On March 23rd, the Treasury Board Secretariat released Contracting Policy Notice 2020-1: Response to COVID-191 (CPN 2020-1). CPN 2020-1 provides for: time limited increases to emergency contracting limits, confirmed that Public Services and Procurement Canada (PSPC) is operating as a central purchasing organization for the federal, provincial and territorial governments, directed Deputy Heads not to undertake one-off purchases, and directed all departments to confirm with PSPC before initiating their own procurements.
As PSPC undertakes this massive procurement effort to meet the urgency of the COVID-19 Pandemic, we anticipate that open competitive procurement processes will, by necessity at least in the near term, give way to alternative procurement mechanisms, such as limited tendering and even direct contract (sole source) awards.
We provide below an overview of the most significant options the government may exercise under trade agreements and applicable contracting regulations.
Readers should note that for the options listed below, Advance Contract Award Notices (ACANs) may not always be issued. Please continue to refer to the federal government's COVID-19 response page on buyandsell and sign up for tendering updates at:
https://buyandsell.gc.ca/calling-all-suppliers-help-canada-combat-covid-19
TRADE AGREEMENTS
For trade agreement covered procurements, there are a variety of options including: limited tendering, implementing measures necessary to achieve legitimate objectives, the national security exception, and shortening notice periods.
Limited Tendering
What is it?
The contracting authority selects a supplier or suppliers of its choice instead of running an open or selective competitive process.
How would this apply in a pandemic?
The contracting authority could use this option to acquire goods and services than cannot otherwise be obtained in time in a competitive process, "if strictly necessary, and for reasons of urgency brought about by events unforeseeable by the contracting authority2". The contracting authority cannot have caused the urgency of the requirements - poor planning doesn't meet the 'unforseeability' test. Over time, even if the acquisition of goods and services remains urgent, the requirement may no longer be "unforeseeable", and thus should be subject to an open tendering process.
Measures to Achieve Legitimate Objectives
What are they?
Measures that are inconsistent with the trade agreement rules but are implemented to achieve objectives such as protection of human life or health and public security and safety.
How would this apply in a pandemic?
As an example: a contracting authority may limit purchases of medical supplies to in-Canada suppliers with in-Canada manufacturing facilities, to ensure security of the source of supply in response to other nations' export restrictions or border closures that could impede timely delivery (this would normally be non-compliant with all international trade agreements). Measures may also encompass those legislative amendments being made at the federal, provincial and territorial levels to restrict movement of personnel in an effort to contain COVID-19 spread (which could otherwise offend the requirements of the Canadian Free Trade Agreement (CFTA)).
National Security Exception
What is it?
An exception under all trade agreements, whereby a party is not prevented from taking any action that it considers necessary to protect national or essential security interests.
How would this apply in a pandemic?
The concepts of "national security" or "essential security interest" are not defined in any trade agreement, and as such, each party to the trade agreement would have to consider whether and to what extent "national security" or an "essential security interest" is at risk or of concern. In the current emergency situation, one might expect the government is already considering whether to exercise this exception on a general basis; although there has been no indication of that by PSPC as of the date of publication of this bulletin.
Shortening Notice Periods
What is it?
Most trade agreements prescribe a specific period of time a solicitation must be open for bidding (these are usually shorter if the procurement is being management electronically). If there is no specific notice period (such as, for example, in the CFTA), the notice period is influenced by factors such as the nature and complexity of the procurement, the anticipated extent of subcontracting and the time necessary for using non-electronic means to transmit tenders.
How would this apply in a pandemic?
Procuring entities may rely on limited tendering, legitimate requirements or the national security exception to shorten notice periods.
WHEN NO TRADE AGREEMENTS APPLY
Even if trade agreements do not apply, contracting authorities are still subject to the Government Contracts Regulations3 (GCRs).
What are the GCRs?
The GCRs are regulations, issued by the Treasury Board Secretariat under the Financial Administration Act, that require contracting authorities to issue a public call for tenders unless one of the seven listed exceptions apply.
What exception could apply in a pandemic?
GCR section 6(a) permits a contracting authority to enter in to a contract without soliciting bids where "...the need is one of pressing emergency in which delay would be injurious to the public interest". The GCRs do not define "pressing emergency" or "public interest"; although Contracting Policy Notice 2007-4 Non-Competitive Contracting4, provides examples of "pressing emergencies" relevant to COVID-19:
- actual/imminent life-threatening situation;
- disaster endangering quality of life or safety of Canadians; and
- disaster resulting in loss of life.
Even in the face of a pressing emergency, contracting authorities must still determine whether the time required to conduct a procurement, even on a limited competitive basis, results in a delay that is injurious to the public interest. As with the limited tendering options provided under the trade agreements, as the requirements and sources of supply for goods and services becomes better understood, the element of "pressing emergency" may begin to give way to the public interest of obtaining best value from a competitive procurement.
OTHER POLICIES AND DIRECTIVES THAT APPLY
While the emergency contracting limits (thresholds) have been increased by the Treasury Board, all departments remain subject to applicable policies and directives, the Contracting Policy5, Contracting Policy Notices, such a CPN 2007-4 - Non-Competitive Contracting, approvals, and reporting obligations, including emergency contract award reporting.
Footnotes
1. Treasury Board of Canada Secretariat, "Contracting Policy Notice 2020-1: Response to COVID-19" (23 March 2020), online: (https://www.canada.ca/en/treasury-board-secretariat/services/policy-notice/contracting-policy-notice-2020-1-emergency-contracting.html)..
2. This specific language, as contained in the Canadian Free Trade Agreement, Article 513.1(d), is reflected, either exactly or in essence, in the other trade agreements.
3. Government Contracts Regulations, SOR/87-402.
4. Treasury Board of Canada Secretariat, "Contracting Policy Notice 2007-4 - Non-Competitive Contracting" (amended 10 June 2019), online: (https://www.canada.ca/en/treasury-board-secretariat/services/policy-notice/2007-4.html).
5. Government of Canada, "Contracting Policy", (modified 10 June 2019), online: (https://www.tbs-sct.gc.ca/pol/doc-eng.aspx?id=14494).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
