The province of Quebec has long regulated the procurement of public services and construction contracts through the Act respecting contracting by public bodies1. The Act provided a legislative and regulatory regime governing the procurement by public authorities of supply, service and construction contracts.
The regime initially provided, in essence, that public bodies were required to proceed by way of public tender for contracts the value of which varied depending on the type of contract2 and the regulations set out the process which had to be adhered to. At the time the regulation was relatively innovative in that it allowed a qualitative analysis of bids submitted for certain types of contracts.
Since that time and as result of the various investigations which were carried out or are still ongoing, the provincial government has sought to address various concerns by amending the Act. A first series of measures was enacted which provided that, if contractors were convicted of certain identified offenses, they would be rendered ineligible for public contracts, and a register was established which would identify those ineligible contractors so that any public body issuing a tender could ascertain whether a given bidder was ineligible for same.
Confronted with the troubling testimony heard before the Charbonneau Commission revealing questionable practices dealing with the award of construction contracts, the newly elected provincial government tabled, on November 1, 2012, Bill - 1 entitled Integrity in Public Contracts Act, which amends, amongst other statutes, the Act respecting contracting by public bodies and, in effect, abolishes the existing register and creates a new register which will list those individuals and or contractors that will be authorized to transact business with the provincial government, either directly or by way of subcontract. The Bill has also extended its "reach" as it will apply not only to a wider array of "public bodies" but also to municipalities which were previously not subject to the Act.
The Bill has not yet been enacted and is presently the subject of parliamentary hearings pursuant to which the government may amend legislation to reflect some of the concerns that have been raised by the various stakeholders.
The new legislative and regulatory framework will require that any contractor interested in providing services to the government will have to be registered the effect of which will be to authorize the contractor to bid on public contracts and to contract for same. The registration, once obtained, will be valid for 3 years, which will then require a renewal. Where a consortium is formed for the purposes of a public contract, each member of the consortium will have to be authorized.
The Autorité des marchésfinanciers (the "Authority") has been tasked with administering the register, the applications for registration and their renewals. The Authority will either refuse to register a contractor or may revoke an existing authorization where it is shown that, in the preceding 5 years, the contractor or any of the shareholders3, directors or officers has been found guilty of one or more of the offenses listed in schedule to the Bill. The listed offenses are numerous and include fraud and tax evasion.
Moreover, where a contractor's authorization expires, due to either non-renewal or revocation, during the course of the contract, the contractor will be deemed to be in default at the expiry of the 60 days following the Authority's decision. The legislation does allow a contractor in such a position to obtain from the Conseil du Trésor leave to continue the performance of the contract on the terms and conditions that the Conseil du Trésormay deem appropriate.
In order to ensure that the public authorities comply with the provisions, they will be required to appoint a "contract rules compliance monitor" who will be charged with ensuring that the legislation and its regulations are followed and to review the public institution's internal governance measures to ensure that they meet these new requirements.
One provision which raises a number of questions and concerns relates to the discretion granted to the Authority to either refuse to qualify or revoke a previously granted authorization if it considers that "public confidence in the enterprise concerned is undermined on account of a lack of integrity on the part of the enterprise, any of its partners, directors or officers or another enterprise that has direct or indirect, legal or de facto control over the enterprise".
The discretion granted to the Authority by this provision is wide-rangling and, if enacted in its present form, will likely result in much uncertainty until such time as the courts will have circumscribed the ambit of the discretion. The draft legislation provides by way of some specific examples, some indication as to the manner in which the discretion may be exercised:
- Whether, in the preceding 5 years, the contractor or any of its shareholders, partners, directors, officers or another contractor that has a direct or indirect legal or de facto control over the enterprise has been the subject of indictments pertaining to the listed offenses;
- Whether the contractor or any of its shareholders, partners, directors, officers or another enterprise that has direct or indirect legal or de facto control over the contractor has, again in the preceding 5 years, been found guilty of, or been indicted for any other criminal or penal offense or has behaved in a reprehensible way in the course of the contractor's business;
- Whether a reasonable person would conclude that the enterprise is the extension of another enterprise that would be unable to obtain an authorization;
- Whether the enterprise can be perceived as lending its name to another enterprise that would be unable to obtain an authorization;
- Whether the enterprise is unable to prove that has legal sources of financing enabling it to carry out the contracts it has obtained;
- Whether the contractor's structure enables it to circumvent the application of the legislation.
This proposed legislation, which will require that all contractors interested in contracting with the public authorities establish their bona fides in order to obtain the authorization from the Authority, represents a significant departure from the existing regime which, for the time being, allows contractors to contract with public bodies unless having been listed on a register which expressly prohibits them from bidding and contracting with public entities.
The Bill has been the object of public consultation and numerous construction stakeholders, such as design professionals and construction industry associations, have provided comments on the draft legislation and suggested amendments.
If enacted in its present form, the Bill will obviously impact the procurement requirements of various public infrastructure projects, and contractors, amongst others, will have to modify their processes in order to ensure that they obtain the requisite authorization.
1 c. C- 65.1
2 The amounts were those provided in any existing interprovincial agreement: The amounts for construction contracts, by way of example, was $ 100 000.
3 Holding 50% or more of the voting rights.About BLG
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