199. The estimated annual value of government procurement at the federal level is approximately Can*10 billion annually, or less than 1% of GDP.[1] Reported procurement at the provincial and territorial level is estimated at some Can*7 billion.[2] In 2000, contracts representing 89.8% of the total value were allocated through competitive methods, while 10.2% was allocated in a non-competitive fashion. Canada last notified annual statistics under Article XIX:5 of the WTO Agreement on Government Procurement in October 1998.[3] Procurement by municipalities, municipal organizations, publicly funded academic institutions, and health and social services entities (MASH entities) is estimated at some Can*20 billion a year. Procurement for all levels of government and governmental institutions represents some 3.5% of GDP.
(a) Institutional and legal framework
200. The Treasury Board of Canada establishes the rules for contracting in the Government Contract Regulations (GCRs), which also provide the overall policy direction through the Treasury Board Contracting Policy. The Financial Administration Act outlines the financial responsibilities and authorities for contracting, and forms the basis of the GCRs. The Department of Public Works and Government Services Act gives the Minister of Public Works and Government Services exclusive authority to buy goods and services for other Departments and Agencies and to delegate this authority to other Ministers. Public Works and Government Services Canada (PWGSC) is the Government's principal purchasing arm.
201. Federal procurement policies, procedures, notices and circulars are available online.[4] They apply to all federal government contracting activities, and require procurement to be conducted in a manner that will meet operational requirements in the most cost-effective manner and provide equal opportunity to tender, while being consistent with Canada's international obligations.[5] Procurement policy is evaluated and updated on a regular basis. Industry Canada is responsible for the evaluation of the effectiveness of procurement in support of industrial and regional development.
202. Canada is party to a number of trade agreements all of which are reflected in Canadian law and function concurrently. Canada has been a party to the WTO Agreement on Government Procurement (GPA) since 1 January 1996. Government procurement in Canada is also affected by provisions contained in national and international arrangements such as the Agreement on Internal Trade (AIT), the North American Free Trade Agreement (NAFTA) and the Canada-Korea Telecommunications Equipment Procurement Agreement (CKTEA). The other FTAs signed by Canada do not have provisions on procurement (see also Chapter II).
203. For procurements not subject to NAFTA Chapter 10 and to the GPA, the Federal Government is of the view that its procurement activities should be consistent with and supportive of such national objectives as industrial and regional development, aboriginal economic development, the environment, and other socioeconomic objectives. To this end, the Government requires that all federal procurements in excess of Can*2 million are reviewed for potential regional and industrial benefits. For the most part, this review is achieved administratively by an interdepartmental Procurement Review Committee.
204. Information on procurement matters is accessible online.[6] Annual reports on contracting at the federal level and reports by the provinces are available online.[7] Most federal procurement notices for goods and services, including construction, above Can*25,000 are posted on the Government Electronic Tendering Service (GETS). The service currently operates under the name MERX and is provided by contract to the Federal Government.[8] GETS is the designated publication for opportunity notices, information on permanent lists of qualified suppliers, and administrative rulings and procedures under the GPA, the NAFTA, AIT, and CKTEA. Sole sourcing may be used in a pressing emergency; when the estimated expenditure is less than Can*25,000 for goods and services, or Can*100,000 for architectural and engineering services or for the Canadian International Development Agency (CIDA) service contracts related to international development programmes or projects; a competition is not in the public interest; or only one supplier is capable of performing the work, as in the case of a supplier who owns a copyright or software licence.[9]
205. The Contract Claims Resolution Board (CCRB) provides dispute resolution services and is one of five directorates in the Audit and Ethics Branch of PWGSC. With the exception of bid challenges, CCRB acts as an appeal/review agency in PWGSC for all procurement-related disputes and claims arising from commercial, construction, and consulting contracts. CCRB administers the Contracts Settlement Board (CSB), and the Contract Disputes Advisory Board (CDAB). CSB is an independent review body that resolves disputes concerning extra cost claims, which are referred to it by contractors providing goods and services to PWGSC. CDAB is an independent review board that provides non-binding advisory arbitration for contract-related disputes that are referred to the Minister by contractors or consultants under contract with PWGSC for construction, leasing, and building maintenance. CCRB also settles contractors’ claims arising under PWGSC and Canadian Commercial Corporation (CCC) contracts that are terminated for convenience of the Canadian and U.S. governments, and arranges for Assist Audits for terminated contracts on behalf of the U.S. Government. In 2001, PWGSC announced the launch of the Dispute Resolution Pilot Project in Construction, a two-year pilot project covering all construction requirements valued between Can*100,000 and Can*5 million, applicable to tender documents since 12 November 2001, where the work is carried out in Canada.
(b) Access conditions to procurement at the federal level
206. Canada grants national treatment to foreign suppliers in respect of procurement covered by the GPA and other international agreements. For transactions covered by the GPA, national treatment conditions apply to most federal procurement, subject to the agreed thresholds of SDR130,000 for goods and services and SDR5 million for construction contracts. In addition to general exceptions, a number of specific goods and services are excluded from the scope of the GPA.[10]
207. As required by the GPA, the thresholds for procurement contracts in Canadian dollars are revised and notified to the WTO every two years. For the period 2002-03, the relevant thresholds are Can*255,800 for supplies of goods and services and Can*9.8 million for construction contracts. These thresholds are some 2% lower in Canadian dollar nominal terms than those applied in 2000-01.[11]
208. The NAFTA grants national treatment to Canadian, Mexican and U.S. goods and services. Goods and services exclusions are similar to those in the GPA. As required by NAFTA, the thresholds for procurement contracts in Canadian dollars are revised every two years. The current thresholds for federal departments and agencies are Can*37,500 (Canada-United States), Can*84,400 (Canada-Mexico) for goods, Can*84,400 for services, and Can*10.9 million for construction. The thresholds for crown corporations are Can*422,200 for goods and services, and Can*13.5 million for construction.
209. Chapter 5 of the AIT, the Procurement Chapter, attempts to ensure equal market access conditions to procurement for "Canadian" suppliers, meaning those that have a place of business in Canada. The AIT covers procurement by the signatories of the agreement, namely the Federal Government, 10 provincial governments, and two territories. The AIT also covers procurement by municipalities, municipal organizations, publicly funded academic institutions, and health and social services entities (MASH). The AIT applies to all Government procurement of goods valued at Can*25,000 or more and of services and construction valued at Can*100,000 and up. For MASH entities the thresholds are Can*100,000 for goods and services, and Can*250,000 for construction. The AIT does not cover MASH entities in the Yukon, and includes only seven of the 43 crown corporations (public utilities). Some services are excluded altogether from the AIT.[12] The AIT does not apply to procurement related to cultural industries, or aboriginal culture.[13]
210. For procurement not covered by the GPA or NAFTA, entities covered by the AIT may accord a preference for Canadian value-added, provided that the preference margin is no greater than 10%. They may also limit its tender to Canadian goods or suppliers, provided the procuring entity is satisfied that there is sufficient competition among Canadian suppliers.
211. The CKTEA, which came into effect on 1 September 2001, applies to most federal government departments and agencies and covers purchases of telecommunications equipment and materials plus any services included in goods contracts covered by the agreement valued at Can*255,800 or more. Exceptions to its coverage include purchases for commercial resale or use in the production of goods for commercial resale; for Canada, purchases under set-asides for small and minority businesses; purchases for the Departments of Transport, Fisheries and Oceans, and certain types of communications equipment.
212. Complaints involving alleged federal government breaches of the AIT, the GPA, the NAFTA, and the CKTEA may be brought to the Canadian International Trade Tribunal (CITT) by potential suppliers in respect of procurement by the federal government. When a complaint is found to be valid, the CITT determination may contain recommendations to the government institution, such as re-tendering, re-evaluation or providing compensation. The CITT may also award reasonable costs to a complainant to cover expenses for participation proceedings related to a complaint or in bid preparation.. The review process generally takes 90 days, with an express option of 45 days; a requested extension of up to
135 days may be granted. The CITT reviews only complaints involving procurement by the federal government, not by provinces and the MASH sector. The bid protest procedures contained in Chapter 5 of the AIT apply in the case of provincial procurement practices.
213. In the period 1999-01, a total of 145 complaints with respect to procurement were under review by the CITT. Of these, ten complaints were resolved by the parties or were abandoned, 59 did not lead to the initiation of an investigation, 55 were investigated on merit, and the rest were still in progress at the end of the period. Of the 55 complaints that were investigated, the CITT determined 27 complaints to be valid, and 28 not valid. A few of the complaints were made by foreign suppliers, and many of them came from foreign-owned companies based in Canada. Most of the determinations with respect to the validity of a complaint were with respect to breaches of the AIT, followed by breaches of the NAFTA, and the GPA.
214. Federal regional development agencies maintain a number of schemes to promote the participation of small or regional businesses in the procurement process. Under the Atlantic Canada Opportunities Agency's (ACOA) Business Development Program, Atlantic-based small or medium-sized businesses may receive up to Can*250,000 over a period of two years to help cover the cost of preparing bids and other procurement activities.[14] Incentives of this type are also provided by Canada Economic Development for Quebec Regions.[15] One of the purposes of Western Economic Diversification Canada is to increase access to procurement opportunities for companies in Manitoba, Saskatchewan, Alberta, and British Columbia.
(c)Procurement by provincial governments
215. Procurement at the sub-federal level, is ruled by provincial or other sub-federal government laws and procurement regulations. Canada did not table an offer in the GPA at the sub-federal level. Canada's position in this respect has not changed since its last Review: it is prepared to table an offer at the sub-central level only if other parties are prepared to include sectors of priority to Canadian suppliers, such as steel and transportation, and to agree to circumscribe the use of small business and other set asides. In particular, Canada considers that U.S. federal government policies must be addressed to assure market access and non-discriminatory treatment for suppliers to U.S. state and municipal governments before tabling a schedule at the sub-federal level.[16]
216. Provinces may have their own procurement agencies and thresholds, as well as their own procurement policies, under the general framework of the AIT (Annex III.1). For procurement falling within the scope of the AIT, the provinces grant similar access conditions to procurement from the rest of Canada, but do not extend this automatically to procurement from foreign suppliers. In the framework of the AIT, the provinces are currently negotiating the extension of the scope of the agreement to entities of an industrial or commercial nature (e.g., crown corporations).
217. Some provinces grant provincial or regional preferences to procurement not falling within the scope of the AIT or other internal procurement agreements, since such practices are not covered by the GPA or NAFTA. Under British Columbia's Purchasing Commission Act, British Columbia's Purchasing Commission has power to give a preference in favour of goods or services produced, manufactured or sold in British Columbia, or in a local area. Although in practice no price preference is granted to British Columbia suppliers, the Commission may decide to limit the opportunity to bid to British Columbia suppliers, subject to the AIT. The authorities have noted that British Columbia was engaged in a comprehensive process to cut the red tape and regulatory burden by one-third within three years. This would include a review, and possible repeal of the Purchasing Commission Act.
218. In New Brunswick, for procurement below the thresholds defined in the interprovincial procurement agreements, the province may (but is not obliged to) apply a preference for New Brunswick products, services or suppliers. When determining if a preference will be given, the New Brunswick's Central Purchasing Branch applies a policy of reciprocal treatment to bidders from other provinces. The authorities have noted that the magnitude of the preference margin, by policy, does not exceed 5%, and that the actual percentage of the preference depends on factors such as local content. They have also noted that the preference is used rarely: some 10 to 12 times per year out of 4,400 tenders. New Brunswick, by policy, will not apply a preference against vendors from Nova Scotia since they do not use one against New Brunswick suppliers. The authorities of New Brunswick look at the preference policy for other provinces, and at the access New Brunswick vendors have.
219. In Nova Scotia, the Procurement Branch may consider and evaluate bids from other jurisdictions on the same basis that the purchasing authorities in those jurisdictions would treat a similar bid from a Nova Scotia supplier.
220. Ontario applies a Canadian Steel Preference Policy, using a 10% price preference for Canadian structural steel products. The preference is applied by deducting 10% of the value of products identified in a construction bid of Can*100,000 or more, as Canadian structural steel products.[17] Under the Environmental Choice Program, environmental factors are given special consideration in purchasing decisions for all contracts worth more than Can*10,000.
221. In Quebec, contracts for goods and auxiliary services valued at or above Can*25,000 and services and construction projects of or over Can*100,000 must be tendered publicly. Purchases of goods and auxiliary services under Can*25,000 are made by the different departments, and suppliers are generally chosen from a list, or are invited to tender; in the latter case, only suppliers from Quebec receive an invitation. Procurement of services is subject in many cases to meeting ISO requirements. In the case of auxiliary services compliance with ISO 9003 standards is rewarded with a 10% reduction in the offer price.[18] Apart from the AIT, Quebec has government procurement market access liberalization agreements with New Brunswick and Ontario, and with the U.S. State of New York. The Quebec-Ontario Bilateral Agreement, signed in 1994, applies to procurement above Can*25,000 for goods, Can*200,000 for services, and Can*100,000 for construction. The agreement with New Brunswick and Quebec establishes some basic principles governing public procurement of goods, services, and construction by the governments of the two provinces. The authorities have noted that, in practice, this agreement is inactive, because the AIT is more trade liberalizing and therefore prevails in most cases. The agreement with New York, which entered into force in November 2001, has thresholds of Can*25,000 for goods and Can*100,000 for services and construction, and grants reciprocal non-discriminatory treatment.
222. In Alberta, British Columbia, Manitoba, and Saskatchewan, there is a regional preference for goods tenders valued between Can*2,500 and Can*25,000, which are restricted where possible to firms located in the four western provinces. The authorities have noted that this preference is in keeping with the Western Accord, a Memorandum of Agreement signed in 1989 for the reduction of Interprovincial Trade Barriers in Western Canada. The Western Accord calls for equal non-discriminatory access to government procurement to all vendors in Western Canada (Alberta, British Columbia, Manitoba, and Saskatchewan). Although the Accord stipulates no minimum thresholds, for operational reasons, the procurement of goods has a threshold of Can*2,500 and services and construction Can*100,000. The authorities have noted that the preference clause is used sparingly.
223. In Yukon the provincial procurement agency maintains a source list, which identifies businesses that qualify as Yukon businesses.[19] In addition, local-content requirements may be applied for contracts under Can*50,000.
[1] Information provided by the authorities, based on Treasury Board Secretariat reports for federal procurement for departments and agencies for the years 1997 to 2000. Purchases totalled Can*9.9 billion in 1999 and Can*9.4 billion in 2000. More detailed information is available online at: http://www.tbs-sct.gc.ca/pubs_pol/dcgpubs/con_data/siglist_e.html.
[2] The latest available complete information is for fiscal year 1999-00 and can be found on the Internal Trade Secretariat's online information. Available at: http://www.intrasec.mb.ca/index_he.htm.
[3] WTO document GPA/21/Add.1, 16 October 1998.
[4] Treasury Board online information. Available at: http://www.tbs-sct.gc.ca.
[5] Treasury Board of Canada Secretariat, "Procurement Policy Review", January 2002 [Online]. Available at: http://www.tbs-sct.gc.ca/pubs_pol/dcgpubs/Contracting/dwnld/contractingpol_e.rtf.
[6] Contracts Canada online information. Available at: www.contractscanada.gc.ca.
[7] Treasury Board online information. Available at: www.tbs-sct.gc.ca; and Internal Trade Secretariat online information. Available at: www.intrasec.mb.ca/index_he.htm, respectively.
[8] Available at: www.merx.cebra.com.
[9] Contracts Canada online information. Available at: http://contractscanada.gc.ca/en/chap1-e.htm.
[10] These include shipbuilding and repair; urban rail and transportation components; transportation services; some communications, detection, and coherent radiation equipment; oil purchases related to any strategic reserve requirement purchases made in support of the safeguarding of nuclear materials;dredging work; and some office equipment and special industry machinery for the Departments of Transport, Communications, and Fisheries and Oceans; research and development; utilities; and health and social, financial, communications, photographic, mapping, printing, and publications services.
[11] WTO documents WT/GPA/W/168/Add.2, 14 January 2002, and WT/GPA/W/101/Add.1, 9 February 2000.
[12] These include some professional services; services for sporting events; services of financial analysts or the management of investments or of government financial assets and liabilities; health and social services; and advertising and public relations services.
[13] AIT Secretariat online information. Available at: http://www.intrasec.mb.ca/pdf/consol_e1.pdf.
[14] More online information on the Atlantic Procurement Agreement is available at: http://www.gnb. ca/0337/01-e/3-e.htm, and http://www.gov.nf.ca/tenders/APA.stm.
[15] More information about this programme is available online at: http://www.dec-ced.gc.ca.
[16] WTO document WT/GPA/51, 18 June 2001.
[17] Canadian steel content is defined as the total value of the supplier's structural steel product minus the dutiable value of any imported goods or services applied to that product. See. "Tips on how to do Business with the Government of Ontario" [Online]. Available at: http://www.ppitpb.gov.on.ca/mbs/psb/psb.nsf/ feca7955f260027587256738007faf3e/3439ac3dc008760a85256a79006605d3/*FILE/tips_eng.pdf.
[18] Further information is available online at: http://www.tresor.gouv.qc.ca/marche/accords/ textes.htm.
[19] This requires meeting at least two of the following criteria: the business employs Yukon residents; the business owns, for purposes directly related to the operation of the business, real property in the Yukon; the business operates a permanently staffed office, year-round in the Yukon; or the business is owned, or is a corporation that is owned 50% or more by Yukon residents.
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