Public Works and Government Services Canada has released its anticipated revisions to the Integrity Regime, Canada’s debarment regime for public sector contractors. Despite relaxing some of the more controversial provisions from the previous Integrity Framework, Canada continues to impose strict debarment rules for contractors and their affiliates who have committed anti-corruption, fraud or similar offenses.
In this article, we review the new Integrity Regime and how companies (or affiliated companies) involved in federal procurement in Canada can comply with the obligations it imposes.
The breadth of the new Integrity Regime
The new Integrity Regime applies to all suppliers to the Canadian government, including all federal departments and agencies, for procurement and real property transactions. This also extends to any subcontractors: prime contractors will be required to subcontract only with eligible suppliers, and prime contractors will be debarred for five years if they knowingly subcontract with an ineligible supplier.
Under the new Integrity Regime, all suppliers must certify in their bids for federal contracts that neither the company nor any of its directors or affiliates have been charged, convicted or discharged of one of 16 listed offenses or similar foreign offenses in the past three years. This list of offenses includes violations of anti-corruption and bribery laws, the Competition Act (i.e. price-fixing), money-laundering, participation in organized crime, tax evasion, extortion, drug trafficking and various fraudulent activities. All such offenses are treated equally whether the activity occurred in Canada or abroad. Any supplier who fails to provide such a certification will be ineligible to bid on public contracts with the Canadian government.
Under the previous Integrity Framework, a supplier would be debarred whether the supplier itself or an affiliated company committed the offense. This has now changed. Under the new Integrity Regime, a company may still bid on Canadian government contracts if an affiliate is convicted of a listed offense, so long as it provides an independent assessment to show that the bidding company was not involved in the actions that led to the affiliate’s conviction.
Suppliers’ 10-year debarments may also now be reduced to five years if they are able to demonstrate that they either cooperated with law enforcement that investigated the offense or have undertaken remedial measures to address their wrongdoing. In order to qualify for this relief, a supplier will have to enter into an administration agreement with PWGSC to abide by strict remedial and compliance measures that will be overseen by an independent monitor.
Navigating the compliance obligations: 5 tips
Given the severity of the Integrity Regime, we suggest the following compliance tips to help public contractors (and their parent companies) navigate the compliance obligations imposed by this regime:
- Properly examine all subcontractors, directors and affiliates’ compliance history before certifying any bid for a public contract with the Canadian government. Any supplier that provides false or misleading information in the certification will be debarred for 10 years without any ability to apply for a reduced ineligibility period.
- Conduct appropriate diligence of internal and subcontractor fraud and anti-corruption compliance programs to ensure employees receive proper compliance training and that there are sufficient internal controls and management oversight to avoid and detect any potential violations.
- If awarded a bid, ensure fulsome compliance representations and warrants in any subcontracts, as well as additional indemnities and other remedies, to help protect against a potential suspension or even termination of the prime contract over a subcontractor’s violation.
- For larger subcontractors with multinational operations, carefully consider what role, if any, a Canadian subsidiary involved in public contracting may have played for any incidents or violations of corruption or fraud-related offenses when entering into settlement or plea agreements in other jurisdictions (for instance, relating to the US Foreign Corrupt Practices Act).
- Consider the benefits of cooperating with authorities if under investigation for a potential violation of the enumerated offenses. Canadian investigators and courts tend to view such cooperation as a mitigating factor in sentencing violations and, additionally, may reduce the length of any debarment arising therefrom.