Ontario’s Proposed Supply Chain Management Act: Highlights of Key Provincial Procurement Developments

As part of its most recent budget legislation (Bill 138), the Government of Ontario introduced the Supply Chain Management Act (Government, Broader Public Sector and Health Sector Entities), 2019 (Act) in support of the provincial government’s policy of centralizing procurement activities. Public sector buyers and vendors doing business with Ontario will be keenly interested in this Act and the Regulations to follow as the procurement landscape continues to change.

The stated purposes of the Act, which has passed first reading, are to: enhance and establish a framework for regulating supply chain management (a term which encompasses a broad range of procurement-related activities) in respect of government entities, broader public sector entities, and health sector entities; leverage the buying power of such entities; and codify roles and responsibilities for supply chain management.

BROAD SCOPE OF THE ACT

The Act’s scope of coverage is expansive and covers not only government entities, but also entities included in the broader public sector, consistent with the overall legislative and policy framework for public sector procurement in Ontario. As expected, the Act applies to the Crown in right of Ontario, any ministry of the Government of Ontario, bodies prescribed as “public bodies” by regulation under the Public Service of Ontario Act, 2006, as well as the Independent Electricity System Operator, and Ontario Power Generation Inc. Notably, the Act also applies to all broader public sector entities and health sector entities, as well as corporations controlled by broader public sector entities or health sector entities that exist with the primary purpose of purchasing goods or services.

Any entity covered by the Act will be obligated to comply with any regulations passed under the Act governing how supply chain management is carried out, requiring the implementation of specified vendor performance standards and practices, or establishing reporting requirements. Regulations under the Act are expected to cover important procurement issues such as procurement methodology, coordination of procurement activities, and vendor performance.

Obligations under the Act are deemed to be requirements of any funding arrangements between broader public sector or health sector entities and the Crown in right of Ontario, or an agency thereof, and failure to comply with the Act may result in funding being withheld. Furthermore, covered entities are required to ensure that any contracts with third-party supply chain managers mandate compliance with the Act.

SUPPLY CHAIN MANAGEMENT ENTITIES

The Act permits the Lieutenant Governor in Council to establish “supply chain management entities” by regulation. A supply chain management entity is a government entity, broader public sector entity or health sector entity designated to provide or support supply chain management on behalf of another government, broader public sector, or health sector entity or a corporation (without share capital) incorporated to provide or support supply chain management on behalf of such entities. This regulatory power will permit the province to appoint certain supply chain management entities to procure goods and services in specified categories on behalf of government bodies, broader public sector entities, and health sector entities.