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Failure to Launch? The Federal Procurement Strategy for Indigenous Business Struggles to Get off the Ground, 25 Years After Its Inception

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Procurement Bulletin


There are over 37,000 Indigenous-owned businesses in Canada, providing goods and services in all sectors of the economy. Since the establishment of the federal Procurement Strategy for Aboriginal Business (“PSAB”) in 1996, Indigenous businesses have competed for and won over $3.3 billion in federal contracts.

This sounds like progress. But is it?

Since Canada purchases approximately $22 billion of goods and services annually, purchases from Indigenous business equate to less than 0.6% of the half-a-trillion spent in the quarter century since the policy came into force.

It is impossible to know how many contracts should have been set aside through the PSAB, but were not. The lived-experience of Indigenous business owners raises the obvious question—how many more opportunities would be available if the PSAB, recently renamed the Procurement Strategy for Indigenous Business (“PSIB”), was treated as a true mandatory requirement or Cabinet directive in federal procurement?

What is the PSAB?

PSAB applies “mandatory and voluntary set-asides” for Indigenous businesses in federal procurement. These “set asides” are intended to increase federal procurement opportunities for Indigenous businesses.

What is an “Indigenous Business”?

An “Indigenous business” is defined under the policy as a business majority owned and controlled by Indigenous persons. Prior to August 2021, one-third of the business’ full-time employees were required to be Indigenous peoples in order to qualify. Indigenous Services Canada (ISC) administers an online directory of Indigenous businesses[1] that it has determined meet these requirements.

How Does the Policy Work? 

A federal contract must be set aside for Indigenous businesses if:

  • The contract is in an area, community or group in which Indigenous people make up more than half of the population; and
  • The Indigenous population will be the primary recipient of the goods, services or construction.

A federal department may voluntarily set aside a contract for Indigenous businesses if:

  • Indigenous businesses have capacity; and
  • Sound contracting management can be assured.[2]

Why has the PSAB achieved such modest success? One explanation is that federal buyers are simply not applying it consistently.

A Failure to Consider the PSAB—Even When It’s Obvious

In 2013, the Innu of Ekuanitshit challenged a federal procurement decision[3] after the contracting authority failed to apply the PSAB—or even consider its application—in a procurement where the mandatory set-aside should have been considered.

A fire had completely destroyed a wharf adjacent to the Ekuanitshit reserve and the village of Minigan. The responsible federal ministers did not apply the PSAB when procuring reconstruction services, despite it being an obvious requirement: the Ekuanitshit had an interest in being involved in the wharf reconstruction, the Ekuanitshit reserve community would be the primary community benefiting from the wharf, and the wharf was the most important infrastructure of the Ekuanitshit community.

The Ekuanitshit applied to the Federal Court for judicial review of the ministers’ decisions with respect to the procurement. The Federal Court held that the PSAB requires contracting authorities to determine whether a federal contract is subject to a mandatory set-aside for Aboriginal businesses. The federal ministers had not analyzed the PSAB to identify whether the project was subject to a mandatory set-aside, did not establish whether the Innu of Ekuanitshit were the primary recipients of goods and services related to the reconstruction of the wharf, and did not determine whether Innu of Ekuanitshit were an Aboriginal population within the meaning of the PSAB.

The court found that the ministers knew or should have known that the application of the PSAB to the project was something to carefully consider. The court also found that the minsters addressed the question “in a casual and cavalier manner, not even taking the trouble to thoroughly consider the criteria”.[4] The court agreed with the Innu of Ekuanitshit that the decision to disregard the PSAB was unreasonable.

Unintended Barriers to Natural Justice?

If an Indigenous business identifies a failure to apply the PSAB, the time, expense and resources required to challenge a procurement is, in many cases, prohibitive. 

The usual forum for procurement disputes, the Canadian International Trade Tribunal (Tribunal), is accessible and cost-efficient. However, Indigenous businesses cannot access the Tribunal bid dispute process to challenge a procurement (including the failure to apply the PSAB), because measures for the benefit of Indigenous peoples and businesses in procurement are excepted from the application of the principles of “open and accessible competition” under trade agreements. The irony being that the very trade agreements that allow governments to invoke measures for the benefit of Indigenous bidders, prevent Indigenous businesses access to the Tribunal when these measures are not applied or an Indigenous business is treated unfairly in public sector procurements. As a result, Indigenous business owners are forced to engage in lengthy and expensive litigation in order to hold the federal government accountable.

The recent case of Asokan Business Interiors v. Department of Finance[5] is a case in point. Asokan was a pre-qualified Aboriginal business whose bid on a federal contract was rejected for failing to comply with the bid criteria.

Asokan submitted a complaint to the Tribunal, arguing that their bid was indeed compliant. The Tribunal dismissed the complaint on that basis that it did not have the jurisdiction to resolve the dispute.[6] The Tribunal found this lack of recourse perplexing, and pointed out the particularly troubling fact that despite considering “options” for a redress mechanism since the mid-1990s, the government had yet to implement a dispute resolution process for Aboriginal businesses.

As noted by the Tribunal, Indigenous suppliers currently have less rights of access to justice than non-Indigenous Canadians and foreign suppliers, who can access the Tribunal when the trade agreements are applicable. The Tribunal viewed this as an important systemic differentiation that was highlighted by Asokan’s complaint.

The PSAB Is Now the PSIB—But, What’s Changed?

On August 6, 2021, the Government of Canada announced[7] that it will be implementing a mandatory requirement for federal departments and agencies to ensure a minimum of 5% of the total value of its contracts are held by Indigenous businesses. To support this mandatory target, ISC announced that it will invest $35.2 million over five years to modernize the PSAB, including expanding the scope of the mandatory set-asides and broadening the definition of eligible “Indigenous business”.

Since this announcement, ISC has issued guidance to Indigenous businesses[8] and federal procurement officers[9] on set-asides, although a formal policy does not appear to be available at the time of writing. While the guidance reflects the promised changes, the absence of a formal directive or mandate may leave the PSIB in the same grey zone as the PSAB. One of the promised changes—removing the Indigenous employee percentage required to qualify as an Indigenous business—is a positive step. However, this change is not currently being applied for Modern Treaty or self-governing areas. As indicated in the guidance, consultations with rights-holders must first be conducted. One questions why this requirement remains in any form. While it is a positive step that the non-compliance with the definitions for Indigenous businesses under Comprehensive Land Claims Agreements has finally been remedied; no other disadvantaged group under federal procurement policies is required to have any percentage of disadvantaged persons from their group as employees in order to qualify under federal procurement programs.[10]

It appears to be early days for the implementation of the new PSIB. However, the changes, while positive, may have marginal impact if the PSIB has the same inconsistent and unaccountable application as the PSAB.

[1] Aboriginal Business Directory, online.

[2] Where a contract has been set aside under the PSAB but no Aboriginal business has submitted a compliant bid, then the solicitation must be reissued, either as another set aside (with adjustments) or publicly in accordance with any trade agreements that might apply.

[3] Council of the Innu of Ekuanitshit v. Canada (Fisheries and Oceans), 2015 FC 1298.

[4] Para. 122.

[5] Asokan Business Interiors v. Department of Finance, PR-2021-045.

[6] In a further ironic twist – the RFB itself contained a clause indicating the Tribunal as a venue for dispute resolution. The issue with this clause has been a long-standing irritant between the Tribunal and the government. See our previous Bulletin on this clause: "No “Do-Overs”: Even If The Government Provides Confusing Information, Bidders Remain Responsible For Meeting Bid Dispute Filing Deadlines" (April 28, 2021).

[7] Public Services and Procurement Canada News Release, “Government of Canada announces federal-wide measures to increase opportunities for Indigenous businesses” (August 6, 2021).

[8] Indigenous Services Canada, “Procurement information for Indigenous business owners” (November 26, 2021).

[9] Indigenous Services Canada, “Indigenous business procurement information for federal procurement officers” (November 26, 2021).

[10] See our recent Bulletin on the government’s plans to develop diversity in federal procurement: “Developing Diversity in Federal Contracting – PSPC Launches Coaching Service for Bidders from Diverse Groups” (August 10, 2022).

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