Until now, the MASH (municipal, academic, schools and hospitals)
sector has in practice been relatively unscathed by federal trade
agreements, such as the Agreement of Government
Procurement, the North America Free Trade Agreement
and the Agreement on Internal Trade (AIT). In contrast,
the federal government and its agencies have been subject to and
bound by these agreements and the companion federal Canadian
International Trade Tribunal Act (CITT). The CITT gives
disappointed bidders enforceable recourse against the federal
government and its agencies where the principles and stipulations
of the trade agreements are not observed.
The new CETA proposes to drill down and apply to the Provinces
and the MASH sector, in a legally binding and enforceable manner,
in the same way as the federal government and its agencies have
been subject to the CITT. This would have a major impact on MASH
sector procurement. Procurements by MASH entities would become more
scrutinized and more susceptible to challenge. MASH entities would
have to comply with strident measures designed to ensure
transparency and compliance. Disappointed bidders would have
enforceable recourse. Remedies could include monetary awards and
re-opening the outcome of bidding processes.
Illustration - Selection of Microsoft by Revenue Canada
challenged by Ottawa-based Corel Corp
The impact of the CITT on the federal government and its
agencies is illustrated by the Corel / Microsoft dispute involving
a procurement by Revenue Canada years ago. In May 1998, Revenue
Canada decided it needed new office software for Y2K – the
"millennium bug" was coming. Revenue Canada engaged in a
competitive process for this procurement. Ottawa-based Corel argued
that Revenue Canada discriminated against it in favour of
Microsoft. Corel argued that the bidding process was inherently
tilted in favour of rival Microsoft. Bidders were required to
provide estimated costs for converting the department's
Microsoft software and for training staff. The department had
already been using Microsoft products. Corel complained it
couldn't provide conversion costs because the department
wasn't supplying enough information. Corel perceived that
Microsoft had an advantage. In June 1998, Corel took its case to
the Canadian International Trade Tribunal and won. Revenue
Canada's liability extended beyond the usual contract and
common law principles. The principles of the trade agreements were
upheld. Corel was entitled to a level playing field. The Canadian
International Trade Tribunal ruled that the government had to
either reopen the bid or compensate Corel. Revenue Canada
unsuccessfully appealed, then reached a deal with Corel. In 1999,
the Globe and Mail reported that, as a result of the 1998 decision
of the Canadian International Trade Tribunal, the federal
government agreed to pay $9.9 million to Corel.
The Corel / Microsoft case is one of many such cases.
It is interesting to note that remedies are available not only
to foreign bidders but also to the Canadian bidders involved.
Implementation – Thresholds for Application
The proposed thresholds for CETA application are: for
Goods, $315,000; for Services, $315,000; for
Implementation Legislation – Timing
Federal implementation legislation for CETA is expected to be
tabled in House of Commons where it will be debated prior to
ratification (late 2014 or early 2015).
Thereafter Provincial implementation legislation would be
What to make of this?
As a lawyer practicing extensively with MASH entities, I
don't know whether to lament the added complexity - or welcome
it (and wring my hands in expectation). There will be more work for
Will things play out as is being projected?
A skeptic might point out that even though the Provinces are
party to the AIT (and the MASH Annex of the AIT purports to extend
to MASH entities), in practice MASH entities have not been affected
by the AIT to the degree that is now being projected for CETA.
However, it certainly appears that the proponents of CETA have a
strong resolve to capture MASH entities in its application. It
remains to be seen whether it will play out as is being projected
– stay tuned.
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.
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