Quebec’s Register of Enterprises Ineligible for Public Contracts (referred to by its French acronym RENA) has been operational since June 1, 2012. Enterprises that have committed any of the offences enumerated in the Regulation respecting the register of enterprises ineligible for public contracts and oversight and monitoring measures (the RENARegulation) (over a hundred offences under some thirty laws and regulations are included in the list) have their names recorded in the RENA and are barred from doing business with the Government (provincial ministries and government bodies, the healthcare system, the education system, cities, towns and municipalities, Hydro-Québec, Société des alcools du Québec, Loto-Québec, etc.), directly or indirectly, for a prescribed period of time which varies from case to case.
The Register was set up pursuant to the recent adoption of the Act to prevent, combat and punish certain fraudulent practices in the construction industry and make other amendments to the Building Act,1 originally tabled as Bill 35.
The Conseil du Trésor (Treasury Board), which manages the RENA, records in it the names of enterprises that have been convicted, by final judgment, of any offence listed in the RENA Regulation. The Conseil du Trésor has 20 days in which to record a contractor’s name in the RENA from the time it is informed of the final judgment convicting the contractor of one of the listed offences. The Conseil du Trésor also records in the RENA the names of enterprises that have chosen to enter guilty pleas, as if they were final judgments.
A contractor becomes ineligible for public contracts as soon as its name is entered in the RENA. Performance of contracts that are then in process must cease immediately, unless the public body that awarded them applies to the Conseil du Trésor, within 20 days, for authorization for their continued performance. The decision on such authorization is issued within 10 days and the Conseil du trésor may subject its authorization to certain conditions, including that the contractor agree to the implementation of oversight and monitoring measures, at the contractor’s expense.
A contractor whose name is recorded in the RENA may not, for the duration of its ineligibility, submit a bid to obtain a public contract, enter into such a contract or enter into a subcontract that is directly related to such a contract. Statutory exceptions are made in a few situations, including an emergency that threatens human safety or property.
When a public contract is interrupted owing to the contractor’s ineligibility, the contractor will be deemed to have defaulted on performance of the contract, which may give rise to an action in damages if the other party suffers harm as a result of the default.
Before any work forming part of a public sector project is subcontracted, the contractor has a responsibility to ensure that its subcontractor‘s name has not been recorded in the RENA. Hiring an ineligible subcontractor is an offence that carries a fine of $2,000 to $20,000 in the case of a corporation,2 and a contractor that accumulates two such convictions within a two-year period will also have its name entered in the RENA. It is therefore critical for every contractor to make sure that any parties with whom it enters into subcontracts are not listed in the RENA before retaining their services in the context of a public sector project.
The domino effect of convictions by a contractor’s “associates”
If an “associate” of a contractor (“associate” being defined to mean, where the contractor is a corporation, a director, officer or shareholder holding shares carrying more than 50% of the voting rights3) is convicted of an offence listed in the RENA Regulation, the contractor’s name will be entered in the RENA. However, it should be pointed out that this “domino” effect can be avoided if the contractor is able to show that the offence committed by the “associate” was not committed in the course of exercising functions for the contractor (except in the case of a shareholder, where the effect is automatic and irreversible).
The consequences of a conviction for any of the offences listed in the RENA Regulation are far-reaching, especially for enterprises whose revenues are dependent on public sector contracts, making it essential for these enterprises to adopt best practices and ensure that the conduct of their officers, directors, shareholders and employees is above reproach. Enterprises should also be especially wary of pleading guilty to an offence just to avoid the inconvenience associated with contesting the charges in cases where a serious defence could be mounted.
Some examples of offences listed in the RENA Regulation
Here are just a few examples of some of the offences enumerated in the RENA Regulation. The list is far from exhaustive:
- Having wilfully evaded or attempted to evade compliance with the Act or payment of taxes4 (5 years’ ineligibility)
- Knowingly giving the Autorité des marchés financiers incorrect information5 (5 years’ ineligibility)
- Not obtaining a copy of the subcontractor’s attestation from Revenu Québec or not making sure that it complies with the Regulation6 (1 year’s ineligibility)
- Having in his or her possession coloured fuel oil stored in a propulsion tank7 (1 year’s ineligibility)
- Conspiracies, agreements or arrangements between competitors8 (5 years’ ineligibility)
- Bid-rigging9 (5 years’ ineligibility)
- Offence of an insider on securities of a reporting issuer or change in an economic interest in a financial instrument related to those securities10 (2 years’ ineligibility)
- Prohibited insider trading11 (2 years’ ineligibility)