One of the most critical elements in achieving meaningful economic reconciliation with Canada’s Indigenous communities is increasing the opportunities for Indigenous owned businesses. Whether it is small businesses getting that important early-stage contract, or established businesses to secure that “next level” project which will help them continue to grow into new markets, supporting these businesses to achieve those goals will help bring true reconciliation that much closer.
One of the tools that Governments of all political stripes have historically used to pursue their economic and social policy goals is procurement. Whether for regional development, ensuring domestic supply of critical supplies for Canada’s military, or to achieve specific goals including economic reconciliation with Canada’s Indigenous communities, government procurement can have a powerful impact on businesses and communities. It is a public policy tool that governments have complete control over, and when they use it, it can help set an example for the rest of Canada’s business community.
In 2021 the Trudeau government committed to supporting Indigenous entrepreneurs as a critical element of economic reconciliation by using the federal procurement process to provide increased economic opportunities to First Nations, Inuit and Métis businesses. This included a requirement for federal departments and agencies that a minimum of 5% of the total value of their contracts are awarded to Indigenous owned businesses. This mandatory requirement was to be phased in beginning in 2022-2023 and to be fully implemented by the end of 2024-2025. Under this approach, 92 Federal departments and agencies were provided implementation deadlines with 32 federal organizations scheduled to meet or exceed the 5% target by the fiscal year of 2022 to 2023. An additional 20 were scheduled to meet or exceed this target by 2023 to 2024, with the remaining 44 organizations meeting or exceeding the 5% target by the end of 2024 to 2025.
To ensure this approach to supporting economic growth and reconciliation is implemented across the Federal government, each department and agency is required to report on whether they have achieved their 5% target and if not, what they are doing to improve their performance. Looking back at the first year of implementing this new approach, the Government reported that 28 of the 32 federal organizations met the 5% target in fiscal 2022-2023 with 14 organizations (56%) achieving over 10 percent of contracts awarded.
In the government’s most recent report on Indigenous procurement it notes that in 2023-2024, 72 of 95 federal organizations (76%) reported that they plan to meet the mandatory minimum target of 5%, while thirteen organizations reported they will not. As a result of these commitments in departmental spending plans, Indigenous Services Canada (ISC) expects that “Government of Canada will be buying more from Indigenous businesses.”
While this is positive news for Indigenous businesses, the federal government must continue to pressure all departments to meet this mandatory requirement, along with addressing some ongoing concerns with how this policy is being implemented.
The Federal government's own reports show that one fact is clear: the federal organization with highest numbers of procurement transactions or large projects and budgets are encountering more significant challenges related to Indigenous procurement than smaller organizations. In 2022 to 2023, 12 out of the 15 top performers in the 3 phases of implementing this focused approach to support indigenous businesses through government procurement were small or very small federal organizations.
It should also be noted that some federal expenditures are considered exceptions and therefore not included under the 5% procurement goals including “… overseas operations, emergency crisis, national security, research and development (space projects), commissionaires, interpreter/transcription contracts, royalties and rights payments, legal database, publications and periodicals, software licenses and proprietary systems.”
As the Department of National Defense (DND) accounts for over 85% of these exceptions, it means that over $6.4 billion in federal spending falls outside the Indigenous procurement goals. This may reflect the mission critical nature of some procurement but it also points to the need to increase the capacity of Indigenous companies to successfully bid on DND contracts directly, or in partnership with larger firms.
While the majority of federal departments are on track to meet the 5% mandatory target, there are always ways to improve performance across departments. One recommendation from Indigenous business leaders is that the total dollar value and the number of contracts awarded should contribute to the achieving the 5% requirement for departments. This will help support smaller indigenous businesses that are more capable of winning and building on smaller government contracts or participating in business partnerships.
Another recommendation is to provide sufficient “heads up” to Indigenous businesses about government procurement plans as the time between a tender opening and closing can be short. Providing information on procurement plans can also help ensure Indigenous businesses know in advance what procurement opportunities are upcoming and adequately plan for potential tender notices.
In November 2023, the Government provided a high-level summary of the Federal Departments' and Agencies' Indigenous Procurement Plans from 2023 to 2024 and has promised to provide these highlights earlier in the fiscal year to allow Indigenous institutions and businesses to better prepare for future opportunities in the supply chain.
While advance notice of opportunities allows Indigenous businesses to build capacity directly or through partnerships, the capacity of Indigenous businesses to service a potential contract remains a key factor in government procurement decisions. In the summary of departmental procurement plans it identified the top three areas where indigenous businesses capacity is greatest and what Government is prioritizing to procure from Indigenous business, namely: Information equipment and parts, office equipment and furniture including parts and informatics services.
The summary also noted where the “capacity gap” of Indigenous businesses is greatest, namely: informatics services, professional services, and business services. These are areas where governments, industry and indigenous entrepreneurs can work together to raise awareness of existing services and develop new partnerships that strengthens the capacity and creates opportunities for indigenous owned businesses in these sectors.
The Trudeau government continues to see government procurement as a key policy instrument in their efforts to address the systemic changes needed for meaningful economic reconciliation. The advances most government departments have made should be applauded - but much more work remains. This includes implementing the recommendations made in 2019 by the Canadian Council for Aboriginal Business (now the Canadian Council for Indigenous Business) in its report - Partnerships in Procurement: Supporting Indigenous Business Growth through Improving Federal Secondary Procurement from Corporate Canada
The federal Government has committed to consult with indigenous entrepreneurs and non-indigenous owned businesses in 2024-25 to identify challenges and best practices related to increasing Indigenous procurement by federal departments and agencies. It is critical that indigenous and non-indigenous industry leaders fully participate in these consultations to help ensure the underlying policies and actual performances of government departments help achieve the shared goals of increasing procurement from indigenous owned businesses and building a stronger foundation for economic reconciliation.
