Federal Procurement Minister Jean-Yves Duclos and Treasury Board President Anita Anand announced on March 20, 2024, new measures that Canada is taking to address supplier misconduct and fraud in federal procurement processes.

The new measures were announced amid ongoing investigations (including by parliamentary committees and the Royal Canadian Mounted Police (RCMP)) into the contracting practices used for the ArriveCAN app.

What We Know So Far

A New 'Office of Supplier Integrity and Compliance (OSIC)' Will Be Implemented

The Office of Supplier Integrity and Compliance will replace the Public Services and Procurement Canada (PSPC) Integrity Regime in May 2024.

The Potential Grounds for Debarment and Suspension Will Be Substantially Expanded

Also in May 2024, a revised Ineligibility and Suspension Policy (a core part of the Integrity Regime) will come into effect, introducing broader grounds for supplier suspension or debarment. The revised Policy will:

  • enhance identification of and response to specific cases of supplier fraud and wrongdoing and "suppliers of concern" in general
  • expand the list of criminal offences and add certain civil offences as grounds for supplier debarment or suspension, including convictions:
    • under the Criminal Code, such as terrorist financing,
    • under the Financial Administration Act, such as public officials offering and accepting bribes,
    • the Canada Elections Act, such as illegal political financing, and
    • offences related to forced labour, human trafficking and labour rights and environmental protections
  • expand the grounds for possible supplier suspension or debarment to include suppliers who have been:
    • charged with or convicted of similar offences in a foreign jurisdiction,
    • charged with or convicted of similar provincial (civil) offences, and
    • debarred in another jurisdiction or by an "international organization
  • empower the OSIC to initiate supplier reviews to determine, even in the absence of charges or convictions, whether "contracting with the supplier may bring the federal procurement into public disrepute or otherwise be contrary to Canadian public policy". To date, these review parameters, which appear to be highly subjective, have not been defined. Canada's examples provided to date reflect the supplier disqualification provisions of Article 507 of the Canadian Free Trade Agreement such as: "situations of false declarations, significant or persistent deficiencies in performance of any substantive requirement or obligation under a prior contract or contracts, final judgments in respect of serious crimes or other serious offences and professional misconduct or acts or omissions that adversely reflect on the commercial integrity of the supplier".

It is unclear whether Canada will continue to distinguish between offences that automatically lead to a debarment and other offices that may lead to debarment or suspension based on a discretionary determination. For a historical review of past changes to the Government Contracts Regulations that raised similar concerns, see our bulletin, "Guilty Until Proven Innocent; Changes to Government Regulations Deliver a Serious Blow to Natural Justice for Government Suppliers".

Increased Use of Data Analytics to Identify Potential Instances of Fraud and Wrongdoing

OSIC will be responsible for the further development and deployment of data analytics capacity as a tool to detect supplier fraud and other types of misconduct.

Increased Transparency Requirements in Departmental User Agreements for Professional Services Contracts

PSPC will require increased transparency in costing and subcontractor transparency from all client departments for the contracts it manages.

Enhanced Oversight and Auditing of Contracting Practices by the Treasury Board Secretariat (TBS)

TBS is taking a series of actions to strengthen oversight of departmental contracting processes and practices including:

  • updated internal guidance for managers procuring professional services – such as deciding when to outsource, exercising due diligence, avoiding conflicts of interest and ensuring contractual obligations are met (including by subcontractors) – and
  • new mandatory procedures (under the Directive on the Management of Procurement) to reinforce their responsibilities and accountabilities in managing contracting processes.

TBS also plans to:

  • conduct a government-wide departmental audit in 2024 to assess governance, decision-making and controls for professional services contracts, including information technology (IT), the results of which will inform any corrective measures that are necessary;
  • review the Directive on Conflict of Interest to ensure that the rules for the federal public service are clear, particularly for employees who engage in outside employment or contracts with the federal government, and to determine whether additional measures are needed (such as mandatory training and strengthening the consequences for non-compliance); and
  • improve the "Open Government" data portal by publishing more information about federal government contracts and ensuring it is clear, accurate and user-friendly.

The new measures can be expected to lead to greater scrutiny of suppliers (and their subcontractors) in federal government procurement and contracting.

We will continue to provide updates as the changes take place.

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