Can Saskatchewan’s $7.5B Infrastructure Investment Balance Economic and Community Benefits with Trade Agreement Compliance?

Authors: John Dipple, Aziz Aboudheir, Chad Eggerman

On Wednesday, May 6, 2020, Premier Scott Moe announced an increase of $2 billion to Saskatchewan’s capital plan to stimulate the province’s recovery from the COVID-19 pandemic.

This increase brings the province’s total commitment to infrastructure funding to $7.5 billion over two years. In the press release, Premier Scott Moe said:

“Over the next two years, our government will invest $7.5 billion in schools, hospitals, highways, Crown utility projects, municipal infrastructure and other important capital projects designed to build a strong Saskatchewan. This $2.0 billion economic booster-shot over and above the $5.5 our government had already planned to invest in capital projects over the next two years will be an important step in our province’s economic recovery.”

Saskatchewan’s $7.5 billion capital plan presents an opportune time to consider how the province’s key objective of economic development can be reconciled with its obligations under trade agreements.

Many jurisdictions across Canada have adopted measures designed to promote supplementary economic benefits through infrastructure spending. Provincial and local governments are leveraging infrastructure dollars to produce additional value for the communities that they are being spent in. By procuring strategically, governments are maximizing return-on-investment for each infrastructure dollar spent. Underpinning the concept of “community benefits” is the principle that additional social and economic benefits can be realized from infrastructure projects that improve the well-being and economic prosperity of the community affected by the project. Benefits include job creation, apprenticeships, economic sustainability and support for small and medium-sized businesses, among others.

Well before COVID-19, many governments recognized that community benefits initiatives are an effective way to maximize the effects of infrastructure spending to drive more far-reaching economic and other strategic benefits. In a post-COVID-19 environment, such initiatives hold more weight now than ever before.

Following is an overview of economic and community benefits measures adopted by various Canadian jurisdictions.

Ontario

In 2016, Ontario enacted the aptly named Infrastructure for Jobs and Prosperity Act, 2015 (the “IJPA”) and became the first province to pass legislation directly aimed at promoting community benefits through infrastructure spending. The stated purpose of the IJPA is to encourage principled and strategic long-term infrastructure planning that supports job creation and economic growth within the province.

In 2017, Ontario developed a long-term infrastructure plan that echoes the purpose of the IJPA, recognizing that “the best value is not always reflected in the lowest cost.” The Plan states that the Ontario “government is using infrastructure investment to achieve multiple objectives” that include economic growth, environmental sustainability, and other community benefits. Ontario’s commitment to community benefits is described at Section 3.6 of its Long-Term Infrastructure Plan:

The government wants to ensure that communities benefit from new infrastructure projects during development. The Government of Ontario is the first Canadian jurisdiction to pass legislation (IJPA) to enable consideration of community benefits in infrastructure planning and investment.

Community benefits are defined in the IJPA as the “supplementary social and economic benefits” arising from an infrastructure project, such as local job creation and training opportunities, improvement of public space or other benefits the community identifies. This concept can help advance a range of goals, including reducing poverty and developing the local economy with input from under-represented groups.

Federal Government

The Federal Government has implemented an Investing in Canada Infrastructure Program delivered through bilateral funding agreements between the Federal Government and the provinces. Under this initiative, provinces that seek funding for infrastructure projects exceeding certain dollar thresholds are required to report on community employment benefits. These benefits are required to target small and medium-sized enterprises, typically defined as organizations with fewer than 500 employees, as well as apprentices, Indigenous people and other targeted groups. The program’s purpose is to provide sustained economic growth, build stronger and more inclusive communities, and create meaningful jobs for Canadians.

Toronto

The IJPA regulations require every Ontario municipality to develop a strategic asset management policy that includes community benefits principles. In compliance with the IJPA, Toronto adopted a corporate asset management policy in 2019. Under the policy, the city must include criteria for local job creation, economic competitiveness and training opportunities, among other criteria, when making infrastructure procurement decisions. To further guide civic procuring entities, Toronto released a detailed Community Benefits Framework. The stated goal of the framework is to maximize social and economic impacts when the city invests in new and updated infrastructure.

Vancouver

Vancouver employs an expanded definition of “best value” in its procurement policy that includes consideration for the local economy. Specifically, “best value” requires the city to consider social, environmental and economic sustainability factors with a view to sustaining a diverse and resilient local economy.

Saskatoon

Similarly, the City of Saskatoon also uses an expanded definition for “best value” in its procurement policy. Much like Vancouver, “best value” includes consideration for each of environmental, social and economic sustainability. “Economic sustainability” is defined in Saskatoon’s procurement policy as “providing and enhancing the Services, infrastructure and conditions that sustain a healthy, diverse and resilient local economy in which businesses of all sizes, and their employees, can flourish [emphasis added].” Environmental sustainability touches on protecting the climate and conserving natural resources, and social sustainability is aimed at cultivating safe and affordable communities for the diverse residents of Saskatoon.

Does the Pursuit of Economic and Community Benefits Conflict with Trade Agreements?

Trade agreements require open, transparent and non-discriminatory access to public sector procurement. They prohibit governments from preferring local suppliers of goods and services over those of other provinces or territories.

As a result, reconciling economic and community benefits with trade agreement compliance is not easy. It requires tying those benefits to other legitimate objectives permitted by the trade agreements, or designing and implementing the community benefits criteria in a way that doesn’t discriminate against goods and services from other jurisdictions.

Given the examples canvassed earlier, it is clear that various jurisdictions have either concluded that economic and community benefits criteria can be implemented in a way that complies with trade agreements, or alternatively, have adopted approaches that balance trade agreement obligations with their strategic community benefits objectives.

With governments prioritizing recovery from the negative economic impacts of COVID-19, economic and community benefits initiatives that provide “more bang for the procurement buck” make more sense than ever. Here in Saskatchewan, the procurement team at MLT Aikins LLP can assist you in designing and evaluating your organization’s community benefits strategy.

Note: This article is of a general nature only and is not exhaustive of all possible legal rights or options. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.