Impact of COVID-19 on Technology Supply-chains and Year-end Deliveries

March 10, 2020

Attn: The Honourable Joyce Murray PC, Minister of Digital Government

Minister Murray,

In recent weeks, several technology manufacturing facilities in China have been negatively impacted and have been forced to close due to the COVID-19 outbreak. The economic impact is, as you are aware, expected to be severe across all sectors. We write today to express our concerns with reference to your Government’s recent directives and the potential damage to the procurement process due to the coronavirus.

Crucially, COVID-19 is causing a global disruption to manufacturing of hardware relevant to the technology sector. Most vendors have shifted to near “just-in-time” manufacturing, maintaining no more than 15 to 30 days’ worth of inventory in stock. This inventory strategy allows companies to match their supply with demand. The result; many companies are not able, under any circumstance, to produce their products for any market around the world. Further, companies providing services that require products to complete their work, are also severely impacted.

The Impact on Canadian Organizations

Many Canadian and multinational companies located in North America procure products essential to their businesses directly from China. With only approximately 30 per cent of small businesses having resumed production in China since the coronavirus outbreak, manufacturers in North America are scrambling to procure parts to avoid production disruptions. Limited supply and heavy demand have increased the costs of components; with domestic components being priced at 30 per cent higher than the Chinese components.

As such, and by no fault of their own, companies around the world – including here in Canada –- are not able to meet demand for their products and services.

Amid this crisis, it has come to TECHNATION’s attention that many of our Government of Canada suppliers have received the following notice from Shared Services Canada (SSC):

All the deliverables must be received on or before March 31, 2020.

If the Delivery Date is March 31, 2020, the Contractor must ensure it contacts the appropriate delivery authorities by no later than 48 hours before the delivery to arrange delivery for March 31.

 If delivery is not made by the Contractor on or before 11:59pm on March 31, 2020, Canada may, at its sole option:

  1. Refuse delivery (which may involve returning the shipment to the Contractor at the Contractor’s sole cost) and terminate the contract for default, without providing any opportunity to cure; or
  2. Accept delivery and reduce the price payable for all the goods delivered late by 20% before any Applicable Taxes.

If the Contractor misses more than one year-end delivery (i.e., if the Contractor fails to deliver the required goods by March 31, 2020 under more than one contract issued by SSC or issued pursuant to any SSC procurement instrument), SSC reserves the right not to accept bids from that Contractor during the period from January 15 to March 31, 2021.

If Canada terminates this Contract for default, the Contractor agrees that it will not be permitted to bid on any follow-on process to procure the required goods or services it did not provide under the terminated contract.

This policy notice from SSC is neither practical nor appropriate. It does not consider the reality of the global market based on the coronavirus outbreak.

All vendors of information technology, especially those who produce hardware, suffer from the stoppage in factory production and trade in China, and beyond. Because most companies have moved to just-in-time inventory management, few will be able to meet the Government of Canada’s year-end deadline.

Rather than imposing penalties on companies already severely impacted and suffering from a potential global health and supply-chain crisis, TECHNATION, on behalf of its membership, strongly believes that the Government of Canada must begin a process of working with vendors to come to a reasonable solution and to accept delayed delivery of manufactured items until such time as the coronavirus is no longer an issue here in Canada, and abroad. This also includes partnering with the private sector to provide teleworking solutions in the event of more severe quarantines to civil servants to assure the ongoing work of the Government of Canada.

Our organization and members look forward to continuing to work with the Government of Canada in growing the digital economy and investing in innovation in Canada. We invite you to meet with our members to hear from them directly about this ongoing crisis. We stand at the ready to help.

Regards,

Angela Mondou

President and CEO

TECHNATION

ATTN:

Hon. Bill Morneau PC

Hon. Navdeep Bains PC

Hon. Melanie Joly PC

Hon. Mary Ng PC

Hon. Mona Fortier PC

Rt. Hon. Justin Trudeau PC

Hon. Patty Hajdu PC

Hon. Anita Anand PC

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