Evaluation of the Right of First Refusal for Guard Services

A Social Procurement Objective

The RFR is considered a form of social procurement, since its key objective is to support the employment of veterans. Barraket and Wiseman (2009) define social procurement as follows:

Social procurement can be understood as the use of purchasing power to create social value. In the case of public sector purchasing, social procurement involves the utilization of procurement strategies to support social policy objectives.

One of the key benefits of social procurement, according to the authors, is that it can produce greater social value for public spending by simultaneously fulfilling commercial and socio-economic procurement objectives.

The Need to Support the Employment of Veterans

Statistics show that while employment and income among Canadian veterans may be similar to and, in some cases, better than that of the general Canadian population (MacLean et al. 2011), the employment needs of veterans can be extremely diverse and can depend on a number of factors:

• Membership in the regular force or the reserves;
• Being a client of Veterans Affairs Canada (VAC);
• Holding a disability award under the New Veterans Charter (NVC) or receiving disability benefits;
• Medical status;
• Rank upon release;
• Type of release (e.g., involuntary, retirement);
• Age at release;
• Proportion of family income being provided;
• Province of residence;
• Years of service; and
• Gender.

Canadian veterans face a variety of employment-related issues upon release from the CAF. For example, 70 per cent of the veterans who leave the service do not receive an immediate pension (although some will receive a pension when they reach retirement age).^{Footnote 8} Most of those without a pension are former CAF non-commissioned members (NCMs).

MacLean et al. (2011) indicate that among those veterans who left the service between 1998 and 2007, incomes fell by 10 per cent in the three years following their release from the CAF. The decrease in income was 30 per cent for female veterans and 29 per cent for veterans released for medical reasons. Low income was more prevalent among those released at young ages, those released involuntarily, and those released at lower ranks. These statistics indicate that there is an ongoing need to support employment among specific veteran groups, even though the unemployment rate among veterans overall was comparable to the general Canadian population in 2010 (Thompson et al. 2011).

A more recent study (Maclean et al. 2014) found that it took on average eight years for the post-release income of regular forces veterans who were released between 1998 and 2011 to reach pre-release levels. While the average decline in income for these veterans was 2 per cent, veterans released for medical reasons reported an average decline in income of 20 per cent. Also, the percentage of veterans with low incomes peaked in the first year after release; veterans who were released involuntarily, who had served for less than two years or who were released as privates had the highest prevalence of low income.

A unique issue that veterans continue to face is the lack of recognition of their CAF work experience by potential employers. For example, military training in skilled trades is not necessarily recognized in the civilian context. This was mentioned by some focus group participants and is also documented in literature. When CAF members become veterans, “they are certain to face an inhospitable employment situation—one that fails to recognize the management or life experience soldiers have developed in the armed forces” (Veterans Transition Advisory Council 2013). According to the same source, approximately 46 per cent of all employers indicate that a university degree is more important than military service, and 73 per cent of employers admit that their company does not have a veteran-specific hiring initiative.

In focus group discussions, a few participants indicated that they had retired with little or no pension and needed employment because they were still supporting dependents (e.g., university students, younger children). Most of these participants had left the CAF at younger ages. Some participants were receiving a pension, but indicated that a regular paycheque from the Corps helps to improve their quality of life.

Veterans’ Employment and Non-Financial Needs

The literature review found that the transition from being an active member of the CAF to being a veteran can be challenging. A survey of 200 Canadian veterans found that almost 53 per cent described the transition to civilian life as “difficult or fairly difficult.” Over 20 per cent found the transition “very difficult” (Ray and Heaslip 2011, 198–204). Consistent with the literature, focus group participants emphasized the challenges of transitioning from a military to a civilian career, including a lack of recognition by employers of their military skills and experience.

The evaluation found that in supporting the employment of veterans, non-financial issues were addressed as well. According to focus group findings, veterans work for the Corps for 1) employment in the field of security, an area of work they are comfortable with and that suits their background; and 2) membership in an organization where there is a strong sense of belonging and connection to the military. Focus group participants mentioned that being a commissionaire allows them to use their experience and expertise, remain active and feel useful. In addition to providing a source of income, employment with the Corps helps veterans meet the social and psychological needs that are an integral component of employment.

Assessment of Duplication

The evaluation determined that the RFR did not duplicate other policies or programs. Further, it found the RFR to be unique in enabling the direct employment of veterans. The GC provides other types of support for veterans’ employment, such as the VAC Career Transition Services (identified in the Veterans Action Plan) and National Defence’s Secondary Career Assistance Network. There are also several recent public-private and non-profit sector initiatives that have been established to support the employment of veterans, which focus on the training and engagement of private sector employers.^{Footnote 9} However, none of these programs provide direct employment for veterans.

Reach

The evaluation found that the RFR has contributed to the GC’s support of veterans’ employment. The RFR requires that a minimum of 60 per cent of hours worked nationally on NMSO contracts be performed by veterans. To meet this requirement, the Corps hires approximately 1,000 veterans each year for guard services, a recruitment pattern that has proven to be consistent.^{Footnote 10} While totals vary from year to year, the Corps employs approximately 8,000 full-time and part-time veterans, representing about 45 per cent of the Corps’ total permanent workforce (42 per cent at the time the evaluation was conducted^{Footnote 11}).

According to the Corps, the average age of the veterans working as commissionaires is 57; approximately half of them receive some form of pension.^{Footnote 12} The annual pensions are generally low (about $20,000 for New Veterans Charter VAC clients; $24,200 for Disability Pension VAC clients; and $15, 200 for non-clients of VAC (Maclean et al. 2014)), which may contribute to the reasons why older veterans seek additional sources of income by working as guards.

As previously indicated, the RFR facilitates the employment of veterans as guards and is not a government employment program that targets veteran sub-groups (e.g., veterans who have disabilities or low incomes), which would require private information to verify eligibility. Because the RFR does not target specific veterans, it provides broad access to employment as a security guard. As a result, both financial and non-financial needs can be met. Nonetheless, the use of the RFR  is somewhat limited, given that most commissionaires are over 50 years of age.

The document review found that the Corps provides employment in communities across Canada to veterans at different stages of their post-military career. Since wages in the security industry are comparatively low, the Corps often attracts veterans who are transitioning for a second time from a post-military career in the private sector (i.e., beginning a third career with the Corps). According to the Corps, the most stable group of veterans hired by the organization are over 50 years old, as they will often work for the Corps until they retire. Many younger veterans are reservists who join the Corps as a form of transitional employment while they seek other jobs. Presently, 18 per cent of commissionaires come from the reserves.

Although the purpose of the RFR is to support veterans, up to 40 per cent of guard hours are worked by non-veterans. This group is needed in order for the Corps to meet the federal government demand for guard services. As a result, non-veterans receive the same advantages as veterans, which under the NMSO translates into higher wages.

The Corps may face challenges providing employment to veterans in the future. This is due to the gap between the tasks covered by the RFR and the NMSO, and modern veterans’ evolving education, skill profiles, aspirations and expectations. In some regional divisions, Corps business lines include traditional guard services as well as other services such as investigation, threat risk assessment, background checks, identification services, digital fingerprinting and training.^{Footnote 13} At least some of these services fall outside the scope of the RFR and have been excluded from international trade agreements; therefore, they are offered on a competitive basis.

Although the Corps is currently meeting the 60-per-cent requirement for hours worked nationally under the NMSO, PWGSC records indicate that the percentage of hours worked by veterans has been declining. Since 2006, the percentage of hours worked nationally by veterans on NMSO contracts has been between 66 and 74 per cent. The most recent audit information available (2010) indicates that the participation of veterans was at 62 per cent.^{Footnote 14} The challenge in meeting the 60-per-cent threshold is due, in part, to a regional mismatch in supply and demand for bilingual guards, particularly in Ottawa and Montreal.^{Footnote 15} According to Corps and government data, the federal demand for guard services has been increasing, though the evaluation did not delve into the reasons for this.

Quality of Employment

Veterans who work for the Corps on NMSO contracts receive an hourly wage and benefits that generally exceed industry standards (see analysis in subsection 4.2.2 under Operational Efficiency). This was confirmed in the document review^{Footnote 16} and by the veterans who work on federal contracts for the Corps.

In addition, while benefits offered to commissionaires vary by regional division, they may include security guard training, licensing fees, and uniforms along with regulatory benefits. In contrast, some private sector firms charge candidates a fee to attend training. So, the RFR also supports veterans by paying employment-related costs they would have to bear themselves if they worked as a guard for another private company.

For many veterans, the Corps provides opportunities for advancement or managerial positions. Veterans who currently work for the Corps under the RFR indicated in focus group discussions that they were very satisfied with their jobs.

Most departmental interviewees who were able to answer this question responded that Corps services were of higher value than the services of other private sector companies. Of the 8 departmental representatives who answered the question, 6 responded that the Corps provided higher value-for-money services (2 interviewees said the Corps provided lower value-for-money services). The 28 other respondents could not answer the question, largely because they had not used other private sector suppliers. Some interviewees explained that the military background of veterans provided relevant training, including basic training and leadership training. Also, they found that obtaining security clearance is generally easier when dealing with veterans and the Corps, since the veterans have already gone through the CAF screening process.

According to the departmental interviewees who had experience in hiring security guards from both sectors, the Corps can compete with private sector providers in other markets. The two departmental representatives who indicated that Corps services were of lower quality found that other private sector guard services offered more flexibility in meeting their needs and provided faster turnaround when replacements were required.

Interviewees were asked for their views on the potential effects of eliminating the RFR and opening up the provision of guard services to competition. There was a mix of responses, some maintaining that pricing could be more competitive, others that the costs of procurement and oversight by federal officials could increase. Concern was expressed about a potential negative effect on service quality (e.g., reduced stability and continuity), although most departments had limited experience with alternative providers of guard services.

Operational Efficiency

The unit price in the guard services sector typically refers to the hourly rate charged by the Corps. This hourly rate varies by level; the NMSO includes nine levels of commissionaires and five levels of supervisors.

The evaluation team benchmarked the hourly rates of the NMSO against RMSO rates for the Ontario regional division, which are determined following a competitive bidding process managed by PWGSC. Based on federal government and Corps documentation, the rate comparisons demonstrated the following:

• Overall, the hourly rates charged by the Corps were typically higher than the rates charged by other suppliers. However, this comparison was based on an average of the individual rates for all guard levels (from basic guard positions to supervisory positions), rather than on rates at the same guard level. Documentation indicates that NMSO rates incorporate many levels that are not typically found in other corporate environments, which often include only two levels instead of nine. The appropriate level and billing rate for positions are negotiated between the departments and the Corps based on the categories in the NMSO.
• When NMSO rates for basic guard services were compared with competitive rates (RMSO rates for the Ontario regional division were used), NMSO rates resulted in a cost difference of approximately 6 per cent higher than competitive rates.

In sum, the unit cost of basic guard services obtained through the NMSO is considered to be higher than rates obtained through competitive bidding, generally representing a 6-per-cent cost difference for the client. The analysis did not compare the ratio and level of supervisors to guards because the NMSO and the RMSO have different level structures.

Allocative Efficiency

Impacts on Veterans

The RFR does not explicitly aim to support the non-financial needs of veterans. Nonetheless, one important element identified among focus group participants was the camaraderie among Corps members, which they stated provides a sense of belonging and family. Veterans value their continued connection to the military through the Corps and the ability to continue to make a contribution in a position that they feel is worthy of trust, dignity and pride. Because of the military focus and mandate of the organization, focus group participants viewed the Corps as an organization of integrity that is committed and sensitive to the particular needs of veterans.

Impacts on Other Private Sector Security Providers

Preferential sourcing is often associated with concerns about a single supplier controlling the market, while competition among companies is assumed to improve quality and reduce prices. Industry interviewees argued that the Corps’ monopoly, along with its market-share growth in non-federal markets, artificially influences wages and service pricing in the sector and entices security officers from other private sector providers. The interviewees believed that this in turn puts pressure on the profitability of companies.

However, a recent situational analysis of the industry suggests that the security sector is healthy. Between 2006 and 2011, there was a 40-per-cent increase in the number of people in Canada with licences working in the industry. It is estimated that private security revenue will grow 6.1 per cent annually on a global basis until 2015 (Eitzen & Associates Consulting Ltd. 2012).

Impact at the International Level

A second potential unintended outcome of the RFR is push-back from Canada’s international trading partners on the exemption from competition for guard services. Since a 2004 review of the RFR, there have been no challenges to the exclusion. As well, the recent Canada-Chile Free Trade Agreement maintained the exclusion of guard services in its chapter on government procurement. An agreement in principle with the European Union on a Comprehensive Economic and Trade Agreement also includes exclusions on government procurement related to national security.

Meeting the Government of Canada’s Security Needs

The evaluation findings indicate that the social objectives of the RFR have not been implemented at the expense of quality guard services for the majority of federal departments. This is demonstrated by the interview results, where nine in eleven departments indicated that the NMSO had helped to meet the security guard requirements of their organization.

Canada

The following programs support veterans’ employment in Canada:

• Veterans and survivors can get help finding civilian employment through the Veterans Affairs Canada (VAC) Career Transition Services (CTS) program. VAC will reimburse eligible veterans and survivors for these services, up to a lifetime maximum of $1,000 (including taxes). In most cases, veterans must apply within two years after the date of their release from the CAF. Services include career assessments, aptitude testing, job market analysis, resume writing, job search skills, interview techniques, individual career counselling, job finding assistance and professional recruiting.
• National Defence offers the Second Career Assistance Network (SCAN) program to assist in the transition to civilian life. Services include: 1) a long-term planning seminar; 2) transition support through generalized information on major transition subjects; 3) counselling; 4) career transition workshops; 5) interest inventories; 6) a reference library; 7) opportunities for potential employers to advertise jobs for CAF members, and for veterans to post their resumes for the perusal of prospective employers.
• The Canada Company Military Employment Transition Program assists CAF members who are transitioning out of the military to obtain employment. The mandate of the program is to establish, foster, and drive the connection and relationship between CAF members who want to obtain work outside the military and the leaders in the public and private sector who will offer employment.
• Helmets to Hardhats Canada is a not-for-profit organization that provides opportunities to anyone who has served (or is currently serving and looking to transition to a civilian career) in either the Regular or Reserve Force components of the CAF. The program offers the required apprenticeship training to achieve journey person status in any of the applicable trades within the building and construction industry.
• The Public Service Commission Guide on Priority Administration outlines the entitlement of veterans released or discharged for medical reasons to be appointed in priority to all persons to any position in the public service (with exceptions), if they meet the minimum conditions of employment.
• The notion of expanding the NMSO to include tasks that would meet the needs of today’s more highly trained and educated veterans was raised during interviews; however, international trade agreements do not accommodate this kind of expansion.
• Similarly, the concept of open bidding was raised during interviews, where criteria could be used to ensure minimum veteran participation, or a point-based approach taken to maximize veteran participation.

United States

In the United States, there are numerous programs supporting veterans:

• In cooperation with individual states, the Department of Labor (DOL) administers Unemployment Compensation for Ex-Service members, which provides benefits to recently released veterans and reservists who are unemployed following a period of active-duty service of 90 days or more. The DOL also offers online tools for veterans. Other programs include the Transition Assistance Program, the Disability Transition Assistance Program and the Vocational Rehabilitation and Employment Program.
• The Department of Defense offers a variety of service-specific programs during demobilization that assist active and reserve personnel in their return to civilian life and employment, such as VetSuccess.gov and Hero 2 Hire. (The White House Joining Forces Initiatives, 2011)
• The Navy COOL program also provides Navy service members with information about civilian licence and certification requirements, and identifies licences and certifications that are relevant to Navy ratings, jobs and duties. The program teaches service members how to fill the gaps between their Navy training and experience and civilian credentialing requirements, and provides information about resources available to service members that can help them gain civilian job credentials.
• At the government-level, The Veterans Employment Opportunities Act (VEOA) ensures that veterans are able to compete for government positions that previously may have been available only to existing civil service employees. The Veterans Recruitment Appointment and 30 Percent or More Disabled Veterans programs allow eligible veterans to fill certain positions without competition. The Veterans Preference gives special consideration to eligible veterans looking for federal employment.
• A Tax Credit (Returning Heroes) was also implemented for firms that hire unemployed veterans (maximum credit of $2,400 for every short-term unemployed hire, and $4,800 for every long-term unemployed hire).
• Finally, US veterans have access to the Reverse Boot Camp, which is intended to transform the military services’ approach to education, training and credentialing for US service members, and bolster and standardize the counselling services that service members receive prior to separating from the military.

Australia

In Australia, veterans have access to the Rehabilitation Career Transition Assistance Scheme. Under this program, medically released veterans and veterans with rehabilitation needs can access vocational training as part of the rehabilitation program. Veterans with less than 12 years of service are also eligible for some of the benefits and services listed as part of the Career Transition Assistance Scheme. Otherwise, veterans have access to employment services to develop job search techniques, resumes, interview skills training, one-on-one support and job finding assistance. Australian veterans with service-related injuries also have access to income support.

United Kingdom

In the United Kingdom, veterans can benefit from the Career Transition Partnership program. Under this program, medically released veterans are eligible for full benefits and services. In addition, veterans with four years of service or more are eligible for full benefits and services, while those with less than four years of service are eligible for some benefits and services. Benefits include vocational training for veterans who have a service-connected disability; employment services to develop job search techniques, resumes and interview skills; and additional services such as counselling, job finding assistance and one-on-one support.