Lexpert Magazine

LEXPERT MAGAZINE | APRIL 2016 43 ating potential bidders for a $300-million construction project was involved at the same time in a private real estate venture with the builder that eventually won the contract. at raised concerns about the integrity of the procurement process. "Québec was the first to act," says Doyle, "and they are a forerunner of what you're going to see in the rest of the country." Oth- er provinces have included in their RFPs, on a project-by-project basis, requirements for companies to have sufficient policies and procedures to ensure ethical bidding. Governments are not simply accepting bidders' policies at face value, says Doyle. ey are asking bidders to certify that they're compliant with these policies. "In certain circumstances, third-party advisors may be asked to audit those policies. It's still early days, but the public sector is go- ing a bit further than just talking the talk. It's a live issue as to how to actually validate what private-sector participants are saying they do." At the federal level, the former Harper government last July instituted its Integrity Regime for procurement and real estate transactions. Under the much-criticized integrity "Framework" previously in effect, a supplier faced automatic "debarment" for 10 years if convicted of any of several Cana- dian or similar foreign offences. Debarment could cost a vendor mil- lien rights. While sub-contractors would be pleased, says Ackerley, "on the owner's side it would mean more attention would have to be paid to alternative arrangements. What money retention regime would they have to use as an alternative for enforcing warranty work and correcting problems if they don't have the hold-back available to do that? So in some ways, it would solve one problem but create another." ETHICAL BIDDING PRACTICES Proponents now have to contend with an increased emphasis on ethical practices in public procurement in Canada. "In the past, governments were much more con- cerned with price and getting things built," says Doyle at Blakes. "Governments across Canada now want to know that private- sector bidders have sufficient integrity. And that the tendering processes incorporate best practices in respect of ethical bidding." In November 2015, Québec's Charbon- neau Commission issued its final report, making 60 recommendations to combat corruption and collusion in the province's construction industry. Even before the in- quiry's work was completed, the Québec government in 2013 adopted the Integrity in Public Contracts Act, which requires that any company wishing to obtain a public contract be specifically approved by the Autorité des marchés financiers (AMF). e approval process involves consider- able corporate disclosure, including wheth- er officers and directors have been found guilty of any offences. e AMF can refuse to authorize a company to bid on a public contract if it concludes that the company has failed to meet "the high standards of in- tegrity that the public is entitled to expect." e province was responding in part to revelations that SNC-Lavalin Group Inc. officials allegedly paid bribes of $22.5 million to two of the McGill University Health Centre's former executives to en- sure that SNC won the $1.4-billion con- tract. In total, eight people were charged in what police called the biggest construction fraud in Canadian history. Québec, however, was not unique in fac- ing ethical issues in infrastructure procure- ment. In Toronto, St. Michael's Hospital was mired in a conflict-of-interest scandal in September 2015 when it was revealed that one of the hospital executives evalu- lions of dollars' worth of existing or future federal contracts, regardless of mitigating circumstances and with no opportunity to atone for its sins. With the new Federal Integrity Regime, flexibility has been in- troduced to ease some of the Framework's harsher terms. e retroactive application of the Frame- work has been dropped. e new regime applies only to future contracts, not exist- ing ones. e debarment period can be re- duced by up to five years if a supplier shows that it has cooperated with law-enforce- ment authorities or addressed the causes of misconduct. To determine whether a sup- plier should be deemed ineligible due to a foreign conviction, Ottawa will now assess how similar the foreign conviction is to a listed offence within Canada. SNC-Lavalin confirmed in December 2015 that it has signed an administrative agreement with Public Services and Pro- curement under the new Integrity Regime, which allows companies with charges pending to continue with existing con- tracts and bid on future work with the federal government. As part of the deal, the company must adhere to strict condi- tions and third-party oversight of its busi- ness practices. e agreement was the first reached under the new regime. | INFRASTRUCTURE | Sheldon Gordon is a business and legal-affairs writer based in Toronto. PENSION FUNDS Most funds are reluctant to directly finance Canadian infrastructure projects, except in Québec Canadian pension funds such as OMERS and the Ontario Teachers' Pension Plan have not shown much interest in directly financing Canadian infrastructure projects. That reluctance seems likely to be even greater toward municipal infrastructure. Greg Southam, a partner at Davies Ward Phillips & Vineberg LLP in Toronto, says "$15-million [worth of equity] isn't a big enough cheque for the pension funds to write. They'd rather write a $500-million cheque for an infrastructure fund." One notable exception is the Caisse de dépôt et placement du Québec, which is not only investing in Canadian infrastructure but, with the passage of Bill 38 in June 2015, has been able to act as ProjectCo through a wholly owned subsidiary called CDPQ Infra. Its first two projects are in Montréal: the LRT system on the new Champlain Bridge to the South Shore and the LRT linking the West Island, Trudeau Airport and downtown Montréal. "The Caisse is saying they have substantial experience in investing in similar projects throughout the world," says Yvan Houle, a partner at Borden Ladner Gervais LLP in Montréal. "They're leverag- ing that experience and they're quite confident they can run these projects efficiently as a designer, builder and operator rather than just as an investor. But CDPQ Infra will have to bid against other consortia for projects. I suspect other pension funds in Canada will want to see how things play out before they consider jumping into that arena."

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