The federal government is quietly preparing to amend its tough anti-corruption regime as it grapples with the possible loss of a number of key suppliers.
Under current rules, a clutch of companies, including Siemens AG and Hewlett-Packard Inc., could be banned from selling to the government for up to 10 years because of crimes they committed overseas.
An effort to modify those rules and placate critics is now under way, with proposed changes expected to be ready to take to the Conservative cabinet as early as next month, according to several industry sources.
Amber Irwin, communications director for Public Works and Government Services Minister Diane Finley, declined to discuss "cabinet confidences."
"The government is working on next steps, but I wouldn't say there is a plan that's already decided on," Ms. Irwin explained.
The Canadian rules are much more rigid than those in the United States, Britain, much of Europe and at the World Bank.
It is not clear what changes Ottawa is considering. But Ms. Irwin acknowledged Public Works is in the process of setting up a special committee to review its integrity rules with the help of a number of industry groups as well as an independent procurement ethics expert. She added that the government has developed various options to "strengthen" its regime, while ensuring that it buys from companies that "undertake ethical business practices at home and abroad."
Industry sources said the government has completed a review of systems in other countries and is aiming to make changes here by the end of March.
Canada has one of the strictest and broadest regimes of any industrialized country – the result of a new Integrity Framework put in place last spring. Under the rules, companies seeking to bid on federal contracts must certify that neither they nor their affiliates have been convicted anywhere in the world with a long list of criminal offences, including bribery, fraud and money-laundering.
Siemens paid a $1.6-billion (U.S.) fine after pleading guilty in 2008 to corruption-related offences in the United States and Germany. Public Works recently notified the company that it is offside of the Canadian rules.
Hewlett-Packard was fined $58.7-million in the U.S. last year after a subsidiary was convicted of bribing Russian officials. Public Works is currently reviewing its status as an eligible supplier.
Neither company has been barred from selling to the U.S. or German governments.
A senior Canadian official insisted last year that the government had no plans to allow disbarred companies to win reinstatement for good behaviour. "There are not plans in place to add a discretionary regime," the official said last October.
The Canadian government is facing a backlash from affected companies, as well as a number of industry associations, including the Canadian Manufacturers and Exporters, the Canadian Council of Chief Executives and the Canadian Chamber of Commerce. They argue that the rules are too inflexible and don't allow a means for convicted companies to get back on side.
Many legal experts, including proponents of tough anti-corruption rules, say the federal government's regime is too harsh and arbitrary compared to what exists in other countries.
Ottawa could also face potentially costly trade lawsuits, significant layoffs and hundreds of millions in economic losses if it goes ahead and bans major suppliers, according to a recent study commissioned by the Canadian Council of Chief Executives.
SNC-Lavalin Group Inc. chief executive Robert Card has complained that the rules are like a "meat cleaver" that risks destroying the engineering firm if it's convicted in an ongoing international corruption probe.