How to ensure compliance with trade agreements

Author: Liz Busch

Trade agreement obligations for government procurement projects are not easy to understand, which makes it difficult to determine compliancy.  This becomes more complex when more than one trade agreement applies, as the procurement must comply with all.

This article will address two trade agreements – the Canadian Free Trade Agreement (CFTA) and the Canada-European Union Comprehensive Trade Agreement (CETA).  The Canada-UK Trade Continuity Agreement will not be mentioned, as it follows the same obligations as in CETA. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the World Trade Organization – Agreement on Government Procurement are not included, as they don’t apply to all Canadian public sector organizations and although thresholds and exemptions may differ, the general obligations are similar to the CFTA and CETA.  

Many provinces and their broader public sectors have also signed regional trade agreements, such as the New West Partnership Trade Agreement, the Ontario-Quebec Trade and Cooperation Agreement, the Atlantic Trade and Procurement Partnership, etc. As these trade agreements don’t apply across the country, they will not be addressed, but you should be aware of the obligations for those that apply to your jurisdiction.

Applicability:

The first step is to determine if any of the trade agreements apply to your procurement.  Trade agreements include dollar thresholds below which they do not apply, as well as exemptions.  

CFTA, Article 504, item 3 identifies its thresholds, which range between $25,000 and $5 million depending on what is being purchased (goods, services or construction) and who is doing the purchasing.  CETA Annex 19 identifies its dollar thresholds, using a currency called SDR (Special Drawing Rights) which range from $130,000 SDR (about $229,000 Canadian) to $5 million SDR (about $8.8 million Canadian).  However, trade agreement thresholds are increased every two years; check with your procurement specialist or legal counsel for the current thresholds if your project is close to the agreement thresholds.  

To determine the value of your procurement, include all known and potential costs, such as options to renew and the total value of all contracts that may result (see CFTA Article 505 and CETA Article 19.2, item 6).  For example, if you are planning a procurement costing $25,000 per year for three years with two one-year options, the overall value is $125,000 (i.e. $25,000 x the possible 5 year term).

Next, review the exemptions that apply (CFTA: Article 504, item 11, Article 519, Annex 519.1, Chapters 8 and 9, and CETA : Article 19.2, item 3 and Article 19.3).  Some exemptions apply to all trade agreements, such as services delivered to third parties and goods purchased for resale.  Other exemptions may apply to certain commodities or government entities.  However, if even one trade agreement applies you must meet its obligations even if the procurement is exempt from others.

Obligations:

When the trade agreements apply, the following will help to ensure compliance:  

No local preference:  Do not restrict the solicitation or give an advantage to local vendors (e.g. vendors within your city, province, or if CETA applies, Canada).  This includes overt preference where the solicitation states a preference for local vendors, or covert preferences such as requiring local experience or the contractor to arrive onsite with little notice when remote attendance would work equally well.

No previous experience working for your organization:  Do not require previous experience working for your organization.  The solicitation needs to give a fair chance for a new vendor to be successful who has similar experience in another jurisdiction.

Posting Information:  The CFTA (Article 506, item 6) and CETA (Article 19.6, item 3) list what information is needed in solicitations. Some are obvious, such as the final date for the submissions and a description of scope, but others are not as obvious, such as indicating that the trade agreement applies.

Public Posting:  Use your jurisdiction’s website to post your opportunity; you cannot direct the solicitation to only selected vendors unless a pre-qualification list exists (see below for more information).  CETA Article 19.5, section B identifies the sites that each entity must use, but you could post a notice on your jurisdictional site with a link to another site for the details and documents.

Posting Periods:  CETA (Article 19.10, items 3 and 4) has specific information on the minimum time that a solicitation must be open, depending on how it is advertised and how submissions will be received.  

Transparency:  Once you have awarded your contract, inform all participating vendors, and post a publication of the award (see CFTA Article 516 and CETA Article 19.15)

Prequalification Lists:

Trade agreements allow governments to create prequalification lists for one-time and multi-use purposes.  All the above obligations apply, as well as the following:

Threshold:  When determining what trade agreement thresholds apply, consider the total value of all contracts that may be awarded to prequalified vendors.  For multi-use lists, this includes all the contracts awarded to all prequalified vendors for the entire term that the list is valid.

Additions:  Multi-use lists must allow for additional vendors to apply at any time after the initial list is established.  This can be done through annual re-postings of the solicitation, or with a continuous posting.  If you receive a response after the list is established, be timely when evaluating and informing the vendor of the results. Refer to CFTA Article 508 and CETA Article 19.8.

Direct Awards:

Trade agreements specify when governments can directly award without competition (see CFTA Article 513 and CETA Article 19.12). This includes criteria such as no one responding to a solicitation, having only one vendor who can provide what’s needed, unforeseen emergencies, confidential or privileged procurements, etc. Refer to your organization’s policies for direct awards or the requirements in the trade agreements to determine if your circumstances fit within what’s permitted.

This article is intended as general information only and may not address your specific circumstances. If in doubt, refer to the trade agreements directly, or consult with your procurement specialist or legal counsel.

Author: Liz Busch

0 thoughts on “How to ensure compliance with trade agreements

  • Francois Chamberland says:

    Hi Liz, I found your article very interesting. As someone who has worked inside government and with insight into the development of the procurement chapter of some trade agreements, I wonder if you might have any information on the setting up by governments across Canada (except federal) of a bid dispute resolution body. Seems like an important piece of the procurement puzzle that’s mostly missing in Canada.
    Thanks, Francois C.

    • Hi, Francois – thanks so much for commenting on the article.

      Although its been a few years since I directly worked for a government, my impressions are the same as yours. When the CFTA first came into effect, there were discussion within the provincial jurisdictions of what to establish to respond to a formal trade agreement bid dispute. However, I’m not personally aware of any jurisdiction (other than the federal government) that has actually done this (although its possible that they have and I’m just out of that loop).

      Some jurisdictions have formal dispute or complaint mechanisms (e.g. Province of BC, Province of Ontario, University of Waterloo, etc.), but they appear to be internal processes rather than designed to address the trade agreement dispute requirements.

      I think that we might see more movement on this as soon as there’s a high-profile trade agreement dispute launched – and everyone is hoping it happens somewhere else lol!

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