Purpose
The purpose of Policy Notification PN-125 is to inform all PWGSC Acquisitions Program (AP) employees and contracting officers of the replacement of the Agreement on Internal Trade (AIT) with the Canadian Free Trade Agreement (CFTA), and its effect on trade commitments regarding procedural rules and scope of coverage.
Effective date
This policy notification is effective July 1, 2017. The CFTA will apply to all procurements commenced on or after July 1, 2017, while the AIT will continue to apply to all procurements commenced prior to the CFTA’s effective date of July 1, 2017. The procurement process commences after an entity has decided on its requirement (see Article 1210: Entry into Force and Article 1211: Termination of the Agreement on Internal Trade).
Introduction
Trade agreements help to foster competition and innovation by enabling Canadian suppliers to compete on a more even playing field with firms in other jurisdictions based on principles that promote open, fair and transparent competition. These principles include:
- non-discrimination according to country, province, or territory of origin
- an open and transparent tendering process
- competitive procurement
- fair procurement processes
Overview
The CFTA replaces the AIT, which has been in force since 1995, and will apply to the federal government as well as all provinces and territories. The CFTA improves on the AIT and will have significant benefits. The coverage and procedural rules of the CFTA are set out in Chapter 5 of the Agreement, while exceptions are outlined in Annex 520.1: Party-Specific Exceptions, which includes the schedules of Canada, the provinces and territories. Annex 520.1 uses a negative list approach, where exceptions to the obligations of the Chapter are specifically listed in the schedules. The procedural rules of the CFTA have been aligned, to a large extent, with those in Canada’s international trade agreements (ITAs), including the World Trade Organization – Agreement on Government Procurement (WTO-AGP). Currently, the procurement thresholds for the CFTA also remain the same as for the AIT. It is therefore expected that the obligations of CFTA will have a minimal impact on federal procurement activities. However, as with all trade agreements, the entire Government Procurement Chapter should be consulted to identify Canada’s obligations and exceptions.
Procedural obligations
Procedural obligations are found in the text of the Government Procurement Chapter and have been aligned, to a large extent, with those in ITAs such as the WTO-AGP. Procedural rules cover, for example, contract valuation, general exceptions, notices, the content of tender documentation, the circumstances for the use of limited tendering, the publication of award information, and the use of technical specifications.
Covered entities
All federal departments and agencies are covered by the CFTA Procurement Chapter unless excluded in Annex 520.1: Party-Specific Exceptions. Consult both sections within Annex 520.1’s Schedule of Canada: Section A (Excluded Entities) and Section B (Exclusions and Notes).
Goods, services and construction services
All goods, services and construction services are covered by the CFTA Procurement Chapter unless specified in the Schedule of Canada under Section B: Exceptions and Notes (Annex 520.1: Party-Specific Exceptions).
Thresholds
| Entity Type | Goods | Services | Construction |
|---|---|---|---|
| Government Entities | $25,000 | $100,000 | $100,000 |
| MASH Sector Entities | $100,000 | $100,000 | $250,000 |
| Crown Corporations | $500,000 | $500,000 | $5,000,000 |
CFTA's thresholds will be adjusted for inflation every two years commencing on January 1, 2018, and will be published on the Treasury Board Secretariat’s Contracting Policy Notices (Trade Agreements: Thresholds Update) webpage.
Exceptions
Certain exceptions are listed in Chapter 8 (General Exceptions). All other exceptions are listed in Article Article 504:11: Non-Application, Article 520: Exceptions, and in the Schedule of Canada (Annex 520.1: Party-Specific Exceptions).
Summary of changes
While the CFTA is similar to the AIT in terms of coverage and procedural rules, there are a few key differences regarding government procurement. For example, the CFTA:
- has broader coverage than the AIT, using a negative list approach that covers all government procurement with the exception of entities, goods, and services that are specifically listed in the market access schedules for Canada and each province and territory
- allows for small business set-asides that are part of a small business set-aside program
- contains some exceptions for Public-Private Partnerships
- includes obligations for technical specifications in tendering requirements
Several key provisions of the AIT have been retained in the CFTA, including:
- maintaining the AIT’s flexibility on bid periods, referring only to "a reasonable time," rather than the numeric minimums set out in international trade agreements
- maintaining the AIT’s thresholds; although note that these thresholds will now be revised every two years to adjust for inflation
Note: The CFTA does not apply to procurement that is part of a small business set-aside program provided that the program is fair, open, transparent, and does not discriminate on the basis of origin or location within Canada of goods, services, or suppliers.
Contact information
For assistance with the application of the trade agreements, contracting officers may contact Natalie Dupont in the Trade Agreement Unit of the Strategic Policy Sector, either by telephone at 819-420-1710, or by email: Natalie.Dupont@tpsgc-pwgsc.gc.ca