Law Times

Law Times • June 23, 2014 Page 9 www.lawtimesnews.com EU trade deal Agreement to have big impact on municipal procurement By Julius MelniTzer For Law Times he Canada-European Union comprehensive economic and trade agreement announced last year will have a significant im- pact on procurement practices for municipalities. Previously, international agreements such as the World Trade Organization Agreement on Government Procurement and the North American Free Trade Agreement buffered mu- nicipalities from their procure- ment provisions. "Under CETA, Canadian companies bidding on large municipal procurements will encounter much more com- petition from EU companies than they have in the past," says Brenda Swick of McCarthy Tétrault LLP's Ottawa office. "On the other hand, these same companies ought to have more access to EU govern- ment contracts at all levels." From the perspective of mu- nicipalities, they'll have to review their procurements and contract awards to make sure they com- ply with the trade deal. What this means is Canadian procuring entities must not discriminate against European suppliers in law or in fact and must conduct pro- curement in a "transparent, fair, and impartial" manner. "My prediction is that the transparency requirement will be the basis for the vast majority of procurement challenges under CETA," says Swick. Complicating things further is the fact that the procurement rules are neither universal nor uniform. "Only procurements by designated entities for designated goods or services above designat- ed threshold values will be subject to CETA's disciplines on procure- ment," says Swick. While the details won't be available until the release of the final text of the trade deal later this year, some of the generali- ties are out there. The threshold for provincial and municipal contracts, academic institutions, school boards, and hospitals is $315,000; utilities have a thresh- old of $631,000; Crown corpora- tions weigh in at $560,000; and for construction services at all lev- els of government, a $7.8-million threshold applies. All evaluation criteria and their relative importance must appear in the tender documents. "Hidden evaluations and undis- closed weighting are not allowed," says Swick. "Still, they account for over 50 per cent of CITT [Canadi- an International Trade Tribunal] cases at the federal level." Also prohibited are biased technical specifications and those that create an unnecessary ob- stacle to trade. "What this means is that specifications should be based on general functional and performance criteria and not on particular designs or brands," says Swick. "If it's impractical to stick to generalities, the bid must use language that allows equivalent products to the brand or type de- scribed." As well, the deal prohibits off- sets, which are undertakings or conditions imposed on the win- ning bidder that encourage local development or domestic con- tent. But governments around the world widely ignore the prohibi- tion, which exists under the NAF- TA and WTO agreements, espe- cially in defence procurement. The Canadian government's industrial and technological benefits program, for example, requires foreign contractors to invest 100 per cent of the value of the awarded contract in technolo- gies that are strategic to Canada. As well, it weighs some 10 per cent of a bid's value on the technol- ogy benefits it proposes to bring to Canada. "All governments say they disapprove of offsets but they all do it," says Swick. Exclusions from procurement rules in the European trade deal include public-private partner- ships, procurement under $1 mil- lion in rural areas in the territories and the Atlantic provinces for regional economic development purposes, ports and airports, health services, and national se- curity purchases. Otherwise, sole sourcing is an option only where it's not a bid to avoid competition or done in a manner that discriminates against European Union suppli- ers and even then only for speci- fied reasons, including circum- stances where: • Only one supplier is available and no alternative exists due to patent considerations or an ab- sence of competition for tech- nical reasons. • Additional deliveries not in- cluded in the agreement with the original supplier are nec- essary and where a change of supplier isn't possible for eco- nomic or technical reasons such as the ability to inter- change with existing equip- ment, software, services or installations procured under the initial agreement and the change would cause signifi- cant inconvenience or duplica- tion of costs. • There's extreme urgency caused by unforeseen events that prevent a government from obtaining the required goods or service in time using the designated tendering pro- cedures. If an entity uses sole sourcing, it must also prepare and publish a report outlining the value and type of goods and services in- volved and indicating the circum- stances justifying its approach. "A prudent approach would be to publish one's intention to sole source in advance and ask for comments using a procedure similar to federal advance con- tract award notices," says Swick. Overall, she notes, municipali- ties will have to shoulder the ad- ministrative costs associated with providing information, publish- ing notices, issuing requests for proposals, and ensuring substan- tive debriefing. Municipalities will also have to introduce a bid review mecha- nism that, like the Canadian In- ternational Trade Tribunal that reviews federal procurement chal- lenges, designates an independent administrative or judicial author- ity and allows for challenges from European suppliers before they award contracts. Defending these challenges is yet another cost they'll face. Challenge procedures must in- clude "rapid interim measures" to preserve the objector's opportu- nity to participate, including sus- pension of the procurement pro- cess pending the outcome of the dispute. Remedies must include corrective action such as award- ing the contract to the objector or a revaluation of the tender or compensation for damages in- cluding bid preparation and chal- lenge costs as well as lost profits. "All this puts procurement entities in jeopardy of their pro- curement processes being slowed or derailed by having to deal with an order suspending the procure- ment on an interim basis or by having to implement any rem- edies," says Swick. It's also not clear that Cana- dian International Trade Tribu- nal's bid challenge rules will be the ones municipalities choose to emulate. "The rules used by the European Commission may be preferable," says Cliff Sosnow of Fasken Martineau DuMoulin LLP's Ottawa office. It's not likely, either, that the European deal marks the end of changes for procurement prac- tices. "Signing new trade treaties is a very high priority on the fed- eral government's agenda, and all these treaties contain a procure- ment chapter," says Swick. "We can expect that provinces and municipalities as well as utili- ties and Crown corporations will come under increasing pressure to open up their procurements to U.S. suppliers." And while that already hap- pened in part in regards to pro- vincial procurements under the Canada-U.S. agreement on gov- ernment procurement, that deal isn't nearly as intrusive as the Eu- ropean one, according to Swick. In light of these developments, Swick suggests municipalities identify the international agree- ments that apply to a procure- ment; understand their obliga- tions under the trade deal in ques- tion; and understand the expo- sure to the procurement should a challenge arise and take early steps to mitigate the risk. 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Annual editions ensure you are always working with the latest legislation and a section-by-section table of contents plus a comprehensive index provide instant access to the information. available Risk-FRee FoR 30 days order online: www.carswell.com Call toll-Free: 1-800-387-5164 in toronto: 416-609-3800 new edition COnsOlidated OntariO emplOyment and labOur statutes and regulatiOns 2014 COnSULTInG EDITOR: ROBERT S. GREEnFIELD, B.A., j.D. T 'Signing new trade treaties is a very high priority on the federal government's agen- da, and all these treaties contain a procure- ment chapter,' says Brenda Swick.

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