Public Contracts: the Latest Developments Regarding AMF Authorization
The Integrity in Public Contracts Act, assented to by the Quebec legislature on December 7, 2012, amended, inter alia, the Act respecting contracting by public bodies so that authorization from Quebec’s financial markets regulator, the Autorité des marchés financiers (the “AMF”), must now be obtained by any business enterprise seeking to enter into a public contract or subcontract, for an amount determined by the government. Such authorization effectively certifies that the enterprise in question satisfies the high standards of integrity that the public has the right to expect from them. These new provisions apply to the entire public sector, including Crown corporations and municipalities.
As the number of private-sector businesses potentially affected is quite substantial, the new provisions will be phased in gradually. Eventually, all public contracts worth more than $100,000 will require AMF authorization.
The month of September 2014 was a key transitional period in this revised authorization regime.
On September 10, the government issued decrees 793‑2014 and 796-2014 so that the threshold for public services and construction contracts and public-private partnership contracts will drop from $10 million to $5 million. The new threshold takes effect on October 24, 2014 and will affect some 850 additional businesses. The government also issued on September 10th decree 795-2014 effectively expanding the list of contracts awarded by the City of Montreal that require AMF authorization. That change took effect on September 24.
On September 11, the Treasury Board Secretariat published an interpretation bulletin on the meaning of the word “subcontract” to be used in determining whether or not a subcontractor under a public contract must obtain AMF authorization.
Then, on September 17, the government issued decree 815-2014 and, in virtue of section 87 of the Integrity in Public Contracts Act, demand that firm Informatique EBR Inc. obtain AMF authorization within 21 days in order to continue to perform certain supply contracts with the public entity Centre de services partagés du Québec.
Finally, on September 25, the commission of inquiry into the awarding and management of public contracts in the construction industry (the Charbonneau Commission) heard from representatives of the AMF, the Quebec provincial police force’s permanent anti-corruption unit (UPAC) and the Treasury Board Secretariat. During that day’s hearing, Commissioner Renaud Lachance made the observation that Quebec businesses are subject to greater scrutiny than those from outside the province, as the latter’s tax status outside Quebec is not checked when they apply for AMF authorization. Commissioner Lachance also expressed concern over the authorization criterion of being in good standing with the tax authorities, given that a dispute with Revenue Quebec does not necessarily affect the integrity of the business enterprise involved.
The AMF authorization regime will increasingly be under the spotlight. Currently, several business enterprises have been proactive on seeking early authorization from the AMF, perhaps on account of the inherent administrative delays in processing an authorization application, and because businesses must already be so authorized on the day submissions are tendered, unless the call for tenders specifies a different date prior to the awarding of the contract. Moreover, a refusal of authorization by the AMF has serious consequences for a business: the latter becomes ineligible to perform ongoing contracts as well as all subsequent public contracts, even those below the threshold amount for AMF authorization.
In addition, on May 15, 2014, the Quebec Superior Court rendered its first decision regarding the legality of the AMF’s refusal to authorize an enterprise to enter into a public contract (9129-2201 Québec Inc. v. Autorité des marchés financiers, 2014 QCCS 2070, motion for leave to appeal denied in 2014 QCCA 1383). That decision points out the following:
- the concept of “high integrity” is to be broadly interpreted;
- a business enterprise must disclose all relevant facts before the AMF makes its decision;
- a judicial review hearing is not the time to bolster your file;
- a business enterprise has a heavy burden to discharge in order to prevail at the Superior Court on judicial review.
In sum, AMF authorization is rapidly becoming the norm rather than the exception. As a result, being awarded a public contract has become a privilege more than a right. The authorization process is rigorous and requires a well prepared and exhaustive file, an exercise which should perhaps begin even if your business is not currently subject to AMF authorization. It may be in your business’s best interest to start preparing now for the broadening of the scope of contracts that require AMF authorization.