Liberal supercluster groups fend off 'unfair' criticism as combined spending plans near $1B

According to National Post's analysis, combined public and private spending commitments under the program now totals $998M, well above what the PBO report cited

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OTTAWA — The heads of Canada’s five “supercluster” groups are pushing back against a recent report that highlighted spending delays in their program, claiming the study doesn’t properly account for a host of recent contracts that dramatically improves their progress.

Earlier this week, the Parliamentary Budget Officer released a report showing that spending levels under the government’s $950-million Innovative Superclusters Initiative (ISI) had lagged behind projections, feeding criticism that the Liberal government had again failed to meet its lofty promises to taxpayers.

Industry Minister Navdeep Bains announced the ISI program in 2017 in an effort to establish five so-called “superclusters” — industry lingo that describes a compact group of researchers, investors, government, and private firms that collaborate in order to fund and commercialize innovative technologies.

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The heads of the superclusters acknowledge that the report was accurate on several major metrics, but didn’t include hundreds of millions in spending commitments secured in recent months. A sizeable chunk of those contracts were designated for COVID-19 emergency spending projects, which were funded entirely by public dollars.

According to an analysis by National Post, which interviewed the CEOs of all five supercluster groups, combined public and private spending commitments on projects under the program now totals $998 million, well higher than the $277 million cited in the PBO report.

Of the $998 million, federal coffers contributed $439 million, or nearly half of their five-year, $918-million budget for the program. Private companies contributed $524 million, while the remaining $35 million came from research institutions and lower orders of government.

Representatives of the superclusters say the discrepancy is largely due to the PBO using data as of March 6, before many of the groups had published their 2019 annual reports. Government officials, for their part, had few answers as to why the federal Industry department declined to provide updated information to the PBO, which did not publish the superclusters report until months later, on Oct. 6.

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The PBO said the department declined to provide basic information about how it would measure the success of the program, leaving the watchdog to determine that it “cannot draw conclusions” about the matter.

The report also found that actual spending levels have thus far lagged expectations. Just $30 million out of a planned $104 million was spent on the ISI program in fiscal year 2019-20, amounting to a 71 per cent shortfall, according to the PBO. Spending commitments, by comparison, are contractual agreements on capital that will be spent in future years.

For some industry watchers, the report was another example of the Liberal government’s inability to make good on its many ambitious proposals, which have seen spending delays and, in some cases, a lack of private sector involvement.

Those plans include the Canada Infrastructure Bank, which has so far failed to attract the levels of private funding initially claimed by Liberal ministers, all the way down to programs like a small, $600-million clean energy fund that has seen little activity. A 2019 report by The Logic, an online news outlet, found that the fund was struggling to find private firms in which to invest.

Tech experts say the same trend has taken place in the federal innovation file. Ottawa has yet to follow through on a long list of recommendations put forward in a series of reports in early 2018, written by industry leaders including Shopify founder Tobias Lütke, that sought major changes in areas like intellectual property.

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Ben Bergen, executive director at the Council of Canadian Innovators, said the industry is widely appreciative of such efforts by Ottawa, but said reports like the PBO’s suggest progress has been slow.

“This really sheds some light on some of the challenges that government is still having on building an innovation economy,” Bergen said.

Parliamentary Budget Officer Yves Giroux. Photo by Adrian Wyld/The Canadian Press/File

The organization has for years been pressing Ottawa to follow through on making fundamental regulatory changes to IP and data management, which it argues would better position Canadian firms to commercialize innovative ideas.

“You really need to have IP strategies and data strategies in place to capture wealth in the digital economy,” Bergen said.

Delays in actual spending are partly due to the years of legal negotiations that had to take place before the superclusters were established, people representing the groups said. Many hadn’t spent a dime on projects before last summer.

“Superclusters only began their operations at the end of May 2019,” said Julien Billot, chief executive of the Quebec-based AI supercluster.

The other four groups include an Atlantic Canada-based “oceans” supercluster; an Ontario-based “advanced manufacturing” supercluster; a Saskatchewan-based supercluster seeking to “increase the value of key Canadian crops” like canola and peas; and a B.C.-based supercluster focused on digital technologies.

Bill Greuel, head of the Prairie protein supercluster, said his group has secured private sector investments worth $170 million on 14 separate projects The supercluster itself has spent $100 million.

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Those projects include, among other things, the development of facilities that effectively grind down pea crops into protein powders that can be sold to companies like Los Angeles-based Beyond Meats, which manufactures meat-flavoured veggie burgers. Those kinds of projects diversify markets for agricultural players, advocates say, and raise the value of exported products.

“The $170 million of private sector investment is real dollars that our members are putting on the table and investing,” Greuel said.

He called the PBO report “unfair” and said it didn’t show the full picture of recent expenditures.

“It was a snapshot in time from a long time ago,” Greuel said.

All chief executives claimed they were near or ahead of schedule on their spending requirements.

Ottawa earlier this year also tapped into some superclusters as a way to fund COVID-19 emergency expenditures which, unlike typical projects, were 100 per cent paid for by taxpayers, and artificially raised overall spending projections.

“We are well ahead of plan,” said Sue Paish, head of the digital supercluster in Vancouver. “Even without COVID-19 we were going to be well ahead of plan. Right now, we will be fully invested of our full $152 million from the government by March of 2021.”

The B.C. supercluster has spent $60 million on projects specific to COVID-19, compared to $105 million spent overall. Of the $114 million invested by the Ontario manufacturing supercluster, $45 million went entirely toward COVID-19 related manufacturing projects, including for personal protective equipment (PPE) and other goods. The projects did not involve private-sector contributions.

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