On July 1, 2017, the widely anticipated update to Canada’s domestic trade agreement, the Canadian Free Trade Agreement (CFTA), came into force. The CFTA is an agreement among the Canadian provinces, territories and the federal government and replaces the 1995 Agreement on Internal Trade (AIT).
The CFTA is more comprehensive than the AIT because it covers nearly every sector of the Canadian economy, whereas the AIT only covered specific sectors and industries. The changes are intended to align with the requirements of Canada’s international commitments, such as the Comprehensive Economic and Trade Agreement between Canada and the European Union (CETA), expected to begin provisional application on September 21, 2017.
All federal, provincial and territorial governments are impacted by the CFTA, as well as most federal, provincial and territorial agencies, including Crown agencies, municipalities, school boards, colleges, universities and social service entities. Generally, procurement of all goods and services are covered, subject to designated thresholds and listed exceptions.
The provisions of CFTA and CETA are similar but not identical. What this means for procuring authorities is that compliance with the detailed technical and procedural provisions of CFTA will not ensure compliance with CETA, nor vice versa.
Neither CFTA nor CETA represents a wholesale shift in the way procurement activities are regulated in Canada. Procuring authorities are still expected to carry out their procurement activities in an open, transparent and non-discriminatory manner; this has not changed.
The principles, policies and procedures set out in both CFTA and CETA reflect international best practices in terms of open, fair and transparent procurement activities. Procuring authorities that have been regularly updating their policies and practices to reflect best practices will have already implemented many of the requirements in CFTA and CETA.
Nevertheless, there are some provisions of CFTA and CETA that require attention by procuring authorities as they will impact both their procurement governance as well as how they are currently carrying out their procurement processes, including:
- A single point of access for procurement opportunities
- More prescriptive notice requirements, including when procurement documents are issued and following award of the contract
- Detailed requirements regarding technical specifications and other tender documentation, including a requirement to disclose all evaluation criteria
- Prescriptive requirements related to proposal response times
- A requirement to implement an impartial and independent review procedure through which a supplier may challenge a process
IS MY ORGANIZATION IMPACTED?
For public sector procuring authorities, here are some threshold questions to ask to determine whether or not your organization’s procurement activities will be impacted by these new trade agreements:
Are You a Covered Entity Under CETA and CFTA?
- The entities covered by CFTA are identified in article 504 and are consistent for all parties to CFTA, with the exception of party-specific excluded entities named in annex 520.1.
- The entities covered by CETA are identified in the annexes to chapter 19 and each province and territory has a different list.
- Some entities that were not previously subject to the AIT may be subject to CETA and/or CFTA.
Are You Purchasing Goods or Services Covered by CETA or CFTA?
- Under CFTA, the procurement of all goods and services is covered, subject to certain exclusions.
- Under CETA, the procurement of all goods is covered whereas only specified services are covered, subject to certain exclusions.
Does the Total Value of the Proposed Procurement Meet or Exceed the Relevant Thresholds?
- There are thresholds for covered procurements under both CETA and CFTA and they are different under each agreement and for different procuring authorities.
- The thresholds are broken down into goods, services and construction and apply to the total procurement value for the entire duration of the contract, which includes the total value of all options (if applicable).
- Thresholds under the CFTA are set out in Canadian dollars and will be subject to inflation beginning in 2018.
- Thresholds under CETA are set out in Special Drawing Rights, an international reserve asset.
Do Any of the Exclusions or Non-Application Provisions Set Out in CETA or CFTA Apply?
- Certain activities are exempt from application of the procurement provisions of CETA and CFTA in their entirety.
- The exclusions and non-application provisions are quite detailed and may be different for each covered entity. Although the exclusion and non-application provisions of CETA and CFTA are generally similar, there are important differences. Careful review of these in light of a particular procurement activity is required.
Are There Any Non-Competitive Exceptions in CETA or CFTA That Apply?
- Similar to AIT, procuring authorities can only undertake non-competitive procurement under limited circumstances and not for the purposes of avoiding competition among suppliers.
- Both CETA and CFTA provide exceptions for non-competitive procurement, which are largely consistent with the previous exceptions set out in AIT, subject to some modifications.
For public sector procuring authorities, the coming into force of CFTA and the imminent application of CETA provide an opportunity to review their procurement policies and procedures, procurement documents and practices to ensure not only compliance with these new trade agreements, but also to reflect best practices in their procurement activities. This requires a detailed review of both CFTA and CETA and a careful consideration of the impact of these new agreements on both procurement governance and procurement activities. The information set out in this bulletin is meant to provide a brief overview and is not a substitute for this more detailed review.
We wish to acknowledge the contribution of Michael Cork to this publication.