The Government of Ontario is conducting public consultations on its proposal to enact regulations under the Ontario Building Ontario Businesses Initiative Act, 2022, (S.O. 2022, c. 2, Sched. 2) which will require Ontario’s public sector entities to provide preferential treatment to Ontario businesses when conducting certain procurements. If adopted, the proposal may prevent non-Ontario businesses from participating in certain procurements by Ontario public sector entities.
Comments on the Government of Ontario’s proposal are due on August 8, 2023.
Value Thresholds for Application of the Proposed Regulations
The Government of Ontario’s proposed regulations will apply to all procurements by Ontario public sector entities as defined in the Ontario Building Ontario Businesses Initiative Act, 2022, that are valued below proposed regulatory threshold limits that are “consistent with” the application thresholds specified under the Canadian Free Trade Agreement (the “CFTA”). Procurements subject to the CFTA and Canada’s other applicable trade agreements must not discriminate for or against suppliers based on their place of establishment. The obligation of non-discrimination is a core tenet of the procurement chapters of Canada’s trade agreements and is subject to few exceptions.
Under the Government of Ontario’s proposal, any procurement process run by an Ontario public sector entity for any goods and services valued below these thresholds will be required to provide preferential treatment to Ontario suppliers. The Government of Ontario is considering two methods for giving preference, namely limiting participation in procurement processes only to Ontario businesses, and/or giving a point or percentage advantage to Ontario businesses in the evaluation of procurements where business from other provinces participate in the procurement process.
The thresholds that the Government of Ontario proposes to use are shown below:
The application thresholds of the CFTA are the lowest procurement thresholds in any of Canada’s applicable trade agreements. As such, any procurement that does not meet the threshold for the application of the CFTA will also fall below the application thresholds of Canada’s other applicable trade agreements.
Importantly, a procuring entity is not allowed to divide a procurement into smaller procurements in order to fall below the applicable threshold. In practice, however, determining whether a procurement has been divided in order fall below an applicable threshold can sometimes be difficult.
Definition of an “Ontario Business”
For a business to benefit from the Government of Ontario’s proposed regulations, that business must fit the definition of an “Ontario business”. Currently, the Government of Ontario has not supplied a definition for an Ontario business under the Ontario Building Ontario Businesses Initiative Act, 2022 but intends to do so in its proposed regulations. When formulating this definition, the Government of Ontario noted that it will pay specific attention to definitions used in other Canadian jurisdictions.
The Government of Ontario is also contemplating a definition that determines whether a business has a “permanent presence” in Ontario. This definition will consider such things as the percentage of full-time employees located within Ontario, the percentage of compensation paid in Ontario, and the percentage of the value that the business produced in Ontario.
Immediate Items for Consultation
The Government of Ontario requests input from stakeholders in the following areas among others:
- The way that preferential treatment that should be afforded to Ontario suppliers in procurements that fall below the proposed threshold. E.g., whether non-Ontario supplier should be allowed to bid on below-threshold Ontario procurements at all.
- Whether there are goods and services that should be out of scope of the proposed regulations.
- Whether there should be a single threshold for all public sector entities versus multiple thresholds as currently proposed.
- The scope and definition of “Ontario business”.
Please contact CLK’s procurement team if you would like to provide input to the Government of Ontario, or have any questions or concerns regarding this or any other procurement matter.