Michael Ford (post until Oct. 31/19)
Health

Beware the scope of the CFTA

By Michael Gleeson

If your organization is a broader public sector organization that is subject to the procurement requirements of the Broader Public Sector Procurement Directive (the Procurement Directive) and the (still relatively new) Canadian Free Trade Agreement (CFTA), then please take note that the CFTA applies to certain procurements that the Procurement Directive does not.

The Procurement Directive requires organizations to maximize the value that they receive from “public funds”. In the Broader Public Sector Accountability Act, which is the Ontario legislation under which the Procurement Directive came into force, the term “public funds” is defined, subject to certain exclusions, as follows:

“public money of the province of Ontario that is provided by the Government of Ontario or an agency of the Government of Ontario, directly to any authority, board, commission, committee, corporation, council, foundation or organization through a grant or transfer payment or other funding arrangement, and, in the case of a school board, includes money received by the school board from taxes levied under the Education Act for school purposes.”

Based on this definition, the source of funds used for procuring a good or service is relevant to whether the Procurement Directive would apply to the procurement of such good or service. For example, if a public hospital were to purchase goods using funds that were received through charitable donations or that were proceeds from revenue-generating aspects of its activities, that purchase would not be subject to the requirements of the Procurement Directive because it would not involve the expenditure of public funds.

The CFTA, which came into effect just over a year ago (July 1, 2017), does not include a similar reference to public funds and, therefore, is not limited in application only to procurements involving such funds.

The CFTA does include an exemption related to the source of funds for a procurement, but the exemption is far more limited than an exemption for all procurements using non-public funds. The relevant exemption states that the procurement chapter of the CFTA does not apply to “procurement of goods or services financed primarily from donations that require the procurement to be conducted in a manner inconsistent with this Chapter.” In other words, in order for a procurement carried out using donated funds to be exempt, the donated funds would have to have been received by the purchasing organization under a condition that specifically required that the funds be used in a manner that conflicts with the procurement requirements of the CFTA. In our experience, the attachment of such a condition to donated funds would be unusual.

How can we help you?

DDO encourages broader public sector organizations to review their procurement policies to ensure compliance with the requirements of the CFTA. The public funds issue described above is just one of several issues on which the CFTA differs from the Procurement Directive. If you would like help in ensuring that your procurement policies are up to date, please do not hesitate to contact me: mgleeson@ddohealthlaw.com

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