TERMS OF REFERENCE / STATEMENT OF WORK 1. Project Title: Linkages between Workplace Skills Training and Firm Productivity 2. Purpose: The purpose of this project is to gain a better understanding of the relationship between workplace skills training and productivity. Human Resources and Social Development Canada (HRSDC) is seeking a comprehensive report which examines this relationship through quantitative or qualitative analysis of the evidence on the relationship between training and productivity which adds to the current literature – perhaps using Workplace and Employee Survey (WES) data, other data such as international data sets, or other approaches such as targeted case studies. The report should address the question: Is there empirical evidence of the transmission mechanism(s) by which human capital investments through training can affect firm productivity? The analysis should include a literature review and provide a theoretical framework as the base for analysis which focuses on the most relevant policy areas. This project will create policy relevant research that will inform policy development. As such, a strong emphasis is placed on dissemination of the research findings generated from HRSDC’s investment in research. As part of this emphasis on information sharing, there is a possibility of multiple workshops, conferences, and speaker series arising from the research findings. An invitation for future participation in potential workshops, conferences and speakers series as a subject matter expert on the research topic developed in this RFP is a possibility. 3. Background: Productivity is a measure of the efficiency with which labour, capital, and technology are combined to produce goods and services. There are two principal definitions of productivity – labour productivity and total factor productivity. Labour productivity is simply the amount Request for Proposal 1 of output produced by the economy divided by the amount of labour employed to produce it. Total factor productivity is a broader concept that bundles labour, capital and intermediate inputs (inventories, energy, materials and supplies) together into a single input statistic which is compared to the amount of output produced by an economy (Shaw 2000). It is labour productivity that we wish to focus our attention on with this Request for Proposal. Labour productivity growth is important because in the long run it is the key determinant of real income growth. In fact, Gross Domestic Product (GDP) per capita can be decomposed into the product of labour productivity (output per hour worked), the average number of hours each person works, and the proportion of the entire population that is employed (Sharpe 2006). With looming demographic pressures on the horizon due to the potential for a reduction in the working age population, improvements in labour productivity will be increasingly important to maintain and enhance our standard of living. Most discussions of productivity have been at the aggregate economy-wide level related to such factors as technological change, and efficiency gains from trade liberalization and the education of the workforce. However, a main source of comparative advantage can flow from the strategic use of human resources in firms through innovative workplace practices. Training, as well as job design, employee involvement, compensation, work time arrangements, diversity management, and workplace well-being programs have been identified as the most important innovative workplace practices. At the same time, making the direct link between innovative management practices and productivity outcomes has been identified as a key issue that needs to be addressed (Gunderson 2002). A review of available literature finds that the work that has been done on this subject has not clearly examined the direct link between workplace training and direct measures of firm productivity. For example, Betcherman (1996) found that there is very little evidence in the literature concerning the impacts of training on firm performance, e.g. productivity, quality, sales and profits. John Balwin’s (1999) study which focused on the connection between a firm’s innovativeness and its success found that a common element of successful firms was a commitment to training – in particular formal training. However, the study did not quantify this relationship by making the direct link between workplace training and productivity. The OECD (1998) undertook an international literature review on the benefits of training for individuals and firms. Overall, this research found that it is difficult to show direct links between particular training investments and productivity gains. Request for Proposal 2 Bélanger (2002) discussed the need for studies which focus on changes in production systems – brought about by globalization and by the diffusion of information technology – as the central driver of the need for investments in human capital formation. Further, he argues the need for studies that place emphasis on the social dynamics through which human capital is mobilized at the point of production. Edwards et al. (2002) examined trends in productivity in the aluminum smelting industry and found that productivity improvements were due to changes in the social organization of production at the plants. In addition, the authors found that there may be evidence that productivity improvements were associated with increases in training. The Canadian Policy Research Network’s (CPRN 1997) study found that virtually no analysis exists on the impacts of workplace training on key outcomes such as productivity, quality, sales and profits. It attributed this gap to the following methodological obstacles that make it difficult to link workplace training to firm-level outcomes: 1. Most training is informal which is difficult to fully capture; 2. Outcome measures may be inaccessible at the firm level; 3. It is difficult to isolate the impact of training since it is interwoven with other factors such as technological innovation; 4. Single data points may not identify true impacts as training effects may take time to be fully reflected; and 5. It is difficult to determine the direction of causality describing the relationship between training and firm performance. CPRN’s study attempted to tackle these methodological difficulties through the use of panel data. This approach permitted the researchers to compare the performance of training and non-training establishments over time. While the survey did not collect financial or other related performance statistics on firms, it relied on qualitative trends in revenues, profitability and productivity. The main finding of the research was that establishments with training programs performed better than the non-trainers. Other research on the topic has been largely limited to estimating the impact of training on wages. However, in most circumstances wage gains are not equal to overall productivity gains because labour markets are not perfectly competitive and wages are generally not equal to the value of the marginal product (Dearden 2006). Request for Proposal 3 Turcotte et al. (2004) made use of the WES to examine the effect of human capital and technology use. The study found that no micro-level economic study had been able to directly examine the way in which the combination of technology investments and human capital affects the productivity of firms and the wages of workers. The paper found that the share of workers receiving on-the-job training did not significantly affect productivity but that an increase in the share of workers receiving formal training was associated with 3.5% higher productivity with a similar benefit to workers. However, the research was based on cross-section data for one year only with the result that the analysis did not provide any information on the way in which technology and human capital affect productivity over time. From this examination of the literature we can conclude that the impact of workplace skills training on firm productivity is a key gap in the literature. The literature does, however, provide some examples of approaches that could be used to establish the link between workplace skills training and productivity. For example, a 2006 Industry Canada paper using WES data suggests one approach to quantify the impact of training on productivity. In addition, the 1997 CPRN study which used panel data supplies another example that could provide useful insight into this research question. There may also be other useful approaches. References: Baldwin, John. (1999). Innovation, Training and Success, Ottawa: Statistics Canada, Analytical Studies Branch, October 1999. Bélanger, Jacques. (2002). From Human Capital to Organizational Learning, Canadian Public Policy, Vol. XXVIII, No. 1. Betcherman, Gordon, N. Leckie and K. McMullen. (1996). Workplace training in Canada: New Evidence on incidence and impacts. Canadian Business Economics, 5: 33-50. Betcherman, Gordon, Katie Davidman, and Kathryn McMullen. (1998). Training for the New Economy - A Synthesis Report, Ottawa: Canadian Policy Research Networks. Canadian Policy Research Networks. (1997). Developing Skills in the Canadian Workplace: The Results of the Ekos Workplace Training Survey, CPRN Study No. W02. Request for Proposal 4 Dearden, Lorraine, Howard Reed and John Van Reenen. (2006). The Impact of Training on Productivity and Wages: Evidence from British Panel Data, Oxford Bulletin of Economics and Statistics, 68(4). Edwards, Paul, Jacques Bélanger and Martyn Wright. (2002). The Social Relations of Productivity: A Longitudinal and Comparative Study of Aluminum Smelters, Industrial Relations, 57(2). Fortin, Pierre. (2002). Canadian Productivity: When do we Catch Up? ISUMA, Spring 2002: 47-51. Gunderson, Morley. (2002). Rethinking Productivity from a Workplace Perspective, Canadian Policy Research Networks. __ . (1998). Human Capital Investment, An International Comparison, OECD. Jorgensen, Dale and Eric Yip. (1999). Whatever Happened to Productivity Growth? Harvard University. Rabemananjara, Rova and Chris Parsley. (2006). Employee Training Decisions, Business Strategies and Human Resource Management Practices: A Study by Size of Business, Ottawa: Industry Canada. Sharpe, Andrew. (2006). Lessons for Canada from International Productivity Experience, Ottawa: Center for the Study of Living Standards. Shaw, Daniel J. (2000). Canada’s Productivity and Standard of Living: Past, Present and Future, Ottawa: Government of Canada. Turcotte, Julie and Lori Whewell Rennison. (2004). Productivity and Wages: Measuring the Effect of Human Capital and Technology Use from Linked Employer-Employee Data, Ottawa: Department of Finance. Request for Proposal 5 4. Project Requirements: Proposals considered for contract award will: Conduct a literature review to summarize and clarify the key findings in the most recent theoretical and empirical literature about the relationship between workplace skills training and firm productivity, supported by clear definitions of both concepts. The review should draw on international and national research and consider policy implications for Canada. Literature selection criteria should be listed in the proposal and include process for selection; Define key concepts, discuss theoretical underpinnings, and describe research methodologies; Go beyond the information in the current literature by undertaking a quantitative or qualitative analysis of the causal relationship between training and productivity – perhaps using WES data, other data such as international data sets, or other approaches such as targeted case studies1; Consider the empirical evidence of the pathways / transmission mechanism(s) by which human capital investments through training can affect firm productivity; Suggest areas for future research and data needs to support aggregate analysis; Propose feasible research and include appropriate activities, timelines and budget. HRSDC recognizes that the proposed area for research is broad. Bidders are expected to narrow their proposal to address a specific area of research within this topic. Within this specific area, bidders must outline the policy research questions that will be the focus of their research. However, focused proposals and relevance of the research topic / questions to HRSDC policies is essential. Proposals should consider one or more of the following questions, but are not limited to these questions as long as the additional question(s) is/are of importance to HRSDC: 1 HRSDC is open to a range of research methodologies including those that use existing, and new data sources, therefore, bids that propose the collection of new data will be considered. New data includes quantitative (survey etc.) and qualitative (key informant interview, case study, focus group etc.) work. Request for Proposal 6 What skills do the training target? Length of training? Formal vs. informal, on-the-job training? Drivers of training – business objectives, etc. What is the transfer mechanism? Is there only one, or a combination of factors? Are there threshold effects – minimum training levels below which productivity impacts are not measurable (or not there)? What are the characteristics of workers who seek and obtain training and how do they relate to productivity? Is it those who are already highly skilled that pursue further training that are employed in highly productive firms? Are there variable impacts on productivity depending on existing learner skill level? The case of older workers is a possible area of focus as these workers are sometimes perceived as being less interested in training and/or not suitable candidates for training investment. If this is the case, how do various sectors or occupations compare with one another? What are the necessary conditions under which impacts are felt? What are the effects of training on firms? Where relevant, regional disparities, gender and other relevant variables should be considered in the analysis of relationships between workplace skills training and productivity. Multi-disciplinary teams are encouraged to critically discuss and analyze current debates about the relationship between workplace skills training and firm productivity. In undertaking this research the researchers and their personnel must: not act, or identify themselves as acting, on behalf of HRSDC or the Government of Canada when collecting and using personal information to conduct the Research project. This does not, however, preclude Researchers from indicating that the Research project is being funded by HRSDC; inform individuals who participate in any interviews that their individual responses, including personal information, are being collected solely for the Researchers’ use and Request for Proposal 7 that such information will not, at any time, be made available to HRSDC or the Government of Canada; provide reports to HRSDC that do not include any personal information; and fulfill their obligations under the MOU in accordance with all laws applicable to the performance of the work including, without limitation, all laws concerning the protection of personal information. 5. Description of Work: In undertaking the project, the contractor must carry out several activities including the following: Prepare and submit one electronic copy of a preliminary draft report by December 16, 2007. Prepare and submit one electronic copy of the detailed draft paper by February 29, 2008. The paper should follow the attached style guide. Prepare and submit one electronic copy of the final paper, one electronic copy of the power point presentation with speaking notes, and one electronic copy of the two page report summary on the research findings by May 12, 2008. Contractors will also be expected to review the final report for quality assurance once it has been formatted by HRSDC staff for publication. The report must address all of the project requirements. The detailed draft report should be as complete as possible such that the final report should be just an incorporation of the final feedback from HRSDC regarding the preliminary report. The final report will be published as is with no further editing provided by HRSDC. Therefore, text editing and correctness of grammar and spelling will be the responsibility of the contractor. In order to avoid the necessity for extensive changes, the contractor should follow the style guidelines provided when preparing the draft report, abstract and executive summary. The Canadian Style Guide, published by Dundurn Press Ltd. in cooperation with Public Works and Government Services Canada Translation Bureau, can also be helpful in matters of punctuation, capitalization, and usage. The Gage Canadian Dictionary is the Request for Proposal 8 official standard for federal government spelling, but any reputable Canadian dictionary may be used as a reference. In matters of spelling, capitalization, and graphics, consistency is key. 6. Deliverables: Initial (in-person or telephone) meeting with the Director General of Strategic Policy Research on the design of the project, the timeline, and deliverables. Preliminary point form report – to be submitted by December 16, 2007. Complete draft report – to be submitted by February 29, 2008. Final report, including all components listed below, and power point presentation of research findings – to be submitted by May 12, 2008. o Final reports must include: An abstract; An executive summary; A table of contents; A list of figures; A list of tables; A bibliography, proper citations, and explanatory footnotes if required; A two-sentence description of the paper for use as an Internet summary; Ten subject keywords for registering the publication with internet search engines (Without these keywords, the document will not be found on the HRSDC website. The keywords must be found in the Government of Canada Core Subject Thesaurus. The Thesaurus can be found on the Internet at: http://en.thesaurus.gc.ca/these/thes_e.html; A short paragraph of Key Findings; Two electronic versions of the final report must be submitted - one in MS Word (.doc) and one in Adobe portable document format (.pdf), including the source files of all electronic images, e.g. graphs, photographs, tables and images, included in the document (minimum 4X5, 300 dpi). Contractors will receive a manual entitled “Publication Guidelines for Research Contractors”. This manual offers a step-by-step guide to the preparation of all reports for the Strategic Policy Research Directorate (SPRD). Its aim is to ensure that all essential information is included and to promote uniformity of format. Contractors are advised to follow the format described here and to adhere to the report requirements stipulated in the contract. Only final report documents which meet formal specifications will be accepted for final payment. Request for Proposal 9 7. Conditions: Copyright & Intellectual Property: will remain with the contractor but no publication should be released without notifying HRSDC prior to its release. HRSDC requests the contractor allow HRSDC to publish the document on the internet as part of a series of papers commissioned through HRSDC 8. Period of Contract: The contractor will commence upon signature of a contract and should complete the project no later than June 30, 2008. 9. Budget: The cost of professional fees shall not exceed the available budget of $45,000 excluding applicable taxes (GST/HST) and all other related expenses. data access fees to a Statistics Canada Research Data Centre (RDC), if applicable, will be paid to the contractor upon submission of an invoice from the RDC, up to a maximum of $4000.00. Bidders must submit a detailed statement of their estimated costs associated with the submission, including the per diem rates of all researchers who will be involved. 10. Communications: Prospective bidders may direct questions about this RFP to SPRD of HRSDC. Any questions must be posed in writing, and all questions and answers will be shared with all known prospective bidders. Written questions may be directed to: robert.hayman@hrsdc-hrdsc.gc.ca Proposals must be submitted before 16:00 (EST / EDT) November 23, 2007. Proposals will not be accepted after this time. Request for Proposal 10 11. Selection Criteria: a. Mandatory Requirements: The principle analysts must hold an advanced degree (MA, PhD, or equivalent) in at least one of the following areas: Economics Sociology Another discipline relevant to the topic. A detailed statement of the work planned for carrying out this project, including the identification of specific outputs and a schedule for their completion. Bidders should ensure to provide an outline of the level of work allocated to each contractor and subcontractor involved in the project. A Curriculum Vitae (CV) for each staff member involved in the paper, and the estimated time spent by the staff on each component of the paper. If some members are replaced after the contract is signed, the contractor must advise PRCD immediately in writing, and provide the names of the proposed replacement and a CV of the proposed replacement to justify their competence, failing which the contract may be terminated. Does not exceed the available $45,000 budget constraints. A detailed budget for the project must be provided. The bidders shall provide a cost breakdown for all components of the research project, including professional fees and other incidentals. b. Rated Requirements: Proposals will be assessed and awarded points to a maximum of 155 points. The relative importance of certain criteria is reflected in the following selection matrix: Request for Proposal 11 Criteria Total Points Min Pts Rqr’d TECHNICAL Demonstrated Understanding of the Policy & Research Issues Related to the Project Requirements 20 The bidder should demonstrate their understanding of the project requirements and requirements by situating the proposal within existing research and literature on the topic while also demonstrating awareness of HRSDC policy research interests (e.g., Labour Market, Skills and Social policy). Proposals should expand upon the background section outlined in the RFP, bidders who submit a proposal which only copies directly from the background section of the RFP will not be awarded points under the demonstrated understanding section. Proposed Theoretical Approach 30 Proposals will be evaluated on the theoretical approach outlined in the proposal. Where insufficient theoretical literature is available, or is inappropriate for the issues to be pursued, the proposal should provide a sound conceptual framework from which to address the issues. The bidder should ensure to thoroughly describe the relevant theoretical approach(es) (or conceptual framework) to be used in the research and provide an understanding of how such approaches will meet the scope of work. Proposed Methodological Approach 30 Proposals will be evaluated on the methodological approach outlined in the proposal. The bidder should ensure to thoroughly describe the methodological approach(es) to be used in the research and provide an understanding of how such approaches will meet the project requirements. Bidders should ensure that a full description of the proposed methodologies is included (e.g., empirical models, selection of participants in qualitative research etc.); proposals that simply state a process without elaborating on the steps within the process will not receive passing marks. Originality of Proposed Research 20 The bidder should ensure to demonstrate originality in their approach to the research question by indicating where its theoretical or methodological innovation lies. TOTAL TECHNICAL 100 70 CHARACTERISTICS OF THE CONTRACTOR Relevant research experience 40 Bidders should provide evidence of experiences in conducting similar types of work relevant to this project as well as expertise in the analysis & synthesis of information particularly as it pertains to the subject area. Relevant Policy-Oriented Writing Experience Bidders should provide details of relevant experience and competencies that clearly demonstrate the bidder’s experience in writing policy-oriented documents for various audiences. Bidders will be rated on the quality of the body of work completed. TOTAL CONTRACTOR CHARACTERISTICS Total Request for Proposal 15 55 155 38.5 108.5 12 c. Basis of Selection: The highest rated proposal meeting minimum point requirements within the stated budget constraints will be recommended for contract award. In the case of a tie, the contract will be awarded to the lowest cost bidder. A minimum score of seventy (70) percent overall is required to pass. Proposals not meeting the minimum 70 percent will not be considered for contract award. A further break down of how points will be awarded is provided in the Appendix. Given the uncertainties involved in such assessments, HRSDC is prepared to fund more than one such project to see where the analysis yields similar conclusions and where the analysis yields different conclusions. Individual contractors will be awarded no more than one $45,000 contract under this RFP. This will enable us to better assess where the conclusions are more or less robust. Up to four (4) separate contracts of $45,000 each (excluding applicable taxes), could be awarded under this same RFP. Proposal which suggest a budget greater than the available budget of $45,000 will automatically be excluded from the evaluation. 12. Payment: Payments will be based on the deliverables. Payment will be made 30 days after receipt of an invoice and upon acceptance of each deliverable by the Project Authority after review and edits. Payment of data access fees, if applicable, will be made after receipt of an invoice from the RDC. Thirty percent (30%) of the total contract value will be issued when the successful bidder has provided a preliminary point form draft report of the findings to Strategic Policy Research Directorate, (no later than December 16, 2007). Another fifty percent (50%) of the total contract value will be issued upon satisfactory completion of a complete draft (to be submitted no later than February 29, 2008). HRSDC will issue the last twenty percent (20%) of the payment upon satisfactory completion of the final report and power point presentation. The final report and power point presentation are to be submitted to HRSDC no later than May 12, 2008 at which time HRSDC has up to 30 days to review the documents, and if deemed satisfactory, issue the payment. Request for Proposal 13 Request for Proposal 14 APPENDIX Selection Criteria Points TECHNICAL PROPOSAL a) Demonstrated Understanding of the Policy & Research Issues Related to the Project Requirements: (maximum 20 points) Not addressed: 0 points (0%) Fair: 10 points (50%) Good: 14 points (70%) Very Good: 17 points (85%) Excellent: 20 points (100%) Subjective Rating Criteria for Requirement Not addressed: a demonstrated understanding of the departmental policy and research issues is not provided in the proposal or was copied directly from the proposal. There was no discussion of the specific research questions chosen to be addressed by the bidder. Fair: the bidder has little understanding the policy and research issues and / or does provide sufficient links to past research in the area. The bidder provided little elaboration from the proposal background. Little to no discussion of the narrowed research topic and questions to be addressed was provided. Good: the bidder has a satisfactory understanding of policy and research issues related to the project requirements. The proposal provided a good background description that built on the outlined background in the proposal. Some discussion of the research questions and narrowed topic was provided in the proposal. Very good: the bidder has a good understanding of how such research fits with policy and research issues related to the project requirements. The background was well written, clear and provided a good understanding of the state of past research. The proposal provided a good description of the narrowed research topic, its implications for the department, and the research questions to be addressed within this project. Excellent: the bidder has a sophisticated understanding of how such research fits with the policy and research issues related to the project requirements. The background provided an excellent link to previous research on the topic. An excellent understanding of the more narrow research focus was provided. A detailed understanding of the research questions and the impacts of this research for the department was outlined in the proposal. b) Proposed Theoretical Approach: (maximum 30 points) Not addressed: 0 points (0%) Request for Proposal 15 Fair: Good: Very Good: Excellent: 15 points (50%) 21 points (70%) 25.5 points (85%) 30 points (100%) Subjective Rating Criteria for Proposed Theoretical Approach: Not addressed: no information on the theory is provided in the proposal. Fair: proposal inadequately describes the proposed theory and / or the proposed theory is inappropriately linked to the research (i.e. inaccurate, outdated and / or irrelevant) and does not meet the project requirements. Good: the proposal provides a limited description of the theory proposed. The theory is appropriate for understanding key aspects of the problem / issue. Very Good: the proposal provides a decent description of the theory and I well suited for the topic and will meet the project requirements. Excellent: the theory proposed is discussed in depth and demonstrates a sophisticated knowledge of the topic. The selected theory demonstrates a clear understanding of key issues within the topic. c) Proposed Methodological Approach: (maximum 30 points) Not addressed: 0 points (0%) Fair: 15 points (50%) Good: 21 points (70%) Very Good: 25.5 points (85%) Excellent: 30 points (100%) Subjective Rating Criteria for Proposed Methodological Approach: Not addressed: no information on the proposed methodology is provided in the proposal. Fair: proposed methodology is significantly lacking in its description. At least three major questions remain around the methodology. No discussion of the benefits and consequences of this methodology is provided. Good: the description of the methods is adequate; however, at least two significant r questions remain around the methodology to be employed. A brief discussion of the benefits and consequences of this methodology is provided. Very Good: the description of the methods is good, however, there is one major questions or any number of small questions remaining around the methodology to be employed. A good discussion of the benefits and consequences of this methodology is provided. Excellent: the description of the methods is clearly articulated. A good discussion of the benefits and consequences of this methodology is provided. Request for Proposal 16 d) Originality of Proposed Research: (maximum 20 points) Not addressed: 0 points Fair: 10 points Good: 14 points Very Good: 17 points Excellent: 20 points Subjective Rating Criteria for Originality Not addressed: the proposal demonstrates no originality. Fair: the bidder has only fairly demonstrated originality. Good: the bidder has satisfactorily demonstrated originality. Very good: the bidder has provided a good demonstration of originality. Excellent: the bidder has a sophisticated proposal that demonstrates significant originality. CHARACTERISTICS OF THE CONTRACTOR a) Demonstrated Technical Expertise: (maximum 40 points) Not addressed: 0 points Fair: 10 points Good: 20 points Very Good: 30 points Excellent: 40 points Subjective Rating Criteria for Demonstrated Technical Expertise: Not addressed: no information on research experience provided in the proposal. Fair: contractor is missing / has failed to demonstrate relevant experience in at least three of the relevant experiences. Good: contractor is missing / has failed to demonstrate relevant experience in at least two of the relevant experiences. Very Good: contractor is missing / has failed to demonstrate relevant experience in at one three of the relevant experiences. Excellent: contractor has demonstrated relevant experience in all of the relevant areas. b) Relevant Policy Oriented Writing Experience: Request for Proposal 17 (maximum 15 points) Not addressed: Fair: Good: Very Good: Excellent: 0 points (0%) 7.5 points (50%) 10.5 points (70%) 13 points (85%) 15 points (100%) Subjective Rating Criteria for Relevant Research Experience: Not addressed: no information on experience writing research papers and policy-oriented documents for various audiences provided in the proposal. Fair: body of research demonstrates little quality experience in writing research papers and policy-oriented papers for various audiences. Good: body of research demonstrates some quality experience in writing research paper and policy-oriented documents for various audiences. Very Good: body of research demonstrates good quality experience in writing research papers and policy-oriented documents for various audiences. Excellent: body of research demonstrates significant quality experience writing research papers and policy-oriented documents for all audiences Request for Proposal 18