Security and oversight services: Standing Committee on Government Operations and Estimates—March 12, 2020

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Integrity Regime

In this section

Commitment

In line with the minister’s mandate, the Government of Canada will continue to hold contractors accountable for poor performance or unacceptable behaviour, particularly in large-scale procurements.

Key messages

If pressed about enhancements to the Integrity Regime’s Ineligibility and Suspension Policy:

Current status

The current Ineligibility and Suspension Policy remains in effect.

Background

Corporate wrongdoing imposes significant economic, political and social costs, undermines fair competition and constitutes barriers to economic growth. All governments have an obligation to protect and safeguard the use of public funds, to ensure strong stewardship and transparency, and to uphold public trust in government procurement and contracting. In order to achieve these ends, the government of Canada has a framework of laws, regulations, policies and programs in place to detect and prevent improper and unethical business practices.

One such program is the Integrity Regime (the regime), a rules-based debarment system introduced in 2015 that is designed to help ensure that the Government of Canada conducts business with ethical suppliers in Canada and abroad. The department centrally administers the government-wide regime for procurement and real property transactions. Under this regime, unethical suppliers may be rendered ineligible or suspended from conducting business with the Government of Canada. The central component of the regime is the Ineligibility and Suspension Policy (the policy) which sets out when and how a supplier may be declared ineligible or suspended from doing business with the government.

Under the regime, a bidder becomes ineligible to be awarded a contract or real property agreement for 10 years when convicted of certain offences in Canada or similar offences in other countries in the last 3 years. This can be reduced by up to 5 years if the supplier demonstrates that it co-operated with law enforcement authorities or addressed the causes of the misconduct. If a supplier is charged with a listed offence, it may be suspended from doing business with the federal government for up to 18 months (this period may be extended while legal proceedings are underway), should they pose a significant risk.

The regime applies to all federal departments and agencies listed in schedule I, I.1 and II of the Financial Administration Act and can be adopted by other federal entities (such as Crown corporations) on a voluntary basis. As part of its responsibilities under the regime, the department conducts integrity verification requests on behalf of federal organizations—a process whereby the department confirms whether a supplier is ineligible or suspended from conducting business with the federal government. In 2018 to 2019, the department conducted over 26,000 integrity verification requests, on approximately 343,000 individual names, of which over 99% of these requests were completed by the department within the program’s 4-hour client service standard.

All determinations of ineligibility or suspension are undertaken pursuant to the process set out in the policy and are rendered by the registrar of ineligibility and suspension, an assistant deputy minister-level position within the department that has been delegated the authority to administer the regime. The names of ineligible or suspended suppliers are published on the departmental website. Currently, one supplier has entered into an administrative agreement with the department in lieu of suspension (SNC-Lavalin Group Inc.); and 3 suppliers have been rendered ineligible (Hickey Construction Ltd, Les Entreprises Chatel Inc. and R.M Belanger Limited). The minister is informed of all determinations of ineligibility and suspension.

In 2017, after 2 years of operations, the department initiated a review of the regime to determine whether it was achieving its intended objectives and to scope whether possible enhancements were required to address gaps and shortcomings. Following this review, in fall 2017, a national consultation on “expanding Canada’s toolkit to address corporate wrongdoing” was initiated, which included a stream related to potential enhancements to the Integrity Regime. The results of this consultation were reported publicly in February 2018. Following an announcement of planned enhancements to the regime, the department sought comments and feedback on the text of a draft revised policy that reflected the proposed modifications. This second consultation occurred in fall 2018.

Subsequent to this consultation, public discourse has increased regarding corporate wrongdoing and governments’ responses to this type of misconduct. As a result, the department is taking additional time to consider elements of the regime and the feedback received to date.

Questions and answers

Question 1: What is status of the Integrity Regime policy?

Answer 1: The Ineligibility and Suspension Policy was last updated in April of 2016 and is in effect. Following public consultations on possible enhancements to the Integrity Regime in 2017 and 2018, departmental officials are examining a number of potential modifications and revisions to the Ineligibility and Suspension Policy. They are designed to further strengthen the integrity of the federal procurement system in an evolving domestic and global marketplace.

Question 2: How does Canada’s Integrity Regime compare with those implemented in other countries?

Answer 2: Canada’s Integrity Regime is designed to strengthen and protect the integrity of the federal procurement system government-wide and is consistent with international best practices. It provides suppliers with due process, recognizes remedial action undertaken by firms, and allows for the use of administrative agreements to provide the government with additional assurances when conducting business with specific suppliers.

Question 3: What amount of funding is the department receiving to administer the Integrity Regime?

Answer 3: In addition to existing internal resources PSPC received $30 million in incremental funding for administering the previously announced enhancements to the Integrity Regime over a 5 year period.

As not all of the enhancements are operationalized yet and officials are still examining possible modifications to the Integrity Regime, the department is currently re-assessing its resources requirements associated with the program.

Question 4: What is the role of the registrar?

Answer 4: The registrar of ineligibility and suspension is responsible for administering the Ineligibility and Suspension Policy and, as such, solely makes decisions regarding:

The registrar exercises this authority with due consideration of the circumstances facing the supplier and the requirements set out in the policy.

Question 5: What mechanisms are in place within the regime to safeguard the independence of the registrar?

Answer 5: The government is committed to ensuring the independence of the registrar in the exercise of their authority under the Ineligibility and Suspension Policy.

The registrar of ineligibility and suspension is an assistant deputy minister within the department who has been delegated the authority to administer the policy directly from the minister. This direct delegation to the registrar allows for a level of independence and impartiality between the debarment authority and other officials exercising procurement authorities within the department and Government of Canada. The authority of the registrar includes responsibility for making final determinations regarding ineligibility and suspension of suppliers, as well as the negotiation of administrative agreements, where permitted, under the policy.

Question 6: Are there any exceptions for those convicted of a listed offense?

Answer 6: There are limited exemptions for those convicted of listed offences. A public interest exception allows the government to conduct business with an ineligible supplier when it is in the public interest. The exception is applied on a case-by case basis by the authority issuing the contract or real property agreement. The department may apply the exception on specific cases. When an exception is granted, an administrative agreement between the department and the supplier is required, unless a specific time urgency or emergency situation does not allow for such an agreement to be negotiated.

Question 7: What is the process for making determinations of ineligibility within Ineligibility and Suspension Policy?

Answer 7: Under this process, a supplier that is charged with, or convicted of one of the offences listed in the policy would be subject to a determination review. Once the review is complete, a recommendation would be made to the registrar of ineligibility and suspension to suspend (for charges), or debar (for convictions) the supplier from being awarded future contracts.

Ineligible or suspended suppliers that are corporations are listed on a public website. Due to privacy obligations individuals that are suspended or debarred are not listed publicly and are tracked in an internal database, in each case such suppliers are flagged when integrity verifications are undertaken by procurement officers prior to contract award.

Question 8: What is the application of the Integrity Regime to SNC-Lavalin?

Answer 8: SNC-Lavalin is a large company with many subsidiaries and affiliates, therefore it is important to be specific with respect to the names of the entities during this discussion.

In 2015, the RCMP charged SNC-Lavalin Group Inc., and 2 of its affiliates, SNC-Lavalin Construction Inc., and SNC-Lavalin International Inc. (both 100% owned subsidiaries) with 1 count each of corruption under paragraph 3(1)(b) of the Corruption of Foreign Public Officials Act, and 1 count each of fraud under paragraph 380(1)(a) of the Criminal Code.

Bribing a foreign public official under the Corruption of Foreign Public Officials Act is one of the offences listed in the Ineligibility and Suspension Policy and following the announcement of those charges, in 2015, PSPC entered into an administrative agreement with SNC-Lavalin Group Inc., in lieu of suspension under the Integrity Regime in relation to the foreign bribery charges. The agreement allows the company to continue to contract with the federal government pending the outcome of the criminal proceedings associated with the charges on condition that SNC-Lavalin Group Inc. complies with the monitoring and compliance terms in the agreement.

Question 9: Has the government negotiated any other administrative agreements under the Integrity Regime?

Answer 9: Officials at PSPC have been in discussions with an ineligible supplier regarding an administrative agreement to reduce the supplier’s period of ineligibility. Consistent with the policy, such an agreement can only come into force a minimum of 5 years after the start of an ineligibility period and once the conditions within the agreement have been fulfilled. Should an agreement come into force, it will be posted publically on the Integrity Regime website.

Question 10: What implications does the recent guilty plea of SNC-Lavalin Construction Inc. have on SNC’s status under the Integrity Regime?

Answer 10: On December 18, 2019, SNC-Lavalin Construction Inc. pleaded guilty in the Court of Quebec to one count of fraud contrary to paragraph 380(1)(a) of the Criminal Code. All remaining charges against SNC-Lavalin Group Inc., SNC-Lavalin International Inc., and SNC-Lavalin Construction Inc. were stayed pursuant to the plea agreement.

The offence to which SNC-Lavalin Construction Inc. pleaded guilty, fraud under paragraph 380, is not one of the listed offences under the Integrity Regime, and as such, does not trigger a determination of ineligibility pursuant to the Ineligibility and Suspension Policy. Such an offence will only trigger a review if the fraud is perpetrated against Her Majesty (Government of Canada), which was not the case, and the circumstance is therefore not covered under the Integrity Regime.

Consequently, SNC-Lavalin Group Inc.’s status under the Integrity Regime remains unchanged and the company as well as its affiliates, is permitted to contract with the federal government subject to the administrative agreement.

Question 11: Does the recent debarring of 4 of SNC-Lavalin’s affiliates from conducting business with the Government of Quebec impact SNC-Lavalin’s status under the Integrity Regime?

Answer 11: SNC-Lavalin Construction Inc. and the 3 affiliates recently listed on Quebec’s debarment registry are not suppliers to the Government of Canada.

The offence to which SNC-Lavalin Construction Inc. pleaded guilty and which led to these entities’ debarment in Quebec, is not one of the listed offences under the federal government’s Integrity Regime, and as such, does not trigger a determination of ineligibility pursuant to the Ineligibility and Suspension Policy.

Consequently, SNC-Lavalin Group Inc.’s status under the Integrity Regime remains unchanged and the company as well as its affiliates, is permitted to contract with the federal government subject to the administrative agreement.

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