Ottawa’s anti-corruption rules put government’s main buyer in a bind

Recently toughened rules that block Canada from doing business with companies who commit crimes anywhere in the world have put the federal government’s main buyer of goods and services in a bit of a bind.

OTTAWA — Recently toughened rules that block Canada from doing business with companies who commit crimes anywhere in the world have put the federal government’s main buyer of goods and services in a bit of a bind.

The Public Works Department has contracts worth hundreds of millions of dollars with HP Canada — whose Russian sister company pleaded guilty in a United States court last September to charges of bribing Russian government officials for a contract and was fined more than US$58 million.

HP Russia executives created a secret, multimillion-dollar slush fund and used some of that money to bribe Russian government officials, who gave the company a contract worth more than 35 million euros, according to the U.S. Department of Justice.

Under the so-called integrity framework, companies convicted of crimes in Canada or abroad are barred from bidding on government contracts for 10 years. The ban also extends to subsidiaries and sister companies of convicted companies.

That had Public Works scrambling to figure out what to do about HP Canada — a company with which the department has 66 active contracts, standing offers, supply arrangements and call-ups worth around $377 million.

Then-deputy minister Michelle D’Auray prepared a memo to Public Works Minister Diane Finley in August 2014 — a little more than two weeks before HP Russia pleaded guilty — outlining what could happen if a U.S. court convicted the company.

Public Works has the option of using a special “public interest” exception to get around the integrity framework’s 10-year ban and sign new contracts with HP Canada, D’Auray told Finley.

“Should HP Russia be convicted, HP Canada will not be eligible to enter into new contracts with PWGSC or the other organizations using PWGSC’s Integrity Framework — including Shared Services Canada (SSC) — unless it is in the public interest,” the memo says.

“The public interest exception applies on a contract-by-contract basis where exceptional circumstances are necessary to the public interest … In these circumstances, PWGSC could impose stringent controls, administrative measures and monitoring over the contract.”

The Canadian Press obtained a copy of the memo under the Access to Information Act.

The department found that only two of its contracts with HP Canada included integrity framework clauses. The first was a $290-million contract for a pension modernization project, which expires in November 2017 and has three, two-year renewal options. The memo to Finley recommends letting the contract run its course without renewing it in two years’ time.

The second contract, valued at $428,000, is a sole-source deal to provide the Defence Department with technical support for software installed aboard 17 ships and seven facilities on shore. The memo says Public Works will not cancel the contract “for reasons of operational requirements and proprietary rights.”

Another 13 Public Works contracts do not include the integrity framework clause, so they cannot be cancelled.

“Should any of these contracts have a follow-on requirement once expired, (Public Works) or (Shared Services Canada) will put them up for competition,” the Finley memo says.

“In some cases, there may be a need to utilize HP Canada, for example, if they have the intellectual property rights, in which case the public interest exception could apply.”

Shared Services Canada has 13 of its own contracts with HP Canada, worth a total of $85 million. But only one of those deals — worth $13,000 — has the integrity framework clause. The contract expires in June, and the Finley memo recommends letting the deal run out.

Neither Public Works nor HP Canada immediately responded to requests for comment.

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