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HomeMy WebLinkAboutFIN-09-072 - CAW Buy CanadianREPORT REPORT TO: Councillor B. Vrbanovic and Members of Finance and Corporate Services Committee DATE OF MEETING: 2009-06-22 SUBMITTED BY: Larry Gordon, Chief Purchasing Officer PREPARED BY: Larry Gordon, Chief Purchasing Officer (2214) WARD(S) INVOLVED : N/A DATE OF REPORT: 2009-06-15 REPORT NO: FIN 09-072 SUBJECT: CAW Buy Canadian RECOMMENDATION: That the City of Kitchener Financial Planning & Supply Services Division, in accordance with the Purchasing By-law, continue to make every effort to ensure that products and services are obtained within Canada where reasonably possible. BACKGROUND: th At the City Council Meeting of April 6, 2009, staff was directed to report to a future Finance and Corporate Services Committee meeting on the implications associated with the adoption of a “Buy Canadian Policy”, as proposed by the Canadian Auto Workers (CAW) delegation of April th 6, 2009 (see Appendix 1). In researching the City’s current business practices, the City currently spends 98% of its’ annual expenditures in Ontario. This level of activity essentially means that the City already achieves a high level of Canadian Content. The resolution from CAW is problematic in that it requests that staff report specifically on Canadian content annually and requires potential vendors to identify source of goods. These additional requirements would complicate the purchasing process, increase administrative costs and could restrict local bidders (small businesses) from possibly bidding on City tenders and quotations. Based on the collective efforts of Regional and Area Municipal purchasing staff, the recommendation included in this report supports continuing to use reasonable best efforts to obtain good within Canada in accordance with purchasing by-laws. The City of Cambridge has approved this recommendation and it is the intent of the Regional Municipality of Waterloo and the City of Waterloo to bring forward a similar recommendation. REPORT: Current Purchasing Practices Financial Planning & Supply Services oversee purchasing activities in accordance with Chapter 170 of the Municipal Code (Purchasing and Materials Management). It is the objective of this by-law that all goods and services be acquired on a competitive, fair and open basis in a manner that is efficient and accountable. Finance has reviewed its’ payables to all suppliers doing business with the City for the twelve th (12) months ending November 30, 2008. Staff has identified that 98.51% of the City’s payments for purchases were made within Ontario. If we expand this to Canada, it is 99.84%. The expenditure history indicates the City conducts most of its’ business in Ontario in the absence of a Canadian Content Policy. In reviewing Council bid awards in 2008, only one was outside of Canada. Most Council approvals were to local vendors. The majority of vendors are within the Region and the surrounding areas of Guelph and Brantford. Only two were out of Province. Through the Leadership in Energy and Environmental Design (LEED) program, we are able to claim points on the distance from point of manufacture to point of construction, thus emphasizing procurement locally. The shorter the travel distance from manufacturer to installation site, the greater is the point rating. The City is able to attract local content by advertising its’ bids in the local newspaper, on the Ontario Public Buyers website, the City’s website and soon the website of the Purchasing Cooperative of Waterloo Region. In terms of bid documents, these items are available for downloading from the City’s website and are available for pick up at City Hall, which saves time and the expense incurred by suppliers outside the Region. Finally, local suppliers have an advantage in responding to local bids: minimal costs to float equipment and vehicles to job sites, familiarity with local labour, familiarity with local culture, knowledge of infrastructure development, area history and reduced travel costs. Response to CAW’s Request The CAW requires the purchase of goods and services with the highest possible level of Canadian content. The City provides a vast array of very different municipal services. The sheer volume of products purchased by the City make the task of identifying Canadian Content extremely challenging. Most of the products we purchase are off the shelf, thus making this task of identifying Canadian content even more challenging. In discussions with senior Purchasing staff of the local cities and the Region, staff collectively concur that the definition of Canadian Content is far from clear and fraught with complexity in how to award bids; thus unduly increasing the potential of litigation for unfair award. Adopting a Canadian-content policy will delay the issuance of an award for a bid. Should staff have to research the extent of Canadian Content, we may have to extend the acceptance period from a standard 60 days to 90 days to ensure that staff has received all the correct information prior to contract award. Due to the amount of research, compliance to specifications, investigation and verification, an additional FTE will likely be required. The CAW requires potential vendors to identify the source of goods and services, and the overall level of Canadian content, as part of the tendering process. To ensure compliance with Canadian-content policy, staff will need to verify all claims made from all sources of supply to ensure a fair and open process. From a supplier’s perspective, there is an additional overhead cost for them to provide the City with all of the necessary documentation. The CAW has requested annual reporting to Council on the level of Canadian-content in municipal purchases. As outlined above, this will be difficult to do and would require additional staff and resources. The CAW request that the City identify opportunities to enhance the level of Canadian content in future purchases. Staff believes that opportunities to enhance Canadian content happen through a natural course of business. The City advertises locally and is in constant communication with local contractors and suppliers. Our region enjoys an extensive and healthy core of local suppliers, contractors, and consultants to draw from. Staff acknowledges that we have a very vibrant local vendor base without the presence of a Buy Local or Buy Canadian Policy. In addition, programs such as LEED Certification also favour our local suppliers. Ontario Public Buyers Report (OPBA) A report was commissioned by the Ontario Public Buyers Association (OPBA) to help inform the issue of Canadian-content and local preference as it impacts public procurement in the Ontario st municipal sector. This report released on March 31, 2009, was authored by Mr. Paul Emanuelli, an internationally known author and procurement lawyer. In his report the author discusses the legal implication of the CAW request: The Canadian Auto Workers Union has been at the forefront of this debate, calling for the implementation of Buy Canadian policies across the public sector. The CAW commissioned a legal opinion from international trade lawyer Steven Shrybman of Sack Goldblatt Mitchell LLP which claims that governments can legally adopt Buy Canadian policies, whether at the municipal, provincial or federal levels. While the legal opinion may, for the most part, be technically correct within its’ specific narrow context, an issue of this significance cannot be reduced to the narrow legal analysis of specific trade treaty provisions of the Agreement on Internal Trade (AIT). Rather, it must be framed within the broader legal and policy context within the public procurement process. Staff’s response to the above is that CAW’s position is technically correct, that although Canadian-content for municipal procurement it is not in contravention with AIT, it does not take into consideration the spirit and intentions of the AIT which was established for the sole reason of promoting open, fair and transparent purchasing policies. The AIT prohibits the adoption of local or geographic preference. In the Agreement on Government Procurement (AGP), the World Trade Organization membership pledges that its’ public institutions will provide equal access to suppliers from the other jurisdictions as it does to suppliers from its’ own jurisdiction. The North American Free Trade Agreement (NAFTA) gives the three countries of Mexico, the United States and Canada the ability to bid, without discrimination, on each others government procurement annual spending over the prescribed thresholds. Failure in disclosing this information can result in the other parties filing a complaint with the Canadian International Trade Tribunal (CITT). The Municipal sector cannot conduct its’ procurement in a vacuum that makes it immune from international trade issues. While the municipal level protectionism may not be a legal issue, it certainly remains a trade issue with significant economic implications. In addition, the OPBA report raises the following significant legal and other concerns which echo throughout the local municipal buying community: Narrowing Competition:the CAW campaign advocates creating a preference to contractors based on their place of origin, citing narrow exceptions that permit Canadian content polices under limited circumstances while downplaying the letter and spirit of domestic and international trade rules that generally aim to remove protectionist barriers to competition; Distinguishing Canadian Content from Local Preference: the CAW’s “Buy Canadian – Build Communities” campaign fails to adequately distinguish between Canadian content and local preferences, noting narrow exceptions that permit Canadian content while glossing over the general prohibitions against local preferences and other restrictive specifications; Implementation Risks:the CAW campaign downplays the practical challenges posed in properly implementing a Canadian content policy, calling on governments to eventually enact legislation to establish clear rules while, in the interim, leaving municipalities to fend for themselves to navigate significant legal and policy risks in a legislative and policy vacuum; Politicized Procurement: the CAW campaign politicizes the public procurement process in the name of overriding public policy considerations but fails to adequately consider the significant risks created whenever “exceptional circumstances” are cited as a reason to bypass the established best practices of open, transparent and fair competition. Economic Impact of Approving the CAW Resolution The regional economy is a net exporter of goods and services with a significant component of international trade. Adopting restrictive purchasing practices could result in other jurisdictions doing the same and potentially impacting our local businesses exporting internationally. That is, if our purchasing practices become more restrictive we could find that the CAW request can work against our local businesses. Limiting competition will ultimately increase the prices of goods the City purchases. Staff have always maintained that increasing the number of bids provides the best environment for competitive pricing. Federation of Canadian Municipalities (FCM) In early June, FCM narrowly approved a motion (see Appendix 2) that in general supports free trade and encourages that the U.S. repeal its’ “Buy American” requirements. Conclusion Staff recommends that we continue our current practices whereby 98% of the City’s expenditures are spent locally without a Buy Canadian content policy. The City’s current purchasing practices strive to encourage competitive bidding, ensure fairness between bidders and maximize savings for the taxpayers. In accordance with the best practices, policies and procedures, staff will continue to make efforts to ensure that the best valued products and services are obtained for the City. The recommendation included in the report is similar to the recommendation approved by Cambridge Council. In addition, the Regional Municipality of Waterloo has approved their recommendation and the City of Waterloo is planning to bring forward a similar recommendation. FINANCIAL IMPLICATIONS: Nil ACKNOWLEDGED BY: Dan Chapman, General Manager of Financial Services Buy Canadian – Build Communities Resolution WHEREAS: Citizens expect their governments to spend wisely, invest in their communities and recognize that the creation of healthy communities, good jobs and a strong economy are the responsibility of all levels of government; and WHEREAS: Canada’s manufacturing sector is critical to the economy: it is highly productive, generates the highest value-added, accounts for two-thirds of our nation’s total exports and funds three-quarters of all private sector research; and WHEREAS: unbalanced global trade and the uncontrolled surge in the Canadian dollar have resulted in downsizing, layoffs, bankruptcies, plant closures, and the relocation of production to off-shore locations and within North America; and WHEREAS: Canada has lost 350,000 good manufacturing jobs over the past five years, 190 every day, and the pace of job loss is accelerating across the entire range of manufacturing activity including: high-technology, resource-based and labour intensive industries; and WHEREAS: The loss of good manufacturing jobs has devastated workers, their families and entire communities from coast to coast, and severely limits quality job prospects for our children and grandchildren; and WHEREAS: Governments the world over, including those of our main trading partners, clearly understand the benefits of domestic purchasing rules including: the direct and spin-off employment created, taxes generated, and the environmental benefits of local sourcing; and WHEREAS: International trade agreements signed by Canada specifically allow for domestic purchasing rules, including NAFTA and the WTO Agreement on Government Procurement; and WHEREAS : There is urgent need for the largest investments in municipal infrastructure in more than a generation, recently estimated by the Federation of Canadian Municipalities to total $123 billion just for the maintenance of existing infrastructure, and a further $115 billion to meet needs of our growing communities; and WHEREAS: The Canadian Manufacturers and Exporters have called on the federal and provincial governments to introduce Canadian content rules; the Ontario Chamber of Commerce has called upon the Ontario Government to introduce Canadian content rules, and a private members bill, M-183, calling for Canadian content rules has been introduced for debate in federal parliament. THEREFORE, BE IT RESOLVED: That the City of Kitchener will work to keep good jobs in our communities by; 1. Adopting a “Buy Canadian” policy for municipal purchases which includes: • requiring a minimum of 50% Canadian content and domestic final assembly in the purchase of public transit vehicles; • requiring the purchase of goods and services with the highest possible level of Canadian content; • requiring potential vendors to identify the source of goods and services, and the overall level of Canadian content, as part of the tendering process; • reporting annually to Council on the level of Canadian content in municipal purchases, and • Identifying opportunities to enhance the level of Canadian content in future purchases. 2. Calling on the federal, provincial and territorial governments to immediately enact “Buy Canadian” legislation applying to direct public purchases, and to grants and other funding provided to municipal governments. cope343 NC3TE TU VOTING DELEGATES: This version ©f resolution MIT09..0`I re,~laces the version in your Emergency Resolutions package. June 5, 2ga9 nnlTVS.a.a~ 5t1PPDRT FDR FAIR TRADE IN 7'HE U.S. STiMLJLtJS PACKAGE WHEREAS the world's economy has entered into a period of slow economic growth; WHEREAS governments throughout the world have introduced various stimulus packages to encQUrage economic growth; WHEREAS the North American market for a wide variety of construction supplies and manufactured goods used in municipal infrastructure projects is highly integrated; WHIEREAS the United States of America is Canada's largest trading partner and a signatory cif the North American Free Trade Agreement, and both countries benefit fro-n a highly integ[ated market for construction supplies and related manufactured goods used in municipal infrastructure projects; WHEREAS Canadian municipalities era supportive of Free Trade between Canada and the United States which has existed for many years; WHEREAS the Government of the United States of America has introduced infrastructure stirr~ulus packages including the American Recovery and Reinvestment Act ~Af~RA} which includes "Buy American" previsions far steel and other manufactured products; WHEREAS these restrictive provisions which are contrary to the spirit of free trade will preven# Canadian companies from bidding an contracts which contain the "Buy American" provisions at the municipal and state levels in the United States since NAFTA and The Agreement on Government Procurement of the Wnrld Trade Drgaraization do not nullify such provisions at thane levels: WHEREAS Canadian stimulus in#rastructure programs do not contain any restrictions an manufacturers from other countries including the United States bidding on such contracts in Canada; WHEREAS Canadian-based companies may be adversely affected by these restrictions possibly leading to lay-o#fs and financial lasses and could lead to the erasion of their overall ongoing viability; WHEREAS the economic outlook of local employers is a municipal interest because of the potential negative effects of business failures on local quality of life, community vibrancy and the property tax base; WHEREAS Canadian municipalities have the right to undertake measures to protect their Iacal economies and quality of life; BE IT RESOLVED that municipalities express support for the spirit of free and fair trade between the United States and Canada and that the restrictive `Buy American' provisions in the American ftecnvery and Reinvestment Act are contrary to that spirit of free #rade; BE IT FURTHER RESDt_.VEC3 #hat the Federation of Canadian Municipalities (FCM} supports the Government of Ganada and the Canadian Manufac#urers and Exporters and other stakehaiders in their efforts to urge the United S#ates Congress #o repeat 'Buy American' requirements in fiederal stimulus packages; BE IT FURTHER RESOLVE[) that FCM support municipalities who chppse #a adapt procurement policies which favour free and fair trade by ensuring that focal infrastructure projects, including environmental projects such as water and wastewater treatment projects, procure goads and materials required for the projects only from companies whale countries. of origin do oat in~pase trade restrictions against goads and materials manufactured ire Canada; BE IT FURTHER RESOLVE©, given #hat the Prime Minister, Premiers and Territorial Leaders, and the U.S. Chamber of Commerce have recently called far bi-lateral negotiations to resolve this issue, tha# the measures prpposed in operative clause #f3 above be suspended for 12g days to allow for a negotiated resolution of #his matter; and BE IT FURTHER RESOLVE© that FCM urge the U5 Natiana[ League of Cities and the US Conference of Mayors to also support the spirit of this resolution and the spirit a# free trade, so tha# municipalities on bath sides of the border can continue to procure supplies in the fairest and most efficient manner, Town of Nalton f-!ills, Dnfario Halton Regir~n, Dnfario City of Temiskaming Shores, Dnfario City of Surrey, British-Columbia City of Bra-~pfon, Dntaria City of Surlingtar~, Dnfario Town of Milton, Dnfario Town of Caledon, Dnfario Town of Conception Bay South, Newfoundland & Labrador Township of Scugag, Dnfario Township of Uxbridge, Dnfario Township of Langley, British Columbia EXECUTfVE COMMITTEE {May 2~~9}: Category `A'; Cor~ccrrrenca; EMEf2GENCY RESOLUTION 20Q9 ANNUAL CONFERENCE DEClSIDN: