On October 12, 2011, the federal government published regulations in the Canada Gazette, Part II, that amended the Government Contracts Regulations1 (GCRs). These amendments to the GCRs convert several government policies and practices into law. These changes include deemed terms in government contracts that require the public disclosure of “basic information,” prohibit the payment of contingency fees to lobbyists, and prohibit dealing with contractors who have been criminally convicted under sections 121, 124, or 418 of the Criminal Code.
The regulations were registered on September 22, 2011, meaning they are currently in force.2 The GCRs are enacted under the Financial Administration Act3 (FAA), and set out basic requirements for contracting with the federal government. These are the first amendments to the GCRs since March 2006, when the Schedules to the GCRs were repealed.
Contractual deemed terms
The most important amendment to the GCRs is the inclusion of five terms that are deemed to be expressly included in every contract for construction, goods, or services, where the Crown pays any amount of money. The deemed terms are:
- the contractor declares that there is/was no payment of a contingency fee to any individual for the solicitation, negotiation, or obtaining of a contract where the contingency fee would require the individual to comply with the Lobbying Act;
- accounts and records relating to any payment for the solicitation, negotiation, or obtaining of a contract are subject to the accounting and auditing provisions of the contract;
- the contractor declares that it has not been convicted of an offence, unless a pardon has been granted, under section 121 (fraud on the government), 124 (selling or purchasing office), or 418 (selling defective stores to the Crown) of the Criminal Code;
- the contractor consents to the public disclosure of basic information relating to the contract, other than information not disclosed by the Access to Information Act, where the contract has a value in excess of $10,000; and
- if the contractor makes a false declaration or fails to comply with the above deemed terms, it is considered an act of default and the contractor agrees, in addition to any other available remedies, to immediately return any advance payments. Further, the contracting authority may also terminate the contract.
These deemed terms, with the exception of the fourth term, apply where the Crown pays any amount of money pursuant to the contract. There is no minimum monetary threshold to their deemed inclusion in a government contract.
No fees to lobbyists
Looking at the individual provisions, the first deemed term prohibits paying contingency fees to consultant lobbyists. This was already included at section 8.11 of the Treasury Board’s Contracting Policy, a non-legal document referred to by government departments when contracting. However, the effect of this amendment converts Treasury Board policy into law, and gives the contracting authority a means by which it can enforce this policy. The second deemed term allows for the auditing of accounts and records, to ensure that the contractor is complying with the prohibition.
No criminal convictions
The third deemed term relates to criminal offences, a provision which is already included in the Criminal Code at subsection 750(3), and at section 12.5.1 of the Treasury Board’s Contracting Policy. Subsection 750(3) of the Criminal Code prevents anyone convicted of an offence under section 121, 124, or 418 from contracting with the Crown, or receiving any benefit under a contract with the Crown. A contractor convicted under one of these criminal sections would require a pardon before being able to contract with the Crown again.
Mandatory public disclosure of information
The fourth deemed term requires a contractor to consent to the public disclosure of “basic information” relating to the contract. There is no clarification in the regulations as to what information would be disclosed under the GCRs, although information that cannot be disclosed under paragraphs 20(1)(a) to (d) of the Access to Information Act will not be released. Explanatory notes in the Canada Gazette state information that can be publicly disclosed includes “the vendor’s name, the reference number, the contract date, the description of work, the contract period, the contract value and comments.” However, it will be interesting to see if this deemed term will be used to allow more important information to become public, and whether or not it will make defending Access to Information Act disclosure requests more difficult for contractors.
The fifth deemed term gives the contracting authority the ability to enforce the deemed terms. In addition to any other available remedies, a contractor in breach of a deemed term would be required to immediately return any advance payments made, and the contracting authority would have the right to terminate the contract. This is expected to reduce the risk of a contractor making a false declaration.
The amendments also include two terms that are deemed to be expressly included in every bid solicitation for a construction, goods, or services contract. These deemed terms reflect the deemed terms included in contracts, as outlined above:
- the bidder declares that there is/was no payment of a contingency fee to any individual for the solicitation, negotiation, or obtaining of a contract where the contingency fee would require the individual to comply with the Lobbying Act; and
- the bidder declares that it has not been convicted of an offence, unless a pardon has been granted, under section 121 (fraud on the government), 124 (selling or purchasing office), or 418 (selling defective stores to the Crown) of the Criminal Code.
In addition to the deemed terms, the amendments also make a number of other changes. For example, the amendments remove the National Capital Commission (NCC) from the scope of the GCRs, thus treating the NCC like other Crown corporations. The definition of “contracting authority” is broadened to include both individuals who are authorized under legislation to enter into contracts and departments, as defined in section 2 of the FAA, that have legal authority to enter into a contract.
Compliance and enforcement
The notes in the Canada Gazette indicate that compliance with, and enforcement of, the GCRs will remain the same. However, the new deemed terms give the contracting authority the ability to require the immediate return by a contractor of any advance payment made, and to terminate a contract where there has been a violation of the deemed terms.
These regulations are largely a conversion of current government practice and policy into legislation, which gives the government contracting authority more teeth. How these new teeth will be used in practice, and how the changes will actually affect contractors and bidders, remains to be seen.