Directive on the application of the Integrity Regime to replacement entities and completing contractors

On this page

1. Effective date
2. Application
3. Context
4. Directive statement
   • 4.1 Objective
   • 4.2 Expected results
5. Definitions
   • 5.1 Replacement entity
   • 5.2 Completing contractor
   • 5.3 Replacement entity and completing contractor as supplier
6. Requirements
   • 6.1 Process for replacement entities and completing contractors
   • 6.2 Registrar of Ineligibility and Suspension
7. Inquiries

1. Effective date

The directive takes effect on April 20, 2017.

2. Application

This directive applies to all government departments and agencies that have a signed Memorandum of Understanding (MOU) to implement the Ineligibility and Suspension Policy (the “policy”) and Integrity provisions. It applies to all contracts and real property agreements covered by the Integrity Regime, and in the case of contract default, it applies to those for which a Performance Bond dated on or after April 20, 2017, has been duly executed.

3. Context

The policy enables Public Works and Government Services Canada (PWGSC) to issue directives with respect to any aspect of the policy. Directives are used for such purposes as elaborating on or clarifying aspects of the policy, such as establishing monetary thresholds for, or identifying classes of contracts and real property agreements excluded from, application of the policy.

4. Directive statement

4.1 Objective

To apply the Integrity Regime to replacement entities that assume responsibility for a contract or real property agreement, and to completing contractors that complete the work under a contract, such that Canada continues to protect and safeguard the use and expenditure of public funds consistent with the protection provided under the contract or real property agreement with the supplier.

4.2 Expected results

The Integrity Regime is applied in the following cases:

4.2.1 Contract default

The Integrity Regime is applied to a surety or its completing contractor, and any respective first-tier subcontractors, in the event that the supplier to a contract defaults under the contract, resulting in the completion of the contract work by the surety or its completing contractor.

4.2.2 Contract assignment

The Integrity Regime is applied to an assignee, and any first-tier subcontractors, in the event that the supplier to a contract assigns the contract, resulting in the completion of the contract work by the assignee.

4.2.3 Change of lessor

The Integrity Regime is applied to a new lessor, and any first-tier subcontractors, in the event that the supplier to a lease no longer owns or is no longer entitled to lease the real property or immovable, resulting in the completion of the lease by the new lessor. This includes, but is not limited to:

Sale

When a supplier sells the real property or immovable, resulting in the completion of the lease by the purchaser as the new lessor.

Mortgage or deed default

When a supplier defaults under its mortgage or deed, resulting in the completion of the lease by the mortgagee, hypothecary creditor or the hypothecary creditor's assignee as the new lessor.

4.2.4 Change of tenant

The Integrity Regime is applied to a new tenant, and any first-tier subcontractors, in the event that the supplier to a real property agreement assigns or no longer has the rights to the real property agreement by transfer or by other means, resulting in the completion of the real property agreement by the new tenant. This includes, but is not limited to:

Assignment

When a supplier assigns the real property agreement, resulting in the completion of the real property agreement by the transferee as the new tenant.

Bankruptcy or insolvency

When a supplier enters into certain bankruptcy or insolvency-related transactions, resulting in the completion of the real property agreement by the indemnifier as the new tenant.

5. Definitions

5.1 Replacement entity

A “replacement entity” means a corporate or individual entity that assumes responsibility for a contract or real property agreement further to the provisions of the contract or real property agreement, a Performance Bond in the case of sureties, or other means.

Pursuant to the Integrity Clauses of the contract or real property agreement, a replacement entity must comply with the policy and all directives issued thereunder.

For the purposes of the application of this directive, replacement entities include:

5.1.1 Surety

A “surety” means a bonding company who is directed by Canada to complete the contract work following contract default by the supplier.

5.1.2 Assignee

An “assignee” means any entity to whom a supplier assigns a contract.

5.1.3 New lessor

A “new lessor” means any entity who assumes responsibility for a lease as a lessor, including, but not limited to, a supplier’s administrator, assign, encumbrance holder, executor, heir, hypothecary creditor (or the hypothecary creditor’s assignee), mortgagee, lender, purchaser or successor.

5.1.4 New tenant

A “new tenant” means any entity who assumes responsibility for a real property agreement as a lessee or licensee, including, but not limited to, a supplier’s assign, estate trustee, heir, indemnifier, legal representative, successor or transferee.

5.2 Completing contractor

A “completing contractor” means any contractor with whom a surety enters into a contract for the completion of the contract work further to a Performance Bond.

5.3 Replacement entity and completing contractor as supplier

Where any one of these replacement entities will assume responsibility for a contract or real property agreement, or complete the contract work in the case of a completing contractor, it may be viewed as the “supplier” relative to this definition in the policy, for the purposes of its compliance with the requirements of this directive, the policy and additional directives.

6. Requirements

6.1 Process for replacement entities and completing contractors

For all cases where a replacement entity will assume responsibility for a contract or real property agreement, including cases where a contract or real property agreement is being assigned to a replacement entity, or cases where a surety will use a completing contractor for the completion of the contract work:

1. The replacement entity or completing contractor must submit the information required under paragraph 17(a) of the policy to The Registrar of Ineligibility and Suspension, and certify to the Integrity Clauses, in order for Canada to make a determination of ineligibility and suspension pursuant to sections 9 and 12 of the policy
2. Where the replacement entity or completing contractor is unable to certify to any of the Integrity Clauses, or must provide a list of foreign criminal charges and convictions, it must submit a completed integrity declaration form to The Registrar of Ineligibility and Suspension
3. In the event that the replacement entity or completing contractor is determined to be ineligible or suspended, Canada may:
   1. require that a new replacement entity or completing contractor is proposed, where the contract or real property agreement is being assigned, or where a surety will use a completing contractor, or
   2. invoke an alternate measure, pursuant to the provisions of the contract, real property agreement, Performance Bond or policy, where and as applicable (in other words, by invoking another provision in the contract or real property agreement, another condition in the Performance Bond, or a Public Interest Exception as per section 15 of the policy)
4. The replacement entity or completing contractor, once so determined to be not ineligible or suspended, must verify the status of any prospective first-tier subcontractors before entering into a direct contract with such subcontractors as per paragraph 16(b) of the policy
5. The replacement entity or completing contractor must continue to comply with the policy and all directives during performance of the contract or real property agreement

6.2 Registrar of Ineligibility and Suspension

The Registrar of Ineligibility and Suspension can be contacted at the following address:

Registrar of Ineligibility and Suspension
Departmental Oversight Branch
L'Esplanade Laurier, West Tower
300 Laurier Avenue West
Floor 10, Room 10149
Ottawa, ON  K1A 0R5
Canada

7. Inquiries

If you have questions related to this directive, please contact the Integrity Regime Team:

Toll free:

1-844-705-2084

Email:

pwgsc.o.integrity-tpsgc.o.integrite@pwgsc-tpsgc.gc.ca

From: Public Services and Procurement Canada