Update
Further to our bulletin "And So It Begins – How the ArriveCAN Scandal Is Already Impacting Canadian Federal Procurement", the revised Ineligibility and Suspension Policy came into effect on May 31, 2024. Federal government suppliers should take note of the modified supplier integrity rules - including an expanded list of triggers for potential ineligibility or suspension, new provisional suspension measures, and stricter requirements relating to first-tier subcontractors and administrative agreements.
What's Changed Under the Revised Ineligibility and Suspension Policy?
Canada's updated Ineligibility and Suspension Policy:
- sets out the circumstances in which a supplier can be declared ineligible for, or suspended from, federal government contracts (with exceptions for specific types of contracts, such as employment, foreign military sales or contracts with federal investigative entities where criminal investigations, national security or public safety could otherwise be compromised);
- outlines relevant processes for determinations of ineligibility and suspension, applicable time periods, administrative agreements, and the criteria for invoking the public interest exception; and
- introduces several notable substantive and procedural changes (discussed below).
The Policy will be administered by the Registrar of Ineligibility and Suspension, an assistant deputy minister associated with the new Office of Supplier Integrity and Compliance (OSIC) at Public Services and Procurement Canada (PSPC).
Federal suppliers with existing contracts should note that for contracts dated prior to May 31, 2024, a previous Ineligibility and Suspension Policy or directive may still apply. Existing contracts should be reviewed to determine which version of the policy applies.
Broader Grounds for Debarment and Suspension
The list of grounds for potential supplier suspension or a "declaration of ineligibility" (i.e. debarment) under the Policy is substantially expanded to include:
- a broader scope of federal offences, including terrorist financing, bribes offered or accepted by public officials, illegal political financing, environmental offences, illegal immigration into Canada and human trafficking;
- a supplier designated as, or owned or controlled by, a sanctioned person;
- offences in foreign jurisdictions or at the provincial level that are determined by the Registrar to be similar to specific federal offences identified in the Policy;
- triggers that relate to the conduct of a supplier's owners, directors, trustees or senior officers, affiliates, and first-tier subcontractors;
- circumstances where contracting with the supplier "may bring the federal procurement system into public disrepute or otherwise be contrary to Canadian public policy";
- a supplier's poor performance evaluation under the Vendor Performance Management Policy that the Registrar determines to be "serious, repetitive or otherwise egregious"; and
- situations where the supplier "lacks business integrity or business honesty" in a manner that seriously and directly affects the present responsibility of the supplier, including where the supplier has breached the Code of Conduct for Procurement or is debarred by a provincial or foreign jurisdiction, or international organization.
Some of the above grounds for potential ineligibility or suspension are based on vague and undefined terms (e.g. "business integrity" and "business honesty"). The Policy also includes new terminology relevant to determinations of whether a supplier's conduct amounts to a "material event", a "Similar Provincial Offence" or a "Similar Foreign Offence".
First-tier Subcontractors
The revised Policy introduces stricter rules relating to first-tier subcontractors. A supplier could be declared ineligible or suspended if they have, in the prior 3-year period, failed to terminate a first-tier subcontract within one business day of when the supplier "knew or ought to have known" that the subcontractor lacks the capacity to contract with Canada or receive any benefit under a contract with Canada and another party pursuant to subsection 750(3) of the Criminal Code.
The top-ranked bidder in a solicitation process may be required to conduct an "integrity verification" of their tier 1 subcontractors before contract award or call-up and must advise the contracting authority of the results, in writing, within five business days of the request.
Provisional Suspensions
New "provisional suspension" measures allow the Registrar to automatically suspend a supplier for 90 days if the Registrar determines that alleged misconduct, acts, or omissions of the supplier pose "immediate and significant risk to the Government of Canada" (suppliers may make submissions objecting to a provisional suspension). The concept of "immediate and significant risk" is not defined nor are the factors that may be assessed explained.
Administrative Agreements
An administrative agreement between the Registrar and a supplier may suspend the ineligibility period or could be required by the Registrar in lieu of a suspension or termination of contract, or as a condition of a contract under a public interest exception. The revised Policy includes more detailed provisions on administrative agreements, with standard terms and stricter parameters. For example, an ineligible supplier could request an administrative agreement "at any time" under the former policy, whereas they must wait 36 months under the revised Policy.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.