Outside of the province of Québec, procurement law in Canada derives from both a prolific body of common law and a broad range of provincial and federal statutes.  Regardless of the province, federal government procurement entity or particular aspect of common law and judicial oversight in Canada, the prevailing governance principles for all private and public sector procurement transactions are:  equal and unbiased treatment toward all vendors; value for money standards; honesty; and transparency of the process to promote and foster equal treatment, fairness and adherence to a good-faith process.

Federal Procurement

Almost all federal government sourcing, procurement and supply chain management within the government of Canada is centralized within Public Works and Government Services Canada (PWGSC).  Pursuant to the Department of Public Works and Government Services Act, the Minister responsible for PWGSC has mandated numerous procurement policies, contracting protocols, guidelines and strict regulations. 

Federal legislation that is integral to most of PWGSC’s procurement activities includes the Financial Administration Act and related regulations, as well as the Defence Production Act and the Federal Accountability Act. This foundational legislation has given rise to a detailed financial controls policy framework in which PWGSC must operate. This framework is promulgated and administered by the Treasury Board of Canada Secretariat. These general policy categories include the: Treasury Board Contracting Policy; Treasury Board Common Services Policy; Treasury Board Contracts Directive; Treasury Board Procurement Review Policy; and the “Code of Conduct For Procurement.”

Woven into that elaborate procurement law and regulatory and policy framework is the proactive oversight of the Auditor General of Canada who regularly recommends improved procurement administration, governance and operational practices across that office’s mandate. Those selling goods or services to any part of the federal government are well advised to be cognizant and considerate of the Auditor General of Canada’s reports and frequent constructive recommendations.

Dispute Resolution

In the federal arena of procurement dispute resolution, generally speaking, federal government ministries, departments and agencies are willing (and prefer) to resolve disputes through internal escalation and settlement negotiation processes. However, for small procurement transactions (less than $100,000), the Office of the Procurement Ombudsman (created pursuant to the Federal Accountability Act) exists to investigate complaints and allegations of unfairness and a lack of transparency. 

Federal procurement disputes that cannot otherwise be resolved internally are directed to the Canadian International Trade Tribunal (CITT). This tribunal was created under the North American Free Trade Agreement (NAFTA) and the Canadian International Trade Tribunal Act. The CITT’s “Procurement Review Process:  A Descriptive Guide (2009)” sets out the complaint process guidelines. These guidelines cover suppliers to government institutions who have a dispute with (or complaint about) such an institution. A large body of procurement law (decisions and determinations) now exists at both the CITT and at the Federal Court of Appeal (the court with jurisdiction to review CITT determinations).

Shared Services Canada

In 2011, the federal government announced the creation of Shared Services Canada, a new Canadian agency that will conduct, streamline, consolidate, manage and oversee the specialized procurement of information technology, communications, data management and related supply chain management issues through a common procurement and back-office infrastructure across many federal government ministries, departments and other agencies.

Provincial Procurement

Each province in Canada typically procures goods and services through a purchasing government department, ministry or agency. British Columbia has created Procurement and Supply Services (PSS) as a centralized resource to standardize and consolidate the procurement and supply arrangements across all ministries and departments of the province. Although the province of Ontario spends far more each year buying goods and services than any other province, very little has been done to consolidate those activities into the hands of a single professional, specialized and best practices-oriented procurement organization. The Ontario Treasury Board has the mandate to direct (and control) public expenditures and Ontario’s Ministry of Finance has set various standards and guidelines. Procurement activities in the province are controlled through various ministries, direct funding agreements and agency (such as Ontario Buys) expenditures that promote a series of sector-specific procurement consolidation activities.

Despite efforts to promote the most basic standards and consistency of procurement practice across multiple procurement organizations, there is a wide discrepancy and vast inconsistencies across all parts of the Ontario public sector concerning the nature, quality and sophistication of procurement documentation, management standards, contract formulation processes and administrative practices.

Private Sector Procurement

Since a great deal of the public sector’s procurement law arises directly out of the legal duty of public officials to act fairly and in good faith, the laws related to private sector procurement are far more liberal and flexible. However, rapidly developing laws and practices related to good corporate governance in Canada, especially for public companies, may impose duties on executive officers to ensure that the financial (including value for money) ethical and competitive nature of their expenditure activities (especially procurement) are consistent with corporate management and risk management best practices. 

Generally, the private sector is voluntarily moving toward a preference for a competitive tendering process that structurally favours equal treatment, discourages procurement bias and otherwise ensures that all corporate expenditure decisions are in the best interests of the corporation and free from any conflicts of interest. Publicly traded and highly regulated private sector enterprises may be subject to a broad range of securities, regulatory and audit requirements that mandate procurement activities and expenditures to be transparently fair, equitable and in the company’s best interests. Whereas, a few years ago, large corporations would not hesitate to rely on a single executive’s decision to sole source the procurement of an expensive and mission-critical good or service, today, the same corporations have implemented detailed competitive tendering processes that may lead to multi-track vendor negotiations before a vendor is selected.

Trade and Procurement

Canada is a signatory to the WTO GPA, the recent Canada-United States Agreement on Government Procurement and the NAFTA which also contains (at Chapter 10) significant procurement-related commitments. Compliance with the WTO GPA and the NAFTA is ensured through a procurement review process under the terms of the Canadian International Trade Tribunal Act. The CITT has the power to investigate complaints from suppliers about non-compliance with such trade agreement commitments. The CITT’s jurisdiction extends only to designated contracts, which means procurements that are:

by federal departments, agencies and state enterprises that are specifically listed in the agreements; and

for purchases in excess of value thresholds stipulated in the agreements.

Canada has also entered into free trade agreements with a number of countries and associations that directly ensure non-discriminatory procurement access, such as with the United States and Mexico (1989), Israel (1997), Jordan (2009), the European Free Trade Association (2009) and Panama (2010). As of 2011, negotiations are continuing with Turkey, Korea, India and the Caribbean Community. 

The federal government, the provinces and the territories have also signed the Agreement on Internal Trade (AIT). Chapter 5 of the AIT provides extensive commitments with respect to nondiscrimination and transparency in procurement. Several provinces have entered into supplemental agreements that further ensure procurements are carried out in an open, nondiscriminatory and transparent manner.

Conclusion

Federal, provincial and private sector procurement activities in Canada may be subject to a wide range of common law and federal and provincial legislative, regulatory and public policy requirements, as well as judicial oversight. Several agreements that Canada has entered into (or is in the process of negotiating) provide for significant procurement-related commitments.

Bennett Jones Procurement & Outsourcing Group

The Bennett Jones Procurement & Outsourcing Group has deep expertise in the drafting of procurement criteria and documents, the enforcement of procurement rules, and the Requests for Qualifications (RFQ), Requests for Proposals (RFP) and Invitations to Tender processes.  Our procurement experience includes the selection process in pipeline, construction and public infrastructure projects and advising on offshore procurement. Our clients include land developers, oil and gas companies, non-profit organizations and government agencies. We have acted for the Prime Minister’s office, the federal government, the Department of National Defence and numerous provinces in public sector procurement transactions.