Canada Gazette, Part I, Volume 152, Number 40: Regulations Amending the Government Contracts Regulations

October 6, 2018

Statutory authority
Financial Administration Act

Sponsoring department
Treasury Board Secretariat

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issues

The Government of Canada is committed to taking appropriate measures to promote fairness, openness and transparency in the bidding process for its goods and services contracts. A number of initiatives have been undertaken to strengthen procurement processes but opportunities exist to improve them further by amending the Government Contracts Regulations (the Regulations).

In particular, a number of housekeeping amendments are necessary to reduce the risk of confusion and misinterpretation of the Regulations, as well as to remove or amend sections that are out of date. There is also an opportunity to add to the list of contracting authorities that do not require the approval of the Minister of Justice to enter into legal service contracts, to increase the threshold for requiring that bids be solicited for service and construction contracts, and to strengthen the terms deemed to be set out in every goods, services, and construction contract.

Background

In carrying out its programs and providing services to Canadians, the Government of Canada is one of the largest purchasers of goods and services in the country. The Regulations, made under the Financial Administration Act, set out conditions of contract entry (e.g. to require bids), security and deemed terms. Deemed terms are terms that form part of a contract even when they are not written into any contractual documents.

The Regulations were amended in 2011 to broaden the definition of a "contracting authority" and introduced a number of deemed terms in contracts. These deemed terms included that suppliers consented to the proactive disclosure of basic information, and declarations that they had not been convicted of certain criminal offences and had not paid a contingency fee to a consultant lobbyist.

Objectives

The objectives of the proposed Regulations Amending the Government Contracts Regulations (the proposed amendments) are

Description

1. Reduce the risk of corruption and collusion

The proposed amendments would reduce the risk of corruption and collusion in the bidding process for goods and service contracts by adding a deemed term whereby a contractor or bidder declares that they have not, during the bidding process,

A breach of this deemed term, as determined by the contracting authority, would be a default under the contract and the basis for cancelling a contract.

2. Mitigate the risk of confusion and misinterpretation of the Regulations

The proposed amendments would include a number of housekeeping changes to mitigate the risk of confusion and misinterpretation of the Regulations.

Changes to the definitions of goods and services contracts

The proposed amendments would remove contracts for printing and the reproduction of printed matter from the definition of a goods contract, and add them to the definition of a service contract. This will align the definitions of goods and services contracts with those used in Canada's trade agreements.

Clarification of English and French versions

The proposed amendments would fix a discrepancy between the English and French versions of paragraph 6(c). In English, the text reads "the nature of the work," whereas the French text reads "la nature du marché" ("the nature of the contract"). The English text will be updated to clarify that the nature of the work to be contracted for is such that it would not be in the public interest to solicit bids.

Adding a cross-reference

The proposed amendments would add a cross-reference to the new deemed term in paragraph 18(1)(e) in order to ensure that a breach of this deemed term would be a default under the contract and the basis for cancelling a contract.

3. Modernize the content of the Regulations

Increasing the $25,000 threshold for soliciting bids for service and construction contracts

The proposed amendments would increase the $25,000 threshold for soliciting bids for service and construction contracts to $40,000. The objective of the proposed increase for service and construction contracts is to adjust the threshold for inflation since 1996, when the threshold was last amended. The threshold for goods contracts will not be increased in order to remain consistent with Canada's procurement obligations under the Canadian Free Trade Agreement.

Updating a minister's title

The proposed amendments would replace the reference to the minister responsible for the Canadian International Development Agency with a reference to the Minister for International Development to reflect changes to the Department of Foreign Affairs, Trade and Development Act.

Repeal the exclusion for contracts under the Veterans' Land Act

The proposed amendments would remove the exclusions for construction contracts under the Veterans' Land Act, given that there have been no such contracts since 1990 and that no new contracts are expected.

Expanding the list of contracting authorities included in the Schedule

The proposed amendments would add the members of the Military Police Complaints Commission (MPCC); the members of the Military Grievances External Review Committee (MGERC); the Chief Administrator of the Courts Administration Services; the members of the Canadian Nuclear Safety Commission; and the Director of Defence Counsel Services to the list of contracting authorities who are exempted from the provision that "[c]ontracts for the performance of legal services may be entered into only by or under the authority of the Minister of Justice." This amendment would be consistent with the National Defence Act, the Courts Administration Service Act, and the Nuclear Safety and Control Act, which intended these organizations to operate at arm's length from the executive branch of Government.

"One-for-One" Rule

The "One-for-One" Rule does not apply to this proposal, as there is no change in the administrative cost to business.

Small business lens

The small business lens does not apply to this proposal, as businesses are not subject to the Regulations.

Due to the nature of the proposed amendments, however, there is a potential for businesses to experience indirect impacts as a result of the proposal. These impacts are explained further in the "Rationale" section below.

Consultation

Increasing the $25,000 threshold for soliciting bids for service and construction contracts

The Treasury Board of Canada Secretariat consulted with federal departments and supplier associations between December 2017 and March 2018 on the proposed amendment. All stakeholders were provided with consultation packages.

Federal departments were strongly in favour of the proposal to increase the threshold for service and construction contracts, and encouraged the Treasury Board of Canada Secretariat to consider additional increases where possible. Supplier associations felt that the increase was reasonable, but noted that the proposed increase might indirectly impact some suppliers' ability to access government procurement opportunities.

All other amendments

The Treasury Board of Canada Secretariat consulted federal departments between 2013 and 2016 on the remaining amendments, and there is general support. All government departments were provided consultation packages, and responses were received from 36 departments. Officials from the Treasury Board of Canada Secretariat discussed any concerns with stakeholders, which largely involved the correction of misunderstandings.

Rationale

As one of the largest purchasers of goods and services in the country, the Government of Canada is committed to promoting fairness, openness and transparency in bidding processes. The proposed amendments would reduce the risk of corruption and collusion, modernize the threshold for soliciting bids for service and construction contracts, and make a number of housekeeping amendments to mitigate the risk of confusion and misinterpretation with respect to the Regulations.

In particular, the proposal to increase the bid solicitation threshold for service and construction contracts will likely reduce costs to some businesses by not requiring them to submit bids that may have otherwise been required if the $25,000 threshold had not been increased to $40,000. For the same reason, it is also possible that the proposal may have adverse impacts on some businesses' ability to access procurement opportunities between $25,000 and $40,000 by reducing the number of contracts that are awarded through bid solicitations within this range. The impact should be minimal, since the increase reflects inflation since the last update.

Finally, the proposed deemed terms regarding corruption and collusion would increase Canadians' and bidders' confidence in the procurement process by raising the profile of integrity issues, and providing contracting authorities with a legal way to cancel a contract with a supplier who subverts the rules. The deemed terms would have no impact on law-abiding stakeholders.

Implementation, enforcement and service standards

The existing compliance and enforcement protocols associated with the Regulations would remain the same. Following the coming into force, the Treasury Board of Canada Secretariat would notify departments and provide guidance on how to comply with the amended Regulations. The Treasury Board of Canada Secretariat would also advise departments that it is a best practice to write the deemed terms into their contracts.

Contact

Glenn Richardson
Acquired Services and Assets Sector
Office of the Comptroller General
Treasury Board of Canada Secretariat
James Michael Flaherty Building
90 Elgin Street
Ottawa, Ontario
K1P 5E9
Telephone: 613-818-4414
Email: Glenn.Richardson@tbs-sct.gc.ca

PROPOSED REGULATORY TEXT

Notice is given that the Governor in Council, pursuant to subsections 41(1) référence a and 42(1) référence b of the Financial Administration Act référence c, proposes to make the annexed Regulations Amending the Government Contracts Regulations.

Interested persons may make representations concerning the proposed Regulations within 30 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to Glenn Richardson, Senior Advisor, Acquired Services and Assets Sector, Office of the Comptroller General, Treasury Board of Canada Secretariat, James Michael Flaherty Building, 90 Elgin Street, Ottawa, Ontario, K1P 5E9 (tel.: 613-818-4414; email: Glenn.Richardson@tbs-sct.gc.ca).

Ottawa, September 27, 2018

Jurica Čapkun
Assistant Clerk of the Privy Council

Regulations Amending the Government Contracts Regulations

Amendments

1 The long title of the Government Contracts Regulations référence 1 is replaced by the following:

Government Contracts Regulations

2 Section 1 of the Regulations and the heading before it are repealed.

3 The definitions goods contract and service contract in section 2 of the Regulations are replaced by the following:

goods contract means a contract for the purchase of articles, commodities, equipment, goods, materials or supplies and includes a contract for the construction or repair of a vessel; (marché de fournitures)

service contract means a contract for the provision of services, including printing services, but does not include an agreement under which a person is employed as an officer, clerk or employee of Her Majesty; (marché de services)

4 (1) Subparagraphs 6(b)(i) to (iii) of the Regulations are replaced by the following:

(2) Paragraph 6(c) of the English version of the Regulations is replaced by the following:

5 (1) Subsection 18(1) of the Regulations is amended by adding the following after paragraph (c):

(2) Paragraph 18(1)(e) of the Regulations is replaced by the following:

(3) Subsection 18(2) of the Regulations is amended by striking out "and" at the end of paragraph (a), by adding "and" at the end of subparagraph (b)(iv) and by adding the following after paragraph (b):

6 The schedule to the Regulations is amended by adding the following in alphabetical order:

Coming into Force

7 These Regulations come into force on the day on which they are registered.