Ontario restricts U.S. access to government procurement

Torys’ Canadian and New York offices will be providing regular briefs on the legal ramifications of the tariffs and other cross-border policy developments on the horizon.

In response to U.S. tariffs on Canadian goods, the Ontario Government has formally adopted its Procurement Restriction Policy (the Policy) designed to restrict U.S. businesses from accessing public sector procurements in Ontario. The Policy applies to all government entities and all designated broader public sector (BPS) organizations.

This includes:

• all provincial government ministries;
• all provincial agencies;
• Ontario Power Generation;
• the Independent Electricity System Operator;
• hospitals, school boards, universities, colleges and their buying groups and shared service organizations; and
• publicly funded organizations that received $10 million or more in funding from the Government of Ontario in the previous fiscal year.

The Policy requires public sector entities to exclude U.S. businesses from all new procurements of goods and services of any value and regardless of the method of procurement (i.e., whether or not competitive). The Policy does not apply when public sector entities use existing vendor-of-record arrangements.

A U.S. business means a supplier, manufacturer or distributor of any business structure (including a sole proprietorship, partnership, corporation or other business structure) that:

1. has its headquarters or main office located in the U.S.; and
2. has fewer than 250 full-time employees in Canada at the time of the applicable procurement process.

Importantly, a Canadian subsidiary controlled by a company with headquarters or a main office located in the U.S. will be considered a U.S. business unless the Canadian subsidiary has 250 or more full-time employees in Canada.

An exception from the Policy is available when a U.S. business is the only viable source for the good or service and the procurement cannot be delayed (both must be true). Ontario has provided guidance on how these requirements are to be interpreted.

Existing procurement rules under the Building Ontario Businesses Initiative continue to apply to provide preference to Ontario suppliers in procurements where permitted under applicable trade treaties.

The Ontario Government has said that, should tariffs be lifted, the Policy would be assessed and may be adjusted or rescinded.

While the Policy does not apply to Ontario municipalities, municipalities are free to adopt their own strategies for dealing with procurement from U.S. suppliers. For example, in late March, the City of Toronto (the City) adopted amendments to procurement policy to prioritize Canadian suppliers and limit reliance on U.S.-based goods and services, including only allowing Canadian companies to bid on new procurements under certain thresholds, giving preference to Canadian, EU and UK suppliers in competitive procurements, and excluding U.S. suppliers from City contracts when deemed in the City’s best interest.

 
Read more Tariffs and trade briefs.