Integrity Regime: Annual Report—April 1, 2017, to March 31, 2018

Integrity Regime: Annual Report—April 1, 2017, to March 31, 2018 (PDF, 304KB)

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Executive summary

Unethical business practices undermine fair competition, threaten the integrity of the markets, are a barrier to economic growth, increase the cost and risk of doing business, and erode public confidence in government institutions. The Government of Canada has a range of measures in place to protect the integrity of its procurements, and associated taxpayer dollars, from these risks. The Integrity Regime, administered by Public Services and Procurement Canada (PSPC), is one such measure.

The Integrity Regime, which is a policy-based debarment system, strengthens integrity within contracts and real property agreements across government, while being responsive to issues and concerns raised by our partners and stakeholders. It holds companies accountable for their actions, while encouraging them to cooperate with law enforcement when problems arise, and to take corrective actions. It is designed to ensure that procurement and real property practices reflect public expectations that the utmost care and prudence is applied in handling public funds.

All departments and agencies required to adopt the regime have done so. This government-wide approach helps to protect federal organizations from entering into contracts and real property agreements with unethical suppliers that pose financial and reputational risk to the Government of Canada.

Significant outreach efforts have been undertaken to engage with all stakeholders, including other government departments, suppliers, and civil society organizations across Canada to ensure that the regime is well-understood and consistently applied.

In fiscal year 2017 to 2018, PSPC completed 26,322 supplier compliance verification requests, representing 270,934 individual names. Over 99% of these verifications were completed within the program’s four-hour completion standard. Since the introduction of the regime, 156 determinations have been completed, with 34 of them occurring in the 2017 to 2018 fiscal year.

In the fall of 2017, a public consultation was held seeking feedback on the regime. Following two years of implementation, and within the context of the government's procurement modernization initiative, this assessment was an opportunity to consider how the regime addresses new trends and risks in a constantly changing marketplace.

In March 2018, the Government of Canada announced it would be making enhancements to the government-wide Integrity Regime to build additional discretion and flexibility.

PSPC is proud of the work that has been achieved over the last year, and is focussed on continuing to work with partners to further strengthen the accountability and integrity of the Government of Canada’s contracts and real property agreements.

About this report

This annual report covers major milestones and accomplishments for the Government of Canada’s Integrity Regime for the 2017 to 2018 fiscal year. It demonstrates the department’s ongoing commitment to transparency and open reporting.

About the Integrity Regime

The Integrity Regime, introduced in 2015, is a government-wide policy-based debarment system designed to ensure the integrity of the Government of Canada’s contracts and real property transactions. It is a key element of the Government framework to support accountability and integrity in procurement and real property transactions. The regime aims to:

The regime is rigorous and consistent with best practices in Canada and abroad.

How the Integrity Regime works

Key elements

The Integrity Regime is policy based and consists of the Ineligibility and Suspension Policy; any directives issued further to the policy; and clauses, which are used to incorporate the policy into solicitations, resulting contracts and real property agreements.

Through the Integrity Regime’s Ineligibility and Suspension Policy, the government may suspend a supplier, or declare them ineligible, for a contract or real property agreement with Canada. A determination of ineligibility or suspension is made on the basis of charges and convictions of offences listed in the policy, and relate to white-collar crime such as corruption, fraud, bribery, and collusion.

A supplier who has been charged with an offence listed in the policy may be suspended from contract or real property agreement award for a period of up to 18 months, a period that may be extended as judicial processes proceed. In some circumstances, a conviction related to an offence listed in the policy will automatically lead to a determination of ineligibility for up to 10 years, while others will lead to a case-by-case review for determination.

Provided the supplier has cooperated with law enforcement authorities, or has undertaken remedial action(s) to address wrongdoing, they may enter into an administrative agreement with PSPC either in lieu of suspension, or to reduce their period of ineligibility by up to 5 years. An administrative agreement is an arrangement between the supplier and the government that is used when the department determines it must exercise additional caution to further mitigate risks of contracting with a particular supplier. The agreement includes conditions that the supplier must fulfil to be eligible to be awarded a federal contract, such as remedial and compliance measures. Additionally, the agreement must be monitored, at the supplier’s expense, by a qualified and independent third party that is recognized by the department.

To further support the policy, directives are occasionally issued to elaborate on or clarify aspects of the policy. Once issued, these directives form a binding part of the policy. Lastly, integrity clauses are used directly in contracts and real property agreements, and related instruments, setting out a supplier’s responsibilities while conducting business with Canada. The Integrity Regime applies where the contract or real property agreement has a value greater than $10,000, with some exceptions.

Administration

The Integrity Regime is administered centrally by PSPC. It applies to all federal organizations included in Schedule I, I.1, and II of the Financial Administration Act, and is governed through bilateral memoranda of understanding (MOUs) between PSPC and other government departments and agencies.

All required departments and agencies having formally adopted the regime, there are now 78 agreements in place between PSPC and the required federal organizations. In addition, two Crown corporations have adopted the regime voluntarily, and outreach and engagement efforts to facilitate the voluntary participation of the Crown corporations and agents of Parliament are ongoing.

Operations

PSPC works actively with federal procurement and real property officers to verify supplier compliance, and assist departments with any issues that arise throughout that process.

Verifications of companies and individual suppliers are requested by procurement and real property officers through a web-based portal, and are processed using a centralized database that houses information on specific convictions or charges. Typically, requests are processed within a four-hour window; two hours in urgent situations. This quick processing standard helps to avoid time delays in the procurement process.

In emergency situations, an emergency verification feature is in place to operate within a 30-minute service standard, which allows for a temporary fast-track process outside of the established service standards. This fast-track process applies to specific circumstances or events that require contracts be urgently put in place to address crisis situations. For example, during the 2017 to 2018 year, three requests were completed in under 30 minutes in response to the forest wildfire mission in British Columbia, while the province was in a state of emergency.

PSPC continues to fine-tune regime processes to achieve government objectives in a way that minimizes the risk to federal departments, while supporting suppliers participating in the procurement process.

PSPC maintains a toll-free phone line (1-844-705-2084) and a generic email inbox (pwgsc.o.integrity-tpsgc.o.integrite@pwgsc-tpsgc.gc.ca) to answer any questions regarding the Integrity Regime.

In fiscal year 2017 to 2018, 83 calls and 212 emails received from various interested parties were answered regarding the regime.

PSPC administers the regime across four core functions:

Integrity Regime activities (2007 to 2019)

2007

The Code of Conduct for Procurement is introduced.  It applies only to Public Works and Government Services Canada (PWGSC).

2012

The Integrity Framework is introduced, expanding on the code to include real property transactions. It still applies only to PWGSC.

2014

The Integrity Framework is strengthened through the introduction of additional enhancements.

2015

The Integrity Regime is introduced, and is now applied government wide.

2016

The Integrity Regime language is simplified and updated to enable its consistent application.

2017

Public consultations are held seeking input on enhancements to the Integrity Regime.

March 2018

Public Services and Procurement Canada (formerly PWGSC) announces that enhancements will be made and that a Deferred Prosecution Agreement will be introduced.

September 2018

Public consultations are held to identify the administrative impact of policy changes.

November 2018

The new policy is released.

January 2019

The new policy comes into effect.

Year in review

Stakeholder engagement

PSPC actively engages with a range of internal and external stakeholders to solicit feedback on key implementation issues, discuss administrative challenges, and to ensure that the Integrity Regime is well understood and consistently applied. Stakeholder engagement also helps to identify aspects of the regime that need to be clarified through tools and resources.

Public consultations 

In the fall of 2017, the Government of Canada conducted a public consultation to seek input on potential enhancements to the Integrity Regime. After over two years of implementation, it was useful to review whether the Integrity Regime was achieving its objectives, and whether it was efficient in doing so. Within the context of the government's procurement modernization initiative, this assessment was an opportunity to consider how the regime addresses new trends and risks in a constantly changing marketplace.

A discussion guide was created, and participants were asked to provide their views on four  themes:

The views of interested parties were collected in a number of ways, including through a dedicated website for Canadians to submit feedback, as well as through face-to-face meetings and teleconferences. During the consultation period, government officials met with over 370 participants and received 35 written submissions regarding the four themes. Feedback received during the consultation period has been summarized in PSPC’s What We Heard report. Participants were also given the opportunity to comment on a possible Canadian deferred prosecution agreement regime, to be known as a Remediation Agreement (RA) regime. An RA regime represents another tool for the Government of Canada to address corporate wrongdoing. The enhanced Integrity Regime, and RA Regime, add new incentives for corporations to self-report and encourages strong corporate compliance in a continually evolving marketplace. To that end, the Department of Justice has prepared legislative amendments to the Criminal Code to allow for the creation of an RA regime, which, subject to Parliamentary approval will come into effect 90 days after royal assent.

Other outreach activities

External outreach

Beyond public consultations, and as a core component of the program, PSPC actively engages with the supplier community and participates in regional supplier events. In the 2017 to 2018 fiscal year, these included:

It also actively engages with other jurisdictions, non-governmental organizations and suppliers to share information on the Integrity Regime, as well as learn from anti-corruption and fraud experts. In fiscal year 2017 to 2018 these included:

Internal outreach: Training

Our partners within federal departments, agencies and Crown corporations regularly receive training on the verification process through portal demonstrations. Training has been delivered to over 1,070 employees government-wide since the regime’s formal introduction, with approximately 100 employees trained in the 2017 to 2018 fiscal year. Our partners continue to return positive feedback on the portal and on the integrity database client service.

Policy

During the consultation, participants expressed support for the regime’s objective of ensuring that the Government of Canada does business with ethical suppliers, while also stating that additional discretion and flexibility needed to be built into the Integrity Regime.

On March 27, 2018, the Government of Canada announced it would enhance the government-wide Integrity Regime to:

These enhancements to the regime will be reflected in a revised Ineligibility and Suspension Policy to be released on November 15, 2018. The revised policy will come into effect on January 1, 2019.

Verification and supplier compliance

The process to verify supplier compliance with the Integrity Regime is undertaken just prior to contract award to ensure that a bidder or offerer has no convictions or charges of offences listed in the policy.

The Government of Canada has an excellent client-service response time on verification requests. It has a target of completing 80% of verification requests within a four-hour window, and is actually achieving this service delivery standard 99% of the time. In fiscal year 2017 to 2018, a total of 26,322 requests were received, representing verifications of 270,934 individual names.

Figure 1: Number of verification requests received and completed per month, for fiscal year 2017 to 2018

Figure 1: Number of verification requests received and completed per month, for fiscal year 2017 to 2018 - Long description below
Image description

The table illustrates the number of verification requests received from April 1, 2017 to March 31, 2018.

Figure 2: Searchable vendors added to database (fiscal year 2017 to 2018)

Figure 2: Searchable vendors added to database - Long description below
Image description

This image represents the number of searchable vendors added to the database in 2017 to 2018.

A total of 35,540 searchable vendors were added to the database in 2017 to 2018.

This number represents:

Verifying supplier compliance with the Integrity Regime is a continuously improving process. Updates are regularly added to the database to ensure it remains robust and current, including information on relevant charges, convictions, and Canada’s economic sanctions. For instance, in fiscal year 2017 to 2018, the Government of Canada applied sanctions against 81 individuals (from Venezuela, South Sudan, and Syria) under the Special Economic Measures Regulations. This resulted in an alert being created within the Integrity Regime database to help mitigate the risk of departments and agencies conducting business with those subject to sanctions.

Determination of ineligibility

When a supplier is charged with or convicted of offences related to unethical business practices identified under the Ineligibility and Suspension Policy, PSPC assesses this information against the policy’s provisions to determine the supplier’s compliance. A determination of non-compliance can lead to suspension, or the ineligibility to conduct business with the Government of Canada, decisions which are reported through a public list.

Since the introduction of the regime, 156 determinations have been made, with 34 of them occurring in the 2017 to 2018 fiscal year. Three companies are currently ineligible from doing business with the Government of Canada, while one company is in an administrative agreement with PSPC in lieu of suspension.  

Performance measurement

Performance indicators that can demonstrate the operational and organizational effectiveness of the Integrity Regime are a priority. We are currently able to demonstrate the volume of verification requests that are completed within our service level of four hours. PSPC is committed to re-evaluating this standard once the enhanced regime has been operationalized and future results will be monitored with a view to considering revising the target for the 2020 to 2021 fiscal year. Additional performance indicators for the regime are in development.

Conclusion

Into the next fiscal year, PSPC will continue to deliver a high standard of service excellence, while working to further enhance features of the Integrity Regime.

Consultations will be held in September 2018 to gain feedback on how the revised policy will be administered, to ensure it has no unintended impacts or administrative burdens on federal organizations or suppliers.

The revised Ineligibility and Suspension Policy, will be released in its final form on November 15, 2018, with an effective date of January 1, 2019.

The department will continue to engage the supplier and industry community to ensure the parameters of the regime are well understood. Engagement efforts will continue with Crown corporations and Agents of Parliament to encourage voluntary adoption of the regime.

PSPC remains committed to ensuring the integrity of federal procurement and real property processes, and will continue to adapt measures to address emerging challenges to ensure the best possible value for Canadians.

Regular reporting on the activities, as well as achievements, of the Integrity Regime, will continue on an ongoing basis, demonstrating continued transparency and accountability.

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