IRB Eligibility Criteria

There are five eligibility criteria that an IRB contractor must demonstrate when they submit an IRB transaction to Industry 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 Industry 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 clearly and demonstrably brought about by either the IRB contractor or one of the IRB contractor's eligible parties as a result of 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. IRB contractors shall provide evidence of causality including situations where IRB commitments are flowed down to eligible parties. Evidence of causality includes but is not limited to, a history of events in the development of transactions and any supporting written documentation. (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:

Where an Indirect IRB Transaction is for the purchase of goods or services from a Canadian source, and such goods and services are similar to those that the purchaser had acquired in Canada prior to the date of identification of the IRB. The CCV of the IRB Transaction shall be determined only with respect to the increase that the IRB Transaction will provide over the average amount of orders placed by that purchaser for those goods or services from the Canadian source during the three years preceding the date of identification of the IRB Transaction.

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 will only be accepted provided the activity meets the IRB Eligibility Criteria and does not occur prior to the date of identification of the IRB Transaction.

Eligible Party

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 its subsidiaries, divisions and subdivisions; and first tier suppliers related to the performance of any part of the work under the contract. Canadian-owned companies with less than 500 employees (including first-tier suppliers) will not be considered as Eligible Parties without written approval of the IRB Authority.

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. The definition of the CCV formula can be found in the IRB model contract.

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.