Ontario Creates Centralized Procurement Agency – Government, Public Sector

On November 5, 2020, Ontario took another significant step
towards centralizing public and broader public sector procurement
activities with the new Ontario Regulation 612/20 Centralized
Supply Chain Ontario. This regulation establishes a
centralized agency to provide and support supply chain management
for three classes of entities (collectively, “covered
entities”):

• “government entities”, which include any ministry of
  the Government of Ontario, within the meaning of the Public
  Service of Ontario At, 2006, as well as the Independent
  Electricity System Operator and Ontario Power Generation Inc. and
  its subsidiaries;




• “broader public sector (“BPS”) entities”,
  which include district school boards or school authorities,
  government-funded post-secondary educational institutions,
  children’s aid societies, and corporations controlled by any of
  these entities whose primary purpose is to purchase goods or
  services for those entities; and




• “health sector entities”, which include any person or
  entity that receives government funding to provide or support the
  provision of health services (e.g., hospitals), as well as 
  corporations controlled by any of these entities whose primary
  purpose is to purchase goods or services for those entities.

Legislative Context: Supply Chain Management Act

The new regulation was made under the Supply Chain
Management Act (Government, Broader Public Sector and Health Sector
Entitles), 2019 (the “Act“).  That
Act creates a framework for the government to regulate
covered entities in connection with:

• supply chain management;




• vendor standards and practices; and




• reporting on supply chain management and vendor
  performance. 

The Act adopts a broad definition of “supply chain
management”, which effectively covers any activities related
to the procurement of goods and services, including (among other
activities that may be set out in regulation):

• planning and sourcing




• setting standards and specifications




• conducting market research




• developing procurement policy




• determining procurement methodologies




• coordinating and conducting procurements




• controlling logistics and inventory




• managing information systems




• coordinating the actions of covered entities and supply chain
  management entities and furthering those entities’
  collaboration




• overseeing resources




• arranging project financing




• managing contracts and relationships




• receiving and responding to complaints




• disposing of surplus assets

The Act enables the Government of Ontario to designate
or create “supply chain management entities” to provide
or support supply chain management for covered entities, and
enables them to set fees or charges related to their
services.   The new regulation creates just such a
“supply chain management entity”.

Centralized Supply Chain Ontario

The new regulation creates Centralized Supply Chain Ontario, a
corporation that is designated as an agent of the Crown. Its
objectives are:

1. To provide and support supply chain management on behalf of
   covered entities




2. To collect supply chain management and vendor performance data
   from covered entities




3. To provide and support supply chain management for personal
   protective equipment on behalf of entities other than
   covered entities (e.g., to generally support the province’s
   response to COVID-19)

Under the new regulation, Centralized Supply Chain Ontario may
provide notice to a covered entity, specifying the type of supply
chain management functions that Centralized Supply Chain Ontario
would provide or support, as well as the start date. Any covered
entity that receives such a notice must obtain supply chain
management functions from Centralized Supply Chain Ontario as set
out in that notice, until such time as Centralized Supply Chain
Ontario notifies the covered entity otherwise.

Also, the new regulation requires covered entities to provide
Centralized Supply Chain Ontario with the following information
upon request:

• current inventories of any goods, and future inventory
  requirements




• current and future procurement activities




• supply chain opportunities, contingencies and constraints




• information about contracts related to the procurement of goods
  and services




• any information related to supply chain management or vendor
  performance specified by Centralized Supply Chain Ontario

When it first proclaimed the Act, the Government of
Ontario noted the significant impact the COVID-19 pandemic had on
public health supply chains, specifically on obtaining essential
goods and services needed to fight COVID-19 such as ventilators,
masks, and swabs. The Government of Ontario stated that the
Act would allow the government to centrally manage public
sector supply chains and to collect key data on crucial supplies,
which in turn would enable it to prioritize the acquisition and
allocation of essential goods and services to where they were
needed most.¹

Compliance

For BPS entities and health sector entities, the Act
makes compliance with the Act (and by extension, the new
regulation) a deemed term of any funding agreement between such
entities and the Crown or a Crown agency.  It allows for the
withholding of government funding for non-compliance. The
Act also requires covered entities to ensure that their
shared services organizations or other third party supply chain
managers are contractually required to comply with any requirement
imposed on those covered entities under the Act.

Looking Ahead

The creation of Centralized Supply Chain Ontario represents
another means to combat the spread of COVID-19. However, the new
agency’s scope is not limited to pandemic response; indeed, the
range of procurement activities in which the new agency could
engage in, and the covered entities it could support, is
sweeping.

While this a significant step in the Government of Ontario’s
efforts to streamline procurement, it also raises many questions
about the repercussions the new agency will have on public
procurement. For example, will centralized procurement favour
vendors who can serve the entire province?  Although the
Government of Ontario has stated its intention to increase
procurement opportunities for small and medium-sized businesses, it
has not yet provided a clear outline for doing so.² It remains to be
seen how the creation of Centralized Supply Chain Ontario will
affect the ability for small and medium sized companies to compete
against larger companies for provincial opportunities.

Footnotes

1. Ontario Protecting Supply Chains To Support
COVID-19 Emergency Response

2.  Ontario Making it Easier for Businesses to Work
with Government  

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