Contract Clause

Contract clauses are the building blocks of every government procurement agreement—specific provisions that spell out who does what, when, and what happens if things go sideways. In federal procurement, these aren't just legal boilerplate. They're policy instruments that enforce everything from Indigenous participation requirements to environmental standards across billions in annual spending.

How It Works

When PSPC or any federal department issues a contract, the agreement contains dozens of individual clauses covering different aspects of the relationship. Some are standard across all federal contracts—payment terms, dispute resolution, termination rights. Others are mandatory based on contract value, risk level, or specific policy objectives. The Supply Manual sets out which clauses must appear in federal contracts and under what circumstances.

Here's the thing: these provisions aren't negotiable in most government contracts. When you respond to a solicitation on Buy and Sell, you're agreeing to a pre-set framework of clauses. Treasury Board and PSPC maintain standard clause libraries that contracting authorities pull from. A DND contract for IT services will include clauses on security clearances and data protection. An SSC telecom agreement adds provisions about service levels and network reliability. The clause selection depends on what you're buying and the associated risks.

Certain clauses carry real weight. Performance security clauses might require you to post a bond. Labour provisions mandate compliance with provincial employment standards and federal labour codes. The relatively new forced labour clause—introduced in 2024—prohibits goods made with forced labour anywhere in your supply chain and has real teeth that can result in contract termination. Each clause creates specific obligations you'll need to track throughout contract performance, and some come with penalties you don't want to trigger.

Key Considerations

• Mandatory vs. discretionary clauses: Some provisions must appear in every contract above certain thresholds. Others are optional based on the contracting authority's judgment. Understanding which is which helps you anticipate what you'll face.

• Flow-down requirements: Many federal contract clauses require you to impose the same obligations on your subcontractors. You can't just agree to labour standards or environmental requirements yourself—you need to cascade them through your entire supply chain.

• Audit and inspection rights: Standard clauses typically give the government broad rights to audit your records and inspect your facilities. This isn't theoretical. Departments exercise these rights, particularly on high-value or sensitive contracts.

• Conflicting provisions: When a solicitation includes special conditions that contradict standard clauses, seek clarification before bidding. The order of precedence clause tells you which provision wins, but ambiguity creates risk you'll end up wearing.

Related Terms

Forced Labour, Performance Security, Contracting Authority

Sources

• Government of Canada Supply Manual - Official federal procurement policy and procedures

• Canada Buys - Procurement Portal - Federal government procurement information and opportunities

• Buy and Sell - Federal government tender opportunities

Before you sign anything, read every clause carefully and confirm you can comply throughout the contract period. Your proposal commits you to terms that will govern the relationship for months or years.