21 July 2014

If you want to secure a government contract, have a clean record!

It's always useful to scan the various articles that law firms publish on the web, in order to keep yourself up to date on developments. Even though I'm not a lawyer (and have never played one on TV!), it helps to have a working knowledge of the law, in order to help manage risks better for any company or client I may be working for.

McCarthy Tétrault have just published a good one (available here) about what it takes to keep your nose clean if you are trying to get a contact, standing offer or supply arrangement from Ottawa. Specifically, you must be in a position to certify that neither your company, its affiliates, nor any of the directors or owners concerned, have been convicted or discharged in the past ten years of any of the following specified "integrity offences" (which include similar offences in foreign jurisdictions):
  • paragraph 80(1)(d) (false entry, certificate or return), subsection 80(2) (fraud against Her Majesty) or section 154.01 (fraud against Her Majesty) of the Financial Administration Act
  • section 121 (fraud against the government and contractor subscribing to election fund), section 124 (selling or purchasing office), section 380 (fraud against Her Majesty or section 418 (selling defective stores to Her Majesty) , section 119 (bribery of judicial officers, etc.), section 120 (bribery of officers), section 346 (extortion), sections 366 to 368 (forgery and other offences resembling forgery), section 382 (fraudulent manipulation of stock exchange transactions), section 382.1 (prohibited insider trading), section 397 (falsification of books and documents), section 422 (criminal breach of contract), section 426 (secret commissions), section 462.31 (laundering of proceeds of crime) or sections 467.11 to 467.13 (participation in activities of criminal organization) of the Criminal Code
  • section 45 (conspiracies, agreements or arrangements between competitors), section 46 (foreign directives), section 47 (bid rigging), section 49 (agreements or arrangements with federal financial institutions), section 52 (false or misleading representation), section 53 (deceptive notice of winning a prize) of the Competition Act
  • section 239 (false or deceptive statements) of the Income Tax Act
  • section 327 (false or deceptive statements) of the Excise Tax Act
  • section 3 (bribing of a foreign public official), section 4 (accounting), or section 5 (offence committed outside Canada) of the Corruption of Foreign Public Officials Act; or 
  • section 5 (trafficking in substance), section 6 (importing and exporting), or section 7 (production of substance) of the Controlled Drugs and Substances Act.
There are further points to consider:
  • All directors and owners must furnish a Consent to a Criminal Record Verification, and may also be called to supply fingerprints and proof of identity.
  • During the term of the agreement, any changes to directors and owners must be notified, together with any related Consents.
  • Subcontractors must also be required to comply with the above requirements.
  • After the ten-year period, control mechanisms must be in place to ensure continuing compliance.
  • There can be no "end runs", such as assigning contracts without government consent to other parties, even arising from a reorganization. The courts have been quite strict on this.
In addition, if you are bidding for a public tender in Quebec, you will need to comply with the Act Respecting Contracting by Public Bodies. Among notable provisions in that Act:
  • The Conseil du Trésor maintains a list of enterprises that are ineligible to obtain government contracts.
  • Enterprises that are bidding for contracts in excess of a specified value must first obtain an authorization from the Autorité des marchés financiers.
  • The list of offences under Schedule 1 applies to enterprises, plus their directors and any shareholder that holds more than 50% or more of the voting rights, and the Autorité will not issue an authorization if any of them has been convicted of any of the offences within the last five years.
Therefore, any corporate group should have, as part of its governance policy, procedures in place to ensure that no part of the group, nor any controlling shareholders or officers, is offside on any of these requirements. I would personally also check to see if there were any civil or administrative proceedings, or complaints or resignations, that may have arisen in any of these matters, such as is done for anyone that is dealing with securities. The extra cost involved would be minimal, in order to ensure an ethical environment.


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