May 15, 2020 Procurement Lawyer

Doing Business in Canada: A Cautionary Tale for American Suppliers

by Gerald H. Stobo & Marc McLaren-Caux

Gerald H. Stobo is a partner of Cassidy Levy Kent (Canada) LLP and is one of Canada’s leading public procurement and trade lawyers. Marc McLaren-Caux is International Trade Counsel in the Canadian office of Cassidy Levy Kent.The authors thank Alexander Hobbs, University of Ottawa final-year law student, for his contributions.

Canada is a fertile — and profitable — ground for U.S. contractors who regularly compete for, and win, major federal government contract awards. No surprise really. Canada’s federal government spends almost CDN $22 billion annually for goods and services,1 while in 2019, another CDN $22 billion was dedicated to defense spending.2 Familiar U.S. companies like Lockheed Martin, General Dynamics, Raytheon, and IBM feature prominently in federal government contract awards in Canada.

Although U.S. contractors have had great success, either in their own right or through Canadian subsidiaries, several recent developments in Canadian federal procurement law should be kept in mind when considering whether and how to bid on future government opportunities in Canada.

Canadians are regularly reminded by the press that federal procurement is in a terrible state. One recent headline claimed, “Canada Has the Worst Military Procurement System in the Western World.”3 Another claimed that “Military Procurement Is a National Disgrace.”4

In Canada’s recently concluded election, federal procurement activities once again became a political football — or perhaps more of a hot potato — with accusations of incompetence, or assurances of “this is how our party will fix things,” flying around at a dizzying pace.5 There is more than enough blame and criticism to go around, and much of it is well-founded, but suppliers are less interested in the rhetoric and more interested in ways to improve their chances of success.

Forewarned is forearmed, and this article will shed light on recent developments that will help U.S. and other foreign contractors better understand what they might be facing in a federal procurement in the Great White North.

In this article, we will review several recent cases involving U.S. contractors who felt that contract awards to competitors were unfair and in breach of the applicable trade agreements. Secondly, we will discuss a recent amendment to federal procurement regulations that directly, and perhaps prejudicially, affect U.S. suppliers looking to do business in Canada.

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