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New trade agreements signal shift in procurement practices

Warren Frey
New trade agreements signal shift in procurement practices

Construction industry procurement practices may shift as new national and international trade agreements take effect.

Weirfoulds LLP lawyer Glenn Ackerley and Public Services and Procurement Canada (PSPC) senior director Shawn Gardner explained the ramifications of two recent trade agreements on Canadian procurement policy at the Canadian Construction Association’s Standard Practices Committee meeting held on March 10 at the organization’s 100th annual conference in Banff, Alta.

The Canadian Free Trade Agreement (CFTA) went into effect on July 1, 2017 and replaces the Agreement on Internal Trade, Ackerley said.

The agreement is designed to reduce and eliminate trade restrictions within Canada, he added.

It also covers municipalities and the broader public sector, Gardner said, and is designed to align with practices set forth in agreements such as the Canada-European Union Comprehensive Economic and Trade Agreement (CETA), which went into effect on Sept. 21, 2017.

CETA significantly reduces or eliminates most tariffs, improves customs procedures and regulatory co-operation and opens the procurement process, Gardner said.

“It allows Canadians into the European market and also lets Europeans into the Canadian market. To me, it’s an opportunity for our markets,” Gardner said.

Ackerley highlighted the differences between construction thresholds in both agreements to the committee.

Thresholds under the CFTA are $101,000 or greater for ministries, boards, agencies, councils and other similar groups; $252,700 or greater for regional, local, district and other municipal governments; and $5,053,900 or greater for crown corporations, government enterprises and other similar entities.

Under CETA, municipal entities and utilities are subject to the agreement for the procurement of goods and services above thresholds of $221,400 for federal entities; $340,600 for sub-national and local entities; $604,700 for “other” entities such as crown corporations; and $681,300 for the utilities sector. For all municipal entities, procurement of construction services above $8.5 million is subject to CETA.

CETA procurement rules only apply to certain public-private partnerships (P3), such as highways and buildings. Airports, public water and wastewater, electricity and gas projects built with a P3 model are not covered under CETA rules. 

Conditions for participation in both agreements are virtually identical, with each stating: “limit any conditions for participation in a procurement to those that are essential to ensure that a supplier has the legal and financial capacities, and the commercial and technical abilities, to undertake the relevant procurement.”

Technical specifications for both agreements are also similar, Ackerley noted, with each agreement stressing the need to base the specification on standards and to set out the technical specification on performance and functional requirements rather than “design or descriptive characteristics.”

“Including the use of particular brands should also be avoided, but if used, each agreement states an ‘equivalent’ should also be included,” Ackerley said.

In terms of posting, the CFTA states a reasonable period of time must be used for responses, based on the complexity of the project. But CETA states the period for response is 40 days, though it can be reduced by taking other steps like issuing a pre-notice. CETA also requires source lists to be refreshed annually.

“These agreements will change how governments do business, and procurement officers will have to make sure they hew to these rules,” Gardner said.


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