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The earlier procurement rules, introduced in March of 2014, made Canada stricter than the U.S. and Europe, where convicted companies can win reinstatement and reduce their ban if they come clean and take remedial action.
The earlier procurement rules, introduced in March of 2014, made Canada stricter than the U.S. and Europe, where convicted companies can win reinstatement and reduce their ban if they come clean and take remedial action.

Ottawa relaxes integrity rules for firms doing business with government Add to ...

The federal government has softened tough anti-corruption rules for companies that want to do business with Ottawa.

The move comes after intense lobbying from industry, which warned of spreading economic damage because of the regulations introduced just 16 months ago.

The changes ease what were considered draconian standards for suppliers who sell products and services to government, ranging from BlackBerrys to bridges. Under the new procurement rules, a supplier can still be barred from winning Public Works and Government Services Canada contracts for 10 years if it or any board members have been convicted or discharged in the past three years of a range of offences here or abroad. Those include bribery, money laundering or extortion. However, the decade-long ban can now be cut in half if the supplier co-operates with authorities and takes remedial action. With the previous regulations, no reprieve existed unless there were no other suppliers to do work deemed in the public interest.

The changes will soon be rolled out across government.

“Under this new regime, companies who are criminally convicted or face ethical violations will bear the cost of proving to the government that they are a reliable business, not taxpayers,” Public Works Minister Diane Finley said in a statement.

The changes could open the Conservatives to pre-election criticism that it has caved to corporate interests. “The government can rightly say it has improved some of the more blatant deficiencies of the previous system,” said Paul Lalonde, a Toronto lawyer who chairs the legal committee of Transparency International Canada, an anti-corruption group. “Will some critics say that it has watered it down in some ways? Likely yes.”

The earlier procurement rules, introduced in March of 2014, made Canada far stricter than the U.S. and Europe, where convicted companies can win reinstatement and reduce their disbarment for coming clean and taking action to fix the problems. It also created the possibility that several major contractors – including Hewlett-Packard Co., Siemens AG and Montreal’s SNC Lavalin Group Inc. – would find themselves on Ottawa’s black list. That prompted SNC CEO Robert Card – who has been cleaning up the scandal-plagued engineering company he joined in 2012– to threaten that his company could “cease to exist” if Ottawa’s “meat cleaver” approach stood.

Canada’s business lobby lined up to pressure Ottawa to ease up and adopt the carrot-over-stick approach used elsewhere. Last February, the chiefs of Canadian Manufacturers and Exporters, the Canadian Council of Chief Executives and the Information Technology Association of Canada jointly wrote Ms. Finley that the integrity rules were “significantly out of step with Canada’s trading partners” and “negatively affecting investment in Canada now.”

One senior industry source said the government heard “loud and clear that industry thought [its integrity framework] was an overreaction and would be absolutely injurious to many companies and jobs.” The source added the new integrity framework “is welcomed by industry.”

NDP public works critic Pat Martin criticized the changes, saying “the Conservatives had better not start grandstanding about their integrity provisions because the fact is they backed off and folded like a cheap suit as soon as industry objected.”

In addition to softening the 10-year ban, suppliers as of last Friday are no longer automatically banned from winning government contracts due to the actions of affiliates elsewhere, unless it is shown the supplier had any control over the convicted affiliate. The government has made some changes that partially address criticisms the previous system didn’t offer banned suppliers a fair, due, transparent process.

Even with the changes Mr. Lalonde said Canada “is still on the harsh end of the spectrum compared to what we have in other jurisdictions” including the U.S. “but it’s not quite the blunt instrument it was.”

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Follow on Twitter: @SeanSilcoff

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