Access to Public Procurement Markets at Federal and ... · PDF fileagreed will be subject to procedures and obligations of CETA. • CETA only applies to high- value procurement contracts

Access to Public Procurement Markets at Federal and Provincial LevelsThe Canada-European Union Comprehensive Economic and Trade Agreement (“CETA”)

Bob SaccoTrade & Customs Leader KPMG Canada

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Canada’s government structure

• Canada has three levels of government: federal, provincial; and municipal

• Provinces and territories have jurisdiction over public goods such as health care, education, welfare, and intra-provincial transportation

• Municipalities manage local transportation, school boards, public utilities, etc.


Size of the Public Procurement Market

• Government procurement accounts for an average 15% of a country’s GDP.

• The OECD estimates Canada’s public procurement expenditures to be at around 13% of its GDP.

2016 GDP: 1.53 trillion USD

That is almost 200 billion USD spent annually on procurement activities by all levels of Canadian government

Source: OECD, Government at a Glance 2015


Top 100 current infrastructure projects

Source: ReNew Canada Infrastracture Magazine


Existing Procurement Commitments

• Canada has made commitments on government procurement in existing trade agreements such as the WTO Agreement on Government Procurement (GPA).

• As parties to the GPA, Canada and the EU have already committed to rules on non-discrimination, impartiality and transparency in their procurement.

• However, under the GPA, these rules applied only to procurement activities of federal governments.

• CETA builds upon those commitments by opening up competition to a much wider range of procurement activities at all levels of the federal, provincial and municipal government.


GPA vs CETA: what is changing• Under CETA, Canada has included commitments for sub-central entities

(provinces, territories, municipalities) and Crown Corporations.

• Covered entities for Canadian provinces and territories include regional, local, district or other forms of municipal government; municipal organizations; universities, school boards and publicly-funded academic, health and social service entities.

• Canada has opened its coverage of Crown corporations at federal and sub-central levels, as well as government-owned commercial enterprises and corporations controlled by municipalities.

• Canada has also granted access to procurement for public utility companies operating in the sector of drinking water, electricity, airports, maritime or inland ports, railways, urban railways, automated systems, tramway, trolley bus, bus and cable, none of which were covered in GPA.

EU businesses will be the first foreign companies to get this level of access to the Canadian public procurement markets. No other agreement

previously concluded by Canada offers similar opportunities.


This is an enormous game changer• Federal states report much higher level of sub-central government

spending on procurement, as opposed to central government spending.

• According to the OECD, Canada sub-central government spending represents 87% of its overall procurement expenditures.

Source: OECD, Government at a Glance 2015


CETA provisions: application• Canada has 5 years to establish a Single Electronic Point of Access (SPA) that will

allow easy access to all procurement tenders covered under CETA.

• CETA does not apply to all government procurement in Canada and the EU. Coverage is set out in the Annexes, which list the entities that the Parties have agreed will be subject to procedures and obligations of CETA.

• CETA only applies to high-value procurement contracts that exceed a defined monetary threshold.

CETA minimum thresholds for procuring goods and services

Level Central Sub-central Other

Goods SDR* 130,000(EUR 150K)

SDR 200,000(EUR 240K)

SDR 355,000(EUR 420K)

Services SDR 130,000(EUR 150K)

SDR 200,000(EUR 240K)

SDR 355,000(EUR 420K)

ConstructionServices

SDR 5,000,000(EUR 6,000K)

SDR 5,000,000(EUR 6,000K)

SDR 5,000,000(EUR 6,000K)

*SDR: Special Drawing Right (monetary reserve currency created by the International Monetary Fund)


CETA provisions: exclusionsGeneral Exceptions applicable to both parties:

• International assistance and development aid;

• National security and national defence;

• Protection of public morals; human, animal or plant health; intellectual property.

• Persons with disabilities, philanthropic institutions or prison labour.

Canada Specific Exceptions (non-exhaustive list):

• Agricultural goods for support or human feeding programs;

• Broadcasting material;

• Preferences for Aboriginal people

• Purchase of water, energy, or fuels for the production of energy;

• Regional economic development, subject to certain limitations

• Shipbuilding and repair;

• Ontario and Quebec retain ability to require 25% local content for mass transit vehicles (street car, bus, subway car, passenger rail car etc.);

• Quebec: works of art and cultural industries.


How to find GP opportunities? BuyandSell• Federal government’s tenders are currently published at www.buyandsell.gc.ca

http://www.buyandsell.gc.ca/


How to find GP opportunities? MERX• Canadian opportunities (including federal, provincial and municipal tenders) can

also be found on MERX (www.merx.com), a private website.

• Businesses can search and view high level info on tenders at no charge, but will need a subscription to submit bids online or access more detailed information.

http://www.merx.com/


What is CETA’s Recourse?• CETA Parties are required to provide an administrative or judicial review

procedure to allow suppliers to challenge procurement decisions on covered transactions that they believe run contrary to the obligations of the Agreement.

• In Canada, the Canadian International Trade Tribunal (“CITT”) performs this role.

Who may file a complaint?

• Any bidder or prospective bidder may file a complaint. A bidder can be an individual, a sole proprietorship, corporation, joint venture or any authorized business venture

How much time do I have to file a complaint?

• 10 working days from the date on which the complainant becomes aware of its ground of complaint to : 1) object to the government institution; or 2) file a Tribunal complaint.

How long does the inquiry process take?

• Preceding's are completed within 90 calendar days. However, they can be accelerated by an "Express Option" which cuts the standard timeframe to 45 days.

Do I have to be represented by a legal counsel?

• No. Parties may be self-represented, or represented by non-legal counsel.


What is CETA’s Recourse (cont’d)?

What remedy can I expect if my complaint is valid?

• Reimbursement of reasonable costs incurred in filing a complaint and/or your reasonable costs incurred in preparing your bid.

• The Tribunal may recommend to the government that: 1) A new solicitation for the designated contract be issued; 2) Bids be re-evaluated; 3) Contract be terminated or be awarded to the complainant; or 4) The complainant be compensated for lost profits or losses

What can I do if I want to appeal a determination by the Tribunal?

• You can challenge determinations made by the Tribunal by way of judicial review in the Federal Court of Appeal within 30 days of the determination.

Is the government obligated to implement the Tribunal’s recommendations?

• The government must implement the recommendations to the greatest extent possible and has 20 days to advise the Tribunal of the extent to which it intends to implement the recommendations or the reasons for not doing so.


Abitibi vs Newfoundland• AbitibiBowater (“Abitibi”), a U.S. company,

operated several paper mills in Newfoundland (Canada) for over a century.

• In 2008, Abitibi filed for bankruptcy protection.

• The Newfoundland Provincial Government retaliated by expropriating all the company’s assets without compensation.

• Abitibi filed a formal complaint under NAFTA.

• The Federal Government agreed with Abitibi that the Newfoundland expropriation was illegal and settled for $130 million to avoid “potentially long and costly legal proceedings”.

• Few years later, Newfoundland found itself saddled with massive environmental cleanup costs on the expropriated Abitibi property.

• The Supreme Court of Canada decided that Newfoundland had to pay for the clean-up along with the costs of the protracted litigation.

All the level of governments, including provinces and

municipalities, are bound by the CETA provisions on government

procurement


Siemens vs Metrolinx: a future CETA case?• Siemens has recently complained about

Metrolinx’s* decision to issue a $528 million contract for the purchase of 61 light-rail vehicles to Alstom SA, a French company.

• According to Metrolinx’s procurement policy, the agency must issue competitive public tenders for goods valued over $25,000, and award the contract to the lowest bidder. In the case of the Alstom contract, there was no competitive bid.

• Metrolinx argues that the procurement policy makes exceptions for “emergency purchases” as the other provider (Canada-based Bombardier) is facing huge delays and the agency needed to develop a contingency plan.

• Siemens claims that the non-competitive deal violates government procurement policies as well as the provisions of CETA.

* Metrolinx is an agency of the Government of Ontario


KPMG: your trusted advisor• CETA offers a great opportunity for EU businesses

willing to invest in a country consistently ranked as one of the best where doing business, and with the lowest business cost.

• But what are the key considerations when planning to establish or acquire a business in Canada? Business organization;

Income and commodity tax;

Import and export controls;

Regulations and product standards;

Related party transactions;

Financing;

Bankruptcy and restructuring;

• EU businesses willing to invest in the Canadian market must consider all the legal, regulatory and tax consequences of their actions.

Source: Forbes Magazine

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Access to Public Procurement Markets at Federal and ... · PDF fileagreed will be subject to procedures and obligations of CETA. • CETA only applies to high- value procurement contracts