As if hospital staff aren't busy enough. The enactment in Ontario of the Fairness in Procurement Act, 2018 (the "Act") on March 8, 2018 will almost certainly ensure that some staff have more to do, especially when regulations are passed that trigger potentially important consequences for both the hospital and the supplier responding to bidding opportunities. Given how the rules in public procurement more commonly apply to public organizations, extending consequences to the private sector is a clear indication of the government's commitment to achieving its policy objectives.
The Act applies to members of the broader public sector in Ontario, such as universities, colleges, including hospitals within the meaning of the Public Hospitals Act. It also applies to so-called "Government entities" in Ontario, which includes ministries of the Government of Ontario and various crown corporations.
The Act is a pointed rejoinder to the protectionist winds now blowing across the United States. While the Buy American Act has been on the books in the U.S. for many decades, creating a price preference that favors American firms on U.S. federal government contracts, some U.S. states and municipalities have passed their own protectionist legislation since the start of the Trump presidency. As the preamble to the Act says, "The Government of Ontario is committed to defending the province's economic interests and protecting the interests of Ontarians and Ontario businesses."
Designation of Offending American Jurisdiction
The stated purpose of the Act is to respond proportionally to protectionist measures initiated by certain American states and local governments, measures that "inhibit or prevent Ontario suppliers from participating or succeeding in procurement processes" in what the Act describes as "offending American jurisdictions". Those jurisdictions are those that will have been specifically designated by the Ontario Cabinet under the Act. In other words, if a U.S. State government adopts a "Buy American" policy that either restricts or prevents an Ontario supplier from participating in a procurement, the Government of Ontario can designate that State as an offending American jurisdiction.
Responding "proportionally" in this context means customizing a regulatory response that will affect the procurement processes involving suppliers from the specific offending American jurisdictions. The response could include customizing consequences impacting both the targeted suppliers and the particular hospital. Since American suppliers extensively sell to hospitals, the latter should track this piece of legislation to ensure they don't run afoul of it.
Retaliatory Options
The specific "requirements, restrictions, policies, sanctions or other measures" imposed on a hospital or bidder-supplier will depend on the applicable regulation passed under the Act. The range of responses is broad and could include the following:
- Providing that a procurement contract formed between a hospital and a supplier from an "offending American jurisdiction" is void.
- Sanctioning a hospital that has entered into a procurement contract in contravention of the Act. The sanctions described in a particularized regulation could be wide-ranging and would reflect, in the spirit of proportionality, the restrictions imposed on Ontario suppliers by the offending American jurisdiction.
- Requiring suppliers from offending American jurisdictions to provide additional information to Government entities or broader public-sector entities or meet additional requirements when participating in procurement processes.
- Fully excluding suppliers from an offending American jurisdiction from participating in procurement processes, or allowing them to participate but creating an evaluation preference in favour of the non-sanctioned suppliers. This would mirror the above-noted Buy American Act.
- Barring certain parties from launching legal proceedings or otherwise seeking compensation or other remedies against the hospital and the Government of Ontario, among other parties.
The proportional approach proposed to be taken by the Government of Ontario may be seen by the restrictions now imposed on suppliers from the State of New York, a jurisdiction which has introduced protectionist measures. Here the regulation requires that, on a procurement process worth at least $1 million initiated by a Government entity (therefore not applicable to hospitals in this case) and involving the construction, repair and maintenance of surface roads or bridges, a successful supplier from the State of New York could not use any structural iron fabricated in that State. The regulation also bars the Government entity from entering into any contract unless structural iron restrictions are included in the contract.
Given the state of the current trade negotiations with the U.S., it is difficult to know how frequently regulations will be enacted, but where that happens, the level of analysis will be nuanced, precise and targeted. Hospitals would do well to review their procurement procedures to ensure they are positioned to comply with the Act and the regulations as they are enacted.
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