Recent analysis from business law firm Torys suggests firms reliant on government procurement should take a fresh look at long-assumed practices given that governments have essentially rewritten the rule books during the pandemic.
Soon after the start of the pandemic, Torys said, many presumptions underlying government procurement were set aside, including the strong presumption in favour of competitive procurement and against sole-source contracts, and the presumption in favour of advance notice and of transparency in costing.
Not only did jurisdictions move quickly to secure personal protective equipment (PPE), vaccines and other critical supplies but there were also shifts in the way governments procured long-term-care homes and affordable housing, both of which became new priorities and were procured in accelerated fashion.
Torys counsel and co-author of the article Thomas Yeo said lawyers are getting ready to react to changes in how governments deal with procurement in the future. The importance of domestic supply chains became apparent during the early days of the pandemic and emergency exemptions in trade treaties were relied on by governments through the acute phase of the pandemic.
“As things settle, I think governments are all thinking, OK, how are we positioned in the future if we face another crisis like COVID or a different type of crisis,” Yeo said. “Do we have the domestic capability to meet the needs of an emergency like that, and how dependent are we as a nation on foreign supply chains.”
The Torys article, titled Rewiring the Supply Chain: How the Pandemic is Reshaping Government Procurement, noted that Ontario’s Long-Term Care COVID-19 Commission has recommended that Ontario should have a central procurement process for PPE and other necessary supplies that provides clarity about purchasing and supply chain legislation, policies and best practices. Torys suggested governments around the world may increasingly turn to the use of national security exemptions or the use of grants or other financial assistance to protect critical domestic industries.
“I think you’re going to see some of these exemptions that have been in these trade agreements and maybe haven’t been used all that much being looked at in a new light,” said Yeo.
“It is going to be worth watching…in the coming years to see how governments try to rely on these exemptions and to see whether there will be challenges.”
But Yeo does not think the changes in procurement practices both domestically and globally will be so extensive that contractors have to worry about losing access to foreign projects potentially deemed to be of national interest.
“I think governments will be reluctant to bypass the traditional rules completely and I think you’ll see this more in the situation of ensuring development of domestic capacity for things, as opposed to just trying to bypass the rule to get things done as quickly,” he said.
Yeo does believe firms in the construction sector should completely evaluate their procurement practices in the private sector given the newfound awareness of the fragility of international supply chains. It is worth noting, he said, the automotive sector was hard hit by a lack of computer chips and realized how vulnerable its supply chain is.
“Every business is likely looking at, where are we vulnerable for the next crisis and, is it a pandemic, is it a natural disaster, is it climate change, all these things,” said Yeo.
“The ability of the supply chains to be there and to meet their demands, that’s all thrown into question now. So I think companies are going to be taking a good hard look at where those vulnerabilities are.
“And also trying to try to deal with things contractually and thinking very closely about force majeure clauses and those sorts of things to make sure they’re prepared for the future.”
The article notes trade agreements such as the Canada-European Union Comprehensive Economic and Trade Agreement expand the scope of government procurement rules to the broader public sector, including universities and hospitals. Those measures make it more difficult for the Canadian public sector to favour local suppliers.
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