Ontario Responds to “Buy American” Measures with the Fairness in Procurement Act, 2018

The Government of Ontario has passed the Fairness in Procurement Act, 2018 (Act) in response to measures taken in certain U.S. jurisdictions that restrict Ontario businesses’ opportunities to participate in public procurements. The Act is not yet in force in Ontario. However, when any regulations enacted under the Act come into effect there may be significant consequences for procuring entities in the broader Ontario public sector and for potential bidders.

OVERVIEW

One of the stated purposes of the Act is to respond proportionally to so-called “Buy American” measures undertaken by certain American state or local governments. For this reason, while the Act is drafted to allow for wide-ranging restrictions on participation in Ontario public procurements by suppliers from what the Act calls “offending American jurisdictions”, actual restrictions will be implemented by way of particularized regulations. At present, two proposed sets of regulations relating to suppliers from Texas and New York states are under consideration.

SUMMARY OF THE ACT

Who Does It Apply To?

Subject to the enactment of particular regulations, the Act will apply to procuring entities in Ontario and to potential bidders to those procurements.

Procuring entities may include “Government entities” or “broader public sector entities”, each of which are defined in the Act.

  • “Government entities” will include, among others, the Crown, the Independent Electricity System Operator and other public bodies.
  • “Broader public sector entities” will include, among others, certain hospitals and health care organizations, school boards, universities and colleges, children’s aid societies and any other entity prescribed by regulation.

Potential bidders may include “suppliers” from offending American jurisdictions. The Act provides that a supplier may be any form of business (e.g., sole proprietorship, partnership, corporation or other legal entity) that offers goods or services. An American jurisdiction — meaning any sub-national jurisdiction in the U.S., including any state or local government — may be designated by regulation as an “offending American jurisdiction” if the jurisdiction has adopted legislation or policies that may inhibit or prevent Ontario suppliers from participating or succeeding in public procurements in that jurisdiction.  

What Restrictions Will Be Imposed?  

The particular restrictions imposed on any Ontario procuring entity or potential bidder will depend on the content of any applicable regulation enacted under the Act. That said, the Act contemplates a variety of restrictions that may be imposed by way of regulation, which include, among other things:

  • Excluding suppliers from offending American jurisdictions from participating in procurements entirely. Alternatively, requiring such suppliers to provide additional information or meet additional requirements when participating in Ontario public procurements, and/or evaluating proposals from such suppliers according to different or more stringent criteria.
  • Providing that any procurement contract formed by a broader public sector entity in contravention of the Act or regulations is void.
  • Sanctioning a broader public sector entity that formed a procurement contract in contravention of the Act or regulations.
  • Prohibiting any person — including a U.S. supplier — from bringing any legal proceedings or otherwise seeking any compensation or remedies against the Crown, Government entities or broader public sector entities, and their respective personnel, as a direct or indirect result of the Act and regulations.

CURRENT PROPOSED REGULATIONS

The Ontario government has indicated that once the Act is in force, it intends to implement regulations to respond to “Buy American” legislation enacted by the states of New York and Texas. The government has described the proposed regulations regarding these states as follows:

  • New York: the proposed restrictions would apply to procurements worth over US$1-million by Ontario Government entities relating to the construction, repair and maintenance of surface roads or bridges. The regulation would require that, if the successful supplier is from New York, it may not use any iron from that state in the surface road or bridge. The regulation would also prohibit Ontario Government entities from entering into any contract unless the foregoing prohibition regarding New York iron is included in the contract.
  • Texas: the proposed restrictions would apply to procurements by Ontario Government entities for the construction, remodelling or altering of any building, structure or infrastructure or supply of material containing iron or steel for those projects. The regulation would require that, if the successful supplier is from Texas, it may not use any iron or steel from that state. The regulation would also prohibit Ontario Government entities from entering into any contract unless the foregoing prohibition regarding Texas iron and steel is included in the contract.

The government has indicated that both of the regulations proposed above will not apply to any procurement processes or contracts that had been initiated or signed before the regulations came into force. It has also indicated that the regulations may contain a process for seeking exemptions from the regulations.

NEXT STEPS

While the Act and current proposed regulations are not yet in force, Ontario procuring entities and their potential suppliers each should review them and consider whether and how these developments may affect them. Further, procuring entities may wish to review their procurement documents and procedures to ensure readiness to comply with the Act and proposed regulations, including any further regulations proposed in the future.

For further information, please contact:

Marianne Smith                         416-863-3156
Erin Hoult                                  416-863-4011

or any other member of our Procurement group.

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