Regulations Amending the Government Contracts Regulations: SOR/2024-273

Canada Gazette, Part II, Volume 159, Number 1

Registration
SOR/2024-273 December 16, 2024

FINANCIAL ADMINISTRATION ACT

P.C. 2024-1329 December 16, 2024

Her Excellency the Governor General in Council, on the recommendation of the President of the Treasury Board, makes the annexed Regulations Amending the Government Contracts Regulations under subsection 41(1)footnote a of the Financial Administration Act footnote b.

Regulations Amending the Government Contracts Regulations

Amendments

1 (1) Subsection 3(1) of the Government Contracts Regulations footnote 1 is amended by striking out “or” at the end of paragraph (f) and by adding the following after paragraph (g):

(2) Section 3 of the Regulations is amended by adding the following after subsection (3):

(4) In this section, government entity means

Coming into Force

2 These Regulations come into force on the day on which they are registered.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issues

The Government Contracts Regulations (the Regulations) set conditions on the entry into goods, services and construction contracts by the federal government and the deemed terms that form part of every such contract. These conditions include the general requirement to solicit bids, as well as exceptions to this requirement.

Two amendments to the Regulations are required to support transparency and efficiency for parties involved in federal procurements, in alignment with and supported by existing procurement policy, practice, and public guidance. This lack of clarity is placing unnecessary added burden on departmental procurement resources.

The first amendment concerns contracts where a national security exception (NSE) has been properly invoked in accordance with the Canadian International Trade Tribunal Procurement Inquiry Regulations. Such contracts are not subject to the bid requirements of various trade agreements to which Canada is a party.

Canada has long maintained the right to limit competition for reasons of national security. An NSE can apply to any federal procurements that give rise to national security concerns.

Since 2019, Section 10 of the Canadian International Trade Tribunal Procurement Inquiry Regulations has required the Canadian International Trade Tribunal to dismiss complaints in respect of which an NSE has been properly invoked, meaning that the NSE invocation was approved in writing at the Assistant Deputy Minister level before the contract was awarded.

However, this only exempts procurements with a properly invoked NSE from the bid requirements under trade agreements. Contracting authorities were still subject to the obligation to solicit bids under section 5 of the Regulations unless one of the exceptions under section 6 applied. Since 2007, Treasury Board Secretariat has provided policy guidance via Contracting Policy Notice 2007-4 - Non-Competitive Contracting to departments, which outlines that national security can be a criterion for invoking paragraph 6(c). The additional documentation required to establish the applicability of this exception based on the same facts has added unnecessary burden to the procurement process.

The second amendment concerns contracts between Canada and other government entities. Agreements with government entities are typically governed as contractual arrangements (as defined in the Policy on the Planning and Management of Investments), i.e. arrangements which Canada is committed to uphold but which are not legally binding.

The long-standing Treasury Board Secretariat policy position is that such non-legally binding arrangements with other government entities are not contracts, and as such the Regulations do not apply. However, the current practice of needing to establish that every arrangement with a government entity is a contractual arrangement and not a contract has become unnecessarily complex, and places added burden on departments.

Objective

The objective of the amendments is to provide greater clarity to help optimize federal procurements, including for supplies essential to national security.

Description

The Regulations Amending the Government Contracts Regulations exempt the following types of contracts from the bid requirements of the Regulations:

(1) Contracts in respect of which an NSE has been properly invoked in accordance with subsection 10(3) of the Canadian International Trade Tribunal Procurement Inquiry Regulations, or where the procedure set out in subsection 10(3) has been followed for those procurements indispensable to national security that are not covered by a trade agreement.

(2) Contracts between the Government of Canada and a government entity, meaning a government of a province, a foreign state, a political subdivision of a foreign state, or a municipality; a Crown corporation or a corporation or agency wholly owned by one of these governments; or an intergovernmental organization established by two or more states, or an agency of such an organization.

Note that section 18 (“Deemed Terms”) of the Regulations continues to apply to these contracts.

Regulatory development

Consultation

Given that these amendments are clarifying in nature, no consultations were undertaken, and the amendments were not prepublished.

Following a continuous improvement model, amendments to the Regulations have been made four times in the last eight years.

Modern treaty obligations and Indigenous engagement and consultation

The amendments to the Regulations will not impact the Crown’s obligations under modern treaties. They will not impact Indigenous governing bodies or Indigenous organizations contracting for the provision of goods or services as they do not fall within the definition of “contracting authority” in the Regulations. None of the amendments remove or change any obligation on the Crown to fulfil its legal obligations to Indigenous peoples when contracting for goods or services.

Instrument choice

There was no alternative instrument that would have the same effect as the amendments. In addition to amending the Regulations, a refresh of the guidance for departments will clarify the application of the amendments for contracting authorities.

Regulatory analysis

Benefits and costs

Clarifying that contracts with a properly invoked NSE or with a government entity or intergovernmental organization are exempt from the Regulations will help support transparency and efficiency in federal procurement processes.

By clearly incorporating the policy and procedural framework into the Regulations, all parties involved in federal procurements will benefit from greater clarity.

The amendments

(1) Promote transparency in federal procurement by codifying into regulation exemptions related to contracts with national security considerations and government entities.

(2) Streamline and reduce the administrative burden on departments by no longer requiring separate processes for national security considerations under the Canadian International Trade Tribunal Procurement Inquiry Regulations and the Government Contracts Regulations.

The amendments are not expected to result in incremental costs, and will bring greater regulatory alignment with international practices, including under the Canadian International Trade Tribunal Procurement Inquiry Regulations.

Small business lens

These amendments do not impose new costs on businesses, including small businesses.

One-for-one rule

The one-for-one rule does not apply to these amendments, as they do not change the administrative cost to business.

Regulatory cooperation and alignment

While the Regulations Amending the Government Contracts Regulations are not related to a work plan or commitment under a formal regulatory cooperation forum, they will result in the following:

(1) The properly invoked NSE amendment is expected to bring greater regulatory alignment to procurements, including the way these are handled under the Canadian International Trade Tribunal Procurement Inquiry Regulations. The amendment also takes into consideration Canada’s existing trade agreements, such as the Canada-European Union Comprehensive Economic and Trade Agreement and the World Trade Organization’s Agreement on Government Procurement.

(2) The exemption for contracts with government entities will lead to better alignment with Canada’s trade agreements, including Canada’s annex in the World Trade Organization’s Agreement on Government Procurement.

Effects on the environment

In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan concluded that a strategic environmental assessment is not required.

Gender-based analysis plus

No gender-based analysis plus (GBA+) impacts have been identified for these amendments.

Implementation, compliance and enforcement, and service standards

The amendments come into force on the day that they are registered.

These amendments will not apply retroactively. The amendments will only apply to contracts awarded after the amendments come into force.

The existing compliance and enforcement protocols associated with the Regulations remain the same. The Treasury Board Secretariat will publish a contracting policy notice announcing the amendments and provide supporting guidance, as appropriate, to further clarify the Government’s long-standing policy position. The notice will be accessible to the public on Canada.ca.

Contact

Enterprise Strategies - Procurement and Materiel Division
Acquired Services and Assets Sector
Office of the Comptroller General
Treasury Board of Canada Secretariat
James Michael Flaherty Building
90 Elgin Street
Ottawa, Ontario
K1P 5E9
Email: ppd-psr@tbs-sct.gc.ca