Reconciling Public Sector Procurement Requirements Under the New West Partnership Trade Agreement and the Agreement on Internal Trade


This post was written prior to our January 2017 merger, under our previous firm name, MacPherson Leslie & Tyerman LLP.

Many public sector entities in Canada are subject to domestic or international trade agreements that can impact procurement processes.

In British Columbia, Alberta and Saskatchewan, the New West Partnership Trade Agreement (NWPTA) and the Agreement on Internal Trade (AIT) impose a number of procurement-related obligations and requirements on most public entities including government ministries and departments, Crown corporations, and entities in the “MASH” sector (i.e. municipalities, school divisions, health regions and other publicly funded academic, health and social service entities).

The objective of both the AIT and the NWPTA is to reduce barriers in trade in order to increase competitiveness, economic growth and stability amongst their signatories. Each trade agreement includes procurement obligations based on the principles of non-discrimination, non-circumvention, openness and transparency.

However, the fact that there are contemporaneous procurement requirements under both the NWPTA and the AIT has the potential to complicate the area of procurement for public entities in the three western provinces as these entities must consider the application of both agreements on their existing procurement practices.

In order to determine what procurement rules an entity should adhere to, it is important to understand the effect of the combined application of the AIT and the NWPTA procurement provisions.

What is the AIT?

The AIT is essentially a free trade agreement between the provincial, federal and territorial governments of Canada. The AIT came into effect in 1995 and, since that time, a number of amendments have been made to the original agreement. The AIT is divided into several chapters and the procurement obligations are included in Chapter 5. According to the AIT, the purpose of Chapter 5 is to establish a framework to ensure equal access to procurement for all Canadian suppliers in order to contribute to a reduction in purchasing costs and the development of a strong economy in a context of transparency and efficiency.

What is the NWPTA?

The NWPTA is a trade agreement between the provinces of Saskatchewan, Alberta and British Columbia, signed April 30, 2010, which supplements the provisions of the AIT. The NWPTA was enacted pursuant to Article 1800 (Trade Enhancement Arrangements) of the AIT, which permits the provinces to enter into additional arrangements to liberalize trade, investment and labour mobility beyond the level required by the AIT.

How is the NWPTA Different From the AIT?

While the general procurement principles of the NWPTA and the AIT are the same, the NWPTA differs from the AIT in three important ways:

(1)   Scope of Application. The NWPTA has an expanded scope in that it applies broadly to public entities, including government ministries and departments, Crown corporations, government-owned commercial enterprises, and entities in the MASH sector (i.e. municipalities, school divisions, health regions and other publicly funded academic, health and social service entities). In other words, the NWPTA generally applies to all public bodies unless there is an applicable exemption. These exemptions are based upon the circumstances of the procurement rather than a specific list of entities. In contrast, the AIT applies to entities that are specifically listed as being subject to the agreement, and there are extensive lists of inclusions and exclusions. Accordingly, the NWPTA may apply to entities that are not specifically subject to AIT.

(2)   Dispute Resolution. Under the NWPTA a person may be awarded monetary damages awards in addition to dispute settlement costs. In contrast, no monetary damages awards are available under the AIT.

(3)   Procurement Thresholds. Both the NWPTA and the AIT contain thresholds to avoid the need to apply the strict procurement rules to smaller purchases. However, under the NWPTA, the monetary thresholds for procurement are generally lower than the AIT.

Can a Public Entity be Subject to Procurement Obligations Under Both Trade Agreements?

Most public entities will have procurement obligations under both trade agreements.

For example, the NWPTA includes much less detail than the AIT on how procurements should actually be conducted. Among other things, both the main body of Chapter 5 of the AIT and the MASH Annex include specific procurement procedures and prescribe what must be included in procurement documents. By contrast, the NWPTA does not include specific procurement procedures or documentary requirements.

Therefore, while the NWPTA will govern certain aspects of a public entity’s procurement for goods or services (i.e. the monetary thresholds that will trigger the procurement, etc.), the procurement may also be subject to the specific procurement procedures, processes and requirements of the AIT.

To the extent that there are any inconsistencies between an entity’s obligations under the NWPTA and the AIT, the entity must determine which requirement is “more conducive to liberalized trade investment and labour mobility” and then proceed with the procurement on the basis of that requirement.

Are There Exceptions to the Procurement Obligations?

The procurement rules do not have to be followed in all circumstances. Both the AIT and the NWPTA contain three different types of exceptions:

(1)   Full Exceptions – There are specific procurements that will be fully excluded from the application of the AIT and the NWTPA;

(2)   Qualified Exceptions – There are procurements of specific goods or services which may be excluded in certain circumstances (for example, where only one supplier is able to meet the requirements of a particular procurement);

(3)   Legitimate Objectives – Public entities can adopt measures that are inconsistent with the procurement requirements if the entity is pursing certain prescribed “legitimate objectives” (there are additional requirements that need to be met in order for an entity to rely on this exception).

Conclusion

The procurement requirements in the NWPTA and the AIT will have implications on the procurement practices of most public entities in British Columbia, Alberta and Saskatchewan. Consequently, each of these entities will need to consider the application of the NWPTA and the AIT for each procurement that is undertaken. A public entity that is subject to the obligations under these trade agreements should ensure that its procurement policy addresses the applicable requirements (as well as the exceptions to these requirements).