The federal government's procurement department, Public Works and Government Services Canada (PWGSC), recently amended provisions of its Supply Manual that relate to the integrity certifications of bidders and contractors that want to sell to the federal government. The changes, which came into force on March 1, 2014, increase the grounds upon which companies can be barred from doing business with the Government of Canada.

Four significant changes

The new "Integrity Provisions" include four significant changes to the previous "Code of Conduct and Certifications" that bidders and contractors will need to comply with for bids and contracts entered into after March 1, 2014.

Defined time period: The previous Supply Manual clauses did not specify the time range applicable to certifications. As a result, if a bidder had been convicted of a listed offence at any time in the past, it could be debarred from bidding on a contract. The revised policy now states that a company and its affiliates cannot obtain a federal government contract within 10 years of being convicted of a listed offence, nor can an individual who has been convicted or been given a conditional or absolute discharge.

This is a significant improvement from the previous version as it provides a timeframe for certifications. Under the new provisions, only certain fraud-related offences will require, in addition to the passing of 10 years, a pardon, record suspension, or restoration of capacities as defined in the Criminal Code.

New offences: The list of offences that a company must certify that it and its affiliates have not been convicted of has been expanded. It now includes bribery of judicial officers, bribery of officers, extortion, forgery, fraudulent manipulation of stock exchange transactions, insider trading, falsification of books, criminal breach of contract, secret commissions, as well as the new offences in the Corruption of Foreign Public Officials Act.1 This adds a significant number of Criminal Code offences, some of which have no relation to government contracting, as well as updates to include recent coming into force of the amendments to Canada's anti-bribery legislation.  

Foreign offences: A company must now certify that in the previous 10 years, neither it nor its affiliates have been convicted of any offence in a foreign jurisdiction that the federal government "deems" to have similar constitutive elements as the offences enumerated in PWGSC's integrity provisions. The federal government will, however, consider any measures in the foreign jurisdiction that are similar to a Canadian pardon, record suspension, or restoration of capacities. Previously, foreign offences were not included as a basis for debarment. By adding this provision with a broad discretion, bidders and contractors will now be required to obtain confirmation from their foreign affiliates that the affiliates have not been convicted of offences similar to those listed in the Supply Manual clauses.

Subcontractors: A company must ensure that all subcontracts include integrity provisions that are "no less favourable to Canada" than the provisions that will be included in the contract between the company and the federal government. This will have a flow-down effect on subcontractors, which will now be indirectly required to comply with PWGSC's integrity provisions.

Impact of changes

While the 10-year time period is a welcome change, the others impose significant new requirements on companies doing business with the federal government. The increase in the number of listed offences, the addition of foreign offences and the requirement to flow down the integrity provisions to subcontractors means companies are at greater risk of debarment. Companies will need to increase their vigilance of affiliates and their due diligence of subcontractors. Of particular concern is that the revised integrity provisions maintain the very limited public interest exception, which means there is very little room to obtain a waiver from the requirements.  

The most concerning aspect of the new provisions is that they do not recognize or reward companies that have "cleaned house" within the 10-year period by, for example, removing employees who engaged in the corrupt behaviour that resulted in the conviction for a listed offence and putting in place practices and procedures to ensure that corrupt activities do not re-occur. This can result in the anomalous situation where a foreign affiliate that has "self-cleaned" can do business with the government in the jurisdiction in which the conviction occurred, but the Canadian affiliate that was not even involved in the foreign offence remains debarred by Canada for a 10-year period. Further changes to the PWGSC integrity provisions would therefore be desirable.

PWGSC's complete Standard Acquisition Clauses and Conditions Manual is available at: https://buyandsell.gc.ca/policy-and-guidelines/standard-acquisition-clauses-and-conditions-manual

Footnotes

1 Our publication about the new offences, "New Canadian corruption offence and other amendments to Canada's anti-corruption legislation come into force," is available online: http://www.nortonrosefulbright.com/knowledge/publications/100068/new-canadian-corruption-offence-and-other-amendments-to-canadas-anti-corruption-legislation-come-into-force

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