Small computer companies warn Queen’s Park could put some of them out of business by rebooting the way IT contracts are awarded in a “streamlining” effort.

The move will cut the number of pre-qualified “vendors of record” to 10 from 317 and favour big operations at the expense of small- and medium-sized local firms, a coalition of smaller companies charged Wednesday.

“They’re threatening my business,” said Peter Sundiata of Sundiata Warren Group Inc., which has four full-time staff. “I’ve told my employees we’ll scramble for other contracts.”

A spokesman for Government and Consumer Services Minister Tracy MacCharles said the system had become “cumbersome” with changes to get better value for taxpayer dollars recommended by Auditor General Bonnie Lysyk in her latest annual report.

“It streamlines things,” Andrew Lang told the Star. “It shouldn’t change an individual consultant’s ability to do work for us.”

The companies involved are contacted by the government in a “request for bids” to find specialized IT experts when ministries embarking on information technology projects do not have the in-house staff to do the job. Lysyk dubbed these firms the “middleman agencies.”

But smaller IT consulting firms said proposed new requirements that they have ISO 9001 quality management certification and references from three other customers who have been billed more than $25 million are too onerous.

That will reduce the number of qualified bidders by about 300 firms, said Rajiv Chaudhuri of CSI Consulting in Toronto, which employs about 50 people and has about 20 contracts with the province.

“Taxpayer dollars have to be respected. I get that,” he said, joining other coalition members in acknowledging the list of potential vendors has grown too large.

“We understand the direction but don’t go from 317 to 10 and expect no damage to be done,” added Chaudhuri, who wrote a letter to Premier Kathleen Wynne warning the reduction will “stifle” competition and innovation in the sector.

Lang said the government got feedback from vendors and looked to other jurisdictions before developing the new system.

“This work – and that of the auditor general – demonstrated that we should be using a vendor base consisting of a few vendors with the skills, experience and capacity to service a large organization’s needs while still allowing us to source additional skilled workers from the market as needed.”

The change is frustrating because it comes after the government has been encouraging small firms for years to learn how to make better bids, several companies said.

The coalition encouraged the province to devise a rating system that measures how well IT firms have met the government’s needs as a pre-condition for bidding on future contracts.

“As long as it is performance-based we have no problem with that. Give us the metrics,” said Bud Derakhshani of Yoush Consulting, a Markham-based IT project management services firm with five full-time staff.

In her 2016 annual report issued last November, the auditor general said IT is the largest “preferred supplier arrangement” in the Ontario government and pointed to an “overreliance” on consultants.

“A consultant costs $40,000 more annually than a permanent employee. Part of the extra costs of using consultants is the middleman fee paid by the ministries to the preferred supplier for placing a consultant.”

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Ministry officials could not estimate how much the government expects to save by limiting the number of IT supplier agencies.

Lysyk said her audit could not determine how much the “middleman” fees cost taxpayers annually because the government’s Treasury Board Secretariat “has not asked agencies to explain what they charge.”