In adopting procurement policies and practices, municipalities must address the challenges of understanding a complex array of trade agreements, legislation, directives and court decisions. The need to keep abreast of new developments poses a particular challenge to small and medium-size municipalities that may not have the in-house expertise arising from extensive experience with complex procurement projects.

Trade and Procurement Agreements

Among the agreements of which municipalities should be aware are the North American Free Trade Agreement (NAFTA), the WTO Agreement on Government Procurement, the Agreement on Internal Trade and the Canada-US Agreement on Procurement.  Municipalities may also be affected by various regional agreements such as an Agreement on the Opening of Public Procurement between Ontario and Quebec.

While not all agreements are directly applicable to the municipal sector, they may nevertheless have consequences for municipalities. For example, while provinces or municipalities are not expressly bound by NAFTA, the Agreement allows private sector entities to initiate challenges based on the actions at the so-called “sub-federal” level. Based on these mechanisms, a wind power company located in the U.S. owned by T. Boone Pickens recently launched a $775 million lawsuit against the federal government, alleging that the Ontario government discriminated against U.S. companies. The complaint arose as a result of a requirement for companies to procure a certain percentage of goods and services from within Ontario as a condition of receiving premium pricing under the feed-in tariff program pursuant to the Ontario Green Energy Act.

In addition to existing agreements, a Comprehensive Economic and Trade Agreement (the “CETA”) is currently under negotiation between Canada and the European Union ("EU").  The EU negotiators have stated that one of their objectives is to ensure that European companies obtain enhanced access to public procurement markets through provisions in the Agreement to apply to sub-central (i.e. provincial and municipal) governments.

Legislation

While not directly binding on municipalities, the Ontario Broader Public Sector Accountability Act is also of significance for municipalities in that province. The Act applies as of April 1, 2011 to designated broader public sector organizations, such as hospitals, schools and universities, and will extend to other publicly funded organizations as of January 1, 2012. Pursuant to this legislation, Management Board of Cabinet of the Ontario government issued a Broader Public Sector Procurement Directive which imposes some 25 mandatory requirements for affected organizations.  The requirements in the Directive represent a set of best practices that municipalities should consider in reviewing their own procurement policies.

Decisions of Courts and Tribunals

In addition to the express requirements of applicable trade agreements, legislation and directives, municipalities should also take into consideration various court decisions, as well as decisions of the Canadian International Trade Tribunal (“CITT”). The CITT provides an administrative dispute resolution mechanism for suppliers to the federal government. While its decisions are not binding on municipalities, they provide guidance as to the rules that municipalities should follow as part of their procurement processes.

Guiding Principles for Procurement

While arising from different legal instruments, certain well-established principles must be followed by municipalities in the conduct of their procurement activities. Some of these principles include: (i) reciprocal non-discrimination (i.e., the obligation to treat suppliers from various jurisdictions in the same manner); (ii) transparency and openness (i.e., the obligation to make procurement documents and the terms and conditions for submitting bids generally open and available to all interested parties); and (iii) use of neutral specifications and standards (i.e., the obligation to define requirements for goods and services based on objective criteria, rather than criteria that only one supplier would be capable of meeting).

Other basic principles with which municipalities must comply are the obligation to require bidders to comply with all mandatory requirements, to ensure that any waiver of deficiencies is expressly permitted under the terms of the applicable procurement document, and to ensure that all bidders are treated fairly and equally.

Conclusions

While it may seem like a daunting task for municipalities to understand the myriad of agreements, laws, directives and court decisions to which they may be subject, it is a much less complex task to identify the principles which must be followed in conducting any procurement. If municipalities ensure that they comply with those principles in drafting and enforcing their procurement policies, the risks of challenges to their procurement decisions will be greatly reduced.