The New Public Contracting World
As part of an ongoing initiative aimed at ensuring Canada only
does business with ethical suppliers, Public Works and Government
Services Canada ("PWGSC") has introduced changes to its
Integrity Regime and Code of Conduct for Public Procurement. A new
Integrity Regime (the "New Regime") for procurement and
real property transactions came into effect on July 3, 2015,
replacing the former PWGSC Integrity Framework (the "Old
Regime"). It applies to real property contracts, goods and
services contracts and construction contracts that are completed by
federal government departments and agencies as identified in
Schedule I, I.1 and II of the Canada Financial Administration
Act.
The New Regime provides flexibility and seeks to alleviate the
supplier's burden. Its key features include: reduced debarment
from an automatic 10 years to a possibility of five years, a more
contextual approach regarding affiliates, a five year debarment for
contracting with an ineligible supplier, and incentives to
self-report transgressions. For more information on the New Regime
see our more detailed assessment here. The New Regime can
be found here.
Key Features of the New Regime
Ineligibility Offences
If a supplier or members of its board of directors are convicted
or discharged (either absolutely or conditionally) of any of the
listed offences (or similar foreign offences) in the previous three
years it is prohibited from doing business with the Canadian
Government. The New Regime now explicitly states that any existing
contracts between the supplier and the federal government can be
terminated. There is no minimum dollar amount for committing any of
the listed offences.
Some examples of the listed offences include: payment of a
contingency fee to a person to whom the Lobbying Act
applies; corruption, collusion, bid-rigging or any other
anti-competitive activity under the Competition Act; money
laundering; income and excise tax evasion; bribing a foreign public
official, and secret commissions.
Period of Ineligibility
The period of ineligibility will last for 10 years unless the
supplier applies for reduced ineligibility to have this period
lessened by up to five years. Reduced ineligibility may be granted
if the supplier can demonstrate that it cooperated with the
authorities and it has undertaken corrective action. This would
require an administrative agreement. Debarment will be permanent if
a supplier has been convicted of fraud against the Canadian
Government under either the Criminal Code or the
Financial Administration Act, unless the supplier obtains
a record suspension.
Offences by Affiliates
If an affiliate commits one of the listed offences, the PWGSC will
conduct an assessment to determine the degree to which the supplier
exercised control over the affiliate. For the assessment, the PWGSC
will look at whether or not the supplier assented to, acquiesced
in, directed, influenced, authorized, or participated in the
commission or omission of the offences committed by the affiliate.
This is a significant change from the Old Regime in which a
conviction of an affiliate was an absolute bar to a supplier
dealing with the federal government.
Bid Requirement
A supplier's bid must contain certification that it, its
directors and its affiliates have not been charged, convicted, or
absolutely/conditionally discharged of any of the listed offences
(or similar foreign offences) within the past three years.
Contractors at Risk of Debarment
A supplier cannot subcontract with another supplier who has been
deemed ineligible. The PWGSC will provide a list of ineligible
suppliers, and suppliers are required to verify its
subcontractor's eligibility. If a supplier enters into a
subcontract with an ineligible supplier, the prime supplier will be
debarred for five years. Suppliers should now create and follow
strict due diligence processes to screen any potential
subcontractors.
Suspensions
If a supplier is charged with or admits guilt to any of the listed
offences, the PWGSC could suspend the supplier from doing business
with the Canadian Government for 18 months. After a suspension,
there is no mechanism by which the supplier could be compensated if
the supplier is exonerated.
Advance Determination of Debarment Status
At any time, a supplier is able to request an advance
determination of its ineligibility. The request must contain an
accurate account any unfavourable information regarding the
supplier. This is meant to incentivize suppliers to disclose its
own transgressions earlier because cooperation will be regarded
favourably. The advanced determination is final and binding with
only the option for a limited re-evaluation through judicial
review.
International Implications
In determining whether a supplier will be deemed ineligible based
solely on a foreign conviction, the New Regime will scrutinize the
foreign charge and compare it with the Canadian charge to determine
if debarment is appropriate. This assessment must be made by an
independent third party.
Application
The New Regime does not operate retroactively. It applies to
contracts entered into and procurements in process as of July 3,
2015. It does not affect pre-existing contracts. The PWGSC will
re-assess the eligibility of suppliers who have been deemed
ineligible under the Old Regime.
Administrative Agreements
An Administrative Agreement is an agreement between the supplier
and the PWGSC. As a means of reducing risk, the agreements will be
used in situations where caution must be exercised in contracting
with a certain supplier. Remedial and compliance measures for
eligibility would be included in such an agreement.
Public Interest Exception
There is an exception that operates to retain a debarred supplier
when it is in the public interest to do so. Such instances of
public interest include: if there is no other contractor capable of
the work, if there are emergent national security circumstances, or
if the government's financial interests are in jeopardy.
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.