Are our governments’ hands tied by international trade agreements when they put social-care services out to bid? That was a question we really wanted the answer to at Board Voice, as that would be a complicating factor in working toward a better procurement process for BC’s non-profits and the communities we serve.
So we reached out to two trade-agreement experts: York University’s Gus Van Harten, a professor in the Osgoode Hall School of Law, and Scott Sinclair, Director of the Trade and Investment Research Project at the Canadian Centre for Policy Alternatives. We are very grateful to them for their speedy response to our query. Here’s what Scott Sinclair had to say, with the concurrence of Gus Van Harten:
The procurement of healthcare and social services is fully excluded from the procurement obligations of all Canada’s international and internal trade agreements, including the most extensive, which are CETA, CFTA and the WTO GPA.
Certain types of purchasing of goods and services (things like building cleaning services, computer services, and some consulting services) by publicly funded social services entities are covered, but not procurement of social or healthcare services themselves, whether the purchasing is by ministries or by publicly funded health and social service entities.
That means that ministries and publicly funded health and social service entities are free to contract community-based health and social services without worrying about procurement obligations. Tendering conditions such as favouring local ownership, local content, requirements for local knowledge, established relationships with the communities or recipients being served, are all permissible (as long as they are clearly spelled out in the tender documents or request for proposals). Ministries could also restrict tendering for health and social services to local community-based non-profits or not-for-profit corporations (for example, as defined under the Societies Act).
Two caveats: I haven’t looked specifically at the New West Partnership, but expect that it more or less reflects the CFTA. Also, certain (non-procurement) obligations of international agreements, such as investment protections could come into play. But unless the province was arbitrarily breaking a contract with a multinational company before that contract had expired, I wouldn’t be too concerned.
For those of you who like to see those details, here are the parts of the trade agreements relevant to our sector, as shared by Scott:
Overview:
The procurement provisions of trade agreements usually have two parts: 1) the rules or obligations as set out in the text of the chapter or agreement and 2) the market access schedules which specify which public entities and types of purchases (goods, services, construction) each party has agreed to cover.
In other words, the obligations don’t automatically apply to all government purchasing, only to those entities and types of goods, construction and services specified in the schedules.
The procurement of healthcare and social services is excluded, either by the rules or the market access schedules, from all of Canada’s trade agreements.
In fact, procurement by provincial governments and the MASH sector (“regional, local, district or other forms of municipal government; school boards; publicly-funded academic, health and social service entities; and any corporation or entity owned or controlled by one or more of the preceding entities”) is not covered at all under most Canadian trade agreements, including NAFTA and the pending CUSMA.
The three exceptions are CETA, the WTO Agreement on Government Procurement (GPA), and the internal Canadian Free Trade Agreement. But although those three agreements do cover many aspects of sub-central procurement, they do not cover the purchasing of health and social services.
- CETA
CETA’s procurement obligations are set out in Chapter 19. They generally prohibit any form of discrimination in favour of local or national suppliers and strictly prohibit any consideration of local benefits in contracting decisions.
Canada’s schedule of market access commitments Annex 19.2 describes the sub-central entities that are covered. For B.C., these include all government ministries and publicly funded health and social service entities.
Annex 19-4 states that the schedule covers purchases of all goods. It’s a negative list, so only those goods that are expressly exempted are not covered. Consequently, procurement of goods by publicly funded social services entities are generally covered by the agreement, provided they are over the monetary thresholds.
Annex 19-5 sets out covered services. It is a positive list, meaning that only those services listed are covered. Covered services are identified by their Central Product Classification (CPC) reference. For example, “CPC 874 – Building-cleaning services” is covered. Therefore, when a publicly funded social service entity contracts for building cleaning services, it must follow the CETA procurement rules.
But health and social services are not listed in Annex 19.5. Just fyi, health and social services are classified under Division 93 of the CPC. “Social services” are under CPC 933. It’s a hierarchical classification system, so, for example “Child day care services including day-care services for the handicapped” is CPC 93321. In any case, the whole division is not covered by CETA’s procurement obligations.
- Canadian Free Trade Agreement
The Canadian Free Trade Agreement also covers procurement by provincial ministries, agencies, crown corporations and the boarder public sector (including publicly funded health and social service entities). But, like CETA, the CFTA excludes contracting for health and social services, whether by provincial ministries or broader public sector entities (the MASH sector).
The CFTA’s procurement obligations are set out in Chapter Five, Government Procurement. You can find the latest Consolidated text here https://www.cfta-alec.ca/canadian-free-trade-agreement/.
Health and social services are excluded under CFTA Chapter 5, Article 11 (h) (ii). “This chapter does not apply to … health and social services.” In other words, the purchasing of health and social services by any government entity is fully excluded from the procurement chapter.
Furthermore, Article 11 (h) (i) (v) excludes procurement of goods and services “from philanthropic institutions, non-profit organizations, prison labour, or natural persons with disabilities” (emphasis added). Accordingly, contracts for all goods and services (not just health and social services) between a government ministry and a non-profit organization are excluded.
- WTO GPA
The WTO Agreement on Government Procurement (GPA) also applies to certain purchases of goods and services by, in British Columbia’s case, “All Ministries, Boards, Commissions, Agencies and Committees of the Province” (WTO GPA, Annex 2 of Canada’s schedule, sub-central entities). The WTO GPA does not apply to purchasing by the MASH sector.
Annex 5 of of Canada’s schedule sets out Canada’s covered services. It is a positive list, meaning that only those services listed are covered. Once again, health and social services are not listed, and therefore not covered.