Private firms conducting AI research and development or providing a necessary service yield the expertise and information needed to assist the functioning of the federal government of Canada. In an abstract context, the relationship between private entities and the state is of a mutually beneficial nature (Pongsiri, 2002). The state uses its funds to employ a private firm, and the firm provides the state with sought-after knowledge. The problem that surfaces is that the knowledge that is transferred to the state is not explicit because it is extracted from a tacit source. Firms specializing in AI are experienced within this industry, and apply various techniques to produce outcomes. These firms employ researchers and practitioners who have personal and academic experience within the AI discipline resulting in a collective concentration of tacit knowledge. This form of knowledge cannot be easily transferred, taught, or understood without rigorous training and attention over a distinct period (Howells, 2007). Furthermore, clients, such as the federal government, may not have a large amount of experience applying AI methods to their needs and will not have the time to retrain employees (Howlett, 2009). The tacit knowledge that the private firms yield cannot be translated to explicit knowledge to reduce a portion of the outsourcing or contracting the Public Services and Procurement Canada (PSPC), and Treasury Board of Canada Secretariate (TBS) engage in. This blog post will discuss reasons for the Canadian Federal government’s over-reliance on public-private partnerships to finance its Artificial Intelligence industry.

In Canada, the link between academia and industry was not definitive before 2018. Kinder and Welsh (2013) explain that government efforts in the sphere of science and technology were made of two definitive classes of activities: research and development, and related science activities (Kinder & Welsh, 2013). Research and Development consist of the application of independent scientific thought processes of public service researchers on a continual basis within the confines of the federal government (Kinder & Welsh, 2013). Harnessing these thought processes can increase the foundation of scientific and technical knowledge held by the federal government’s workforce (Kinder & Welsh, 2013). Related Science Activities are internal actions of the government that pertain to the development, distribution, and execution of “scientific and technological” insight (Kinder & Welsh, 2013). The information used to generate scientific insights can be integrated into policy decisions (Kinder & Welsh, 2013).

The federal government’s preoccupation with Research and Development and Research Science Activities portrayed Canada as an appealing destination for companies situated in the knowledge-based industries (Kinder & Welsh, 2013). From 1971-2009 Canada’s regulatory environment for science and technology related businesses provided tax incentives, technical assistance, and various financial aid packages to increase the probability of financial success for these companies (Kinder & Welsh, 2013). Therefore, it is no surprise that Canadian Gross Expenditure on Research and Development (GERD) increased for the business sector within Canada (Kinder & Welsh, 2013). Conversely, within the same time the GERD spending within the federal government’s allocation of government science declined from just under 30% to 9% (Kinder & Welsh, 2013). Signifying a shift from the federal government as the arbiter of scientific knowledge to private firms. However, considering the federal government as the lower bound for GERD and private firms as the upper bound, Canadian higher education institutions were flourishing in the middle (Kinder & Welsh, 2013). Within this same time period Canada’s universities were producing world-class research despite being stuck in a regulatory environment that had trouble integrating academics with the appropriate domestic industries (Kinder & Welsh, 2013). Instead of directing more funding to build the necessary links between academia and industry the federal government adopted a “make-or-buy” approach to government science (Kinder & Welsh, 2013). An approach that required federal departments to distinguish between the science that will be conducted within the government and the science that will be outsourced to private firms (Kinder & Welsh, 2013).

Within this regulatory environment, higher educational institutions were overlooked as potential candidates to assist the growth of the Canadian economy through their research and development activities. The federal government missed an opportunity to introduce policies to incentivize the creation of links between the private sector and academia. Canadian academic research continued to flourish, however, many Canadian researchers fled to the United States for better salaries, and research communities (Zhao et al., 2000). Perhaps contributing to a lack of competition among private firms to secure federal government contracts for scientific research and development. At the time, the regulatory environment favoured private firms over the commercialization of potential entrepreneurial academic researchers within Canada (Kinder & Welsh, 2013). The federal government could not adequately satisfy all the goals of government science. In relation to AI, the federal government will experience issues: “Maintaining expertise in areas supporting public security and welfare”, and “Producing public goods, products and services”, without outsourcing much of the research to the private sector (Kinder & Welsh, 2013). The federal government’s department of procurement- the PSPC and the TBS have procured various companies that produce AI solutions (Brandescu, 2021). All departments within the federal government can navigate to the PSPC’s platform and engage in a process that will provide them with a relevant AI solution or product that meets their needs (Brandescu, 2021). The decision to outsource or contract private firms that can provide AI expertise neglects a potential opportunity to educate and upskill the current pool of federal government employees. Reskilling a segment of the federal government may result in a latency period that will delay the potential benefit of government science that can be produced. However, the potential benefits accrued from cultivating AI talent within the confines of the public service can minimize the reliance on private firms for this kind of knowledge. Currently, the majority of AI knowledge and expertise that the government of Canada relies on originates outside the federal government (Knubley, 2021). Despite the initial setbacks, outsourcing AI seems like it will continue to be an action the federal government partakes in. Concerns relating to the potential sunk costs that accompany succeeding control of projects to private firms originating in the public sector do not outweigh the benefits outsourcing AI-related tasks can bring (Professional Institute of the Public Service of Canada [PIPSC], 2020).

Sources:

Brandescu, A. (2021). Artificial Intelligence Policy and Funding in Canada: Public Investments, Private Interests. Centre for Interdisciplinary Research on Montreal, McGill University.

Howells, J. (2007). Tacit Knowledge. Technology Analysis & Strategic Management, vol (8), (2).

Howlett, M. (2009). Policy analytical capacity and evidence-based policy-making: Lessons from Canada. Canadian Public Administration (52), 153-175.

Kinder, J., & Welsh, F. (2012). Performing Strategic Science in the Public Interest: Updating the Policy Debate Regarding Government Science.