On November 5, 2020, the Ontario government published
Ontario Regulation 612/20 Centralized Supply Chain
Ontario (the “Supply Chain Regulation”), under the
Supply Chain Management Act, 2019 (the
“Act”).
The Supply Chain Regulation establishes Supply Ontario, a
centralized procurement agency that will provide and support Supply
Chain Management on behalf of government, broader public sector and
health sector entities and collect Supply Chain Management and
vendor performance data from these entities. In addition, Supply
Ontario is responsible for providing and supporting Supply Chain
Management in respect of personal protective equipment on behalf of
entities other than government entities, broader public sector
entities and health sector entities.
“Supply Chain Management” is broadly defined and
includes 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, managing contracts and relationships,
and more.
Centralized Procurement in Ontario
Centralizing government procurement has been evolving in Ontario
for some time. For several years health sector entities have been
engaging in joint procurement initiatives and establishing shared
procurement agencies. In 2019, the Province released the Broader
Public Sector Interim Measures (“Interim Measures”) which
require certain entities (including hospitals and shared
services/group purchasing organizations) to use existing vendor of
record arrangements whenever possible and appropriate, regardless
of the value of the procurement. The Interim Measures also set out
limitations on new contract terms and require certain reporting to
be submitted to the organization’s funding Ministry. The Supply
Chain Regulation continues the development of centralized
procurement in the Province and has perhaps been accelerated by the
need for greater centralization to support response to
COVID-19.
Who does the Supply Chain Regulation apply to?
The Regulation applies to government, broader public sector, and
health sector entities.
“Government entity” includes the Crown, any ministry
under the Government of Ontario, a public body within the meaning
of the Public Service of Ontario Act, 2006, the
Independent Electricity System Operator, and Ontario Power
Generation Inc. and its subsidiaries.
“Broader public sector entity” includes school boards,
post-secondary educational institutions that receive regular
operating funding from the provincial government, children’s
aid societies, a corporation controlled by a broader public sector
entity that exists primarily for procurement, and any other persons
prescribed as a broader public sector entity.
“Health sector entity” includes any prescribed person
or entity that receives funding from a government entity to provide
or support the provision of health services and corporations
controlled by such entities to purchase goods or services.
Currently, health sector entities are limited to public hospitals,
private hospitals, the University of Ottawa Heart Institute and
corporations that are controlled by one or more of the foregoing
entities and exist solely or primarily for the purpose of
purchasing goods or services for those entities (i.e., shared
services/group purchasing organizations).
What are the requirements under the Supply Chain
Regulation?
Parts of the Act came into force in March 2020 to enable swifter
response to the COVID-19 pandemic. The Act is now fully in force
and requires government, broader public sector and health sector
entities to comply with the Act and regulations governing how the
entity carries out Supply Chain Management, including
procurement.
Under the Supply Chain Regulation, Supply Ontario may require
entities to pay a fee or proprietary charge for providing or
supporting Supply Chain Management including any costs incurred by
Supply Ontario. Government, broader public sector and health sector
entities will also be required to provide the following information
upon request from Supply Ontario:
- 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, and - any other information related to Supply Chain Management or
vendor performance that the Corporation specifies.
Supply Ontario may mandate any specifications related to the
form, content, or timing of the required reporting.
The obligations under the Act are subject also to the terms of
the entities’ funding agreements, meaning a failure to comply
with an obligation under the Act may result in funding
implications.
How does the Supply Chain Regulation affect current procurement
activities?
At this time, there are no changes to the way entities access
and procure goods and services, and entities are still required to
comply with the Broader Public Sector Accountability Act
and its directives, as well as Interim Measures, as applicable.
Entities will continue to receive personal protective equipment and
other critical supplies and equipment as they have been. Supply
Ontario and government officials have indicated that they will be
engaging stakeholders, including third party vendors and suppliers,
shared services and group buying organizations and entities
themselves, impacted by the Supply Chain Regulation as new
information becomes available.
Over time, the Supply Chain Regulation has the potential to
change the way the affected entities procure goods and services as
Supply Ontario becomes the single supply chain in the Province.
However, at this time, little guidance is available on how the
central agency is intended to operate.
It is important to remember that when entering into contracts
through a centralized procurement process that your organization
will be the legal party to the contract. Therefore, while
centralized processes may be relied upon for efficiency and value
for money, organizations must undertake their own due diligence on
the legal terms and conditions that the organization will be asked
to assume and determine whether they are appropriate to the
organization from a risk management perspective. We recommend
organizations engage independent legal review early in the process
to ensure there is opportunity for the organization’s interests
to be well represented and addressed.
Miller Thomson’s Health Industry Group will continue to
monitor and keep you informed of any further developments affecting
procurement by health sector entities in Ontario. Please contact us
for more information about our Procurement Support Programs and
Contract Management Programs.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
