On July 11, 2012, Public Works and Government Services Canada (PWGSC) released updates to its integrity provisions surrounding procurement and real property transactions (the "Integrity Provisions"). The July 11 updates were introduced as a reaction to Quebec's Charbonneau Commission1; however, they have also broadened the scope of the Integrity Provisions, specifically in their application to real property transactions.
The purpose of PWGSC's Integrity Provisions is to promote transparency, accountability and integrity throughout the procurement process and to strengthen PWGSC's commitment to doing business with companies that respect the law. In order to achieve these goals, the Integrity Provisions contains a list of offences that if convicted would render companies and individuals ineligible to bid on PWGSC contracts. These include:
- frauds against the government under the Criminal Code of Canada;
- frauds under the Financial Administration Act;
- corruption, collusion, bid-rigging or any other anti-competitive activity under the Competition Act in the procurement process; and
- payment of a contingency fee to a person to whom the Lobbying Act applies.2
The July 11 updates have expanded the list of ineligible offences to include the following:
- money laundering;
- participation in activities of criminal organizations;
- income and excise tax evasion;
- bribing a foreign public official; and
- drug trafficking.3
Additionally, unlike previous iterations of the Integrity Provisions, the ineligible offences will now apply to real property transactions such as leasing agreements, letting of space and acquisition and disposal of Crown-owned property.4 The updates are effective immediately and will be applied to all future PWGSC solicitations and real property transactions. Both the existing and new offences will be taken into consideration when evaluating an applicant's eligibility. These measures will also allow PWGSC to terminate early any contracts and/or leases with companies or individuals that are convicted of an above listed offence before the end of their contract or lease.5
If a company or individual has been convicted of one of the offences listed in the Integrity Provisions they will be ineligible to participate in the procurement process unless they can satisfy one of three exceptions:
- the company has been granted a pardon;
- the company's capacities have been restored by the Governor-in-Council; or
- it is necessary to the public interest for the PWGSC to award a contract to, or to enter into a real property agreement with, the company.6
Those companies who have not yet been convicted may avoid the Integrity Provisions if an official suspected of one of the listed offences leaves or is fired before they are convicted.7 Further, the policy does not prevent companies from obtaining government contracts if they are convicted of an offence outside of Canada.8
Prior to the July 11 updates there was an additional exception to the ineligibility offences for companies or individuals involved in a leniency program, such as the one offered by the Competition Bureau. The Competition Bureau leniency program provides for more lenient sentences for companies or individuals accused of one or more criminal cartel offences provided they voluntarily agree to cooperate with the Bureau's investigation and plead guilty to the offences.9 The July 11 updates have removed this exception, meaning any company or individual that is involved in a leniency program will be excluded from future contracts with PWGSC.10 This will be true regardless of whether they have secured a contract with PWGSC in the past.
PWGSC has also simplified the verification process for companies and individuals seeking to satisfy the integrity provisions. The PWGSC now requires the applicant to:
- certify that neither bidders nor proponents seeking to enter into a contract or real property agreement, nor their affiliates, have any of the convictions listed under the Integrity Provisions; and
- provide a complete list of names of all individuals who are currently members of their board of directors.11
PWGSC will then verify this information and if they require any additional verification they will request a signed Criminal Record Verification Check consent form from the applicant before a contract is awarded.12
These changes to the Integrity Provisions present a number of considerations for applicants moving forward. PWGSC will now require additional integrity provisions in their contracts that have a real property component; which will include the provision that will allow for the early termination of a contract in the event of a conviction for one of the listed offences. In addition, all applicants must conform to both the integrity and verification requirements in order to be eligible for consideration. Although contracts made with PWGSC before the July 11, 2012 updates will be honoured, the updated policy may take effect if existing contracts are modified.13 This means that companies and individuals who are currently doing business with PSWGC and those who plan on doing business with PWGSC in the future will need to be aware of the new Integrity Provisions and carefully consider how this will affect their proposed transaction.
1. Elizabeth Thompson, "Firms linked to crime can keep Federal contracts under new integrity policy" ipolitics (December 7, 2012).
2. Public Works and Government Services Canada, "Integrity provisions" (December 17, 2012), online.
5. Public Works and Government Services Canada, "Harper Government Takes Action To Crack Down On Corruption" (July 11, 2012), online: Canada News Centre.
6. Supra note 2.
9. Competition Bureau "Leniency Program" (November 14, 2011), online.
10. Supra note 2.
13. Supra note 1.
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