National Security Exceptions (NSE)

A national security exception, abbreviated NSE, is a provision in Canada's trade agreements that allows the government to exclude a procurement from some or all of the agreements' obligations. It applies when Canada considers the exclusion necessary to protect its national-security interests. The provision exists so that trade commitments never require Canada to compromise those interests (CanadaBuys: general principles of trade agreements).

In Canadian practice, the exception is tied to procurements that are indispensable for national security or national defence, and to cases where an open competition could create a defence or security risk. It is a decision about whether trade-agreement rules apply. It is not a blanket exemption from every procurement rule, and suppliers should read it that way.

How the exception is invoked

The NSE comes from the national-security provisions of Canada's trade agreements, including the Canadian Free Trade Agreement (CFTA) and its international trade agreements. For a Public Services and Procurement Canada (PSPC) Acquisitions Program requisition, the client department seeking an NSE must provide a request letter from its responsible Assistant Deputy Minister (ADM) or equivalent. The request must explain the procurement and how it relates to the applicable national-security language in the trade agreements, including CFTA Article 801 where relevant (CanadaBuys: trade agreement applicability).

In defence procurement, a client such as the Department of National Defence must explain the security rationale. Approval comes from the department holding delegated contracting authority, such as PSPC, at the ADM level before contract award (Office of the Procurement Ombud).

What the notice in procurement documents says

Once an NSE is invoked and applied, the procurement documents must carry a notice. It reads: “This procurement is subject to a national security exception and is, therefore, excluded from all of the obligations of the trade agreements.” Suppliers reviewing a solicitation can look for this statement to confirm the exception has been applied (CanadaBuys: trade agreement applicability).

What an NSE does and does not remove

A properly invoked NSE can remove trade-agreement obligations such as open, non-discriminatory competition requirements. It can also support limited competition or a non-competitive approach where that is necessary to protect national security (Office of the Procurement Ombud).

It does not, by itself, remove other requirements. The Government Contracts Regulations, sole-source justifications and departmental procurement policies continue to apply (CanadaBuys: general principles of trade agreements). The NSE is also distinct from ordinary security requirements in a solicitation. It concerns whether trade-agreement obligations apply, so it does not exempt a supplier from security screening, contract-security, technical or financial requirements.

Where the exception has been used

• Defence and national-security procurements, where an open and competitive process could pose a security risk.
• Procurements of goods or services indispensable for national security or national defence.
• Limited-competition and sole-source procurements, where the approach is necessary to protect national-security interests and is properly justified.
• Emergency purchasing: the Public Health Agency of Canada asked PSPC to invoke the NSE for federal purchases of goods and services required to respond to the COVID-19 pandemic (PSPC briefing on the use of the national security exception).

What it means for a supplier

If a solicitation states that an NSE applies, the trade-agreement rights you would normally rely on, such as open and non-discriminatory access, no longer apply to that procurement. Do not assume the procurement is sole source or that competition is prohibited. The government still has to justify its chosen approach and follow the applicable rules. Keep meeting every solicitation and contract requirement that remains, including security, technical and financial conditions, and check the procurement documents for the NSE notice before deciding how to bid.