Government Operations Committee on Nov. 2nd, 2017

[Erin Weir, NDP, Regina—Lewvan, SK]

That's no problem. I just thought I would try to tap into the international trade expertise here, but thanks very much.

I did want to follow up with Mr. Burn, though, on one point.

I think you quite reasonably noted that one of the challenges in enacting border adjustments to carbon pricing would be having really solid data on the carbon content of imports. In the absence of that data, would it be feasible to simply apply the same price to a ton of imported steel as a ton of Canadian steel and at least level the playing field to that extent?

[Peter Burn]

I'm not going to venture there.

[Voices]

Oh, oh!

[Peter Burn]

That's a very tricky question. I would have to do a legal opinion and think long and hard about the answer.

I would note that if you're going to pick steel, you should be cautious. For example, in Alberta, if you were going to be looking at upstream emissions in certain other products, you might find they're higher on the domestic level than on the foreign level. I would be very careful in entering the realm of emissions.

To the extent that you picked a lower emission, you would have a better chance of getting it through than you would by picking one that looks highly discriminatory, such as the European Union attempted to do on Alberta oil sands bitumen through its field standard. That caused it to be defeated, because the number was discriminatory and inaccurate.

[Erin Weir, NDP, Regina—Lewvan, SK]

Of course, that makes sense. What we are trying to avoid is creating this perverse incentive to use dirtier products because they are not subject to our carbon pricing regime.

I also want to ask about the whole notion of Buy American. A comment was made that it's a discriminatory policy, yet I note that the United States is party to most of the same trade agreements as Canada. My understanding of how Buy American is allowed is that the state and local governments that are actually making the purchases are, for the most part, not covered by trade agreements. I wonder to what extent Canada has the same flexibility at the provincial and local level. I know that the comprehensive agreement with Europe does apply at the subnational level.

I wonder if panellists could elaborate on how much flexibility we have in our federal system.

[The Chair, Conservative, Tom Lukiwski]

I'm afraid they will have to elaborate during a subsequent round of questioning, because we are out of time on this one.

We will start now with another seven-minute intervention. Go ahead, Mr. Peterson.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Thank you, Mr. Chair.

I'm sorry, Mr. Weir. You have a habit today of asking questions just at the buzzer.

[Erin Weir, NDP, Regina—Lewvan, SK]

I'm giving people lots of time to think about their answers.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

That's good.

I think it's fair to say that when you are dealing with many policies, directives, legislations, and regulations, federal procurement is a complex landscape.

Walk us through a bit of the process. When a purchaser of goods decides to put out a bid for a contract, how does that work? Is there a shelf bid that they use and they tweak? Is there analysis that has to be done on what trade agreements might be caught by this and what sort of set-asides need to be considered? It seems to be very complex. I wonder how the actual process practically works.

[Matthew Sreter]

Maybe I'll field that one.

In terms of how it works for PSPC, PSPC is a common service provider. A client department comes to us with its requirement. That's the first stage. That requirement, though, can be clear as mud, or it can be clear. PSPC works with that department to clarify what the requirement is. There may have to be, and it is encouraged that there be, industry engagement to look at capacity within the industry. It's also encouraged to look, early on, at whether trade agreements apply and, if so, what trade agreements would apply.

The first question we ask ourselves is about coverage. We look at the requirement and we look at the good or service. We ask ourselves whether that good or service is covered by any of the applicable trade agreements or multiple trade agreements. Then we look at contract value. We look at the threshold and whether the thresholds apply or not. Then we look at the entity that's actually purchasing the goods, and whether they are covered under the schedules or not. Then we look at whether one of the exceptions applies. Is it under the procurement strategy for aboriginal business? Is it a national security exception, depending on the requirement? That attends to the coverage elements.

From there, in terms of the boilerplate you mentioned, I wouldn't call them “boilerplate”. They are customized within PSPC for each and every single procurement with the client department. We do have standard acquisition clauses and templates that we employ, depending on low-, medium-, or high-risk complexity, that will govern what standard contract clauses are first incorporated, and then they are further tweaked. Those standard clauses basically ensure that government is on the right side of the trade agreement obligations procedurally, from a fairness perspective and from a transparency perspective.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

I don't know if any of the other panellists want to add to that. It was a pretty broad question, but it paints a big picture.

Okay, so there is the process, and it goes out there.

I think it's fascinating too that we have the international trade angle here. We have the International Trade Tribunal, which is not wearing a national hat when it comes to procurement. That's always interesting.

Obviously, there are dispute resolution provisions in every trade agreement we have, or nearly every trade agreement we have. Are we tracking the complaints by our international partners, or even companies within the nations that we have trade agreements with? Obviously they wouldn't avail themselves of the trade tribunal. Do we track that as well? Do we tweak the process based on that?

[Matthew Sreter]

In general, I covered off coverage, but there are all those procedural rules that I had in my opening statement, a plethora of procedural rules. Each of them has to be adhered to—timelines, so on and so forth.

In terms of the CITT, I did bring stats with me just to show you PSPC's robust system. In terms of results, 0.3% of PSPC's contracts go before the CITT, and 0.03% result in determinations of valid or valid in part. Over an average of three years, 130 complaints based on PSPC contracts actually go to the CITT. Of those, then, as I indicated to you in part, 0.03% are found to be valid.

I don't know what the stats are, but it's a very rare occurrence that Canada will be taken to the WTO for a dispute settlement resolution. What that means is, one, through PSPC's robust mechanisms, we're basically avoiding them; we're making sure that we're attending to all the procedural fairness elements before they even get there. Two, the CITT, as well as our Office of the Procurement Ombudsman, takes care of the complaints and makes sure that they're tended to well before they get to the WTO.

What I'm missing in my response is that there's also an opportunity to avail themselves of the federal court system. There are a number of appeals before the Federal Court.

[Peter Burn]

I'll add a couple of things about CITT. Foreign companies will come to us before a dispute settlement to see if it can be resolved. Alluding to the Public Works situation, if we say an inquiry should go forward, they have very good people who are very serious about the reputation of the Government of Canada. If they smell anything early in that process, they'll shut it down. That has been my experience.

Secondly, they then investigate very rigorously what's going on, and we get to hear the other side. Do you remember, Eric, we had that one? If, on occasion they say, “Whoa”, they just shut it down and re-tender it. They do it themselves. They do not want to risk the reputation of the Government of Canada. Those are a couple of things about it.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Go ahead, Eric, if you want to add something.

[Eric Wildhaber]

To add a bit more context, just to paint the picture a bit more, there are two processes: the process of the company against the Canadian government, and the state-to-state litigation. In the company against the Canadian government process, the companies can be foreign or domestic, and they'll come to the Federal Court, the superior court of the province, or to the CITT.

With the CITT, to put the numbers in context, the tribunal members like to believe it's not the amount of casework that comes to them that's important, although it's heavy and it's high-dollar-value money; it's that there can be a very small case that will bring out a huge development. For example, years ago, there was a very small case that led to the advance contract award notice mechanism. Before that case, a government department could say it was sole-sourcing and there would be no mechanism to let the supplier community know that they could challenge that. That was a CITT development.

On the state-to-state litigation, if a foreign company is not happy with a procurement practice in Canada, it can seize its government to bring Canada to the World Trade Organization. Likewise, if Canada is not happy with something, a procurement practice with one of our partners in the WTO AGP, they can seize our government to do a state-to-state mechanism. At the WTO, I think there has been only one dispute settlement matter under the AGP, the agreement on government procurement, since the inception of the agreement. It's a rare occurrence.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

Mr. McCauley, you have seven minutes.

[Kelly McCauley, Conservative, Edmonton West, AB]

Before I start, Mr. Burn, I hope you weren't referring to Alberta oil when you said we should be careful about emissions, because it has lower emissions than Venezuelan oil and Nigerian oil, as well as U.S. oil that is brought in.

[Peter Burn]

In a previous life, I advised certain governments on this subject. Frankly, I know too much about it.

[Kelly McCauley, Conservative, Edmonton West, AB]

I'd just thought I'd correct the record in case you were disparaging our oil.

When we were studying procurement on Tuesday, we chatted about Bill C-344, a private member's bill that was going to introduce community benefits into government procurement.

How might that affect the procurement process with regard to our trade relations in terms of fairness, and so on? Have you looked at that, or has that been considered yet?

Part of the issue is that it's a well-meaning bill, but it's quite obscure and gives great latitude to the minister, with very undefined powers. When there are undefined powers and uncertainty in a procurement contract, we've seen that we can put out a 30,000-page RFP and still get sued on it and have companies misinterpret to a point where they misbid by $1 billion.

I'm curious about whether you've looked at that yet and how it will affect procurement trade if this uncertainty gets added. Are we opening ourselves up to having the same issue in the States and maybe block Canadian business down in the States?

[Pierre Marier]

I'll take a stab at this. I'm not familiar with the specifics of the bill, so I can't comment on whether or not it would be consistent with our trade obligations. I would just say that when you speak of community benefits as you've described them, it's not clear to me what exactly that would mean, but it sounds as though it is what we would call an “offset”.

We have a prohibition on offsets. Offsets are any conditions that would provide preferential treatment for local content or conditions. For example, an arrangement to hire local people would be an offset. These are carved out of our trade agreements, but there's a lot of scope to do things within the context of our trade agreements. It really depends on the specifics of the procurement.

[Kelly McCauley, Conservative, Edmonton West, AB]

On that same topic, it has been in the mandate letters of a couple of the ministers for a couple of years now to introduce fair wage policies. At one of the committee meetings, the minister commented that this was going to apply to every single government purchase, so it would apply to federal procurement as well. If a U.S. company wanted to bid on something, would they be considered discriminated against if they were not following our internal fair wage policy? This would of course leave us open to retaliation.

[Matthew Sreter]

As to the fair wages policy itself, I understand that the Department of Employment and Social Development Canada is developing a modernized fair wages policy. It's currently in development. PSPC is supporting ESDC in that regard.

They're looking at what would constitute a modernized fair wages policy. Right now they're looking at options. I believe there will be a written response provided to the committee. One of PSPC's options in the procurement modernization effort is to look at ethical sourcing. We are looking at revisiting our code of conduct for procurement and how we can incorporate a fair wages policy within that code, which would then be applicable to all PSPC procurements at that stage. It is, however, a consideration still in early development.

[Kelly McCauley, Conservative, Edmonton West, AB]

It's a fair ways off, and I assume there'll be enough time for input from the experts so that we won't face retaliation for blocking foreign investment or foreign bidders.

[Matthew Sreter]

For anything we would be putting in place at PSPC, we would be consulting with our colleagues at Global Affairs and at Justice Canada to ensure that we are on the right side of our obligations under the trade agreements.

[Kelly McCauley, Conservative, Edmonton West, AB]

What else would be in the set-asides? You said the community benefit might be in a set-aside. What else is in the set-asides? We know about the aboriginal contracts. What else would be put in there?