On November 5, 2020, Ontario took another significant step towards centralizing public and broader public sector procurement activities with the new Ontario Regulation 612/20 Centralized Supply Chain Ontario. This regulation establishes a centralized agency to provide and support supply chain management for three classes of entities (collectively, "covered entities"):
- "government entities", which include any ministry of the Government of Ontario, within the meaning of the Public Service of Ontario At, 2006, as well as the Independent Electricity System Operator and Ontario Power Generation Inc. and its subsidiaries;
- "broader public sector ("BPS") entities", which include district school boards or school authorities, government-funded post-secondary educational institutions, children's aid societies, and corporations controlled by any of these entities whose primary purpose is to purchase goods or services for those entities; and
- "health sector entities", which include any person or entity that receives government funding to provide or support the provision of health services (e.g., hospitals), as well as corporations controlled by any of these entities whose primary purpose is to purchase goods or services for those entities.
Legislative Context: Supply Chain Management Act
The new regulation was made under the Supply Chain Management Act (Government, Broader Public Sector and Health Sector Entitles), 2019 (the "Act"). That Act creates a framework for the government to regulate covered entities in connection with:
- supply chain management;
- vendor standards and practices; and
- reporting on supply chain management and vendor performance.
The Act adopts a broad definition of "supply chain
management", which effectively covers any activities related
to the procurement of goods and services, including (among other
activities that may be set out in regulation):
- planning and sourcing
- setting standards and specifications
- conducting market research
- developing procurement policy
- determining procurement methodologies
- coordinating and conducting procurements
- controlling logistics and inventory
- managing information systems
- coordinating the actions of covered entities and supply chain management entities and furthering those entities' collaboration
- overseeing resources
- arranging project financing
- managing contracts and relationships
- receiving and responding to complaints
- disposing of surplus assets
The Act enables the Government of Ontario to designate or create "supply chain management entities" to provide or support supply chain management for covered entities, and enables them to set fees or charges related to their services. The new regulation creates just such a “supply chain management entity".
Centralized Supply Chain Ontario
The new regulation creates Centralized Supply Chain Ontario, a corporation that is designated as an agent of the Crown. Its objectives are:
- To provide and support supply chain management on behalf of covered entities
- To collect supply chain management and vendor performance data from covered entities
- To provide and support supply chain management for personal protective equipment on behalf of entities other than covered entities (e.g., to generally support the province's response to COVID-19)
Under the new regulation, Centralized Supply Chain Ontario may provide notice to a covered entity, specifying the type of supply chain management functions that Centralized Supply Chain Ontario would provide or support, as well as the start date. Any covered entity that receives such a notice must obtain supply chain management functions from Centralized Supply Chain Ontario as set out in that notice, until such time as Centralized Supply Chain Ontario notifies the covered entity otherwise.
Also, the new regulation requires covered entities to provide Centralized Supply Chain Ontario with the following information upon request:
- current inventories of any goods, and future inventory requirements
- current and future procurement activities
- supply chain opportunities, contingencies and constraints
- information about contracts related to the procurement of goods and services
- any information related to supply chain management or vendor performance specified by Centralized Supply Chain Ontario
When it first proclaimed the Act, the Government of Ontario noted the significant impact the COVID-19 pandemic had on public health supply chains, specifically on obtaining essential goods and services needed to fight COVID-19 such as ventilators, masks, and swabs. The Government of Ontario stated that the Act would allow the government to centrally manage public sector supply chains and to collect key data on crucial supplies, which in turn would enable it to prioritize the acquisition and allocation of essential goods and services to where they were needed most.1
For BPS entities and health sector entities, the Act makes compliance with the Act (and by extension, the new regulation) a deemed term of any funding agreement between such entities and the Crown or a Crown agency. It allows for the withholding of government funding for non-compliance. The Act also requires covered entities to ensure that their shared services organizations or other third party supply chain managers are contractually required to comply with any requirement imposed on those covered entities under the Act.
The creation of Centralized Supply Chain Ontario represents another means to combat the spread of COVID-19. However, the new agency's scope is not limited to pandemic response; indeed, the range of procurement activities in which the new agency could engage in, and the covered entities it could support, is sweeping.
While this a significant step in the Government of Ontario's efforts to streamline procurement, it also raises many questions about the repercussions the new agency will have on public procurement. For example, will centralized procurement favour vendors who can serve the entire province? Although the Government of Ontario has stated its intention to increase procurement opportunities for small and medium-sized businesses, it has not yet provided a clear outline for doing so.2 It remains to be seen how the creation of Centralized Supply Chain Ontario will affect the ability for small and medium sized companies to compete against larger companies for provincial opportunities.
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