Canada: New Federal Integrity Regime: Two Steps Forward, One Step Back

 On July 3, 2015, Public Works and Government Services Canada (PWGSC) announced the implementation of a new government-wide Integrity Regime for all federal government procurement, effective immediately.

The Integrity Regime replaces the Integrity Framework initially introduced by PWGSC in 2012 and amended in March 2014, which was heavily criticized as being unfairly harsh for its lack of due process and failure to account for remedial actions taken by many companies subject to its application. The Integrity Regime is a definite improvement on its predecessor, particularly insofar as it eliminates automatic debarment for the actions of affiliated companies and also allows for a reduction in the debarment period for companies that undertake appropriate remedial conduct. Where it falls short, however, is the Integrity Regime continues to impose a lengthy mandatory debarment period, which for some companies could be akin to a death sentence, no matter what lengths these companies have undertaken to identify, fix and report a problem. This is particularly problematic given that companies may be held criminally liable for the actions of mid-level managers, even in the absence of knowledge or involvement by officers or directors. In certain cases at least, mandatory debarment represents an unduly harsh penalty on innocent shareholders and employees. Under the Integrity Regime, a supplier is barred from doing business with the Government of Canada for 10 years if it or any board members have been convicted or discharged in the past three years for a range of integrity-related offences in Canada or abroad, including bribery, fraud, bid-rigging, tax evasion, insider trading and money laundering. However, the decade-long ban can now be cut in half if the supplier shows it has taken action to co-operate with authorities and takes remedial action. While the new regime amounts to a retreat from the integrity rules enacted just last March, in which any prior conviction against a supplier or any of its international affiliates would have earned a 10-year ban with no chance of its reduction, the five-year debarment penalty remains punitive and is far stricter than the U.S .and European equivalent integrity provisions, where governments allow convicted companies to win reinstatement and reduce their disbarment for coming clean and taking action to fix problems.

Another concern with the Integrity Regime is that any existing supplier can be suspended for 18 months (or longer) just for being charged in Canada or abroad with an integrity offence. This raises issues relating to the presumption of innocence and throws a supplier's status into question, even though they may actually be innocent. Although the Integrity Regime has introduced the prospect of an "administrative agreement" in place of a suspension, which would see a third-party monitor overseeing the charged company, it has yet to be seen how these administrative agreements will be utilized in practice.

The following are the key elements to the new Integrity Regime:

  • Government-Wide Application: Previously, the Integrity Framework applied only to solicitations by PWGSC and certain other government departments that adopted PWGSC's Integrity Framework. Effective as of July 3, 2015, PWGSC will administer the regime on behalf of the Government of Canada and will apply it within the department to all new solicitations and contracts issued by PWGSC. The Integrity Regime will then be rolled out to the rest of the Government of Canada's departments and agencies over the coming months.
  • Certification: Under the Integrity Regime, a supplier certifies with their bid that they and members of their board of directors have not been charged, convicted or absolutely/conditionally discharged from one of the "listed offences" or a similar foreign offence in the past three years. A supplier will be deemed ineligible to contract with the Government of Canada for a period of 10 years if it provides false or misleading information in its certification.
  • Affiliates: The former Integrity Framework provided that suppliers contracting with the Canadian government were subject to debarment if an affiliate company was charged with an integrity offence, regardless of whether or not the supplier seeking to contract with the government was in any way responsible for the offence committed by its affiliate. The most significant improvement to the integrity provisions is that the new Integrity Regime eliminates mandatory ineligibility of a supplier for the actions of an affiliate (including a parent company) unless there is evidence that the supplier/potential supplier had involvement in the wrongdoing that led to the conviction of its affiliate.
  • Supplier Rehabilitation: Previously, suppliers were debarred from participating in federal government procurements for 10 years from the date when the contractor or its affiliate had been convicted of an integrity offence. The new Integrity Regime also provides that a bidder remains ineligible for 10 years when they have been convicted of a listed offence, however, the 10-year ban can be reduced by five years if the supplier has cooperated with legal authorities or addressed the causes of the misconduct that led to their ineligibility.
  • Suspension: Despite the general presumption of innocence in Canadian law, the Government of Canada will now have the ability to suspend a supplier for up to 18 months if the supplier has been charged (not convicted) with a listed offence. An administrative agreement may be imposed in lieu of a suspension.
  • Subcontractors: Prime contractors are required to subcontract only with eligible suppliers. A prime contractor who knowingly subcontracts with an ineligible subcontractor will be declared ineligible to contract with the Government of Canada for five years.
  • Treatment of Existing Contracts after Conviction: If a conviction occurs during a contract, the government retains the right to terminate a contract or real property agreement for default. Suppliers will now, however, be afforded an opportunity to show why the termination should not be exercised and enter into an administrative agreement, setting out how the company will take corrective action to ensure ethical behaviour, as a means of preserving existing contracts.
  • Exceptions: There remains a Public Interest Exception to debarment, which applies in exceptional circumstances where it is necessary to the public interest to enter into business with a supplier that has been convicted or has been conditionally or absolutely discharged of an offence under the Integrity Regime, though the available grounds for use of this exception remain narrow.
  • Administrative Agreements: Suppliers and the Government of Canada can now enter into administrative agreements where:
    • An ineligible supplier has had its ineligibility period reduced
    • In lieu of a suspension
    • The public interest exception was invoked
    • When the government decides to continue with an existing contract with a supplier which has become non-compliant

The administrative agreements will stipulate terms and conditions that a supplier must meet to remain eligible to contract with the government, which may include certain remedial measures, the implementation of a compliance program and reporting requirements. The monitoring of the terms of the administrative agreement is conducted by a recognized third party, paid by the supplier. If a supplier does not abide by the terms of an administrative agreement, a lengthened ineligibility period could be imposed.

Although the new Integrity Regime is an improvement on the former integrity policies, the Integrity Regime continues to impose significant consequences, even for companies that do everything practicable to identify and resolve a compliance problem. As such, the Integrity Regime still has long-lasting, potentially disproportionate effects on suppliers charged or convicted with an integrity offence.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
30 Oct 2019, Other, Toronto, Canada

The materials on the Blakes Business Class website are provided for informational purposes only. Accessing this information does not create a lawyer-client relationship.

Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions