Good morning. Thank you, Mr. Chair and committee members.
My name is Matthew Sreter. I'm the executive director of the strategic policy development and integration directorate for the acquisitions program at Public Services and Procurement Canada, PSPC. Thank you for the opportunity to appear today to discuss public procurement obligations under Canada's trade agreements.
PSPC is committed to fair, open, and transparent procurement that delivers the best value to Canada and, whenever possible, does so in a manner that promotes competition. To maximize benefits for Canada and to provide more opportunities for Canadian suppliers, Canada has negotiated access to foreign government procurement markets through rules-based international trade agreements. These agreements greatly expand the marketplace for Canadian goods and services.
Several of Canada's trade agreements include commitments regarding government procurement. These trade agreements contain obligations for federal procurement activities conducted by PSPC, making compliance with these trade agreement obligations necessarily complex and technical.
Canada and its partners agree to abide by substantive obligations and procedural rules, including obligations to ensure non-discrimination and national treatment, as well as market access commitments. Non-discrimination and national treatment principles essentially require PSPC to treat the goods, services and the suppliers of a party no less favourably than the treatment it provides Canadian goods, services and suppliers. Likewise, other parties must do the same in respect of Canadian suppliers.
The agreements also contain a variety of principles that require a certain level of fairness. Most of our trade agreements contain transparency provisions that call upon governments to make information concerning domestic law, regulations, policies, and administrative procedures readily available to domestic and foreign businesses. These include the requirement for notices and trade documentation regarding individual procurement transactions, the requirement for award information for participating suppliers, with explanations supporting the award, and the obligation that the procurement was conducted fairly, impartially, and in accordance with the agreements.
PSPC ensures that its policies and standard contract clauses, including information related to procurements themselves and procurement awards and statistics, are available and accessible to the public on its website.
While other core obligations do apply, ensuring that regulations and measures taken are transparent and not discriminatory is the simplest way to reduce the risk of trade issues arising.
Other procedural rules designed to enhance transparency and fairness include conditions for participation by suppliers; rules for notices; the content of tender documentation; rules on qualification of suppliers and participation; procedures for treatment of tender documents, contract evaluation, and the awarding of contracts; the circumstances for the use of limited tendering, applicable time periods, and the publication of contract award information, among other things.
For example, under the trade agreements, procuring entities may award a contract without soliciting bids only if one or more of the limited tendering reasons stated in each applicable trade agreement can be applied (e.g. in the absence of tenders in response to an open or selective tender, or when the tenders submitted have been collusive), provided that limited tendering is not used to avoid maximum possible competition or in a manner which would constitute a means of discrimination.
Technical specifications ensure that procuring entities publish information on their procurement opportunities and provide prospective suppliers with all the information necessary to prepare and submit bids. This includes a description of the good or service, conditions for participation, evaluation criteria, performance requirements, etc. PSPC does this via its Buyandsell website.
PSPC must also notify participating suppliers of contract award decisions and, upon request, provide an explanation to an unsuccessful supplier for the reasons it was not selected. Provisions pertaining to the qualification of suppliers permit parties to maintain supplier registration systems for use during procurement processes in order to reduce time needed to complete the procurement process. There are also provisions requiring us to provide suppliers with sufficient time to prepare and submit requests for participation and responsive tenders. Usually this is no less than 40 days, with some exceptions provided in the agreements.
While these obligations are rigorous, they also ensure procedural fairness by providing a clear set of rules to which parties need to comply, and reinforce PSPC's core values of openness, fairness and transparency.
However, the rules do not automatically apply to all procurement activities of each party. Rather, coverage schedules play a critical role in determining whether a procurement activity is covered by an agreement or not. Coverage schedules vary by agreement.
For all trade agreements, PSPC is required to comply with the specific procedures of each applicable trade agreement when completing certain procurements. Therefore, a decision must be made as to whether or not the procurement is subject to a particular agreement or to a combination of agreements.
To determine whether a particular agreement is applicable, the agreement must be consulted. When the procurement is covered by more than one agreement, all agreements must be complied with. Compliance with these obligations is ensured by provisions for recourse and dispute settlement between parties and domestically. At the federal level, the Canadian International Trade Tribunal acts as the main bid challenge authority for Canada. Canadian suppliers can also take any of their challenges to federal or superior courts.
As you can see, the rules and market access commitments of trade agreements place limitations on how government procurement can be used. For instance, international trade agreements limit the ability to use government procurement to promote Canadian industries and also prohibit domestic content requirements to procurements when the trade agreements apply.
However, trade agreements do provide opportunities for parties to leverage procurement spending to pursue government priorities and encourage social and economic development opportunities. As long as procurement requirements comply with non-discrimination and national treatment as well as other obligations of the agreements, procurement spending can be leveraged for social and economic development opportunities.
For procurements covered by trade agreements, it is possible, under certain circumstances, to remove them from coverage, such as use of the National Security Exception, and set-asides. As well, there are many procurements under threshold or relating to goods or services not covered by the agreements, which would therefore also not be subject to the procedural obligations.
I will briefly explain how PSPC uses these provisions.
The national security exception, which I understand this committee has previously reviewed, allows Canada to exclude a procurement from some or all of the obligations of the applicable trade agreements. The invocation of an NSE, or national security exception, is not intended to restrict competition—quite the opposite. For PSPC, over the past three fiscal years, 65% of contracts awarded under a national security exception were competitive. This represents 86% of the total value of all contracts awarded under the national security exception.
Another provision of trade agreements is the set-asides. Currently all trade agreements, with the exception of Canada-European Union Comprehensive Economic and Trade Agreement, allow set-asides for small or minority businesses, including indigenous businesses. However, the Canada-European Union Comprehensive Economic and Trade Agreement, or CETA, allows for set-asides for indigenous businesses. If a set-aside provision is invoked, the procurement is removed, i.e. set aside, and therefore is not subject to the obligations of the trade agreement.
With the introduction of the Canadian Free Trade Agreement, which entered into force this summer on July 1, 2017, small business set-asides are now permitted, provided that they are part of a small business set-aside program and that they are fair, open, and transparent. All Canada's trade agreements allow set-asides for aboriginal businesses. Therefore, procurements that are set aside for aboriginal businesses under the procurement strategy for aboriginal business, PSAB, are excluded from trade agreements, making the obligations non-applicable.
Canada can also leverage procurement spending to pursue government priorities and encourage economic development opportunities when goods and services are not covered by trade agreements or when procurements fall under the monetary applicable thresholds. In these instances, Canada is able to apply criteria that would not be allowed under the trade agreements, such as domestic preference criteria.
Some initiatives that give preference to Canadian businesses include the Canadian Content Policy and the Build in Canada Innovation Program. The Canadian Content Policy encourages industrial development by requiring domestic content in procurements not covered by trade agreements, for example, defence-related procurement or procurements under threshold.
PSPC's Build in Canada innovation program helps Canadian businesses bring their innovative products and services to market. As BCIP relates to research and development services, it is not subject to the obligations of trade agreements.