Why Contracting Out Can Boost Small Business Spend

Acquisition services can be defined by Treasury Board of Canada Secretariat (TBCCS) as existing procedures, processes, or strategies for acquiring a tangible asset that is required to meet Government objectives. In common practice acquisition services are mainly used to purchase equipment, products and services. Acquiry also include acquisition services that deal with procurement of real estate and contract management services. The TBS definition of acquisition services also includes undertakings to provide development services and strategic planning. Most acquisition activities are usually carried out by contract management firms.

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Acquisition services are provided by a variety of organizations and they are organized by Department of Finance and Public Services Canada (DFPS). A large number of contract participants provide acquisition support services for the Government of Canada. These include providers of acquisition services for the Department of National Defence, Department of Veterans Affairs, Department of Social Development Canada, Department of Transportation, Department of Justice, Department of Health, Natural Resources Branch of Canadian Revenue Agency, Department of Employment and Social Development Canada, Canadian Pension Corporation, and the Canadian Mortgage and Housing Corporation. In addition, other organizations providing procurement services to the Government of Canada include: Canadian Business Information Centre, Service Canada, Canadian Society of Professional Engineers, Institute of Chartered Surveyors, Canadian Society of Energy Carriers, Institute of Chartered Accountants, Canadian Society of Navigators, Canadian Environmental Assessment Office, Toronto Board of Trade, and the National Research Council of Practicing Accountants of Accountants. As well, there are many private companies providing acquisition services to the Government of Canada.

Contracting and outsourcing acquisition services in Canada refer to the arrangement by an external organization, generally a business, to provide procurement or technical support in exchange for a fee. This contract model has increasingly become preferred by some Canadian businesses because of the reduced cost, time and paperwork that they get. In addition, companies in Canada can focus on their core business activities rather than focusing on procurement and technical support activities. This is because a third party provider typically focuses on selling products or acquiring technology rather than providing procurement services. Although the third party may have developed specific programs and may be a highly qualified practitioner, these usually do not constitute full-time staff in the firms.

Contracting and outsourcing acquisition services allow small businesses and start-ups to concentrate on their core business activities such as product development, sales, marketing and technical support. By delegating this work to a third party organization, small business owners are able to free up their valuable internal resources for higher value activities. In effect, it helps them to increase their profit margins as well. The main advantage of utilizing this method for procurement purposes is that it helps small businesses cut down on their costs while accessing the best services available at competitive prices. In fact, it has been seen that this model of contracting reduces the overall cost of procuring information technology by about 40%. Indeed, the savings created through contract services can be used as equity to finance the purchase of new systems.

Another advantage of contracting out the procurement services is that it enables the client agency to gain greater negotiating power with suppliers. For instance, it allows the agency to demand higher pricing from suppliers especially in cases wherein the direct suppliers have been regularly providing poor customer services. This is because smaller customer agencies are generally not as financially strong as their larger counterparts and cannot ask for steep discounts on products just because they are small. However, a big vendor may be willing to negotiate on the price of certain acquisitions. The role of customer service representatives in procurement is therefore minimized. They have limited tasks that do not involve dealing with vendors directly.

While details about the benefits of contracting out for acquisitions continue to evolve, many people involved in the procurement industry believe that the trend is here to stay. There are even those in the government who agree that contracting out is inevitable for the future of government procurement activities. Some sources say that there will be a day when General Counsel is no longer needed, as the general counsel of a company is assigned to oversee acquisitions.