This question comes up often in our seminar and webinar discussions, so we thought we’d try to provide some clarity – but fair warning, the answer is not a simple one.

There is no doubt that most – but not all – Canadian municipalities are bound to the terms of the CFTA, which is an intergovernmental agreement between the federal government and all provincial and territorial governments in Canada (the “Parties” to the agreement).

To debunk one myth out of the gate, even though municipalities didn’t actually ‘sign’ the CFTA, they are brought in under Article 103, which states that each provincial or territorial government is responsible for compliance by its “regional, local, district, and other forms of municipal government.”

The starting point, then, is recognition that municipalities are bound to the CFTA by the signature of their respective Party. Each Party, however, has negotiated specific ‘excluded entities’ and ‘exemptions’ to Chapter 5, the procurement chapter. These exclusions and exemptions are set out in separate Schedules to that Chapter. The Schedule negotiated by the Yukon Government, for example, states that “regional, local, district, [and] other forms of municipal government” in the Yukon are excluded from application of the agreement (among other entities). Under the former AIT, municipalities in the Yukon were also excluded. The Yukon is the only Party to specifically exempt all municipal governments.

In addition to ‘excluded entities,’ however, these separate Schedules also outline more general exemptions. In some cases these exemptions include the right to deviate from the requirements of Chapter 5 (“derogation rights”) under certain circumstances. For example, several Parties have included an exemption for purposes of ‘regional economic development.’ Both the Yukon Schedule and the Nunavut Schedule limit the right to derogate no more than ten times per year.

In other cases, the negotiated exemptions described in the Schedules adjust the thresholds at which CFTA applies. For example, the Schedules for the Northwest Territories and for Nunavut prescribe higher thresholds for core government, the MASH sector, and Crown and related entities. This means that for municipalities in the NWT and Nunavut the thresholds at which the CFTA provisions apply are $300,000 for goods and services and $7.5 million for construction, rather than the lower thresholds prescribed in Chapter Five.

Some of the current confusion may be arising from Article 1001 which specifically exempts local government procurements from Part B of Chapter 10 which deals with formal Dispute Resolution under the CFTA. The implication of this provision is that a Person (eg a supplier) cannot request a Party to initiate the Consultation and Panel Review Process described under Part A of that Chapter for an issue arising from a municipal procurement. It does not mean that municipalities are not bound to the CFTA.

If you are a procurement professional operating in a Canadian public sector environment and sufficient guidance isn’t provided by your internal subject matter experts, we encourage you to review the specific exclusions and exemptions under the Schedule applicable to your jurisdiction. That, coupled with a close read of Chapter Five, will put you in good stead to ensure that you are meeting these important obligations and are able to guide your internal team on these developments. The full text of CFTA can be found at:
https://www.cfta-alec.ca/wp-content/uploads/2017/06/CFTA-Consolidated-Text-Final-Print-Text-English.pdf

Readers are cautioned not to rely upon this article as legal advice nor as an exhaustive discussion of the topic or case.  For any particular legal problem, seek advice directly from your lawyer or in-house counsel.  All dates, contact information and website addresses were current at the time of original publication.

Alert: NEW Upcoming eSeminar June 26
“Drafting Technical Specs Under New Trade Agreements”