New Public Procurement Obligations Effective July 1, 2017

Authors: Breanne Lothian, John Dipple

The public procurement landscape is set for a refresh on July 1, 2017, when the Canadian Free Trade Agreement (“CFTA”) comes into effect and replaces the existing Agreement on Internal Trade (“AIT”) which has been in place since 1995. The New West Partnership Trade Agreement (“NWPTA”) will continue to apply in Western Canada.

Canadian Free Trade Agreement

The CFTA will apply broadly to all public sector entities including, among others, provincial ministries and agencies, MASH organizations and Crown corporations, unless such an entity is specifically excluded in the CFTA. As a result, entities that were not subject to the former AIT may now be subject to the CFTA.

The CFTA is intended to reduce interprovincial trade barriers applicable to public sector procurements, to modernize and update the AIT, and to complement international trade agreements such as the incoming Canadian European Union Comprehensive Economic Trade Agreement.

Notable Changes

Although the general public procurement principles in the AIT have been carried forward, the CFTA will result in a number of notable changes to the public procurement landscape including:

1. Bid Protest Mechanism

The bid protest mechanism in the CFTA, similar to the current bid protest mechanism introduced under the NWPTA, will allow unsuccessful suppliers from across Canada to challenge a public entity’s procurement processes and contract awards.

As a party to the CFTA, each province is required to develop its own administrative or judicial review processes for procurement challenges which will apply to all public sector entities within the province. Although the provinces have not announced the specifics of the bid protest mechanism at this time, the CFTA clarifies that available remedies must provide for: (a) rapid interim measures to allow the supplier the opportunity to participate in the procurement; and (b) if the complaint is successful, corrective action or compensation for the damages suffered, which provinces may limit to the costs for preparing the tender, the costs relating to the complaint, or both. Public sector entities should watch with interest as the bid protest mechanism is developed in each province.

2. Transparency of Contract Awards

The CFTA requires that public entities promptly inform suppliers of contract awards and, within 72 days of awarding a contract, disclose the particulars of the contract award including the name of the supplier and the value of the contract. However, public entities must be cautious to not disclose supplier information which could prejudice fair competition between suppliers.

3. Debrief

New debrief provisions in the CFTA require public entities, at the request of an unsuccessful supplier, to provide the supplier with an explanation of the reasons it was not awarded the contract.

4. Negotiation

For the first time, the CFTA recognizes the use of negotiations as part of the evaluation process and establishes some minimum rules by which public procuring entities must abide. For instance, during negotiations a procuring entity cannot give an unfair advantage to, or discriminate against, a supplier.

5. Value Thresholds

While the value thresholds for open tendering remain the same under the CFTA, such thresholds will now be subject to future adjustments of inflation based on a prescribed formula on a bi-annual basis. Further, the CFTA clarifies that the valuation method for determining whether a contract exceeds the open public procurement threshold must also include any extension options.

6. Conditions for Participation

The CFTA introduces the ability to establish pre-conditions that a supplier must satisfy in order to participate in a procurement. However, only conditions essential to ensure the legal and financial capacities and commercial and technical abilities of the supplier which are required to undertake the procurement are permitted. The CFTA expressly prohibits pre-conditions which relate to prior experience within the province or prior experience with the procuring entity.

Implications for Public Entities

The foregoing is intended only to provide a basic overview of some of the more notable changes introduced under the CFTA. Public procurements which also fall within the scope of CETA may be subject to additional obligations.

For public sector organizations which are currently meeting their obligations under the NWPTA and the AIT, their procurement practices may only require minor modifications. However, public entities must review their procurement policies and practices to ensure that current practices comply with the new CFTA rules and update procurement templates and policies accordingly. In particular, the new rules relating to dispute resolution and contract award posting may require updates to your current practices.

Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. 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.