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Bill No. 1 – Québec government proposes tightening control on the integrity of public contracts

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Litigation & Dispute Resolution Bulletin

On November 1, 2012, the newly-elected Québec government tabled its first bill, titled Integrity in Public Contracts Act. With this bill, the provincial government proposes to amend the Act respecting contracting by public bodies ("ACPB") in order to tighten control on the integrity of enterprises eligible to enter into contracts with public bodies. If they are passed, the contemplated legislative amendments will likely have a significant impact on companies that do business with the government, not only in the construction and infrastructure sectors, but in a wide range of other areas governed by the ACPB and its regulations.

If and when Bill No. 1 is passed and subject to any amendments that may be made, the provisions of the ACPB will remain in force in their current form.

Back in 2011, the previous Québec government had amended the ACPB to add a series of provisions allowing an enterprise to be declared ineligible to bid for contracts with certain public bodies when that enterprise or an associate thereof was convicted of an offence listed in the Regulation respecting the register of enterprises ineligible for public contracts and oversight and monitoring measures ("Regulation r. 8.1"). To be declared ineligible, an enterprise (or an associate thereof) must not only be convicted of any such offence, but its conviction must be recorded in the register maintained to that end by the Chair of the Conseil du trésor.

In its current form, Bill No. 1 proposes reversing this approach, replacing the register of enterprises ineligible for public contracts by a public register of authorized enterprises. This would be a significant change, because once an as-yet-undetermined financial threshold is exceeded, enterprises would cease being automatically authorized (unless they have been declared ineligible) to enter into contracts with public bodies and henceforth be required to first obtain a formal authorization.

The responsibility and power to grant this authorization would fall upon the Autorité des marchés financiers ("AMF") after it completes a three-step process:

  1. The AMF would only consider an application for authorization if the enterprise submits (provided it has an establishment in Québec) an attestation from Revenu Québec stating that the enterprise is not in default under fiscal laws.
  2. The AMF would have to refuse to grant an authorization if the enterprise (or certain associates thereof) have been found guilty of a listed offence.
  3. The AMF could refuse to grant or to renew an authorization, even if the first two criteria have been met, "if, in its opinion, public confidence […] is undermined on account of a lack of integrity on the part of the enterprise" (or of some of its associates).

Despite the above, the Conseil du trésor would have the power to grant a main contract or subcontract to an enterprise if the Conseil du trésor "is satisfied that it is in the public interest" to do so. Public bodies would also be permitted to do so where they deem that urgent action is required and there is a threat to human safety or property.

The authorization granted by the AMF would remain in effect for a period of three years. That authorization could, however, be revoked at any time if the enterprise failed to maintain the conditions under which the authorization was granted, or if the AMF considered that public confidence was undermined by a lack of integrity. In such a case, Bill No. 1 provides for a series of mechanisms that reconcile this power to revoke an authorization with the smooth performance of projects by allowing the Conseil du trésor to authorize the continued performance of a contract.

In addition to this profound change to the procedure to control the integrity of government co-contractors, the ACPB, as the government proposes to amend it, would apply to any body half of whose members or directors are appointed or elected by the government or by a minister. The source of financing of those bodies would no longer constitute a factor when determining whether they are subject to the Act, contrary to the definition that has prevailed until now. Similarly, the ACPB would henceforth apply to the Société d'assurance automobile du Québec, which was not previously governed by the Act. What is more, its provisions would continue to apply to municipal bodies.

Finally, it bears noting that public bodies governed by the new provisions of the ACPB would be required to designate a contract rules compliance monitor, whose functions would include seeing that the Act and its regulations are complied with, advising the officers of the public body, seeing that internal measures are put in place to ensure integrity, and seeing to the professional fitness of the personnel in charge of contract management.

We will have a better idea of the scope of the provisions proposed by our current government once the National Assembly adopts a final version of the bill and enacts all of its implementing regulations.

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