Introduction to banking
Created in 2009 and further enhanced in 2015, the banking policy allows companies to undertake business activities in Canada before the timelines of an individual procurement and bank the investments for credit against future obligations. The objective of this policy is to attract investment in Canada in advance of a project moving forward and to motivate contractors who currently have existing obligations to complete them early and extend successful supplier relationships.
Guidelines for banking
Cycles of government procurement and business activities do not always align. Banking encourages bidders to engage and invest early with Canadian industry, well ahead of securing a defence contract, and encourages contractors to extend successful business relationships with Canadian companies beyond their existing contractual requirements.
- The policy allows banking of transactions in two circumstances: a) in advance of an upcoming procurement; and, b) as overachievement on a completed obligation.
- Companies wishing to open a bank account should complete, sign, and submit to the ITB Branch the Declaration of Acceptance of Conditions for Banking
- Potential contractors and tier 1 sub-contractors (i.e., eligible donors) may open accounts and bank transactions in advance of an upcoming procurement; however, only contractors can bank overachievement activities.
- Once a bank account is open, a company can then apply to bank specific activities. All banked activities are deposited into the company's bank account and are available for withdrawal towards specific procurement projects.
- Before entering the bank, activities proposed in advance of an upcoming procurement must:
- meet the eligibility criteria related to causality, incrementality, timing, and eligible party, outlined in Annex 1
- be valued based on the Canadian content value (CCV) guidelines contained in Annex 1
- align with the most recent terms and conditions that are published on the ITB website at the time of the transaction's submission.
- For transactions proposed to the bank as over achievements, eligibility and CCV valuation will not be reassessed, with the exception of the eligible party criteria. Please see below and Annex 1 for more details.
- The ITB Branch will assess proposed transactions for eligibility in an expeditious manner; however, the timeline that determines official acceptance of a proposed activity will be strongly influenced by the quality of information provided by the company.
- The ITB Branch will respond in writing to the company on the eligibility of a proposed transaction. If the activity is accepted, it will enter the bank.
- Proposed activities for the bank are only assessed against the eligibility criteria, and not against Value Proposition (VP) criteria. Companies may elect to apply a banked activity towards a Value Proposition requirement; however, companies acknowledge and agree that acceptance of the activity into the bank does not in any way signal or guarantee VP eligibility in a future bid. In addition, a banked transaction submitted in a VP proposal will be assessed during evaluation against a project's eligible party criteria.
- A transaction involving foreign currency should be presented to the bank in Canadian currency values. See Annex 2 for currency conversion details.
Limits to banked activities
- A banked activity, its associated credits, and any updated values may remain in the bank for up to ten (10) years, all from the date that the transaction is first accepted into the bank by the ITB Branch. A company must complete all withdrawals within that period.
- In the event that a company loses a bid, the company can redeposit any banked activities that were included in the bid. The ten-year timeframe would continue along the existing schedule and is not reset to zero. The company may also apply to bank any other non-banked activities from the losing bid.
- While in the bank, banked activities are deemed as meeting the eligibility criteria. Banked activities are subject to annual reporting and verification while in the bank, before credits are awarded.
- A banked activity and its associated credits are treated as a whole entity, withdrawn from the bank as such and applied to a single procurement obligation, based on its total Canadian content value (CCV). A banked activity that meets the pooling criteria below may be pooled upon withdrawal, wherein the banked transaction and any of its associated credits may be withdrawn in increments and applied to different obligations.
- Pooling criteria for transactions:
- the total CCV is not less than $50 million; and
- the transaction involves strategic and long-term impacts on the Canadian recipient company, in areas such as research and development, first purchase of innovative Canadian technologies, unique market leadership, world product mandate, global value chain, consortia, small-and medium-sized business (SMB), and/or technology advancement.
- Pooling criteria for transactions:
- Banked activities may be used to satisfy an ITB/IRB obligation on a procurement (i.e. the requirement to invest an amount equal to the contract value in Canada), up to a maximum of fifty (50) percent of the total obligation value. Banked transactions may be submitted in a VP proposal at bid closing, but the proposal must contain non-banked transactions valued at not less than 50 percent of the value of all identified transactions in the proposal.
- Companies will respect the communications provisions of all RFP processes as they engage with the ITB Branch in the banking process. Companies should ensure that transactions are proposed to the bank for consideration well in advance of the RFP release on the procurement being pursued.
- A company may apply to bank overachievement activities. For the purposes of banking, an overachievement is defined as the amount of credits achieved on a completed project that are in excess of that project's overall (i.e.100 percent) obligation value. Over achievements eligible for banking are those that were achieved between the date of early completion of the obligation and the end date of the achievement period.
- For banking overachievements, the company will:
- meet all of its overall obligations (i.e. 100 percent, regional, SMB, VP, direct) on a project early, before the end of the achievement period;
- elect to continue on with selected indirect transactions and its annual reporting of them, until the end of the project's achievement period; and,
- apply, within one (1) year of final credit notification, to bank those overachieved portions of the selected transactions.
- Overachievements may only be banked once. A banked transaction involving an overachievement, or any portion thereof, is not eligible to be re-banked at a later date as part of a subsequent overachievement banked transaction.
- Only indirect transactions are eligible for overachievement.
- Once all contractual economic commitments have been met, the start of the subsequent reporting period will be used for the purpose of calculating the overachievement amount.
- Transactions that are proposed to the bank as overachievements will already have met the eligibility criteria and CCV valuation that were set out in the original contract. They will not be reassessed for eligibility or valuation in the banking process, with the exception of the following:
- Transactions proposed to the bank must be assessed to confirm that they meet the eligible party criteria, both for entry into a company's bank account and later, for application to a future project.
- With respect to any overachievement bank transaction, the bank account holder is deemed to be the donor for the purposes of eligible party assessment.
Annual reporting, verification, and monitoring
- Bank account holders will report on their banked transactions on an annual basis to the ITB Branch. One annual report will be submitted each year for all of the transactions in a company's bank account. The annual report will document the performance achieved on the banked transactions during the previous year.
- The annual report shall include:
- the CCV value of the achievement claimed for the past year.
- the CCV value of the achievement claimed to date in all the years since the transaction was accepted into the bank.
- an update on any changes to transaction details, such as the CCV percentage or company contact information;
- a description of significant achievements, activities, and delays; and
- a Certificate of Compliance related to the company's achievements and compliance with the Lobbying Act, signed by the senior company comptroller in respect of the banked transactions for which there was activity in the previous year.
- The ITB Branch will review and verify each annual report. Following the verification process each year, the company will receive an annual statement showing the status of its banked transactions and the value of the related total CCV value, claims, and credits. The ITB Branch will complete the verification process in an expeditious manner, within six months of receiving the annual report.
Withdrawal of banked activities
- Banked activities that are withdrawn must be applied either to a bid proposal or an existing contract. They will be considered as already having met the ITB eligibility criteria and will not be reassessed with the exception of "eligible party." Banked activities will undergo confirmation that they meet a project's specific eligible party criteria.
- When including a banked transaction into a VP proposal at bid closing, a bidder will include a copy of the approved bank transaction sheet and the most recent bank statement for that banked transaction, authorized by the ITB Branch and dated before the date of release of the final RFP to which the VP proposal responds.
- When including only a pooled portion of a banked transaction into a VP proposal at bid closing, a bidder will include the most recent bank statement for that portion of the banked transaction, authorized by the ITB Branch and dated before the release date of the RFP to which the VP proposal responds.
- In both cases, the company should ensure that the bank transaction value in its VP proposal is equal to the value on the bank statement.
- The value of a bank transaction withdrawn from the bank will be based on its total CCV value. This value will become an obligation to be fulfilled on the contract to which the banked transaction is applied. Any credits achieved on the transaction while it was in the bank will transfer to the contract as well.
- A banked transaction involving a multiplier, future sales achievement or enhanced CCV may be included in a VP proposal at bid closing. Only the value of the transaction's initial investment will be counted for VP evaluation and scoring purposes. The full multiplied future sales or enhanced CCV value of the transaction will apply as usual after contract award.
- Once a banked transaction is withdrawn and is applied to a current contractual obligation, that transaction is subject to the same contract terms, including reporting, verification, and crediting, as the other transactions on that project.
Information Annex 1: Eligibility criteria for banking
Causality—Each banked transaction shall be one which was brought about by the company, due in part to a current or anticipated obligation to Canada. It shall not be one which likely would have been entered into if an obligation had not existed or been anticipated. Causality may be demonstrated to a specific project or, more broadly, to a company's obligations in general.
The company must demonstrate causality by providing a detailed statement using the space provided in the transaction sheet template. The statement will outline the steps and timelines involved in its decision about a business activity and clearly show the link between the steps and decision on a business activity and Canada's IRB/ITB Policy.
The company will provide evidence that will certify causality in support of its detailed statement.
Incrementality—Banked transactions shall involve new work in Canada.
Should a banked transaction involve the purchase of goods or services from an existing Canadian supplier to the company, the incremental method of calculating the 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 transaction to the ITB Branch;
- Credit will be awarded only on those purchase amounts that exceed the three-year average, in each of the reporting years.
The incremental method of calculation outlined above does not apply in cases where the product or service being purchased in the transaction:
- is substantially different than what was previously purchased;
- involves a different end use (i.e. market sale or application) than what was previously purchased; or
- follows a competitive process to re-select the Canadian supplier.
The company must demonstrate incrementality by providing a detailed statement on incrementality and provide supporting evidence.
Eligible Party—Banked transactions shall be undertaken by an Eligible Party.
At the time that a transaction is proposed to the bank in advance of a future procurement, an Eligible Party is the bank account holder and all its subsidiaries, divisions, and subdivisions.
At the time that a transaction is proposed to the bank as an overachievement on a completed obligation, an Eligible Party is the bank account holder and any of its former eligible parties on the completed obligation. With respect to any bank overachievement transaction, the bank account holder is deemed to be the donor for the purposes of Eligible Party assessment.
At the time that banked transactions are withdrawn from the bank and applied to a bid proposal or an existing contract, an Eligible Party is subject to the terms and conditions associated with the specific project where the bank transaction is being applied.
For proposed Eligible Parties that are Canadian Companies with less than 500 employees, companies must certify that the Canadian company understands and has the capacity to undertake obligations with respect to a Contract. Capacity includes factors such as: company size, product offerings, market conditions, corporate ownership, ITB management processes, level of Canadian content, etc. A certification template is attached in Annex 2.
Timing—Transactions proposed to the bank in advance of an upcoming procurement should involve new work in Canada. Specifically, transactions must begin after September 2009 and credits will only be available for the portion of the work that occurs after the date that the transaction is submitted to the bank for consideration.
Overachievement transactions proposed to the bank will include credits from a previous project that were achieved between the date of early completion of the obligation and the end date of the achievement period.
Level of Technology—Banked transactions shall involve an advanced level of technology, with applications in Canadian advanced technology industries.
Canadian Content Value—Banked transactions shall involve a Canadian Content Value of no less than 30% of the total value of the transaction.
Information Annex 2: Banking process clarifications
Communications and confidentiality
- It is understood that the bank account holder will submit corporate and transactional business information to the ITB Branch in the context of banking, some of which may contain information that is sensitive and confidential to bank account holder.
- The ITB Branch will ensure, to the best of its ability, that this information is protected, stored, and used according to the Government of Canada's information management and security guidelines.
- Subject to applicable federal laws and processes, such as the Access to Information Act, the Privacy Act and the Library and Archives of Canada Act, the ITB Branch will not release or disclose outside the Government of Canada any of the bank account holder's specific corporate, transactional, or proprietary business information.
- Data may be used by Innovation, Science and Economic Development Canada for internal policy analysis purposes.
Companies with a shared-ownership structure
- Transaction donor companies may be jointly-owned by more than one bank account holder. In certain cases, that donor company may also have its own bank account.
- In these cases, each bank account holder may submit transactions involving that same donor company, as long as the transactions involve discrete and separate business activities.
- Each bank account holder may withdraw only those transactions that are in its own bank account.
Currency conversion for banking
- A transaction that involves foreign currency should be presented to the bank converted to Canadian currency.
- During submission, the bank account holder should convert the total Canadian content value (CCV) value of the transaction based on the Daily Noon Exchange Rate published by the Bank of Canada on a date related to transaction commencement (i.e. date of submission to bank, date of investment, and date of sub-contract award).
- During annual reporting, the bank account holder should convert the value of any annual claim associated with the transaction based on the Annual Average Exchange Rate published by the Bank of Canada for the year in which the claim takes place.
- Each year, the total CCV value of the transaction will be adjusted by the bank, based on the Daily Noon Exchange Rate published by the Bank of Canada on or about December 1 each year, and will be confirmed in the annual bank statement. The value of annual claims and credits will not be adjusted annually for currency.
- Banked transactions shall be undertaken by an Eligible Party.
- At the time that a transaction is proposed to the bank in advance of a future procurement, an Eligible Party is the bank account holder and all its subsidiaries, divisions, and subdivisions.
- At the time that a transaction is proposed to the bank as an overachievement on a completed obligation, an Eligible Party is the bank account holder and any of its former eligible parties on the completed obligation. With respect to any bank overachievement transaction, the bank account holder is deemed to be the donor for the purposes of Eligible Party assessment.
- At the time that banked transactions are withdrawn from the bank and applied to a bid proposal or an existing contract, an Eligible Party is subject to the terms and conditions associated with the specific project where the bank transaction is being applied.
- For proposed Eligible Parties that are Canadian Companies with less than 500 employees, companies must certify that the Canadian company understands and has the capacity to undertake obligations with respect to a Contract. Capacity includes factors such as: company size, product offerings, market conditions, corporate ownership, ITB management processes, level of Canadian content, etc. A certification template is attached in Annex 2.
Value of banked transactions
- The value of a banked transaction is based on the estimated total CCV (or the value of all approved credits, if currency conversion makes this amount higher).
- When including a banked transaction into a VP proposal at bid closing, the bank account holder will include: i) a copy of the approved bank transaction sheet; and, ii) the most recent bank statement for that banked transaction, authorized by the ITB Branch and dated before the date of release of the final RFP to which the VP proposal responds.
- When including only a pooled portion of a banked transaction into a VP proposal at bid closing, the bank account holder will include the most recent bank statement for that portion of the banked transaction, authorized by the ITB Branch and dated before the release date of the final RFP to which the VP proposal responds.
- In both cases, the company should ensure that the bank transaction value in its VP proposal is equal to the value on the bank statement.
Companies wishing to open a bank account should contact the banking team to request the necessary documentation, which includes:
- Declaration of Acceptance of the Terms for Banking
- Annex 1—Eligibility criteria and Canadian content value
- Annex 2—Transaction sheet template
- Annex 3—Annual reporting template
The company reviews and signs the Declaration and its annexes and then returns them to the Industrial and Technological Benefits Branch the banking team. Once received, the banking team will then confirm that the bank account is open.
The company may then begin to submit proposed transactions to the bank, using the transaction sheet template. The banking team will review each proposed activity and notify the company in writing regarding eligibility and acceptance into the bank.
The company will submit an annual report to the banking team outlining its progress during the previous year on all of its accepted transactions, using the annual reporting template.
What is banking?
Banking is a feature of the Industrial and Technological Benefits (ITB) Policy that allows companies to undertake business activities in Canada before the timeframe of a procurement, bank them and use these investments later for credit to fulfill ITB obligations.
Who can bank?
Potential contractors and Tier 1 sub-contractors may open bank accounts.
How do I start banking?
Companies first open a bank account and then they can start submitting proposed transactions.Contact the banking team at Innovation, Science and Economic Development Canada (ISED) to get started.
Do I have to identify, up front, what procurement I am banking against?
There is no need to specifically identify the procurement you are banking against at the time of submitting a transaction to the bank.This information is only provided later when the transaction is withdrawn from the bank and applied towards a procurement.
What are the eligibility criteria for banked transactions?
The eligibility criteria for banking are similar to those for all transactions, with a few key differences. For a detailed explanation of each banking eligibility criteria, see the Banking Guidelines on the ISED website.
How do I withdraw a transaction from the bank?
Banked activities may be withdrawn from the bank and used towards a current or future procurement. Bank account holders are provided with the process and templates to do so when they open a bank account. Contact the banking team at ISED with questions.
Can I use a banked transaction towards a Value Proposition (VP) requirement?
You can apply to use a banked transaction towards meeting a VP requirement. However, acceptance of the transaction into the bank does not guarantee VP eligibility or points.
What happens to my banked transactions if I lose a bid?
You can re-bank activities that were included in a losing bid.
Where can I find more details?
See the Banking guidelines.
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