In the fight against COVID-19, the Government of Canada is actively seeking to procure goods and services to combat the virus. At the same time, existing government contractors may be facing supply chain disruptions, work force disruptions or a changing contractual landscape. We have set out several considerations for suppliers and contractors relating to the exceptional COVID-19 outbreak.
- Emergency goods to combat COVID-19
The Government of Canada, through Public Works and Government Services Canada (PWGSC), has set up a specific webpage seeking suppliers’ support to provide key goods and services, including the following:
- Disposable N95 masks
- Disposable surgical masks
- Nitrile gloves
- Vinyl gloves
- Bottles of hand sanitizer
- COVID-19 Testing Kits
- Flock Swabs
- Other prevention products
- Guard / security services
- Nursing services
- Food services
- Laundry services
- Accommodation maintenance services
- Personal services
- IT support services
- Other services
This is in line with Canada’s Plan to Mobilize Industry to fight COVID-19 announced by Prime Minister Trudeau on March 20, 2020, which includes the Government of Canada directly supporting businesses to rapidly scale up production or re-tool manufacturing lines to develop products made in Canada to help in the fight against COVID-19.
Procurements of goods and services in short supply are expected to be expedited, and to include flexible terms to ensure rapid contracting and deployment. Suppliers able to provide such goods and services are urged contact the PWGSC through the portal on the above webpage, or to send a summary of their offers to firstname.lastname@example.org. Dentons is available to assist with any expedited procurement issues and negotiations.
- Shared Services Canada and IT procurement
As federal government employees increasingly move online, the federal government’s capacity to accommodate increased remote work has been strained. In many federal departments, essential network traffic is prioritized to essential work only, with certain departments having told employees to work off-line or allowing only essential work to be completed at this time. Accordingly, Shared Services Canada is looking to increase its IT capacity through private sector vendors, through alternative communications options, increased capacity, and expedited procurement. IT service providers should be cognizant of such opportunities to provide or expand existing IT services and be ready to offer IT services if they are capable of doing so.
- Sole sourced contracts
Given the significant concerns and cascading impacts of COVID-19 on supply chains, the Government of Canada may sole source contracts for certain goods and services. Sole sourcing of contracts must still comply with Canada’s trade agreement obligations and need to fall within the limited exceptions listed within applicable trade agreements. Exceptions to the need to compete contracts include, for example, a lack of suppliers being able to satisfy conditions of a tender or a lack of competition for technical reasons. Alternatively, in such exceptional circumstances, it is possible that the government will invoke the national security exception to forego the requirement to compete government contracts.
- Public Works message to contractors and advisory notice on procurement
On March 19, 2020, PWGSC published a message to contractors stating that only essential work identified by the respective department’s Client Technical Authorities will continue in government workplaces. As such, contractors must curtail all work taking place in government workplaces. Contractors that can provide offsite tasks may continue contracted work on a case-by-case basis. Otherwise, the terms and conditions of contractors’ contracts will dictate work stoppage or work suspensions.
Additionally, in an advisory notice, PWGSC has extended, by at least two weeks, bid solicitations that were set to close on or before March 31, 2020. Bidders should actively monitor any solicitations for updates. PWGSC is encouraging all contractors to submit bids electronically. Updates on the bid submission process can be found here. Further, bids that were set to expire on or before March 31, 2020 have been extended by at least one month. Despite this extension, contractors who submit bids within the initial bid validity period may still be awarded contracts at the Government of Canada’s discretion.
- Key contractual provisions for existing contractors: Excusable delay and work suspension
Contractors with existing government contracts should be aware of the standard terms included in typical government contracts by reference to PWGSC Standard Acquisition Clauses and Conditions (SACC Manual), which do not include a standard force majeure clause but instead provide for excusable delay and suspension of work.
Excusable delays: Excusable delays are defined, for example, in the General Conditions: Goods (medium complexity) (2010A, 2018-06-21, section 07) as delays caused by a contractor that are:
- beyond the reasonable control of the contractor;
- could not reasonably have been foreseen;
- could not reasonably have been prevented by means reasonably available to the contractor; and
- occurred without the fault or neglect of the contractor;
In the event of an excusable delay, contractors must notify the contracting authority as soon as they become aware of any delays. In such a situation, any delivery date or other date under the contract will be postponed, but it is important to understand that historically the Crown has declined to be responsible for any costs incurred as a result of an excusable delay. We also note that, in the excusable delay provision, after a delay of 30 days the contracting authority may terminate the contract. However, given the current situation, we anticipate that the federal government would be flexible in regards to delay periods.
Nevertheless, contractors should be mindful to document any delays they are experiencing to evidence any delays and to communicate frequently with contracting authorities.
Suspension of work: For high complexity contracts, if contractors are subject to one of the closure orders in Québec or Ontario, and they are prohibited from completing a contract, contracting authorities may issue a work suspension order. (See, for example, General Conditions – Higher Complexity – Services, SACC 2035, 2018-06-21, section 28.) Contractors must comply with suspension orders. However, in such situations contractors will be entitled to be paid additional costs incurred as a result of the suspension, plus a fair and reasonable profit. That said, should a suspension order be issued within 180 days of a suspension order, the contracting authority must either cancel the order or terminate the contract. Contractors are encouraged to work with their contracting authorities to determine if work suspensions are possible, which may allow contractors to be paid, at least for a period, throughout the COVID-19 pandemic.
- Defence Production Act, Emergencies Act and the Potential for Ordered Procurement
Although unlikely at this point in time, it is possible for the federal government to order companies to produce key supplies via the Defence Production Act (DPA). Under the DPA, the Minister of Public Works and Government Services has a broad set of powers to procure “defence supplies,” a term that is broadly defined under the DPA to include:
(a) arms, ammunition, implements of war, vehicles, mechanical and other equipment, watercraft, amphibious craft, aircraft, animals, articles, materials, substances and things required or used for the purposes of the defence of Canada, or for cooperative efforts for defence being carried on by Canada and an associated government,
(b) ships of all kinds, and
(c) articles, materials, substances and things of all kinds used for the production or supply of anything mentioned in paragraph (a) or (b) or for the construction of defence projects.
Such an order could arguably cover crucial medical supplies and other supplies required to combat COVID-19. Similarly, should the federal government invoke the Emergencies Act it would have sweeping powers to order the provisions of goods and services from the private sectors. A specific insight on the Emergencies Act in relation to COVID-19 can be found here.
Dentons’ COVID-19 hub provides a range of timely information, updates and practical guidance on this fast-moving situation, drawing on the full scope of our global legal, policy and innovation capabilities.
For the latest information and developments in regulatory law across Canada, see our Canada Regulatory Review blog.