4. Business integrity and competition among public procurement suppliers in Quebec

The Government of Quebec has made significant efforts in recent years to strengthen business integrity and reduce the undue influence exercised by businesses in the conduct of public procurement. However, these efforts should not be made at the expense of efficient procurement, sound communication with potential bidders, and competition in the conduct of public procurement.

To reduce opportunities for bribery and collusion in public procurement processes, several OECD member countries limit direct contacts between public procurement officials and suppliers. Public procurement processes are disseminated through an internet platform through which suppliers can obtain tender documents and submit their bids. The use of these platforms also provides a means of communicating fairly and transparently with potential suppliers in order to, for example, conduct a market analysis before organising the call for tenders.

In 2011, the regulations on contracts for public and municipal bodies were amended so that tender documents and related addenda are distributed exclusively through the electronic tendering system (SEAO). One of the aims of this measure was to combat collusion and malpractice in public procurement more effectively by avoiding direct contacts between potential bidders, as well as between potential bidders and public procurement officials.

With the advent of this requirement, public and municipal bodies no longer communicate directly with bidders prior to the determination of the winning tender. The purpose of this practice is to avoid giving a company an advantage over its competitors by providing it with insider information. In order to notify potential bidders that a call for tenders has been issued, potential bidders may receive a notification from the SEAO that a call for tender (CFT) has been issued in their area. Public and municipal bodies can also use the SEAO to conduct a call for interest, which allows them to survey the market to find out if there is a product or service to meet a specific need, as well as to issue a notice of intent, which ensures that no other potential contractor can provide an item or service below the public call for tenders threshold. The use of calls for interest and notices of intent are currently not supervised and are little used in practice. However, the use of notices of intent will become mandatory for all direct awards above the CFT threshold on an exceptional basis, where the public body believes it can demonstrate that a call for tenders would not be in the public interest. As part of future developments of the platform, and as noted in Chapter 3, registered suppliers will receive these notices of intent by default, unless they have voluntarily changed their profile settings to not receive them.

The Government of Quebec has put in place targeted communications to obtain feedback on its public procurement processes and to make bidders aware of its ethical and lobbying standards. The Government of Quebec requires contracting authorities to include in their tender documents a questionnaire to find out the reasons why a company did not submit a bid, even though it had obtained the tender documents. In addition, the tender documents outline the rules to be followed under the Lobbying Transparency and Ethics Act and the Lobbyists' Code of Conduct. Each bid must include a statement that the communications between the public body and the bidder, if any, were made in accordance with the Act and the Code. Some contracting authorities also communicate with unsuccessful bidders upon request in order to help them improve their future bids, and encourage them to participate in future calls for tenders. Finally, the MTQ organises biannual round tables to obtain feedback from construction and engineering firms on the conduct of the ministry's public procurement.

Communicating with bidders through a web-based platform such as the SEAO is best practice in line with trends in other OECD member countries (OECD, 2016[1]). Procurement units must exercise great care to communicate fairly and transparently with suppliers to ensure that competition is not unduly distorted. Thus, meetings should be prepared and structured to produce maximum results (Box 4.1) while avoiding the disclosure of strategic information that could facilitate bid-rigging agreements (price evaluation, volumes, etc.). Procurement units can also prepare a template to record and communicate the results of the supplier meetings via the web platform. The results of the meetings may also be used to purchase similar goods, services or work in the future.

Several OECD countries have adopted measures to provide a framework for transparent communications and consultations with suppliers, to level the playing field for all businesses, and to mitigate the risk of inappropriate relationships between government officials and suppliers (Box 4.2). For example, although Chile is often described as the country least affected by corruption in South America, public procurement is still a moderate risk there. Thus, the ChileCompra platform has been designed to mitigate the risk of wrongdoings and undue influence as much as possible.

The Government of Quebec could therefore draw inspiration from the operation of these platforms in order to maximise the potential use of the SEAO. The SEAO could be used to publish notices of intent to call for tenders on a more systematic basis as appropriate, as well as meetings with suppliers as part of its market oversight approach. The online exchange forum function could also be used to strengthen communications with suppliers in a fair and transparent manner.

According to best practices in OECD countries, communication with suppliers is increasingly part of a market oversight and analysis approach. These functions are usually assigned upstream, to a sector technical expert, while procurement professionals work with the sector expert downstream in developing the procurement strategy and overseeing the procurement process. For example, the market analysis process of the Italian public procurement agency Consip SpA provides for well-coordinated dialogue with suppliers when the circumstances of a particular contract justify it (Box 4.3). This enhanced framework stems from the increased powers delegated to the Italian Anti-Corruption Agency (ANAC) following numerous cases of corruption in public procurement exposed by the Italian media.

In Quebec, the Directive Concerning the Management of the Supply, Service and Construction Contracts of Public Bodies provides a framework for communications of influence in public procurement. However, the Directive does not provide any guidelines or standards of conduct for situations where officials wish to acquire specific information on specific contracts. The CSPQ has also developed the guide Reference Process in Contractual Management of Supply and Service Contracts, which provides a comprehensive general reference framework for contract management. Nevertheless, this guide provides limited guidance on the suitability and methodologies for approaching key actors in specific markets.

To enhance its understanding of the capacity of markets to meet its needs, the Government of Quebec could make tools available to public and municipal bodies to conduct market analysis and monitoring activities, including the oversight of exchanges with potential bidders when warranted by circumstances. Box 4.3 provides concrete examples of tools that the Government of Quebec could use to achieve this. In addition, the AMP, as part of its monitoring and recommendation remit, may also suggest specific practices that it deems appropriate based on its findings in the exercise of its activities.

In response to the many cases of collusion and bribery brought before the Charbonneau Commission, the Government of Quebec has implemented innovative and ambitious measures to strengthen business integrity in Quebec. On 7 December 2012, the ACPB was amended to introduce the contract authorisation regime, which involves verifying the integrity of companies wishing to enter into a contract with a public body covered by the ACPB or a municipal body. The arrangement also applies to all subcontractors taking part in a public contract as soon as the value of the subcontract is greater than or equal to the applicable threshold. The United States has also adopted a system of corporate control that includes: 1) a centralised list of companies authorised to contract with the state; and 2) a list of companies that cannot receive federal contracts. However, this control system is not as thorough as in Quebec because it does not include in-company audits such as those conducted by the UPAC (Box 4.4).

To be eligible to enter into a contract with a public or municipal body, the company must obtain a contract authorisation from the AMP following a review of the integrity of the company, its shareholders, partners, directors or leaders, or a person or entity that has, directly or indirectly, legal or de facto control over it (the management of the contract authorisation regime has been transferred from the Autorité des marchés financiers to the AMP, which has held the responsibility for it since January 2019). This integrity review is conducted by the Anti-Corruption Associate Commissioner, within the UPAC, which is mandated to carry out the necessary checks and provide the AMP with all the relevant information when deciding to issue the authorisation.

The ACPB gives broad discretion to the AMP to demand corrective measures from companies wishing to obtain authorisation to enter into contracts with public bodies but that do not meet the high standards of integrity that the public has a right to expect from a party to a public contract, as defined in articles 21.27 and 21.28 of the ACPB. The establishment of clear and transparent objectives for the contract authorisation regime could make it possible to measure its performance against predetermined objectives, thus allowing for the adjustment of the benchmarks for the exercise of discretionary power if necessary.

Companies whose integrity is not in doubt receive their contract authorisation within five to ten months without any particular requirements. However, the ACPB requires that the AMP refuse to issue a contract authorisation if the company's majority shareholder, (where this is an individual), or a director or CEO of the company, has been convicted of an offence under annex I of the ACPB within the last five years.

Additionally, the ACPB states that the AMP may refuse to grant (or may revoke) a contract authorisation to a company that does not meet “the high standards of integrity that the public has a right to expect of a party to a public contract”. As stated in the report of the Quebec Auditor General (QAG), “integrity is in itself a concept that can be highly subjective” and in this sense, “the legislator has granted very broad discretionary powers” to the AMP. The ACPB also provides a framework for dealing with what constitutes a lack of integrity on the part of companies. For example, it includes the following:

  • ties to a criminal organisation;

  • the fact that the company or any of its directors, CEOs or shareholders have been prosecuted for one of the offences listed in annex I of the ACPB, or any other offence of a criminal nature;

  • the fact that the company or one of its directors, CEOs or shareholders has repeatedly evaded or attempted to evade the law;

  • the fact that the company requesting the authorisation is a front for, or the successor to, an undertaking that would not receive authorisation.

This power of intervention of the UPAC and the AMP is generally broader than similar powers of intervention in other jurisdictions (Box 4.5).

Given the potential impact of the contract authorisation regime on businesses and in order to exercise its broad discretion in a fair and consistent manner, the AMP has developed a number of benchmarks to ensure that its decisions are consistent with established precedents. Indeed, the AMP has broad powers to compel companies that have committed certain integrity failures (as defined by the AMP), to adopt governance and control measures that can reduce the risk of bribery in the conduct of public procurement. For example, the AMP may issue a demand for corrective action, requiring a company to put in place the necessary measures to ensure that integrity issues do not recur. The AMP may also issue a notice of refusal, which may or may not be maintained following the AMP’s observations of the company’s commitment to put certain corrective measures in place. If the notice of refusal is maintained, the company is entered in the register of ineligible companies (RENA) provided for in the ACPB for a period of five years. Companies are also listed in the RENA if they, or any person related 1to them, are convicted of an offence identified in annex I of the ACPB.

The contract authorisation regime has had a positive impact on corporate governance. For example, more competition has been noted among engineering firms, as stated by the former Inspector General of the City of Montréal and the CEO of the Association des firmes de génie-conseil du Québec (Champagne, 2018[5]). While increased perceptions of greater competition among engineering firms is a positive development, further analysis is needed to gain a full picture of its impact on public procurement.

Nevertheless, following a report of the Auditor General of Quebec that questioned the consistency and appropriateness of the requirements demanded from certain companies that had received a request to implement corrective measures (VGQ, 2018[6]), the AMF is currently developing an action plan to put in place mechanisms to ensure the relevance and consistency across proposed measures. Beyond the establishment of enhanced institutional mechanisms for control of the requirements imposed, the AMP could set specific and measurable objectives that the authorisation regime aims to achieve. Prior identification of specific objectives could greatly facilitate the identification and application of solutions to each problematic situation within a company, thus ensuring greater consistency and objectivity. As an indication, Table 4.1 includes examples of objectives, monitoring measures and impact indicators that could be set in advance by the AMP to assess the performance of the contract authorisation regime.

These targets could be published to ensure natural justice for companies, which would further strengthen the incentives for companies to demonstrate good governance and integrity in the conduct of their business. Publication of the objectives would also increase transparency and accountability in the administration of the contract authorisation regime, including the AMP's interpretation of the term “high standards of integrity that the public has a right to expect from a party to a public contract or public sub-contract” included in the ACPB.

Under article 21.17.1 of the ACPB, the government has broad discretionary powers to determine which contracts will be subject to the contract authorisation regime of the ACPB. The TBS could use this authority in the enforcement of the contract authorisation to target contracts that are at higher risk.

The scope of the contract authorisation regime is currently limited to construction contracts over USD 5 million and service contracts over USD 1 million. This may exclude several high-risk markets from the scope of the contract authorisation regime.

It is understandable that a certain amount of restraint is exercised in defining the scope of the contract authorisation regime. As of July 2018, before the enforcement of the contract authorisation regime was transferred to the AMP, the AMF had received 5 478 requests for authorisation under these thresholds, and if the government decided to follow through on its commitment to lower the threshold for all government contracts to USD 100 000, approximately 20 000 companies would have to apply for contract authorisation. According to the information provided by the AMF, the time taken to obtain an authorisation can vary from 5 to 10 months based on the best case scenario, or even longer in cases where major issues are detected. Thus, the scope of the contract authorisation regime should be extended by the Government of Quebec only on a well-considered basis, taking account of internal capacities to safeguard procurement efficiency.

That being said, the government may consider using its discretion under article 21.17.1 of the ACPB to subject certain additional public procurement contracts to the contract authorisation regime based on risk analysis, audit results and the strategic importance of certain stakeholders to ensure the integrity of public procurement. For example, few construction site oversight contracts require authorisation given the USD 1 million threshold. In addition, for technical reasons, procurement sub-contracts within public construction contracts are not subject to contract authorisation because the regulations do not recognise them as public sub-contracts. However, there are several documented cases where the supply of raw materials for major construction sites is embezzled, replaced with inferior materials, and overestimated in terms of volumes delivered (PwC, 2014[7]). The supply of computer equipment through the Shared Services Centre of Québec has also been identified as a risk area by the QAG (VGQ, 2016[8]).

Nevertheless, any such decisions to extend the scope of the regime should be taken in the light of the capacity to analyse a higher volume of applications, and after ensuring that it does not lead to disproportionate delays in obtaining authorisation - which may affect the efficiency of public procurement.

Regulatory requirements (technical standards, product certifications and approvals2) imposed on suppliers play a key role in public procurement. Their primary aim is to ensure that products and public works undertaken comply with the health, quality or safety requirements of public authorities or minimise the environmental externalities of suppliers' activities.

However, excessive regulatory requirements may reduce the number of potential suppliers, exposing procurement officials to risks of bribery and increasing the risk of collusion between suppliers or for example, between certain producers and installers of equipment in the field of urban infrastructure. These areas of limited competition also expose procurement officials to risks of bribery. These requirements equally contradict the “access” principle of the OECD Recommendation on Public Procurement, which emphasises the need to “encourage broad participation from potential competitors, including new entrants and small and medium enterprises”.

Lambert-Mogiliansky and Sonin (2006) show that the risks of collusion involving bribery are particularly high when competition is weak and the market is characterised by a small number of medium-sized firms with a comparable cost structure (Lambert-Mogiliansky and Sonin, 2006[9]). This market structure applies to numerous cases of collusion in the construction industry highlighted by the Charbonneau Commission.

For example, the asphalt paving market has resulted in bid-rigging agreements among a small number of suppliers of goods with a comparable cost structure. These collusion practices in Montreal in the 2000s were based on territorial sharing of government contracts among five companies, depending on the location of each asphalt plant. This cartel had ensured profit margins of 30% for the companies involved, well above the industry average of 4-8% (CEIC, 2015[10]). Since then, the Government of Quebec has taken several measures to encourage competition between asphalt mix suppliers, notably by increasing the presence of mobile asphalt plants (Bégin et al., 2016[11]).

However, these regulatory requirements have different characteristics depending on whether they relate to product approval, or standards and certification. Indeed, the purpose of approval is to strictly define the products that a contracting authority may purchase, whereas standards and certifications oblige bidders to demonstrate the conformity of products and services with these requirements. In the former, the market is frozen since only approved products can be acquired, while in the latter situation the market is restricted as the procurement officer defines the characteristics of the products and services provided by the companies. The main consequence of this difference is that the risks of bid-rigging are more present in the purchase of approved products, while the risks of bribery increase in markets requiring specific technical standards or certifications because of weak competition. The solutions provided by the Government of Quebec must, therefore, take these differences into account.

In Quebec, public and municipal bodies have the option of approving items “to ensure, before issuing a call for tenders, that the item meets a recognised standard or an established technical specification” (Regulation respecting certain service contracts of public bodies - RCAOP, article 573.1.0.2 of the CTA and 936.0.2 of the MC). Notices of approvals from government agencies are published at least once a year on the SEAO. The list of approved goods is also posted on the SEAO. Any CFT after approval is restricted to approved goods only and may result in a contract of up to 3 years.

The MTQ is the public body that manages the largest number of approval programmes in Quebec. These programmes are designed to ensure the use of reliable, quality products, particularly for the construction and maintenance of road networks, while streamlining the procurement process. Other public bodies (Shared Services Center of Quebec, health-related shared procurement groups) and municipalities also manage their own approval programmes.

Many MTQ approval programmes for very specific products involve only 2 or 3 suppliers located in Quebec3. This kind of market structure calls for increased vigilance with regard to the risk of collusion and bribery among clients. Although suppliers from Canadian regions with which Quebec has trade agreements are admitted to the approval programmes, they generally go through distributors or manufacturing agents located in Quebec. The increased vigilance must therefore also extend to these various intermediaries.

Nevertheless, the impact of these strategies needs to be assessed to ascertain their relevance. In particular, in practice, few non-Quebec equipment installers or suppliers (foreign or from other Canadian provinces) are currently certified by the MTQ, although it must be noted that these suppliers often call upon Quebec partners or distributors to have their products approved.

The MTQ has strengthened the consideration of competition in its approval processes. A market analysis expert is now a member of the approval committees, and the periodic review of approval programmes currently includes market analysis. The Ministry has a team of eight analysts who carry out work on competition, including a monitoring dashboard based on key indicators.

The MTQ's work extended to all of its contracts, with no apparent prioritisation of approved goods contracts. Only the periodic reviews of approval programmes (once every three years) gave rise to specific assessments of their impact on competition. More regular monitoring of competition was introduced in December 2018, including an annual review of products. The MTQ could continue to strengthen its regular monitoring of competition (establishment of indicators, market studies) within its various approval programmes.

Other public agencies and municipalities that manage approval programmes could also assess their impact on competition, for example by developing a dashboard based on the MTQ model. The systematic presence of a market analysis expert on approval committees could be made mandatory, including in municipalities.

On the other hand, and particularly if the strategies developed do not produce the expected effects, procurement officials also have the option of using specific procurement strategies that can minimise the risks of rigging agreements among bidders. In France, for example, the Union of Public Purchasing Groups (Union des groupements d'achats publics) has implemented certain procurement strategies to limit the risks of collusion in markets with little competition. To this end, framework agreements (task order contracts and delivery order contracts) have been drawn up requiring a degressive distribution of volumes between suppliers according to their ranking following a competitive bidding process. These techniques can be used to minimise the risk of collusion, among other things (OECD, 2017[12]).

The small number of potential suppliers of approved goods increases the risk of them colluding to “share” the market between themselves, which also entails risks in terms of integrity. The AMP or the contracting authorities should conduct a systematic analysis of the risks of collusion in markets for approved goods, including using data from the SEAO. Such an analysis presupposes a greater digitalisation of public procurement, as discussed in Chapter 3. Rolling out electronic bid submission would make it possible, in particular, to collect the data necessary for the systematic analysis of collusion risks, as shown in Box 4.6.

Quebec could draw on these two examples to implement collusion risk analysis tools based on SEAO statistics. In addition, the Government should prioritise the markets for approved goods (or markets comprising approved goods) in the implementation of full digitisation of the entire contract management cycle.

The approval of goods by each municipality creates additional costs and delays for suppliers. Indeed, they must prepare approval files for each municipality and make themselves available to take part in possible on-site demonstrations. The multiplicity of registration processes could discourage new entrants and foreign suppliers, or suppliers resident in other Canadian provinces.

Moreover, municipalities do not always have the means and critical mass to conduct competition impact analyses or collusion risk audits. Quebec could therefore examine the advisability of entrusting municipal approval programmes to the centre of expertise under the aegis of the MAMH or the Société québécoise des infrastructures. The Shared Services Centre could manage information technology approval programmes. Another option would be to provide for mutual recognition of product approvals among municipalities, or to make it mandatory to register through multi-municipal joint procurement groups, such as those that already exist for medical devices.

This more centralised approval process could attract a larger number of suppliers, as it would allow access to larger procurement volumes. Increasing the number of potential suppliers whose products are registered would discourage collusion schemes between suppliers by stimulating new entrants from neighbouring provinces (such as Ontario) in the case of calls for tenders in the Montreal metropolitan area.

In Quebec, as in many OECD countries, public bodies and municipalities frequently refer to technical standards and require their suppliers to provide products that are certified as complying with these standards. In Quebec, most of these standards are issued by the Bureau de normalisation du Québec (BNQ) or another organisation accredited by the Standards Council of Canada (SCC). Some calls for tenders require suppliers to comply with an American or European standard (EC standards). Public bodies also contribute to the formation of new standards: the Régie de l'Assurance maladie du Québec (RAMQ), for example, contributes to the formation of a technical standard for wheelchairs under the aegis of the BNQ.

By facilitating the compatibility of products and services, the adoption of standards normally has a favourable effect on competition as it promotes diversity of supply and allows purchasers to easily compare different products, thus reducing information asymmetries. Standards are also an important element in product innovation, as innovative products certified to technical standards are more readily accepted by consumers and clients (OECD, 2017[14]). However, technical standards may also delay innovation and thus access to new market entrants, particularly in cases where two conditions are met: 1) The installed base (the number of products that are being used) relative to an older standard is significant and 2) An innovative product is not compatible with the old standard. (Forrell, Solaner and Org, 1986[15])

In Canada, the technical standards and certification requirements faced by economic actors may vary from province to province. Many standards and certification requirements have differences that create technical barriers to internal trade (Standards Council of Canada, 2018[16]). In some public procurement contracts, these differences may result in a reduced pool of potential suppliers, creating fertile ground for bid-rigging by suppliers. These agreements increase the risk of bribery among procurement officials.

In order to mitigate the “anti-competitive” impact of regulatory standards and requirements on public procurement, the recommendations below present 3 tools available to the Government of Quebec.

Canadian provinces are engaged in efforts to harmonise standards and certification requirements, which is one of the objectives of the Canadian Free Trade Agreement (CFTA) that will come into effect in 2017. The Standards Council of Canada is engaged with Canadian industry associations in identifying standards-related barriers to interprovincial trade.

Nonetheless, there is little, if any, participation of suppliers from other Canadian provinces in public procurement processes in Quebec. For example, the Régie de l'Assurance maladie du Québec reports that bidders resident in other Canadian provinces do not participate in its CFTs, with technical standards presenting a major barrier. One way to increase the participation of suppliers from other Canadian provinces is through the harmonisation of technical standards and certification requirements among provinces. Harmonisation does not mean the outright adoption of the standards and certification requirements of other provinces, but rather the gradual development of common standards. The Government of Quebec could therefore continue its contribution to the harmonisation of standards and certification requirements at the federal level to remove technical barriers to increased competition in public procurement. Besides, better co-ordination between standards assessment bodies (SAB) and federal, provincial and municipal regulators is needed to avoid the development of non-harmonised requirements in newly regulated sectors (Standards Council of Canada, 2018). The Government of Quebec could contribute to the reconciliation of standardisation requirements as part of the modernisation of the CFTA.

The 2009 Ontario-Quebec Trade and Cooperation Agreement (OQTCA) includes provisions for regulatory co-operation (Chapter 3, including Article 3.6). In the absence of harmonisation at the federal level, the harmonisation of technical standards and certification requirements between Quebec and Ontario, particularly with respect to construction work, can be a powerful tool for increasing competition in public procurement in the Greater Montreal area. For example, a joint committee on regulatory co-operation (Article 3.6 of the OQTCA) could be convened or reactivated between MTQ experts and representatives of the Ontario Ministry of Transportation.

The MTQ, as the main contractor for construction work, recognises technical evaluations of products in other jurisdictions similar to Quebec under three of its approval programmes. This has paid off, with a manufacturer of road marking paint in Ontario being approved by the MTQ since 2017. However, it is the only Ontario manufacturer approved by the MTQ. The Ministry could therefore continue its efforts by initiating a study of Ontario suppliers to identify potential barriers to submitting their products to its approval programmes. The inclusion of a non-response form (which already exists in the CFT files) would provide the Ministry with information on why suppliers from other Canadian provinces are not participating in its approval programmes.

As a result of internal analyses of competition in its procurement markets, and as part of the review of its approval programmes, the Ministry could more frequently recognise comparable Ontario road equipment standards in segments where the level of supplier competition is unsatisfactory. The choice of Ontario makes sense given the province's pool of potential suppliers and its geographical proximity to densely populated areas of Quebec (notably the Montreal metropolitan region). Indeed, Ontario accounts for a significant share (36%) of construction employees in Canada.

In addition to the MTQ, other public bodies such as the RAMQ or the City of Montréal could consider recognising comparable standards and certifications in effect in Ontario in certain instances of public procurement with a low level of competition. In all cases, such recognition would necessarily be subject to a thorough technical examination by the relevant Quebec authority.

Fostering innovation among suppliers is a means of stimulating competition and often of promoting access to public procurement for new entrants (sometimes innovative SMEs), thus increasing the level of competition. The access of new entrants also helps to thwart the administrative corruption schemes that accompany collusion in many tenders. Indeed, the literature (Compte, Lambert-Mogiliansky and Verdier, 2005[17]) demonstrates that facilitating the arrival of new entrants who are not involved in the corruption networks of established actors is a means of restoring fair competition between suppliers.

However, new products or technologies may not meet the established technical standards referred to in CFTs and approval programmes. To foster innovation among suppliers, contracting authorities could set up an evaluation process for new products and new technologies, similar to that practised by the MTQ.4

For municipalities that manage approval programmes, the implementation of such a process could be problematic due to a lack of specialised staff and financial resources. For this reason, the implementation of such a process could go hand in hand with the centralisation of approval programmes managed by municipalities.

Public bodies could also engage in a pre-commercial innovation approach, involving the use of research and development services to create innovative products that are adapted to their needs and that can be tested to ensure compliance with the requirements covered by existing standards. The development of these pre-commercial innovations may require a specific government programme, such as the federal government's “Build in Canada” procurement innovation programme (Box 4.7).

In Quebec, regulations allow public bodies to require suppliers to implement a quality assurance system, including an ISO standard. In terms of quality assurance, the standard generally used is ISO 9001: 2015 (ISO 9001: 2008 in its previous version). A comparable system is in place in the area of environmental specifications (the most common is ISO 14001) that may be required of suppliers by contracting authorities, except in the construction field.

However, the public body may opt for an alternative system known as “preferential margins” if it judges that the requirement to comply with ISO standards “unduly reduces competition”. The system of preferential margins makes it possible to accept bidders who do not have a quality assurance system that meets the standard. However, it gives an advantage to bidders with compliant quality assurance systems at the tendering stage: their prices are fictitiously reduced by a margin of between 0 and 10% (for award purposes only). The use of a quality assurance system is mandatory in only one case: that of a contract for information technology professional services, with a value exceeding USD 2 million. However, the head of the contracting authority may authorise a waiver of the enforcement of this obligation if he or she considers it appropriate.

OECD field research has shown that public bodies have different practices in requiring ISO-compliant processes of their suppliers.

The implementation of a quality assurance system in accordance with ISO 9001 or an environmental performance system in accordance with ISO 14001 generates costs and requires a significant investment by suppliers' employees. According to the Business Development Bank of Canada, the entire ISO 9001 certification process can take between 8 and 18 months and costs between USD 12 000 to 50 000. The cost of registration checks, usually ranging from USD 2 000 to USD 30 000 per year5 may be too high for SMEs and new entrants wishing to participate in public CFTs. They can therefore reduce the level of competition in public procurement by restricting the pool of potential suppliers to established actors already holding certificates of conformity to standards.

The Government of Quebec should consider the possibility that contracting authorities may not be able to require compliance with ISO standards for public procurement involving small amounts. Indeed, SMEs and new entrants for whom ISO certification could represent insurmountable costs are generally interested in calls for tenders for lower value contracts.

In cases where the contracting authority deems the reference to an ISO standard indispensable in the context of a procurement process involving lower award amounts, using a system of preferential margins might be preferable. Indeed, this system provides an incentive for all economic operators (including SMEs and new entrants) to comply with ISO quality assurance standards and to obtain their certification from an accredited conformity assessment body without limiting competition.

There is a close link between the integrity of the system, the degree of competition in the CFTs and the deadline for submission of bids. When the duration of CFTs is limited, it does not allow for a competitive environment and represents a risk to integrity. In its handbook for public officials involved in public procurement, the World Bank (2014[19]) states that a bidding deadline which is too tight can make it very difficult for regular bidders to prepare sound tender applications, and on the contrary favours the selection of bidders who have bribed the public procurement officials. Furthermore, a deadline that is too short may encourage some bidders to try to obtain insider information before the publication of the CFT in order to better prepare their bids. Such cases have been uncovered in Quebec by the Charbonneau Commission, for example in the case of water meters in Montreal (Faubourg Contrecoeur).

Several empirical analyses confirm the link between procurement integrity, bid submission deadlines and the competitive environment in a given CFT. Fazekas, Tóth and King (2016[20]) have shown that tight bid submission deadlines in CFTs are associated with higher indirect indicators of corruption (e.g. share of CFTs with only one bidder or only one compliant bidder). Furthermore, based on data from the European public procurement journal TED between 2009 and 2014, Fazekas and Kocsis (2017[21]) show that “extreme” bidding periods (very short or very long) are positively correlated with the existence of contracts where only one bidder submits an offer, which is symptomatic of corruption risks. Extreme bidding periods are defined on a case-by-case basis according to the rules in force and market practices in the different countries.

Different practices are observed in OECD countries relating to the issue of deadlines for the submission of public procurement bids. For example, a minimum time limit exists in European Union countries, whereas in the United States, federal public procurement rules give greater freedom to public bodies: they only specify that the contracting authority must give bidders sufficient time to prepare their bids.

In Quebec, current regulations prescribe a minimum 15-day submission period for all CFTs from public and municipal bodies. However, contracting authorities may allow a longer period to ensure optimum competition conditions. Following the publication of a CFT, a bidder may also ask the public or municipal body to extend the period. If the organisation accepts, an addendum is published on the SEAO and is available to all bidders.

Nevertheless, since 2017, a minimum 30-day bidding period (25 days in the case of electronic bidding) has been stipulated for certain major CFTs covered by the CETA (the Canada-European Union Comprehensive Economic and Trade Agreement): CFTs for goods and services over USD 365 700 and construction contracts over USD 9.1 million6.

At first glance, the minimum periods in Quebec are therefore significantly shorter than those in other jurisdictions (Box 4.8). However, public and municipal bodies have the option of providing longer periods, and this is a relatively common practice as shown in Table 4.2.

Furthermore, since the introduction of the extended minimum period for public procurement subject to the CETA in 2017, the most significant procurement processes are subject to longer submission periods, thus coming closer to international practice for purchases of amounts above the CETA thresholds (see above).

In terms of deadlines, the central issue is not so much the question of minimum periods as their adaptation to the complexity of the relevant tender. In the case of Quebec, the bid submission periods for some CFTs may not be suitable for the complexity of the bids and the reality of the market, which may increase the risk of integrity violations due to lack of competition.

As shown in Table 4.2 above, average submission periods are generally longer than the minimum 15-day period (Table 4.2), suggesting that contracting authorities were consistently setting longer submission periods, even before the CETA came into effect in 2017. This shows a certain adaptation of bidding periods to the characteristics of each call for tender.

However, the actual bidding periods for construction works appear to be very close to the other procurement categories (services and supplies). For example, in 2015-16, average bid submission periods were 27 days for supply and service contracts and 24 days for construction. When the CETA entered into force in July 2017, it increased the minimum biding period for CFTs to 30 days, thus increasing the average bidding period for CFTs above the threshold. Below the thresholds, however, the submission periods have not changed significantly and remain very similar for the different procedures (26 calendar days for construction works and 23 for service and supplies contracts). Given that the thresholds are much lower for contracts for supplies (USD 365 700) than for construction works (USD 9.1 million), the problem of bidding periods that are too short is particularly acute for construction works. Statistics on the extension of the period for submission of bids during the tender process suggest that the periods for some CFTs may be too short. For example, addenda that extend the period for bid submission account for a considerable proportion of CFTs: more than a third (35%) of the CFTs of public bodies have been subject to such an addendum for 2016-17, and slightly more than 27% for municipal ones. , the share of CFTs subject to such addenda is increasing, accounting for 31% (public bodies) and 22.1% (municipalities) respectively of all CFTs over 2014-15. A number of contingencies may arise that force the government body to rethink its planning. However, these increasingly frequent submission prolongation addenda may indicate that the contracting authorities sometimes underestimate the submission period required given the complexity and size of their CFTs.

Accordingly, the Government of Quebec could encourage public bodies and municipalities to further adapt the deadline for submission of bids to the complexity of the CFTs, particularly in the case of construction works. For example, it could develop guidelines defining target average bidding periods for each contracting authority and by purchasing category. This is particularly important since planning for future purchases is only very occasionally published in Quebec, as discussed in more detail in Chapter 2.

This report recommends that the Government of Quebec consider the mandatory publication of advance information notices and procurement plans of public and municipal (Chapter 2). Average bidding periods could be shorter in cases where the advance notice of information (via the SEAO) or procurement plans are published. Moreover, this period could be reduced when the public or municipal body requires electronic bid submission. Australia and the EU provide examples of adjustments to the bid submission periods of CFTs based on these criteria (Box 4.9).

ITT (Invitation to Tender) is an unpublished procedure that allows contracting authorities to solicit bids from certain suppliers (see Chapter 2). The regulations set a minimum period of eight days for the submission of bids.

This minimum period is shorter than in many other OECD countries (Box 4.9). For example, in New York State, a minimum submission period of 15 days applies to all types of procedures below the CFT threshold. In Chile, the periods for submitting bids in response to private calls for tenders are the same as those for public calls for tenders and depend on the estimated value of the contract (20 days above CAD 89 000 and 10 days above CAD 8 900) and the complexity of the goods and services to be procured.

The Government of Quebec could therefore encourage public and municipal bodies to adapt the submission periods for responding to ITTs based on the complexity and value of the contracts and to apply, where appropriate, the same period as for a CFT (15 days), particularly in the case of construction contracts.

Although the periods for submitting bids are, especially for the most complex and costly ones, generally in line with international practice, response times granted to bidders following substantial changes in the tender documentation pose an additional risk of corruption in the public procurement process concerned. In their empirical research on CFTs in Hungary, Fazekas, Tóth and King (2016[20]) found that a bidding period shorter than the legal deadline, in particular where weekends are improperly counted as working days, increases the likelihood that a single bidder will be declared compliant (a bribery risk factor) by about 20%.

Any addendum to the tender documents which may affect bid prices (change in technical specifications or quantity) stipulates a minimum 7-day period between its publication and the closing date of the CFT. If necessary, the contracting authority must postpone the deadline of the CFT to comply with this minimum period.

This type of change requires bidders to re-examine their bids, sometimes thoroughly. In France, in the event of a substantial change to an open call for tenders with an impact on price, administrative case law requires the contracting agency to relaunch a new public call for tenders, again respecting the minimum bidding periods.7 To avoid the risks of bribery inherent in short bid preparation times, the Government of Quebec should increase this period by a further 7 days to bring it closer to the minimum period for the submission of CFTs (15 days).

References

[22] Australian Government, D. (2017), Commonwealth Procurement Rules: Achieving value for money, https://www.finance.gov.au/sites/default/files/commonwealth-procurement-rules-1-jan-18.pdf.

[11] Bégin, L. et al. (2016), “Rapport du Comité public de suivi des recommandations de la Commission Charbonneau”, Éthique publique vol. 18, n° 2, http://dx.doi.org/10.4000/ethiquepublique.2789.

[10] CEIC (2015), Rapport final de la Commission d’enquête sur l’octroi et la gestion des contrats publics dans l’industrie de la construction, https://www.ceic.gouv.qc.ca/fileadmin/Fichiers_client/fichiers/Rapport_final/Rapport_final_CEIC_Integral_c.pdf.

[5] Champagne, S. (2018), “Plus de concurrence depuis la commission Charbonneau”, La Presse, http://www.lapresse.ca/affaires/portfolio/ingenieurs-conseils/201802/21/01-5154755-plus-de-concurrence-depuis-la-commission-charbonneau.php.

[17] Compte, O., A. Lambert-Mogiliansky and T. Verdier (2005), Corruption and Competition in Procurement Auctions, WileyRAND Corporation, http://dx.doi.org/10.2307/1593751.

[3] European Commission (2014), Directive 2014/24/UE du Parlement européen et du Conseil du 26 février 2014 sur la passation des marchés publics et abrogeant la directive 2004/18/CE, http://data.europa.eu/eli/dir/2014/24/oj.

[21] Fazekas, M. and G. Kocsis (2017), “Uncovering High-Level Corruption: Cross-National Objective Corruption Risk Indicators Using Public Procurement Data”, British Journal of Political Science, pp. 1-10, http://dx.doi.org/10.1017/S0007123417000461.

[20] Fazekas, M., I. Tóth and L. King (2016), “An Objective Corruption Risk Index Using Public Procurement Data”, European Journal on Criminal Policy and Research, http://dx.doi.org/10.1007/s10610-016-9308-z.

[15] Forrell, J., G. Solaner and E. Org (1986), “Competition, Compatability and Standards: The Economics of Horses, Penguins and Lemmings”, Department of Economics, Institute for Business and Economic Research, UC Berkeley, https://escholarship.org/uc/item/48v4g4q1 (accessed on 7 September 2018).

[2] Hjelmeng, E. and T. Søreide (2014), “Debarment in Public Procurement: Rationales and Realization”, in Racca, G. and C. Yukins (eds.), Integrity and Efficiency in Sustainable Public Contracts, Bruylant, http://doi.org/10.13140/2.1.4950.4645.

[9] Lambert-Mogiliansky, A. and K. Sonin (2006), “Collusive market sharing and corruption in procurement”, Journal of Economics and Management Strategy, http://dx.doi.org/10.1111/j.1530-9134.2006.00121.x.

[24] Ministry of Finance, Chile (2004), Reglamento de la ley N° 19.886 de bases sobre contratos administrativos de suministro y prestación de servicios, https://www.leychile.cl/Navegar?idNorma=230608.

[23] New Zealand Government (2011), Mastering Procurement: A structured approach to strategic procurement, https://www.procurement.govt.nz/assets/procurement-property/documents/guide-mastering-procurement.pdf.

[4] OECD (2017), OECD Integrity Review of Mexico: Taking a Stronger Stance Against Corruption, OECD Public Governance Reviews, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264273207-en.

[18] OECD (2017), “OECD Survey on Strategic Procurement for innovation 2015”, in Public Procurement for Innovation: Good Practices and Strategies, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264265820-42-en.

[14] OECD (2017), Public Procurement for Innovation: Good Practices and Strategies, OECD Public Governance Reviews, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264265820-en.

[12] OECD (2017), Public Procurement in Chile: Policy Options for Efficient and Inclusive Framework Agreements, OECD Public Governance Reviews, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264275188-en.

[1] OECD (2016), Improving ISSSTE’s Public Procurement for Better Results, OECD Public Governance Reviews, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264249899-en.

[13] OECD (2016), The Korean Public Procurement Service: Innovating for Effectiveness, OECD Public Governance Reviews, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264249431-en.

[7] PwC (2014), Fighting Corruption and Bribery in the Construction Industry, Engineering and construction sector analysis of PwC’s 2014 Global Economic Crime Survey, https://www.pwc.com/gx/en/economic-crime-survey/assets/economic-crime-survey-2014-construction.pdf.

[16] Standards Council of Canada (2018), Solutions de normalisation pour éliminer les obstacles au commerce canadien, https://www.scc.ca/fr/system/files/publications/SCC_RPT_Standardization_Solutions_To_Remove_Trade_Barriers_in_Canada-FR.pdf.

[6] VGQ (2018), Autorisation de conclure des contrats et sous-contrats publics, Rapport du Vérificateur général du Québec, http://www.vgq.gouv.qc.ca/fr/fr_publications/fr_rapport-annuel/fr_2018-2019-juin2018/fr_Rapport2018-2019-PRINTEMPS-ChapAMF.pdf.

[8] VGQ (2016), Contrats d’achats regroupés en technologies de l’information, Rapport du Vérificateur général du Québec, https://www.vgq.qc.ca/Fichiers/Publications/rapport-annuel/2016-2017-VOR-Printemps/fr_Rapport2016-2017-VOR-Chap02.pdf.

[19] World Bank (2014), Fraud and Corruption Awareness Handbook: A handbook for civil servants involved in public procurement, World Bank Group, http://documents.worldbank.org/curated/en/309511468156866119/Fraud-and-corruption-awareness-handbook-a-handbook-for-civil-servants-involved-in-public-procurement.

Notes

← 1. This refers to shareholders, chief executives and directors.

← 2. In Quebec, approval is a procedure for product validation by the contracting authority prior to the publication of the CFT itself.

← 3. An example of this is the HOM 5660 - 101 programme “Semi-Rigid Guardrail End Devices”. Under another programme (“Systems for Lighting and Light Signalling Structures” HOM 6310), there are only two approved products, supplied by installers who purchase from the same US manufacturer.

← 4. The MTMDET's evaluation process for new products and technologies allows manufacturers of innovative products to submit them for in-depth review. Refer to the Ministry's website for further details on this process: https://www.transports.gouv.qc.ca/fr/entreprises-partenaires/entreprises-reseaux-routier/guichet-unique-qualification-produits/Pages/evaluation-produits-nouvelle-technologie.aspx.

← 5. Presentation of the ISO standard on the Bank's website, https://www.bdc.ca/fr/articles-outils/operations/ iso-autres-certifications/pages/processus-certification-iso.aspx

← 6. Thresholds valid in July 2018, subject to change according to the evolution of exchange rates. The original thresholds are expressed in IMF Special Drawing Rights. 

← 7. EC, 16 November 2005, Ville de Paris, No 278646. Text of the judgement available at https://www.legifrance.gouv.fr/affichJuriAdmin.do?oldAction=rechJuriAdmin&idTexte=CETATEXT000008223687&fastReqId=1479551974&fastPos=1.

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