Commitments for Government Procurement Under International Trade Agreements: Find out More!

Commitments for Government Procurement Under International Trade Agreements: Find out More!

When CIF staff receive questions that are new to us, we’re happy to investigate, and where necessary, obtain expert advice. This week’s blog was prepared by Paula Lombardi, LLB of the law firm, Siskinds LLP, to address procurement obligations that may affect Ontario recycling programs.

Responding to an enquiry about what are some of the outside influences that Blue Box programs need to be aware of when making procurement decisions, Ms Lombardi prepared the following response.

Canada is a party to several international trade agreements that contain specific commitments relating to government procurement. The only one that contains international commitments that apply to municipalities is CETA, the “Canada-EU Comprehensive Economic and Trade Agreement”.[1]

CETA came into effect on September 21, 2017.  Chapter 19[2] deals with government procurement and extends procurement obligations to “sub-national” entities in the European Union and Canada. Sub-national entities are defined to include not only provincial and territorial departments and agencies, but also municipalities.[3]  It is important to note that municipal-owned entities and corporations may also be considered as “other entities” under the agreement and  may be subject to specific obligations.

Article 19.2 prescribes the scope and coverage of the application of government procurement obligations. Canada’s specific commitments with respect to procurement are set out in the market access schedules set out in Annex 19-A. These annexes contain the applicable contract-value thresholds (being the value at which point the rules and obligation are triggered) for the entity as well as the goods, services and construction services that the procedural rules will be applied

Generally, the thresholds for municipalities goods and services are approximately $340,600 (CDN) and $8.5 million (CDN)[4] for construction services. If a municipality is undertaking a procurement for an amount less than these thresholds, CETA’s procurement obligations do not apply. While common waste management procurement activities could be captured under CETA, the provisions do not apply to measures relating to Aboriginal peoples, drinking water, energy, transport, and some general categories such as the acquisition of land.

The procurement obligations in CETA are based on four core principles:

  1. non-discrimination,
  2. equal treatment,
  3. transparency, and
  4. accountability.

These four core principles are described as follows:

  1. Non-discrimination: this principle obligates municipalities to treat foreign suppliers the same way as domestic and local suppliers are treated. In other words, a municipality cannot place restrictions on foreign suppliers that are not applied to its domestic suppliers, and there can be no preferences for domestic suppliers.
  2. Transparency: This principle requires that information on procurement procedures, notices and awards be made publically available. Eventually municipalities (along with all Canadian entities covered by CETA) will be required to publish all public tenders governed by CETA on a “single point of access” procurement website (this provision has a 5-year transition period, so it is not yet in-force).
  3. Equal Treatment: This principle prohibits municipalities from using participation or qualification criteria that prevent open competition between domestic and foreign suppliers. It also requires that municipalities apply the criteria in tender documents fairly as between domestic and foreign suppliers.
  4. Accountability: Canada is required to implement a bid challenge processes to allow domestic and foreign suppliers a venue to legally enforce CETA’s obligations (for example, at the federal level, the Canadian International Trade Tribunal and the Federal Court of Appeal as a reviewing court).

Global Affairs Canada in collaboration with the Federation of Canadian Municipalities has prepared a comprehensive guide to international trade agreements for Canadian municipalities.  It includes an entire section with detailed information on the municipal procurement provisions under CETA and a list of frequently asked questions. It is an excellent resource for detailed information for municipalities. It can be found at: http://international.gc.ca/trade-agreements-accords-commerciaux/ressources/fcm/complete-guide-complet.aspx?lang=eng

While the CETA provisions represent one more item to watch during the procurement process, it does not appear to constrain municipalities from making purchases based on lowest cost or best value provided the basic principles are followed.

https://fcm.ca/en/resources/comprehensive-economic-and-trade-agreementReferences

[1] Global Affairs Canada guide to International Trade Agreements and Local Government: A Guide for Canadian Municipalities: http://international.gc.ca/trade-agreements-accords-commerciaux/ressources/fcm/complete-guide-complet.aspx?lang=eng

[2] The full text of Chapter 19: http://www.international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/ceta-aecg/text-texte/19.aspx?lang=eng

[3] https://fcm.ca/en/resources/comprehensive-economic-and-trade-agreement; and full text of CETA 19-A: http://www.international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/ceta-aecg/text-texte/19-A.aspx?lang=eng#a

[4] https://fcm.ca/en/resources/comprehensive-economic-and-trade-agreement