OTTAWA — The federal government in recent years has awarded internal contracts to technology company Cisco Systems with high frequency, part of what some observers call a pattern of dependency by Ottawa on a single network provider that has all but shut out competing bids.
A division within Shared Services Canada known as Networks, Security, Digital Services (NSDS), has awarded $210 million to Cisco for the use of its networks technology since the beginning of 2019, according to federal data supplied to the National Post. That amounts to the vast majority of NSDS’s total spending on network technology over the same two-year period, according to industry sources who have tabulated procurements by the department. Ministry and department spokespeople, for their part, declined to provide details on what proportion of NSDS network spending has been sole-sourced to Cisco.
The dependency on Cisco technology has in turn prompted concerns over whether taxpayer dollars are being spent efficiently, particularly after an industry report in 2018 warned about the inflating cost of equipment supplied by the company. In its speech from the throne last year, the Liberal government under Prime Minister Justin Trudeau laid out plans to make “generational investments in updating outdated IT systems,” an area where government already spends roughly $6.8 billion across all departments.
In a written statement, Cisco Canada said it is “one of many vendors” for NSDS, and said it “competes with other vendors to provide IT products and services in alignment with SSC’s procurement protocols and process.”
But many industry players have expressed doubts as to whether they have an equal shot accessing the growing federal cash pile, citing a heavy reliance on the California-based IT and networks giant.
TECHNATION, an industry lobby group representing Cisco competitors, says a “significant group” of its members have “consistently and openly raised concerns about SSC’s one-sided approach to procuring Network technology and services,” according to a statement from senior vice-president Michele Lajeunesse. “It is contrary to the open, fair and competitive procurement landscape that the Government of Canada is committed to and at the same time puts Canadian jobs at risk.”
Lajeunesse also said SSC has made “significant strides” in recent years improving its procurement process.
Federal IT systems at risk of 'critical failure,' Trudeau warned in memo
Why banning Huawei is just one of a series of steps Canada needs to take to defend itself
Frustrations over the issue have become more visible in recent months, after MPs raised questions over SSC’s procurement practices during two House of Commons committee meetings in November.
Established in 2011, Shared Services Canada operates under the guidance of Digital Government Minister Joyce Murray, serving as the lead in the Liberals’ efforts to update, replace and digitize internal government systems as a way to streamline government services.
In a written statement, SSC said it is “vendor agnostic and committed to openly competing procurement activities.”
“Whenever possible, SSC uses competition to get the best value for Canadians,” the department said. Murray’s office did not respond directly to questions from the National Post about SSC procurement practices, and instead had its department provide written responses.
Modernizing or replacing the government’s internal digital systems involves everything from cloud services to “backbone” network systems of the kind offered by Cisco. The upgrading of network technologies in particular falls under NSDS, led by assistant deputy minister Patrice Nadeau since July 2020. Nadeau replaced former assistant deputy minister Raj Thuppal, who first assumed the position in January 2019. Thuppal has since left NSDS for Transport Canada.
Ottawa’s dependence on Cisco for its networks technology is well understood within IT circles, and department officials have readily acknowledged the issue.
“We have a lot of their equipment,” Paul Glover, president of SSC, said in a Nov. 25 testimony before the House government operations committee. “People would like us to open that up. Moving forward, we will.”
Most networks around the planet run on Cisco and Cisco gear
Government officials regularly cite the challenge of “interoperability” — or, effectively the lack of integration between different types of technology — as justification for its procurement practices. The problem might be loosely compared to the way Apple devices are only useable with other hardware and software developed by Apple, thereby locking consumers into buying from a single supplier.
Ottawa has itself fallen into a pattern of repeatedly procuring technology from a select few manufacturers, observers say. Microsoft and Amazon, for example, are often sought for cloud services over the use of domestic firms; IBM and Unisys are used for mainframe technologies.
“The same is true, frankly, with networks,” Glover said during the November committee. “Most networks around the planet run on Cisco and Cisco gear.”
But Cisco technology is nonetheless particularly entrenched: in the area of “wide-area network” (WAN) routing, Cisco makes up 98 per cent of installed technology across government, according to SSC. In the area of WAN core routing, it makes up 100 per cent; in DC network switching, 93 per cent; in add-ons for “local-area networks” (LAN), 73 per cent.
Cisco hardware is now firmly established in Ottawa’s networks system over several technological generations, making it increasingly difficult to diversify with every successive installation, according to officials.
“There is sometimes the need to consider compatibility with older legacy equipment that is in place,” Murray said in committee testimony on Nov. 30. “Sometimes we have no choice but to go with an existing supplier to have interoperability.”
Some industry representatives say the government’s interoperability defence has become somewhat habitual, however, used even in scenarios where new providers could be tapped under competitive bids.
“It creates a circular logic,” said one industry representative, who spoke on the condition on anonymity due to the sensitivity of the issue. “It never ends — you’re always calling for what you already have because of this issue of interoperability.”
And recent requests for proposals (RFPs) have continued to be awarded to Cisco. In January 2021, $35 million in sole-sourced contracts for Cisco technology have been awarded. According to one source who has personally tabulated SSC’s contracts, NSDS awarded another $29 million to Cisco in February, bringing the total to $64 million this year — amounting to the vast majority of its total spending on network technology, the person said.
SSC said it awarded $327 million in contracts in all of 2019, of which $139 million went to Cisco. Total contracts in 2020 totalled $90 million, with $35 million for Cisco. However, total contract values include requests for non-network spending, and also for network technology that is not provided by Cisco, and therefore can’t be sole-sourced to the firm.
Government officials claim that they have made efforts to diversify away from Cisco technology, but it remains unclear how rigorous those efforts have been.
According to documents secured through access to an information request, SSC appears to have tested interoperability with non-Cisco vendors only once in a five-year period between 2015 and 2020. Juniper Networks and Arista Networks were both cleared for procurement in 2019, according to one document detailing a series of internal screening tests.
Government officials have named several Cisco competitors as would-be suppliers under a new NSDS procurement system launched at the beginning of 2021, but sources said sole-source calls for Cisco equipment have persisted nonetheless. Other potential manufacturers include Ciena Corporation, Hewlett-Packard Company, Palo Alto Networks, and others.
Most industry insiders reject government claims that Cisco technology is installed purely out of necessity. Numerous other companies, some Canadian, are fully capable of providing roughly the same services, several people said. A failure not to do so has effectively shut competing companies out of the bidding process, particularly innovative domestic firms overshadowed by their massive U.S. competitors.
You’re always calling for what you already have because of this issue of interoperability
Ottawa’s repeated use of a select few vendors has also raised concerns over the use of taxpayer dollars, with procurement offices left entirely beholden to a single provider. A report in May 2018 by analysts at Gartner, an industry consultancy, found “widespread price increases” in SSC-procured Cisco technologies over the previous year.
“Cisco-dependent organizations that do not effectively negotiate will see their IT budgets squeezed as Cisco’s costs increase,” the analysts warned. They tabulated recent price markups of as much as 30 per cent on a range of Cisco products, from licences to switches to transceivers.
In the November committee meeting, Conservative MP Dane Lloyd questioned Murray about SSC’s August 2020 bid to upgrade Ottawa’s Lester B. Pearson building, in which SSC paid a 40 per cent higher cost than did Global Affairs Canada for identical Cisco technology, according to Lloyd. Murray responded by saying SSC is “ modernizing our procurement policies.”
Opposition members say uncertainty around cost competitiveness has in turn clouded the Liberal government’s plans to spend billions overhauling government systems.
“It really raises a lot of questions about whether this government’s being fair, and whether or not they’re getting the best value for taxpayer dollars,” Lloyd said.
Lloyd said stakeholders have raised concerns with him over SSC’s dependency on certain vendors, saying that Cisco or other dominant players are sometimes chosen for bids even when, according to their claims, legacy technology isn’t necessarily required.
“What we’ve seen are some cases where the line has really been blurred,” he said. “They try to claim that they have to go with the old company, yet it’s for new technological purposes. So there clearly is a lot of grey area here.”
• Email: firstname.lastname@example.org | Twitter: jesse_snyder