National Security Exception (NSE)

The National Security Exception (NSE) is a provision found in most of Canada's domestic and international trade agreements. It allows Canada to exclude a procurement from some or all of the obligations in those agreements when doing so is necessary to protect national-security interests. National Defence describes it in DAOD 3016-0, National Security Exception Under Trade Agreements.

Canada applies the exception where a procurement is indispensable for national security or indispensable for national defence, as set out in Public Services and Procurement Canada (PSPC) briefing material. The exception exists so that Canada is not required to compromise its security interests by applying trade-commitment obligations.

What the exception removes from a procurement

The NSE can remove some or all trade-agreement requirements. These include obligations concerning competitive tendering, tender periods and other procurement procedures. The CanadaBuys guidance on trade-agreement principles explains that the exception allows a procurement to be excluded from these obligations where national-security interests require it.

Where it is necessary to protect national security, an NSE may allow a procurement to proceed through a limited competition or a non-competitive approach. The Office of the Procurement Ombud describes this use in its page on the national security exception.

Approval and documentation before award

An NSE is not invoked informally. The responsible department must explain the security rationale and obtain approval at the assistant-deputy-minister level from the department with delegated contracting authority, such as PSPC. This approval must be in place before contract award.

The Treasury Board Directive on the Management of Procurement requires departments to document the invocation. The file must include the approval letter signed by the appropriate assistant deputy minister, the rationale, and the justification for the procurement strategy.

How the NSE has appeared in practice

PSPC invoked the NSE for procurements of goods and services needed to respond to the COVID-19 pandemic, following a request from the Public Health Agency of Canada. The department's briefing material to the Standing Committee on Government Operations and Estimates records this use.

The exception also shows up in published notices. One CanadaBuys notice stated that all aspects of the request for information, and any resulting solicitation or contract, were subject to the NSE and excluded from all trade-agreement obligations. The NSE can therefore apply to requests for information, solicitations and resulting contracts.

What the NSE does not remove

An NSE does not exempt a procurement from every other requirement. The Government Contracts Regulations, sole-source justifications and applicable departmental policies continue to apply. The NSE is a government authorization that affects a procurement's trade-agreement obligations. It is not a supplier certification, and it does not excuse a supplier from solicitation or contract terms.

What an NSE notice means for a supplier

• Read the NSE statement in the notice to see which trade-agreement obligations the buyer has set aside.
• Expect a limited competition or a non-competitive approach in some cases, and do not assume the usual open tendering steps will apply.
• Comply with all remaining solicitation, contract, security, technical and administrative requirements.
• Treat the NSE as a statement about the buyer's process, not as an exemption for your own bid.