You Should be A-Waltzing with TILMA Today

The Trade Investment and Labour Mobility Agreement (“TILMA”), an agreement between the governments of British Columbia and Alberta came into effect on April 1, 2009 for the MASH sector (municipalities, academic institutions, schools and hospitals) in British Columbia.

1.0 Applicable TILMA Provisions (Jolly swagmen from Alberta now welcome)

The basic rules of TILMA are set out in Articles 3 and 4:

Article 3 – each party to ensure that its measures do not operate to restrict or impair trade between or through the territory of the parties, or investment or labour mobility between the parties;

Article 4 (Non-Discrimination) – each party is to give treatment, that is no less favourable than the best treatment given to its own goods, persons, services and investors, to

(a) like, directly competitive or substitutable goods,

(b) persons,

(c) services, and

(d) investors or investments.

Article 14 of TILMA relates to procurement and provides than when it comes to procurement of goods, services and construction, the parties (British Columbia and Alberta) are to provide open and non-discriminatory access to procurements of their government entities where the procurement value is (as applicable to local governments

(a) $75,000.00 or greater for goods,

(b) $75,000.00 or greater for services, or

(c) 2100,000.00 or greater for construction.

“Procurement Value” is defined as

“means the estimated total financial commitment resulting from a procurement, not taking into account optional renewals when the compulsory part of the contract is of at least one years’ duration.”

2.0 What is Procurement? (Grabbing the jumbuck at the billabong)

“Procurement” is defined in TILMA as

“means the acquisition by any means, including by purchase, rental, lease or conditional sale, of goods, services or construction, but does not include

(a) any form of government assistance such as grants, loans, equity infusion, guarantees or fiscal incentives, or

(b) government provision of goods and services to persons or other government organizations.”

In other words, if a contract is at least a year in length and the contract for services is for less than $75,000.00, then even though the contract may contain optional renewals (and in my opinion this would mean truly optional with neither party being bound to the renewal) then the TILMA rules would not apply.

3.0 Exceptions (Holes in the billy can)

Exceptions to the requirement are set out in Part V of TILMA.

Of exceptions applicable to procurements, the following would likely be of most interest to local governments:

“Section 2

(b) from a public body or a non-profit organization,

(d) of health services and social services,

(g) where it can be demonstrated that only one supplier is able to meet the requirements of a procurement,

(h) for an unforeseeable situation if urgency exists and the goods, services or construction could not be obtained in time by means of open procurement procedures,

(i) when the acquisition is of a confidential or privileged nature and disclosure through an open bidding process could reasonably be expected to compromise government confidentiality, cause economic disruption or be contrary to the public interest.”

As a matter of interest (to lawyers!), there is also a specific exemption for service provided by lawyers and notaries (Section 2(j)). Finally, if there is a call for bids and there are no bids received, then another means of procurement other than the open bid process may be employed. There are also some exceptions available under TILMA for regional economic development subject to the restrictions set out in Part V.

TILMA requires contracts at various threshold levels to be subject to open procurement processes, including advertising on B.C. Bid. Assuming that none of the specific exceptions apply to a situation, TILMA would supersede a local government’s own internal tendering policy, imposing obligations over and above common law and statute. Accordingly, tendering policies should be reviewed to identify possible areas of inconsistency with TILMA.

The most likely discrepancy is that at common law a purchasing policy is not legally binding and that a local government may in any given situation depart from its own tendering policy and choose not to go to tender for a project that would otherwise require a tender under the municipal policy. Under TILMA, once the procurement falls within the parameters established by Article 14, then the TILMA rules apply, unless the municipality may take advantage of a specific exemption.

4.0 May a Contract be Divided Into Components? (How many jumbucks in a tucker bag?)

Some types of contracts, such as contracts for supply of goods and services, could theoretically be split into different, separate procurements that would not be subject to TILMA provided that

(a) a compulsory component is at least one year in length, and

(b) in the case of a contract for goods or services, the amount of the goods or services being contracted for is less than $75,000.00.

In the case of a contract for services where the services are to be provided on an hourly basis dependant on need, then whether or not the requirements of TILMA would have to be followed would depend upon whether it was reasonable for the municipality to consider, at the time of awarding the contract, that the value of the services would be less than $75,000.00 during the compulsory component.

For example, if a municipality on an annual basis contracted out for consulting services from a consultant and past history demonstrates that the cost to the municipality would be less than $75,000.00 per year, the municipality should be able to enter into an agreement for at least a year with that consultant without going to tender in accordance with TILMA. The contract could be for additional years in the form of optional renewals – both parties having the option to agree to continue the relationship. However, once it became clear that the $75,000.00 threshold was to be surpassed on an annual basis, then TILMA would apply.

Similarly, it should be possible for a municipality to have separate contracts for different projects or services with the same contractor, where it makes sense objectively for sound public policy reasons to structure the business relationship this way. A regional district, for example, might wish to have an engineering firm do $50,000.00 of work on a sewer project for Electoral Area A and other work (worth $40,000.00) on a separate sewer proposed for Electoral Area B. These are different projects for different service areas and it should be possible to proceed in such circumstances without being subject to TILMA.

In this regard, it is important to note that under TILMA, a party must not act for the purposes of “avoiding competition”, “discriminating between suppliers” or “protecting its suppliers”. If the dominant purpose of the municipality in awarding separate contracts is to further the public interest (through the reduction of costs or the maintenance of high levels of service) then a decision should be defensible even under TILMA. However, if a municipality has a practice of repeatedly structuring its purchasing needs to deliberately avoid TILMA, then this will likely be considered a violation.

5.0 Can Local Government Act as Construction Manager and Avoid TILMA?  (Jumping in the Billabong)

No. A construction contract could not be handled through the use of the construction management approval. The reason for this turns on the definition of “Procurement”, which under TILMA is “the total financial commitment resulting from a procurement …”

In the case of a construction project this would be inclusive of the total value of construction. In that scenario, if the value of the procurement would still exceed $200,000.00 then splitting one project into separate component “contracts” would not change that interpretation of Article 14, Section 1(c).

6.0 Is TILMA Legally Binding on Municipalities? (Down come the troopers, one, two three)

While British Columbia and Alberta have agreed that TILMA is to apply to local governments as of April 1, 2009, as yet, no implementation legislation has been brought into effect to actually make adherence to TILMA by municipalities a legal requirement.

However, the provinces of British Columbia and Alberta are themselves both bound by TILMA (Article 2.1) to ensure compliance with TILMA by “government entities”, which includes local governments and would be vulnerable to monetary awards issued by the review panel if a breach of TILMA is found to have occurred. Therefore, it is likely that the Province will move to minimize TILMA violations at the local government level. This could include making provincial grants conditional on compliance with TILMA.

For the moment, however, there does not appear to be any direct legal consequence for a municipality that did not find TILMA an attractive dance partner.