Amendments to the Government Contracts Regulations add fraud and corruption certifications for bidders and increases the bidding threshold for construction contracts
On June 10, 2019, amendments to the Government Contracts Regulations (GCRs) entered into force. These changes affect all suppliers engaged in the federal contracting process.
In brief, the GCRs establish rules for federal government bid solicitation and contracts. The amendments to the GCRs affect suppliers in two significant ways. First, all bidders and contractors must now declare that, throughout the solicitation process, they have not committed certain offences related to fraud or corruption. Second, the amendments raise the threshold for non-competed service and construction contracts to CA$40,000 from its previous threshold of CA$25,000.
These two impacts are described in detail below.
1. New deemed provisions on fraud and corruption
The amendments to section 18 of the GCRs require contractors and bidders to declare they have not committed an act that would constitute an offence under certain sections of the Criminal Code, the Financial Administration Act, the Corruption of Foreign Public Officials Act, and the Competition Act relating to fraud and corruption throughout the solicitation or contract award process. 1 This corresponds to one of the government's stated objectives when making these amendments, of "reduc[ing] the risk of corruption and collusion" in the procurement process.
Pursuant to section 18 of the GCRs, this declaration is "deemed" included in "every construction, goods or service contract that provides for the payment of money", as well as in every bid solicitation for such a contract. Prior to the present amendment, section 18 contained other deemed provisions, including declarations that contractors have not been convicted of any offence listed under section 750(3) of the Criminal Code or paid a contingency fee to a consultant or lobbyist subject to reporting requirements under the Lobbying Act. 1 Notably, the specific text of these declarations (or wording of similar effect) is usually included in the solicitation itself, and/or through the Standard Acquisition Clauses and Conditions (SACC) Manual included by reference in government contracts. The SACC Manual has yet to be updated to reflect this new deemed declaration.
Where a contractor's declaration has been determined to be false, the contractor must immediately return any advance payment, and the contracting authority may terminate the contract, and may seek other potential remedies available under the contract.
Practically, this amendment differs from the existing deemed declarations in respect of Criminal Code offences, which, as noted above, are premised on convictions. The amendments solely require that an "act" or "activity" can "constitute an offence" under the applicable provisions. Hence, there is no requirement of a conviction. Absent specific court judgment on the relevant offences, it remains unclear how determinations of an act or activity constituting an offence of the named provisions will be made, who it will be made by, the standard of proof that will be utilized in making such a determination, and the opportunity that will be afforded to suppliers to defend themselves.
While compliance with such provisions will not be problematic for the majority of suppliers, any supplier that believes they may have any compliance issues is best to clarify the specifics of such determinations in contracts entered into with the government. An adverse determination against a supplier made under these provisions may cause significant prejudice to them. In addition to a contract being terminated, suppliers may also be subject to sanctions under the Vendor Performance Corrective Measure Policy that can affect future contract awards.
2. Increase in threshold for competitive bids
The second impactful change to the GCRs increases the threshold for bid solicitation to CA$40,000 for service and construction contracts. This increase accounts for inflation from the time the previous level of CA$25,000 was set in 1996. The threshold for contracts for goods remains fixed at CA$25,000, in light of Canada's obligations under the Canada Free Trade Agreement.
3. Analysis
The deemed terms noted above are the latest in a series of reforms aimed at corruption in federal government contracting and at white-collar crime, generally. We have previously written about the Integrity Regime, which, as with the amendments noted above, applies to contracting with the federal government. We have also commented on the recent made-in-Canada approach to deferred prosecution agreements.
Other recent developments targeting white collar crime include a broadening of the prohibition against money laundering, and a requirement for federally-incorporated companies to track their significant beneficial owners. The latter initiative attempts to limit misuse of the corporate shield to obscure tax evasion and other misdeeds.
Our team is deeply experienced in procurement and anti-corruption matters. Please contact Paul Lalonde or Sean Stephenson with any inquiries on this or other related matters.
*Daniel McElroy, Practice Support Lawyer in the Vancouver office, contributed to this alert.
- [More specifically, the offences in such declarations include: (i) section 121 (frauds on the government), 124 (selling or purchasing office), 380 (fraud) or 418 (selling defective stores to Her Majesty) of the Criminal Code; (ii) paragraph 80(1)(d) or subsection 80(2) or 154.01(1) of the Financial Administration Act; (iii) section 3 (bribing a foreign public official) or 4 (accounting) of the Corruption of Foreign Public Officials Act; or (iv) section 45 (conspiracies, agreements or arrangements between competitors), 47 (bid-rigging) or 49 (agreements or arrangements of federal financial institutions) of the Competition Act.]
- [These provisions are unchanged by the amendments, so would-be contractors remain, in essence, debarred if ever convicted under section 750(3), which speaks to fraud and corruption offences, or paid an improper contingency fee. ]
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