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Compliance necessary with new Canada Free Trade Agreement

With the Canada Free Trade Agreement (CFTA) in force for one year as of July 1, Toronto health lawyer Michael Gleeson says it’s an apt time for public-sector health organizations to ensure they are in compliance with its requirements around procurement.

“If they haven’t done so already, broader public-sector organizations should turn their minds to making sure that their procurement procedures and processes are changed to comply with the new agreement,” he tells AdvocateDaily.com. 

The Canadian Free Trade Agreement, which replaced the Agreement on Internal Trade (AIT), helps remove barriers to trade — the flow of goods and services — between the provinces and territories across the country, explains Gleeson, a partner with DDO Health Law.

He says the new agreement brought many changes, one of which is new rules for working within buying groups, such as when two hospitals come together to increase their buying leverage for goods and services. Those entities in Ontario are often called shared-services organizations.

Under the new agreement, any entity that’s working with a shared-services organization or another type of buying group is required to annually publish on a procurement website that they are a member of that group, Gleeson says. 

“They need to let the public know they are a member so vendors can find out information about how to get [contracts] through hospitals and other health organizations,” he says. “It increases transparency around the procurement process.”

Entities are also required to list all of the organizations that could be purchasing goods and services under a particular request for proposals (RFP), Gleeson says. 

“You have to list all of the participants in your buying group so the vendors know who the current purchasers might be and who may be buying under that agreement while it’s in effect,” he says. “I think many organizations already did this, but [the policy makers] put it more explicitly in the CFTA, compared to the old agreement.”

Organizations should also be aware of how the new agreement includes some changes to the exemptions under which the procurement rules don’t apply, Gleeson says. 

“The Canada Free Trade Agreement does not include some longstanding exemptions, tweaked others that were part of the AIT, and added new ones that are quite useful,” he says. 

The CFTA introduces the notion of “limited tendering,” which is new terminology that was called sole-sourcing or single-sourcing under the previous agreement, Gleeson says. 

“These were situations where there might be multiple vendors that could provide a product, but for a particular reason, an entity could select a particular vendor without having to go to a competitive procurement process,” he says. 

“The Canada Free Trade Agreement has altered the situations under which that can be done by a purchasing organization. I think the changes reveal the parties have taken input from purchasing organizations to try to make the agreement more practical and user-friendly while maintaining the benefits of transparency and fairness to vendors.”

There are new rules around tender notices of procurement, Gleeson says. 

“Anytime an organization is doing a public procurement, there’s information they have to post,” he says. “The new agreement is more descriptive and formal in terms of what needs to be included in those notices.”

The CFTA also includes a section on conditions for participation, which essentially says that the requirements an organization includes in an RFP must be essential to the purchase, Gleeson notes. 

“Organizations shouldn’t add requirements that aren’t necessary and lead to a limitation on who could participate in the procurement,” he says. 

There are new rules around the pre-qualification of suppliers. 

“The government has loosened up how long such arrangements can remain in place,” he says.

“The one requirement is that if you’re putting a pre-qualification arrangement in effect for longer than three years, you need to publish annually that the arrangement exists and publish a request for additional interested suppliers if they want to participate.”

There’s a new requirement for organizations to publish awards, Gleeson says.

“So anytime an agreement is entered based upon a procurement process, the organization needs to publish details about that agreement,” he says. 

Gleeson emphasizes the importance of following the rules, noting there are two possible repercussions if a health-sector organization isn’t in compliance with the agreement. 

“If they are consistently offside with the rules, they could be held accountable through their Services Accountability Agreement with the Ministry of Health and Long-term Care and that could lead to a reduction in funding,” he says. 

“The other problem is that if you’re not complying with these rules, there’s the possibility that unsuccessful vendors could bring a claim against you. A purchaser could open themselves up to possible liability and claims from vendors.”

Gleeson notes there is an increasing number of buying groups in Ontario that are growing in size.

“And as the value of their procurements rises, the money that a vendor could lose by not getting certain work and the amount they could gain through a lawsuit is more significant,” he says. 

“It’s safer for organizations to stay on the right side of these rules to avoid any risk of a claim down the road.”

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