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Covid-19 | Bulletin

Canada Considers Emergency Procurement Measures to Respond to COVID-19: A Primer on Canada’s Rarely Used Powers to Repurpose our Economy

Fasken
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Procurement Bulletin

COVID-19 Puts the Nation on a War Footing 

On March 19, 2020, Prime Minister Justin Trudeau stated that Canada's Defence Production Act could soon be invoked to respond to the COVID-19 crisis. Trudeau, who was speaking from his home where he is himself in self-isolation due to the virus, added that the government was considering a range of options.

The Prime Minister's statement followed publication of an open letter in the Globe & Mail on March 15th, by over a hundred of Canada's top business leaders, calling for concerted action to respond to the crisis. These executives called upon all business and government leaders to shift their focus to the "singular objective of slowing the pace of transmission" of the coronavirus.

Meanwhile, on March 18th, President Donald Trump invoked the US Defense Production Act, which gives the President the power to force businesses to produce certain goods and deliver them to the government (Trump later tweeted that he would only use the law as a last resort). This law has been used by the US in the past, usually during times of war or a major disaster.  

The Minister of Public Services and Procurement Canada (PSPC) holds broad statutory authority to acquire goods and services -- not only on behalf of the federal government, but on behalf of provincial, territorial, and municipal governments.

While Canada's national and international trade agreements seek to assure open and competitive procurements, all agreements defer to the implementation of measures, including limited tendering and shortened procurement time frames, for the purposes of national security, preservation of public health and safety, public order, and preservation and protection of human health and life.  The COVID-19 pandemic clearly fits within one or more of these categories.

As such, the Minister does not need a further "emergency" authority to acquire goods and services; although having a Cabinet Directive in hand --identifying that all procurements responding to the COVID-19 pandemic meet the emergency or public interest exceptions of the Government Contracts Regulations-- would help prevent any delay arising from contracting authorities having to justify that one or both of the exceptions apply for any purchases they need to make.

To date, over 5,800 responses to a call out to Industry to supply necessary goods and services[1] have been received.

Directing Industry to Respond to the COVID-19 Pandemic – How Can it be Done

As noted above, President Trump invoked the Defense Production Act, legislation. This provides the US federal government with authority to direct private businesses to meet the needs of "national defense". The US government has invoked this authority to deal with domestic emergency preparedness in limited situations in the past; most recently in 2017, to provide disaster relief following the hurricane that ravaged Puerto Rico.

Canada's Defence Production Act (DPA), although similar in name and general intent, is different.

The Canadian legislation grants the Minister of PSPC with broad authority to acquire "defence supplies" for the government, which is exercised routinely, and is the authority under which goods and services are acquired for the Canadian Forces, the Canadian Coast Guard and others.  The legislation also contains provisions enabling the Minister to "mobilize, conserve and coordinate all economic and industrial facilities", including engaging in the manufacture of supplies, stockpiling essential materials and substances to prevent shortages, and making loans or advances (or providing repayment guarantees) to provide assistance or capital to industry to achieve the production of defence supplies. Aside from times of war, this additional authority - to direct industry and assume control of industrial operations - has not been exercised by any government.

The use of this additional authority to meet a national pandemic would raise significant policy considerations for any government with respect to how it interacts with industry in peace-time, in addition to being unprecedented. Further, the Canadian government has other options and resources at its disposal, many of which are already operational, and arguably can achieve the requisite level of response to the COVID-19 emergency.

Funding has already been allocated to fight the COVID-19 emergency.  Processes such as those supported by the national Emergency Management Framework[2], have been implemented. The government is also realigning existing funding mechanisms to focus research and development efforts to respond to COVID-19. On March 20th, the government announced that Canada's current industrial policy will be refocused to support the COVID-19 response; meaning that funds reserved to help companies innovate, such as the Strategic Innovation Fund, will be used to help companies accelerate the research and development of products and services that can be used in Canada's response to the COVID-19 emergency (i.e. masks, ventilators and hand sanitizer). 

Canada's other national regimes, such as the Disaster Financial Assistance Arrangements administered by Public Safety Canada, are also available and have been used by the federal government in the past, without the need to invoke the DPA.

Finally, the federal government has at its disposal the Emergencies Act and its companion legislation, the Emergency Management Act, which, through the Minister of Public Safety, provides a framework for pan-Canadian emergency management and response. While the Emergencies Act is often referred to as legislation of "last resort", it is likely better suited to support a response to COVID-19 than is the DPA.

Marcia Mills is procurement counsel with the Fasken Ottawa office and has 20+ years of private and public sector experience, including over a decade as counsel to the Department of Public Procurement and Services Canada, advising on major Crown defence procurements and the Defence Production Act.  She can be reached at mmills@fasken.com.

Peter Mantas is the leader of the Procurement group of Fasken. He is frequently retained to advise companies in complex matters involving government. He has expertise in Canadian defence and other forms of procurement, and also has experience with the US Defense Production Act. He can be reached at pmantas@fasken.com.

Andrew House practices in the areas of Government relations, ethics, and national security law. He works with clients facing urgent and emerging issues related to government regulation of corporations in the protection of critical infrastructure, supply chain assurance, and the safety of citizens. Andrew served as Chief of Staff to Canada's Public Safety Minister from 2010 to 2015. He can be reached at ahouse@fasken.com.



[1] See our bulletin at Triggering an “Excusable Delay” Claim During the COVID-19 Pandemic: What Federal Contractors Need to Know

[2] An Incident Response Group on Coronavirus and a federal-provincial-territorial Special Advisory Committee on the Novel Coronavirus (SAC) were both established in January and, in March, a Cabinet Committee on the federal response to the coronavirus disease (COVID-19) was struck.

 

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