Will Public Bodies Join this Era of Local Procurement?

While Québec’s economy is currently suffering from COVID-19-related disruption, buy-local initiatives are being ever encouraged more than. Public and parapublic organizations that will be tempted to adopt a "Panier Bleu" type procurement strategy following this crisis, however, will need to be cautious.

In recent years, the governments of Québec and Canada have signed various public procurement liberalization agreements¹, the provisions of which have been incorporated into the Act respecting contracting by public bodies ("A.R.C.P.B.."). This statute determines the conditions applicable to public contracts concluded by a public body with a contractor. Such conditions include compliance with intergovernmental agreements designed to open markets and allowing qualified bidders from outside Québec to participate in public body tenders.

Thus, depending on the nature and value of the contract, it will generally not be permitted for a public body to favour Québec suppliers.

Depending on the case, tender bids will have to be opened to suppliers and contractors with an establishment in Canada, Ontario, New Brunswick and even the European Union.

What Are "Public Bodies"?

Section 4 of the A.R.C.P.B. determines which bodies constitute public bodies within the meaning of that statute. A wide range of organizations are subject to the A.R.C.P.B., including ministries, school boards, colleges, universities, public institutions within the meaning of the Act respecting health services and social services, as well as several subsidiaries of these public bodies and even enterprises and corporations controlled by a public body.

Since 2019, pursuant to articles 573 to 573.3.4. of the Cities and Towns Act ("CTA") and articles 935 and following of the Municipal Code, municipalities are also subject to several provisions of the A.R.C.P.B.

It should be noted that certain organizations are deemed equivalent to municipalities for the application of the rules concerning the granting of contracts. More particularly, it is the case for organizations whose board of directors must be composed mostly of members of the municipality’s council or of members appointed by a municipality. Similarly, organizations whose budgets are approved or adopted by a municipality, or more than one-half of whose funding are provided by a municipality and whose  annual revenues are more than $1,000,000, are subject to these provisions.

Paramunicipal bodies and even NPOs (define) affiliated with cities should therefore verify their compliance with these rules governing the granting of contracts before adopting a local procurement strategy.

It should also be noted that organizations operating in the municipal sphere and  deemed equivalent to municipalities will also have to adopt contract management policies, as it is now the case for municipalities.

What Contracts Are Covered?

Currently, the threshold for indexed public tenders is set at $101,100². This means that for contracts above this threshold, public bodies and municipalities, and other similar bodies, must generally issue calls for tenders and cannot directly award contracts by mutual agreement.

If, on the other hand, the contract qualifies for a category of public procurement covered by the A.R.C.P.B.., the nature and value of the contract will determine the ceiling from which it will no longer be possible to apply territorial discrimination against bidders, i.e. to limit the territory from which bids may be received.

In fact, the various free trade agreements cover the following three categories of public contracts:

• supply contracts including contracts for the purchase or lease of movable property, which may involve costs for the installation, operation or maintenance of goods, in so far as they do not relate to the acquisition of goods intended for sale or resale in trade, or for use in the production or supply of goods or services intended for sale or resale in trade;
• contracts for construction work covered by the Building Act for which the contractor must hold the licence required under Chapter IV of that Act; and
• contracts for services which now include engineering and architectural services.

Certain exceptions apply in each category depending on the agreement.

It should be noted that for contracts in these categories where the expenditure is valued at more than $101,100, it will generally not be possible to limit bids to those made by Québec contractors and suppliers. Depending on the nature of the contract and its value, bids from Canada, Ontario, New Brunswick and the European Union will have to be considered by the public body.

It should be noted, however, that it is possible for a public body (and in some cases determined by the A.R.C.P.B.), to enter into a contract by mutual agreement when the total amount of the contract is above the public tendering thresholds. Section 13 of the  A.R.C.P.B. provides the following five exceptions:

• emergency situations;
• only one contractor is possible;
• matters of a confidential or protected nature;
• a call for tenders would not be in the public interest; and
• any other case determined by regulation.

The present crisis caused by the COVID‑19 could therefore justify public agencies, municipalities and other organizations to enter into a contract by mutual agreement by invoking Section 13 A.R.C.P.B.,, even if the total amount of the contract is above the thresholds requiring a call for tenders, as long as the situation can still be qualified as urgent.

It should also be noted that Decree 177-2020 dated March 13, 2020 declaring a health emergency provides that the government may, to protect the health of the population, make expenditures and enter into contracts it deems necessary without delay and without formality,. The government may therefore enter into contracts by mutual agreement without a call for tenders, as long as this decree is continued by the renewal of the state of health emergency, without invoking Section 13 A.R.C.P.B.. But this measure only applies to the government and not to any public body.

Consequently, although we may be tempted to adopt an approach that favours the local market, public bodies and those deemed equivalent have an interest in inquiring into their obligations with respect to the contracts they intend to award. While laudable, the objective of local procurement could cause such organizations to run afoul of the law. Contractors and suppliers should also be aware of these rules, which have a direct impact on their competition.

For 25 years, BCF's mission has been to support Canadian businesses. We know the issues you face, and our Administrative Law team is available to help you use the resources at your disposal. Please do not hesitate to contact us for any questions you may have regarding the rules governing the awarding of contracts by public bodies and contract management policies.

¹ The Agreement on the Opening of Public Procurement for New Brunswick and Québec ("AOPPNBQ"), the Trade and Cooperation Agreement Between Ontario and Quebec ("TCAOQ"), the Canadian Free Trade Agreement ("CFTA"), the Canada-European Union Comprehensive Economic and Trade Agreement ("CETA").
² Regulation ordering the expenditure threshold for a contract that may be awarded only after a public call for tenders, the minimum time for the receipt of tenders and the expenditure ceiling allowing the territory from which tenders originate to be limited, RLRQ, c. C-19, r. 5, s. 1.