IRB Eligibility Criteria

There are five eligibility criteria that an IRB contractor must demonstrate when they submit an IRB transaction to Innovation, Science and Economic Development Canada for review: causality, incrementality, Canadian Content Value (CCV), timing and Eligible party.

Causality
IRB contractors must demonstrate that decisions to place business activity with a Canadian company have a link to their IRB obligation. They need to prove to Innovation, Science and Economic Development Canada that the business activity would likely not have happened had it not been for the IRB requirement.

"Causality" defined in the IRB terms and conditions:

Each IRB Transaction shall be one which was brought about by either the contractor or one of its eligible parties, due in part to a current or anticipated IRB obligation to Canada. It shall not be one which probably would have been entered into if an IRB obligation had not existed or been anticipated. Causality may be demonstrated to a specific project or more broadly to a company’s IRB obligation in general.

The Contractor must demonstrate Causality by providing a detailed statement on Causality, which outlines the steps and timelines involved in its decision about a procurement or investment activity and which clearly shows the link between the steps and decision on a business activity and Canada’s IRB Policy.

The Contractor will provide evidence of Causality in support of its detailed statement,which includes written documentation such as sub-contract documentation, correspondence, meeting documents, corporate presentations, etc. (See IRB Causality Guidelines)

Incrementality
Allows IRB contractors to use current suppliers on a particular business activity. If an IRB contractor has an established business relationship on a particular part or service and, because of an IRB obligation, they choose to increase this work, the increase is eligible for IRB credit. This ensures that the new work that has a link to the IRB obligation is counted but work that was occurring before the IRB obligation is not factored in.

"Incrementality" defined in the IRB terms and conditions:

Should an IRB Transaction involve the purchase of goods or services from an existing Canadian supplier to the Contractor or its Eligible Party, the incremental method of calculating the IRB Credits will apply, as follows:

  • A three-year average of previous purchases is calculated, based on the three years immediately preceding the date of identification of the IRB Transaction to the IRB Authority;
  • IRB Credit will be awarded only on those purchase amounts which exceed the three year average, in each of the Reporting Periods.

The incremental method of calculation outlined above does not apply in cases where the product or service being purchased in the IRB Transaction:

  • involves Direct Work;
  • is substantially different than what was previously purchased;
  • involves a different end use (market sale, application, etc) than what was previously purchased; or,
  • follows a competitive process to re-select the Canadian supplier.
Timing
IRB contractors must complete their obligations within a specified period of time. The IRB period usually begins with the first formal notification to industry for a specific project and is completed at the end of the overall procurement contract. The period that IRB contractors have to compete their obligations vary from project to project. Example: Company "A" has an IRB obligation of $150 million and the IRB period is from 2011 to 2018. This means that Company "A" must fully complete its IRB obligation by 2018, and that only work that was identified and completed between 2011 and 2018 can be considered for IRB credit.

"Timing" defined in the IRB Terms and Conditions:

IRB Transactions shall be implemented within the Achievement Period. IRB Transactions or substitute IRB Transactions identified after the Effective Date must meet the IRB Eligibility Criteria and must only involve work occurring after the date of identification of the IRB Transaction to the IRB Authority.
Eligible Party
This means the company that provides the IRB work to a Canadian company. An IRB contractor and its major suppliers are eligible parties to the contract.

"Eligible Party" as defined in the IRB terms and conditions:

Eligible Party means the provider of the IRB, and consists of: the IRB contractor, its parent corporation, and all the parent’s subsidiaries, divisions and subdivisions; and the contractor’s Tier One suppliers related to the performance of the work under the contract, their parent corporations and all the parent’s subsidiaries, divisions and subdivisions.

For proposed Eligible Parties that are Canadian Companies with less than 500 employees, Contractors must clearly demonstrate that the Canadian Company has the capacity to undertake IRB Obligations with respect to this Contract. Capacity includes factors such as: company size, product offerings, market conditions, corporate ownership, IRB management processes, level of Canadian content, etc.

The Contractor shall be fully responsible to Canada for all IRB Commitments related to this Contract, regardless of flow down arrangements with Eligible Parties.

Canadian Content Value (CCV)
CCV is measured in Canadian dollars and is the portion of the selling price of a product or service associated with the work actually performed in Canada.

All proposed IRB transactions must be valued in terms of the CCV. Only the Canadian labour and materials of a particular work package is counted toward an IRB contractor's obligation; all foreign overhead, labour and materials for any particular transaction is excluded from CCV. Example: if an IRB contractor places a $1-million contract with a Canadian company and the CCV of the particular work package is 65 percent, the contractor would receive credit for $650 000.
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