On December 1, 2017, the National Assembly unanimously adopted An Act to Facilitate Oversight of Public Bodies’ Contracts and to Establish the Autorité des Marchés Publics (Bill 108).
Bill 108 comes on the heels of the legislative and regulatory changes that were introduced following the Commission d’enquête sur l’octroi et la gestion des contrats publics dans l’industrie de la construction created by decree in 2011, commonly known as the Charbonneau Commission, and The Integrity in Public Contracts Act adopted in December 2012.
With the adoption of Bill 108, the Autorité des marchés publics (AMP) finally comes to life. The mission of this body is essentially to oversee public procurement and monitor Quebec’s public markets. It is to be recalled that the creation of the AMP was the first recommendation made by the Charbonneau Commission in its final report of November 2015.
It is certainly the most significant legislative measure to be adopted in the area of public markets since the implementation in 2012 of the system of authorizations to contract and subcontract with public bodies.
The intervention powers of the Autorité des marchés publics
In order to fulfill its mission of oversight of public contracts, the AMP has been entrusted with important oversight and intervention powers, inevitably making this mandatary of the State a key player in the area of public markets in Quebec.
In addition to being able to intervene through a complaint processing procedure addressed in the following section, the AMP may also, when the public body does not seem to comply with the normative framework, conduct an audit regarding:
- the tendering process for a contract awarded through a public call for tenders, whether ongoing or completed;
- the awarding process for a contract by mutual agreement, involving an expenditure above the public tender threshold, whether ongoing or completed; and
- the performance of a public contract that is in process.
The AMP may also examine in a more general manner the contract management of a public body that it designates or that of a public body designated by the government. This examination could cover the identification of needs, the awarding process for public contracts, the performance of contracts, and the accountability of the public body.
New remedy available to tenderers: the complaint processing procedure
Traditional approaches available to tenderers
Traditionally, the tenderers that were aggrieved in connection with a public call for tenders process, or disadvantaged as a result of the requirements provided in the tender documents, had the following options:
- sending a request to the public body based on the prescribed procedure (generally as part of the questions and answers process provided in the tender documents);
- sending a formal demand to the public body before the deadline for receiving tenders in order to obtain, for example, a modification to the tender documents.
- seeking an injunction intended in particular to prevent the contract from being awarded to an ineligible tenderer or whose tender is non-compliant;
- bringing an action for damages by which the tenderer is seeking compensation to offset the profits which he has been unfairly deprived of.
The "non-judicial" approaches, although they tend to be expeditious and less expensive, can however prove unsuccessful for various reasons, thereby forcing the tenderers to go to court.
As for the judicial remedies, as they often prove to be lengthy and expensive, and the outcome uncertain, it is not uncommon for businesses not to invest the required human and financial resources therein, even though they may often have a solid case.
In a recent Legal update, we had the opportunity to address the issues associated with the injunctive relief, although a recent court decision opens the door to such a recourse. Essentially, one of our observations was that the courts are often reluctant to issue an injunction order due to the fact that the tenderer has another recourse, namely, the action for damages.
New complaint processing procedure
From now on, tenderers will have a new opportunity to raise, in due time and at little cost, an irregularity identified in the context of a public call for tenders.
It is the complaint processing procedure implemented by Bill 108. This procedure involves two steps, namely 1) a complaint filed with the public body and 2), if necessary, a complaint filed with the AMP.
1st step: complaint directed at the public body
The new complaint processing procedure will allow any interested person (or a group of companies) to first file a complaint directly with the public body if it believes that the tender documents:
- provide conditions that do not ensure honest and fair treatment of the tenderers;
- do not allow tenderers to compete even though they are qualified to meet the stated requirements; or
- are not compliant with the applicable normative framework.
This complaint must be received by the public body no later than the deadline for the receipt of complaints as specified in the tender documents. This filing deadline for complaints must correspond to half the time for receiving tenders, but may not be less than 10 days. For example, if the call for tenders is published on June 1, 2018 and the deadline for receiving tenders is June 30, 2018, the deadline for receiving complaints must then be established as at June 15.
The public body must send to the tenderer its decision with reasons in writing no later than three days prior to the deadline for receiving tenders.
2nd step: complaint with the AMP
In the event that the tenderer disagrees with the public body’s decision, or the decision is not sent within the specified time limit, the complainant may then file a complaint with the AMP. The complaint must be filed with the AMP no later than three days after the tenderer receives the public body’s decision or, if applicable, no later than three days before the tender closing date if the public body has not made its decision.
It will also be possible for a tenderer, under certain conditions, to file a complaint directly with the AMP regarding an amendment made to the tender documents following the publication of an addendum.
Bill 108 contains provisions to extend the deadline for receiving tenders during the complaint processing procedure.
Oversight of the awarding of contracts by mutual agreement
The complaint processing procedure will also apply to certain contracts awarded by mutual agreement. These are more specifically the contracts involving an expenditure equal to or above the public tender threshold that a public body may enter into by mutual agreement where it considers that it will be able to prove that a public call for tenders would not serve the public interest1.
From now on, the public body will have to publish a notice of intention in the SEAO (the electronic tendering system) within 15 days before the contemplated date for entering into the contract, allowing any enterprise to express its interest in carrying out the contract. This notice must specify, among other things:
- the name of the contracting party with which the public body intends to enter into the contract;
- a detailed description of the public body’s requirements and the contract obligations; and
- the reasons the public body invokes for entering into a contract by mutual agreement.
The public body must send to the enterprise having expressed its interest its decision to maintain or not its intention to enter into a contract by mutual agreement. If the enterprise disagrees with the public body’s decision, or if the decision is not sent within the specified time limit, it may file a complaint with the AMP.
The AMP may, at the conclusion of its review, order the public body not to follow up on its intention to enter into the contract by mutual agreement, which would then require it to resort to a public call for tenders in order to enter into the contract.
Possible sanctions following an examination by the AMP
Following an examination of a complaint regarding the tendering or awarding process for a public contract that is in process, the AMP may order the public body to amend its tender documents or cancel the public call for tenders if it is of the opinion that (1) the conditions of the call for tenders do not ensure the honest and fair treatment of tenderers, (2) do not allow tenderers to compete although they are qualified, or (3) are otherwise not compliant with the normative framework. This is clearly an important sanctioning power given to the AMP.
If the examination focuses however on a public contract that has already been awarded, the AMP may then make recommendations to the chief executive officer of the public body.
Furthermore, any public contract entered into in connection with a tendering or awarding process before the AMP has made its decision following the filing of a complaint will be cancelled by operation of law once a notification from the AMP is received to that effect. The same shall apply if the contract is entered into in contravention of an order made by the AMP.
Finally, when it exercises its jurisdiction to review the contract management of a public body as a whole, the AMP may, for the time it specifies, suspend the performance of any public contract or cancel such a contract if it is of the opinion that the seriousness of the breach observed so justifies.
Application to "Municipal" contracts
Contracts of municipal bodies, i.e. according to the definition of Bill 108, municipalities, metropolitan communities, intermunicipal boards, and public transit authorities (STM, RTC, etc.) are also covered by Bill 108 and, accordingly, by the complaint processing procedure. However, any decision made by the AMP in respect of a municipal body is solely in the form of a recommendation to the body’s board.
In its initial draft, the bill covered only contracts of public bodies and not contracts of municipal bodies. An amendment was however adopted during the detailed review of the bill at the National Assembly in order to bring the municipal sector under the AMP’s jurisdiction.
Coming into force of Bill 108
The provisions of Bill 108 will come into force gradually. The provisions related to the complaint processing procedure will come into force within 10 months following the date on which the president and chief executive officer of the AMP is to take office.
Businesses will now have a new, inexpensive way to attempt to restore a fair balance between themselves and their competitors before it’s too late, provided that they act expeditiously and comply with all the specified terms. They will also have to refrain from taking legal action before the AMP has made a decision, or else their complaint will be dismissed.
In view of the powers given to the AMP and the substantial benefits this new system promises to deliver, it is both likely and desirable that businesses will not hesitate to use this new oversight mechanism. It will be up to the AMP to put the necessary protections in place to minimize the risk of these new rules being used by some tenderers for dilatory or other strategic purposes.
1 This relates to the exception provided in paragraph 4 of section 13 of the Act respecting contracting by public bodies. Indeed, any public contract involving an expenditure equal to or above the public tender threshold must be awarded pursuant to a public call for tenders, in accordance with section 10 of the Act respecting contracting by public bodies.
2019 guide to Foreign Private Issuer status
A company organized outside the US subject to provisions of the US federal securities laws receives benefits if it qualifies as an FPI.