large multinational tech companies, but is encouraged that Ottawa is working on ways to direct more work to Canadian companies.

 

Federal procurement material describes the “contract duration” as a period of “300 months,” which is 25 years. Shared Services Canada says Ottawa would not be locked in to a 25-year contract through the process, but would have the option of using the selected companies for specific tasks during that period.

 

The competition for the platform and infrastructure aspects included consultations with industry for feedback on the government’s planned approach.

 

A March, 2024 document summarizing “comments provided by industry” include a list of concerns.

 

The documents were obtained through an access-to-information request by Ottawa researcher Ken Rubin. They do not reveal the names of the industry participants who made the comments.

 

A common theme of concern is that the competition did not award extra points for genuine Canadian companies, as opposed to Canadian affiliates of U.S.-based multinationals.

 

A March, 2024, document summarizing industry feedback quotes one unnamed participant, saying that using Canadian companies guarantees that the entire design, engineering and support team resides in Canada. The person said this provides invaluable benefits “in an unstable geopolitical context.”

 

Several of the comments accuse the government of defining the requirements in a narrow way that favours a very small number of large companies that already do large volumes of business with Ottawa.

 

There are also repeated warnings that the length of the arrangement would reduce the government’s flexibility and “further increase vendor lock-in.”

 

Several industry participants were clearly left with the impression that the government is planning to ultimately select two large companies for the work, though Shared Services says more companies could be involved.

 

Another unnamed industry participant said Ottawa should keep its options open given the rate of change within the cloud industry.

 

“It makes no logical sense to limit the GC [Government of Canada] options to only 2 cloud vendors for decades,” adding that such an approach risks “creating huge financial, security and operational risks” for the government, according to the document summarizing industry feedback.

 

Additional comments from the same person pointed to the then-recently released report by the Office of the Auditor-General on ArriveCan, a government app for cross-border travellers, which said contract terms were so narrowly defined that only one company ultimately bid and won a related contract.

Another industry voice pointed out that competition for government cloud contracts is currently a topic of controversy in the European Union, where Google filed an antitrust complaint last year against Microsoft, alleging anti-competitive behaviour.

 

Spokespersons for Amazon and Google both declined to comment.

 

Veronica Langvee, director of communications at Microsoft Canada, said in an e-mail that Microsoft has worked with Canadian governments for 40 years and is focused on providing trusted technology solutions.

 

“We believe that a diverse and competitive cloud market benefits all, and that collaboration is key to ensuring the success of Canada’s digital future,” she said.

 

Oracle did not respond to a request for comment.

 

Benjamin Bergen, who advocates for the Canadian technology sector as president of the Council of Canadian Innovators, said in light of the current trade tensions with the U.S., Ottawa should be prioritizing Canadian companies when it comes to data-storage contracts.

 

“On something as critical as this type of government infrastructure, is allowing foreign firms to be the controllers of that really in our national interest?” he asked.

 

“It shouldn’t just be what’s easiest, what’s cheapest. But more: how do we build our economic sovereignty? How do we build capacity, and how do we build goods and solutions that the rest of the world wants, and then sell those goods and solutions so we can be a prosperous country?”

 

 

 

 

 

This article was first reported  by The Globe and Mail