Canada: Government Of Canada Announces New Integrity Regime For Federal Contractors

On Friday, July 3, 2015, the Government of Canada ("GoC") issued its long-awaited changes to the federal integrity regime. The Ineligibility and Suspension Policy establishes a new ethical framework for bidders/contractors (hereinafter referred to as "suppliers") doing business with the federal government. This memo summarises the key points in the recently-issued policy statement.

With these changes, the GoC addresses some of the harsher and more intransigent provisions that Canada's business community railed against in previous versions of the integrity regime. However, there is real concern that the changes do not go far enough to mitigate the tough consequences  that can potentially arise from the application of the federal integrity provisions. Moreover, in view of additional grounds for debarment in this revised policy, there is also concern that companies may face debarment without first having been convicted by any court of any of the enumerated offenses.

Before looking at the new policy, it is worth remembering that earlier integrity provisions issued by Canada's procurement department – Public Works and Government Services Canada ("PWGSC") – created an immovable 10-year period of debarment for suppliers who were convicted of particular itemised offenses. And then in 2014, PWGSC ramped up the reach of the integrity regime to include the actions of world- wide affiliates and directors if convicted of the enumerated offenses in Canada, or of similar offenses, in a foreign jurisdiction. The 2014 changes crystallised the business community's opposition to the unforgiving and harsh effects of Canada's integrity regime, long-considered to be the toughest among our trading partners.

To give one example: under the previous integrity regime, it was virtually impossible for companies to avoid the 10-year period of debarment even if they had taken proactive steps  to "clean up" the misconduct by way of voluntary disclosure and cooperation with government authorities, or by putting in place measures to avoid future ethical breaches. Moreover, Canadian businesses did not want to be held accountable for the ethical breaches committed by related companies in foreign jurisdictions.

Over the past year, Canada's business community has  lobbied the GoC long and hard for changes to the integrity regime, ones that would not have such devastating effects on companies doing business with the federal government. The recently-announced changes to the GoC's integrity regime respond in part to that lobbying effort, but still allow the government to maintain its stance that it is tough on those who break the law, which remains one of this government's foundational pillars.

a) Scope of Application

The Ineligibility and Suspension Policy applies to virtually all government solicitations and resulting contracts and comes into effect immediately. However, because these new provisions are forward-looking, they do not affect current contracts or solicitations. Although the Ineligibility and Suspension Policy applies to most government contracts, some contracts are exempted, such as work to be performed outside Canada, insurance contracts, financial contracts, lease-to-own contracts for real property, contracts in existence before the new policy came into effect last week etc. In order to give effect to these new provisions, all solicitations and contracts undertaken after the changes were announced will contain contractual terms and conditions reflecting the form and substance of the policy.

b) Permanent or Temporary Debarment, and the Implications Arising from the Actions of Affiliates

The Ineligibility and Suspension Policy imposes permanent debarment of suppliers for certain offences, such as fraud against the GoC, and certain frauds committed in respect   of election funding. In respect of other offenses like bribery of judicial officers; extortion; laundering proceeds of crime; bid rigging; false or deceptive statements under the Income Tax Act or Excise Tax Act; bribing a foreign public official; if convicted within the past 3 years, a supplier will be ineligible for a contract award for 10 years. If a bidder has obtained a pardon, or was given an absolute or conditional discharge, they may still be eligible to receive federal contracts.

If a supplier is convicted of an offense in a foreign jurisdiction that is similar to the ones enumerated in  the Ineligibility and Suspension Policy, it may also be debarred, assuming that the prosecution process in the foreign country was not motivated by improper means and that the supplier had the right to mount a full defense to the allegations. These foreign-prosecution qualifications are intended to respond to concerns voiced about unfair prosecutions initiated abroad which were initiated for political or retaliatory reasons.

A supplier can also be debarred permanently or for a prescribed period of time, if any of its affiliates have been convicted of one of the enumerated offenses if there is evidence showing that the supplier somehow directed, influenced, authorized or assented to the unauthorized behavior of the affiliate. Requiring the supplier to have some involvement in the actions of the affiliate is an important change with these revised provisions.

Under the previous integrity regime, if an affiliate was convicted in Canada or abroad, the supplier would face debarment, even if it had nothing to do with the acts committed by the affiliate. Now, if the supplier can show it was in no way involved in the actions of the affiliate, it may avoid a period of debarment altogether.

This is a welcome change, particularly because the definition of affiliate is so broad. The term "affiliates" is defined in the Ineligibility and Suspension Policy to include a person, (including, but not limited to, organizations, bodies corporate, societies, companies, firms, partnerships, associations of persons, parent companies or subsidiaries, whether partly or wholly-owned), as well as individuals, directors, officers and key employees if: one controls or  has the power to control the other, or a third party has the power to control both. It is apparent therefore that these integrity provisions take into account the actions of the company and affiliates, but also the actions of individuals who lead the company. So, if a director of a supplier is convicted of bribery or corruption, this may result in the supplier becoming ineligible to receive a contract.

This wide-reaching definition is a carryover from the previous iterations of the integrity regime and is one of the areas of most concern to Canadian businesses who have claimed, with some justification, that they ought not be punished for the wrongs committed by a related company over whom they had no control.

c) Right to Request a Redetermination for Actions of Affiliate

Another important change in the Ineligibility and Suspension Policy is the provisions which will allow for what is termed a Limited Review. In this process, a supplier can ask the Minister to reconsider a declaration of ineligibility based on a conviction of an affiliate. Upon receipt of a request, the Minister will consider whether the supplier directed, influenced, authorized, assented to, or acquiesced in the affiliate's illegal conduct. If the supplier can demonstrate that none of those factors apply, the supplier will again be eligible to receive contracts.

d) Potential Reduction to the Period of Debarment

The Ineligibility and Suspension Policy includes some interesting changes regarding the potential reduction of the period of debarment. First, suppliers may request a reduction of up to 5 years if the Minister approves of an Administrative Agreement. Second, as we noted above, a period of debarment may not be imposed or maintained if the supplier has been granted an absolute or conditional discharge or granted a pardon in Canada, or in the country where the conviction was entered. This change will be welcome news to companies who, through their cooperation with authorities, will remain eligible for GoC contracts even though they have committed one of the enumerated  offenses.

Unfortunately though, because Canada's justice system does not permit deferred or non-prosecution agreements for companies, suppliers in Canada cannot avoid debarment by voluntarily disclosing and remediating the ethical conduct. That said, a supplier might be able to  avoid debarment if it does cooperate with authorities and, in consequence of that cooperation, it receives an absolute or conditional discharge which, as we noted earlier, may  be a reason for avoiding debarment altogether. However, unlike other integrity regimes where suppliers can avoid prosecution altogether, a supplier in Canada accused of misconduct will have to endure the criminal prosecution process and hope that, at the end of that process, it receives a discharge.

e) Suspensions from Procurement Process Participation

In a significant departure from the previous integrity provisions, under the new regime, the Minister may suspend a supplier from participating in a procurement process for up to 18 months if the supplier has admitted  to, or been charged with, any of the enumerated offenses. This period may be extended if the court proceedings continue beyond the 18-month period. However, this section also allows the Minister to abridge or suspend the period of suspension and allow a supplier the opportunity to compete for future government contracts if it enters into an Administrative Agreement. If a supplier does not have  an Administrative Agreement in place when a particular procurement process is initiated, the supplier will be ineligible to receive a contract if it is suspended under this provision.

The suspension provision is an important change arising from the Ineligibility and Suspension Policy. Concern has been expressed that a suspension, without first having a conviction, runs counter to Canada's justice system which presumes everyone to be innocent until proven guilty. That (important) point noted, the revised integrity regime provides that suppliers who have been charged (but not convicted) with an enumerated offense, and who have been suspended, may have that suspension revoked by the Minister if the supplier enters into an Administrative  Agreement.

f) Ineligible Subcontractors

In another noteworthy change, suppliers face a 5-year debarment if they engage a subcontractor, or an affiliate of the subcontractor, who has been convicted of one of the enumerated offenses. This provision is of particular importance for general contractors who must now ensure that their subcontractors or their affiliates have not been convicted of the enumerated offenses.

g) Advance Determinations

A supplier may request an advance determination about whether or not it is ineligible to receive a contract from the GoC. A supplier can submit information to show why  it should not be declared ineligible notwithstanding the charges or convictions. The Minister may request further information, or retain a Third Party Monitor, to validate the information provided. If the Minister determines that a supplier is ineligible, the supplier's only recourse is to the Federal Court of Canada by way of judicial review.  In other words, there is no appeal process to review the Minister's decision.

h) Advanced Warning of Ineligibility or Suspension

If the Minister believes that a supplier is ineligible to receive a contract, he can issue a Notice of Intention  to Declare Ineligible/Suspend. Upon receiving this Notice, a supplier will then have 30 days to respond to this Notice, setting out why the supplier should not be declared ineligible. Suppliers who are declared ineligible or suspended will be included on a list that will be made public.

i) Administrative Agreements

As we noted above, the Ineligibility and Suspension Policy permits a supplier to enter into an Administrative Agreement, the effect of which is to lessen the period of certain debarment and suspension. Under an Administrative Agreement, the supplier will generally agree to a separation of employees from management or programs; implementation or extension of compliance programs; employee training and information; outside auditing; access to contractor records; or some other form of remedial or compliance measure.

If an ineligible supplier wants to participate in a procurement process that is underway, but does not yet have an Administrative Agreement in place, it will not be permitted to receive a contract in that solicitation.

Another important change in the Ineligibility and Suspension Policy grants contract authorities some flexibility to permit the supplier to carry on with an ongoing contract, rather than automatically terminating the contract in the event the supplier is convicted of an enumerated offense.

j) Public Interest Exemption

Like the earlier integrity provisions, the Ineligibility and Suspension Policy permits the GoC to enter into contracts with a supplier even if it has been convicted of one of the enumerated offenses where to do so is in  the public interest. This is known as the Public Interest Exemption ("PIE") and it allows an otherwise ineligible supplier to receive contracts in cases where there is a pressing emergency, the supplier is the only party capable of performing the work, the contract is necessary to ensure sufficient stockpiles or where not entering into the contract would adversely impact the health, national security, safety, or economic or financial well-being of  the people of Canada, or the functioning of the public service. If the PIE is invoked, the supplier will be required to enter into an Administrative Agreement. This exemption will apply only to the urgently undertaken contract in question and will not constitute a waiver of debarment or suspension for other contracts.

k) Registrar of the Ineligibility and Suspension List

The Ineligibility and Suspension Policy will create a position within PWGSC to act as Registrar of the Ineligibility and Suspension List. The Registrar will include on the List the names of all persons and companies who are ineligible to receive government contracts. Importantly, if a supplier intends to use a subcontractor, the supplier is required to make enquiries of the Registrar to ensure  it is not dealing with an ineligible party. This requirement is very important, and one that must be followed by all general contractors, to ensure they do not become ineligible through the inadvertent hiring or an ineligible person or contractor.

The List can be accessed at: http://www.tpsgc-pwgsc.gc.ca/ci-if/four-inel-eng.html. Currently, there are no company names on the List.

If the subcontractor is a person, the supplier must get the person's consent permitting disclosure of information to the supplier about whether the person is ineligible to receive a contract.

Concluding Remarks

These changes require the attention of all federal contractors. The new provisions in some ways mitigate the harshness of the previous integrity regime, but in other ways impose new obstacles for companies selling to the federal government. Knowing how these provisions can affect your company is crucial. Adherence to high ethical standards is important not only to ensure compliance with the law, but also to ensure suppliers are not cut off from federal contracts, which for some suppliers is the blood that keeps them alive.

The Ineligibility and Suspension Policy and associated documents can be found at: http://www.tpsgc-pwgsc.gc.ca/ci-if/ci-if-eng.html.

About BLG

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 Mondaq.com.

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

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions