preparing for the comprehensive economic and trade · pdf filepreparing for the comprehensive...

Preparing for the Comprehensive Economic and TradeAgreement

PUBLIC PROCUREMENT

January, 2015

National Education Consulting Inc.

Brenda C. SwickPartner

Chair, Government Contracting Group

[email protected] 601 7545

McCarthy Tétrault LLP Brenda C. Swick NECI January 2015

Overview

1. Changing Dynamic in Public Procurement“Broadening the Net”

2. “Spaghetti Bowl” of International AgreementsHow CETA fits in

3. Status of CETA

4. CETA Coverage & Thresholds

5. Procurement Obligations under CETA

Qualifier - this is an overview- devil is in the detail

6. What CETA means to your organization

7. Next Steps


1. Broadening the Net

¬ Canada is signing new trade treaties

¬ Very high priority on federal government agenda

¬ All treaties contain procurement chapter

¬ Pressure on Canada to open up procurement practices of all levels ofgovernment

¬ being fuelled by foreign suppliers who want access to “the entire” Canadianprocurement market

¬ no longer just federal procurements

¬ now drilling down to sub-federal provincial and municipal procurement,crown corps, utilities & MASH

¬ Why?

¬ Significant public purchasing dollars at sub-federal level

¬ At least $100 billion is spent annually by all governments & MASH


1. Broadening the Net

¬ Canada-EU Comprehensive Economic Trade Agreement (CETA)

According to the EU, “The public procurement market access offer that Canada

has made is the most ambitious and comprehensive offer Canada and its

Provinces have ever made to any partner, including the US. The outcome

regarding the inclusion of provincial and territorial governments, regional and

local government entities, including agencies, crown corporations, and the

MASH sector is highly satisfactory.”

¬ Bottom Line:Procurements by municipalities will become

¬ much more competitive¬ more scrutinized¬ more susceptible to challenge


2. Spaghetti Bowl: ProcurementAgreements

Canada-US Agreement onGovernment Procurement

Applies to provincial procurements being bid on by US suppliersExempts provincial crown corporationsRequires compliance with the WTO Government Procurement Agreement

NAFTA-Chapter Ten Applies to federal procurements being bid on by US, Canadian and MexicansuppliersNot applicable to provinces or municipalitiesCITT is the bid review mechanism and provides rapid interim measures and remedies

WTO Agreement on GovernmentProcurement

Applies to federal contracts being bid on by Canadian and foreign suppliers from37 countriesNot applicable to provinces or municipalitiesCITT is bid review mechanism

Agreement on Internal Trade (AIT) Applies to federal, provincial and municipal & MASH contracts being bid on byCanadian suppliersCITT is bid review mechanism for federal contracts onlyDispute settlement mechanism for provincial./MASH

New West Trade PartnershipAgreement (NWPTA)

Applies to B.C. Alberta and Saskatchewan provincial and municipalprocurements being bid on by suppliers carrying on business in those provincesState to state and private party bid review mechanism

Canada-EU ComprehensiveEconomic and Trade Agreement

Will apply to procurements by federal, provincial, municipal, Crown corporations,MASH and utilities/ being bid on by EU and Canadian suppliers


3. Status of CETA

¬ September 2014 – At the Canada-EU Summit in Ottawa, leaders release text ofthe Agreement.

¬ Legal Scrub – final legalized text – March 2015 (5-6 mos)

¬ Translation

¬ Ratification in Canada - federal

¬ Legislative package introduced into House of Commons – 1st Q 2015

¬ Committee hearings

¬ Opportunity to appear

¬ Important to shape implementation to protect and promote your interests

¬ Implemented into Canadian law – Q2 2016

¬ All of legislation will have been changed

¬ Provincial Implementation

¬ Important to shape implementation to protect and promote your interests

¬ European Council must approve unanimously

¬ European Parliament requires majority


4. CETA Coverage

¬ 3 rules: designated entity; designated good/service;exceed monetary threshold (based on the value of the contract –cannot divide a procurement into separate parts or select aparticular valuation method in order to circumvent the Agreement)

¬ Designated Entity - Broad coverage – unprecedented – biggerthan NAFTA

¬ Federal

¬ Provincial

¬ Municipalities (but in Ontario not municipal energy entities)

¬ School boards and publicly funded academic, health and social service entities

¬ Crown corporations

¬ 75% of procurements by public utilities

¬ Mass transit by provinces


4. CETA Coverage

¬ Designated contract

¬ All goods covered with enumerated exception in Annex X-05

¬ Services Annex X-06

¬ Construction Services – Annex X-07

¬ Arguable that goods or service must meet the CETA Rule oforigin to be a covered procurement

¬ Issue which should e discussed with Province in implementation


4. CETA THRESHOLDS (CDN$)/ *in SDRs

TradeAgreement

Government Entity Crown Corporations Utilities

CETA Goods Services Construction Goods Services Construction

Federal 205,000 205,000 7,800,000 560,000 560,000 7,800,000 630,000

Provincial/Territory

315,000 315,000 7,800,000 560,000 560,000 7,800,000 630,000

MASH(Municipal,Academic,Schoolboards,Hospitals)

315,000 315,000 7,800,000 N/A N/A N/A 630,000



¬ Devil is in the detail: some caution - still have not seen final legal text

¬ Will apply the WTO Agreement on Government Procurement (GPA/113)2 April 2012

¬ Nondiscrimination¬ Canadian municipalities must not discriminate against European (or other

Canadian) suppliers in their procurements¬ In law or in fact¬ Lots of case law on this

¬ Substantive Rules¬ Procurements must be conducted in a “transparent, fair and impartial

manner”¬ Tender documentation shall include a complete description of “all evaluation

criteria that the entity will apply”¬ Predict these two requirements alone will be basis for vast majority of

procurement challenges under CETA



¬ Tendering Procedural Rules¬ Must publish “notice of intended procurement”

¬ Commitment to create a single point of electronic access for ALLnotices of procurement opportunities within 5 years of entry into force

¬ Need to talk to Province

¬ Requirements for contents¬ Must indicate whether procurement covered by CETA

¬ Must publish summary with it that is readily accessible

¬ Specific rules on the conduct of procurements by electronic means

¬ Detailed requirements for 3 types of tendering procedures¬ Open tendering Procedures – all interested suppliers may bid¬ Selective tendering procedures – only prequalified suppliers may bid¬ Limited tendering procedures – sole source



¬ Tendering Procedural Rules (cont’d)

¬ Rules for qualifications of suppliers¬ Must be restricted to those that are “essential” to ensure that the

supplier has the legal and financial capacity and the commercial andtechnical capabilities to undertake the procurement

¬ May require relevant “prior experience” but not require that the priorexperience be in the territory of the procuring entity

¬ Slippery slope


5. Procurement Obligations underCETA

¬ Time Periods¬ “Sufficient time” to prepare bids taking into account complexity; extent

of subcontracting; time to transmit non-electronic tenders from foreignplaces¬ Selective (prequalification)

¬ Min 25 days to submit qualificationrequest

¬ General rule:¬ Open - 40 days from when NIP issued¬ Selective - 40 days from when prequalified suppliers invited to bid¬ Can reduce to not less than 10 days where

¬ State of urgency “duly substantiated” renders 40 days impracticable

¬ Can reduce by 5 days where¬ NIP published by electronic means¬ All tender documentation is available electronically and¬ Entity accepts electronic bids

¬ Can reduce to 13 days where commercial goods/services and NIP andtender documents published electronically at same time

¬ Exceptions to exceptions



¬ Evaluation Criteria¬ “All evaluation criteria” must be disclosed in the tender

documentation including “the relative importance of such criteria”(except where price is the sole criterion)

¬ No hidden evaluation criteria and no undisclosed weighting¬ Account for over 50% of CITT cases

¬ Rules on Technical Specifications¬ Prohibits biased technical specifications¬ Cannot used technical specifications to create “unnecessary

obstacle to trade”¬ Specifications should be described in terms of functional and

performance requirements; and by particular design, brand or type¬ If impractical, and design or description included, then language

must allow products that are “equivalent” to the brand described



¬ Rules on Debriefing¬ On request¬ Must provide

¬ Explanation why bid was not selected; and¬ the relative advantages of the successful supplier’s tender

¬ Similar requirement under NAFTA¬ Requires disclosure of score of winning bidder and value of contract¬ Evaluation team guidelines, instructions¬ Raw scoring sheets of evaluators & notes & consensus scoring sheets

¬ Purpose is¬ to allow unsuccessful bidder to improve its bid for next time; and¬ to understand whether the procuring entity has breached its

procurement obligations under the Agreement¬ 10 day rule for filing bid dispute starts



¬ Sole Sourcing – Limited Tendering¬ Must meet 2-part test

1. Must not be done to avoid competition or in a manner thatdiscriminates against EU suppliers and

2. For one of the following reasons:1. Goods/services can only be provided by one supplier and no reasonable

alternative or substitute exists due to1. Protection of patents copyrights or other exclusive rights, or2. Due to an absence of competition for technical reasons

2. For additional deliveries by the original supplier that were not included inthe initial procurement where a change of supplier1. Cannot be made for economic or technical reasons such as

requirements of interchangeability or interoperability with existingequipment, software, services or installations procured under the initialprocurement; and

2. Would cause significant inconvenience or substantial duplication ofcosts of the procuring entity

3. As is strictly necessary where for reasons of extreme urgency broughtabout by events unforeseeable by the procuring entity, the goods/servicescannot be obtained in time using open tendering procedures



¬ Sole Sourcing (cont’d)

¬ If sole source used, procuring entity must prepare a reportand publish it

¬ outlining the value and kind of goods/services sole sourced¬ indicating the circumstances and conditions that justified the

sole source award

¬ Prudent approach would be to publish intention to solesource in advance and ask for comments

¬ Similar to federal Advance Contract Award Notices (ACANs)



¬ Domestic Review Procedures

¬ Each Party must introduce “timely, effective, transparent and non-discriminatory” procedure to allow disappointed supplier to challenge acontract award or the process

¬ Procedural rules for challenge must be in writing and easily available¬ Complaint must be heard by either an impartial administrative body or a

judicial authority that is independent of the procurement entity¬ If review body is not a court, its decision must be subject to review by

the courts or its review must be conducted in a manner which meetscertain prescribed procedures including

¬ Procuring entity can hold hearing in writing¬ Right for complainant to ask that the hearing take place in public¬ Right to be heard for all parties¬ Right to access to all relevant documents¬ Reasons for decision/recommendation

¬ The bid review mechanism for federal contracts is the CanadianInternational Trade Tribunal

¬ Its decisions are subject to judicial review by Federal Court



¬ Domestic Review Procedures

¬ Suppliers must have “sufficient time” to submit a challenge which cannotbe less than 10 days from the time when the basis of the challengebecame known or reasonably should have become known to thesupplier

¬ Not easy to win – but can be disruptive and time-consuming¬ Reputation risks on both sides

¬ Must introduce procedures for¬ “Rapid interim measures” to preserve the ability of the supplier to

participate in the procurement¬ May include suspension of procurement process pending outcome of

dispute¬ Discretionary relief¬ Stop Contract Award process before the CITT – must be filed before

contract is awarded



¬ Domestic Review Procedures (cont’d)

¬ If breach, reviewing authority must be able to impose remedies onprocuring entity for corrective action or compensation for the loss ordamages suffered

¬ Bid preparation costs¬ Costs of challenge¬ Lost profit award¬ Setting aside contract award and awarding to applicant¬ Re-evaluationof the tender



¬ Canadian International Trade Tribunal

¬ Federal bid review mechanism for complaints filed underNAFTA, WTO GPA, AIT and 6 other trade agreements

¬ May award the complainant

¬ Costs incurred in filing and proceeding with a complaint

¬ Bid preparation costs

¬ discretionary

¬ Such remedy as it considers appropriate, including

¬ the re-solicitation of the designated contract,

¬ that the contract be terminated and be awarded to thecomplainan.

¬ that the complainant be compensated for the loss of the contractor for the opportunity it lost (lost profits)


6. WHAT DOES THIS MEAN FOR YOURORGANIZATION?

¬ Will make it more difficult for procuring entity to use procurement¬ as a tool for local economic/ social development

¬ unless under thresholds or non-designated entity/contract

¬ Will require procuring entity to shoulder the administrative costs associated with:¬ providing information about procurements practices¬ publishing detailed notices of intended procurements¬ issuing RFPs and contract awards in accordance with CETA rules¬ providing substantive debriefings¬ defending action, if challenged before bid review mechanism

¬ Put procuring entities in jeopardy of their procurement processes being slowed orderailed by having to

¬ deal with an order suspending the procurement pending the resolution of a complaint¬ implementing remedy of review body

¬ New and not new - all of this already happens at the federal government levelwhich has been subject to international trade agreements since 1994

¬ trade agreements are now reaching down further to sub-federal entities


7. NEXT STEPS

¬ Municipalities need to understand

¬ what their procurement obligations are under CETA

¬ “what is in” and “what is out”¬ What is a “designated contract”?¬ What are “designated goods” or “designated services”?¬ What exemptions apply?

¬ Understand the recourses and remedies which are available to adisappointed EU or Canadian suppliers who successfully challenge aprocurement

¬ Understand the exposure to your procurement if it challenged and takesteps early on to mitigate that risk

¬ Engage now with the Federal and Provincial Government onImplementation

¬ Shape implementation to protect and promote your interests


Questions?

¬ Brenda C. Swick

¬ [email protected] 601 7545


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