Canada: Legal Newsletter For Business Entrepreneurs And Executives, Number 17

Last Updated: June 21 2013
Article by Nicolas Gagnon

Nearly everybody talks about it. The Integrity in Public Contracts Act, also referred to as Bill 1, has been assented to on December 7, 2012 after an expedited review process of barely three months. Everybody is talking about it because the Act imposes on tenderers new requirements aiming at curbing fraud and corruption which, according to investigations of public authorities, undermine the construction industry.


The Act Respecting Contracting by Public Bodies ("ARCPB") determines the conditions applicable to contracts between a public body and private contractors involving an expense of public funds. It applies, among others, to government departments and bodies, educational and health establishments and public transit companies. The ARCPB applies to supply contracts, to services contracts and construction contracts entered into with these public bodies, as well as to public-private partnership agreements entered into as part of an infrastructure project carried out under a public-private partnership within the meaning of the Act respecting Infrastructure Québec.

The ARCPB imposes on public bodies the general rule whereby contracts are to be awarded by way of calls for tenders, which is supposed to enable owners to get the lowest contract price through competition between tenderers while affording to tenderers an equal opportunity to get State contracts. This being said, the conclusions of the Duchesneau Report, made following the police investigation of the Marteau Squad on fraud and corruption in the construction industry, and the revelations from the Charbonneau Commission, demonstrate that the call for tenders system for the awarding of public contracts obviously fails to achieve its expected results.

Bill 1 accordingly amends the ARCPB in order to reinforce integrity in public contracts and control access to these contracts. It further increases the number of public bodies covered by this Act by adding entities such as Hydro-Québec, Loto-Québec and the SAQ.

The amendments implement a system to verify whether enterprises wishing to enter into contracts with public bodies or municipalities meet the required conditions as regards integrity. Therefore, an enterprise wishing to enter into a contract or a related subcontract for an amount equal to or greater than a threshold determined by the government is required to obtain an authorization from the Autorité des marchés financiers (the "AMF"). This rule is also applicable to sub-subcontracts, the amount of which is equal to or greater than such threshold.

Subject to transitional provisions, the enterprise must be authorized as of the date it files its bid, except where the call for tenders specifies a different date which precedes the date the contract is entered into. An authorization must be maintained throughout the contract or subcontract. An authorization is valid for a period of three years and must be renewed upon expiry. The AMF keeps a public register of enterprises holding an authorization to enter into a contract or a subcontract. These rules also apply to contracts awarded by towns and municipalities.


An application for an authorization must be made to the AMF using a prescribed form with several schedules, which can be obtained from the website of the AMF. A guide for enterprises wishing to obtain an authorization is also available from the same website. The contractor must also provide with his application an attestation from Revenu Québec, issued not more than 30 days before the date on which the application is files, stating that the enterprise has filed the returns and the reports that it was required to file under fiscal laws and that it has no overdue account payable to the Minister of Revenue. Lastly, the enterprise must not have been refused an authorization or have had its authorization revoked in the preceding 12 months.

Upon receipt of an application for authorization from an enterprise, the AMF sends to the permanent anti-collusion squad (unité permanente anticollusion or "UPAC") the information obtained in order for the UPAC to make the verifications it deems necessary, in collaboration with the Sûreté du Québec, Revenu Québec, the Régie du bâtiment du Québec and the Commission de la construction du Québec. The UPAC sends to the AMF a report on the compliance of the enterprise with the integrity requirements. The AMF renders a decision of the application for an authorization.


The Act provides for mandatory and discretionary grounds for refusal. The fact, for an enterprise or related person, to be found guilty of any offence under various provincial or federal laws as listed in Schedule I to the Act results in the enterprise being automatically denied its application for an authorization. The offences listed in Schedule 1 mainly relate to criminal law and tax laws.

Therefore, if the enterprise which applies for an authorization, any of its shareholders holding 50% or more of the voting rights attached to the shares of the enterprise, or any of its directors or officers has, in the preceding five years, been found guilty of an offence listed in Schedule I of the Act, the AMF refuses to grant or to renew an authorization. The AMF may even revoke an authorization if an enterprise or any of its related persons is subsequently found guilty of such an offence.

Furthermore, if an enterprise has, in the preceding five years, been found guilty by a foreign court of an offence which, if committed in Canada, could have resulted in criminal or penal proceedings for an offence listed in Schedule I, the AMF will automatically deny the issuance or renewal of an authorization. Lastly, an enterprise found guilty of certain offences described in electoral laws, who, in the preceding two years, has been ordered to suspend work by a decision of the CCQ or been ordered to pay an amount claimed under subparagraph c.2 of the first paragraph of section 81 of the Act respecting labour relations, vocational training and workforce management in the construction industry will also be denied its application for an authorization.

The AMF may also at its sole discretion refuse to grant or to renew an authorization or even revoke an authorization to an enterprise if the enterprise concerned fails to meet the high standards of integrity that the public is entitled to expect from a party to a public contract or subcontract. In this respect, the AMF, following an investigation by the UPAC, will review the integrity of the enterprise, its directors, partners, officers or shareholders as well as that of other persons or entities that have direct or indirect legal or de facto control over the enterprise (a "Related Person").

To that end, the AMF may consider the following factors listed in the ARCPB:

  1. whether the enterprise or a Related Person maintains connections with a criminal organization;
  2. whether the enterprise or a Related Person has been prosecuted, in the preceding five years, for any of the offences listed in Schedule I;
  3. whether an enterprise or a Related Person has been a Related Person of another enterprise which was found guilty, in the preceding five years, of an offence listed in Schedule I, at the time such offence was committed;
  4. whether an enterprise or a Related Person is under the direct or indirect legal or de facto control of another enterprise that has, in the preceding five years, been found guilty of an offence listed in Schedule I;
  5. whether the enterprise or a Related Person has, in the preceding five years, been found guilty of or prosecuted for any other criminal or penal offence;
  6. whether the enterprise or a Related Person has repeatedly evaded or attempted to evade compliance with the law in the course of the enterprise's business;
  7. whether a reasonable person would conclude that the enterprise is the extension of another enterprise that would be unable to obtain an authorization;
  8. whether a reasonable person would conclude that the enterprise is lending its name to another enterprise that would be unable to obtain an authorization;
  9. whether the enterprise's activities are incommensurate with its legal sources of financing; and
  10. whether the enterprise's structure enables it to evade the application of the ARCPB.


A contractor or subcontractor whose authorization expires, is revoked or denied upon application for renewal is deemed to have defaulted on the public contract or subcontract on the expiry of a period of 60 days after the date the authorization expired or the AMF notified its decision. In such a case, the enterprise must cease its work under any public contract, except for contracts where only the obligation to honour the contractual guarantees remains. However, the enterprise may continue to perform the public contract if the public body, for reasons of public interest, applies to the Conseil du trésor for permission for continued performance of the public contract or subcontract in question. The Conseil du trésor may subject the permission to certain conditions, including that the contractor or subcontractor agrees to the implementation, at the contractor's or subcontractor's expense, of oversight and monitoring measures. In the case of bonded contracts, regulations favour the exercise of oversight and monitoring measures by the surety of the enterprise.


The proclaimed target of the government is to submit any contract worth $25,000 and more to the authorization mechanism. However, as more than 24,000 different enterprises on average enter each year into contracts worth in the aggregate between $20,000,000,000 and $30,000,000,000 per year with public bodies, the UPAC and the AMF will obviously not be able to review the files of all the enterprises wishing to enter into contracts with public bodies.

The Act therefore provides that, from the day it comes into force, the new provisions apply to contracts and subcontracts that involve an expenditure equal to or greater than $40,000,000 and for which the award process is underway on that date or begins after that date.

Furthermore, the Act also provides that regardless of the amount of the contract, the government may, before March 31, 2016, determine that the rules requiring an authorization apply to public contracts or subcontracts even if they involve a public expenditure amount of less than $40,000,000 or that such rules apply to a category of contracts other than those determined in application of the sections in question. In such a case, the Government may determine special terms for the applications for authorization that enterprises must file with the AMF in respect of such contracts. We have seen some examples of the application of this provision since December 19, 2012, since the government, by five different orders in council, has identified 125 contracts of the City of Montreal, the estimated value of which would likely be less than $40,000,000, which would require an authorization. These orders in council have been issued at the request of the City of Montreal, which wanted to subject these contracts to the new authorization regime. Specific application conditions have been made applicable to these orders in council, particularly the following:

  • a preliminary application for authorization must be filed by each tenderer to the AMF no later than on the deadline for submitting bids;
  • only the applications of the two best ranked tenderers after the bids have been analyzed would be considered by the AMF as being completed;
  • if the contract cannot be awarded to either of those tenderers, the other preliminary applications would be considered completed for the subsequent tenderers until the contract can be awarded.

Lastly, the Act provides that the Government may, before 31 March 2016, require enterprises that are party to public contracts that are in process to file an application for authorization within the time it specifies. This provision is not limited to the contracts that are in process at the time the Act comes into force and may therefore affect any contract in process before March 31, 2016, possibly for a contract whose awarding process would have commenced after January 15, 2013. The consequences of this provision are serious since an enterprise which would not obtain its authorization following a request from the government would see its name registered in the register of enterprises ineligible for public contracts (designated under tis French acronym the "RENA") for a period of five years. Such registration results in a presumption of default under all of its public contracts in process and forces the enterprise to cease its work unless the co-contracting public body obtains from the Conseil du trésor the permission for the enterprise to continue its work, with or without conditions.

A first order in council has just been issued under this provision on May 8, 2013, under which the Centre hospitalier de l'Université de Montréal (CHUM) and the Centre Universitaire de Santé de McGill (CUSM) requested the government to require a party to a contract with them to apply with the AMF for the authorization to enter into a contract. This order in council grants to the enterprise 21 days from the date it comes into force to file its application for the authorization to enter into a contract. The order in council adds that if the enterprise fails to provide within the allotted time the information and documents prescribed by the AMF, it will be deemed to have defaulted under the contract within 60 days following the expiry of the 21 days period or the expiry of the time granted by the AMF for providing the information it requested, according to the case. It must be understood from that order in council that should the enterprise fail to provide its application for authorization to the AMF, it will be deemed to have defaulted under the contract.


The new conditions for obtaining a public contract imposed by the Act are demanding but they are no stranger to the legislative framework applicable to the construction industry. In fact, the Building Act was already imposing similar high integrity conditions to enterprises who wish to obtain a licence from the Régie du bâtiment. It does not seem to this day that the Régie du bâtiment has pushed the systematic application of these control rules. However, it must be understood that with Bill 1, unanimously passed by the National Assembly, government authorities intend to exercise strict control over the integrity of enterprises wishing to enter into contracts with the State. These enterprises must therefore ensure that they, as well as their directors, officers and shareholders, have a clean record, failing which they will suffer a purgatory of up to five years with no access to public contracts. Enterprises with a director, officer or shareholder charged with, or found guilty of an offence listed in Schedule I to the Act must distance themselves from such persons if they wish to maintain their right to enter into contracts with the State.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.