Mandate commitment: Creation of a 5% target in procurement-Indigenous business—Standing Committee on Indigenous and Northern Affairs—June 19, 2020
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Key messages
- The Government of Canada is committed to increasing the participation of Indigenous businesses in federal procurement, to do so, we are working with Indigenous Services Canada and the Treasury Board of Canada Secretariat to create a new target to have 5% of federal contracts awarded to businesses managed and led by Indigenous Peoples
- Public Services and Procurement Canada (PSPC) has awarded 12 contracts to 10 Indigenous businesses, logistics and air charter services, accommodation and cleaning services, IT professional services, masks and thermometers, these contracts are collectively worth nearly $40 million
Background
The mandate letter for the minister of Public Services and Procurement includes a commitment to “work with the minister of Indigenous Services and the president of the Treasury Board to create more opportunities for Indigenous businesses to succeed and grow by creating a new target to have at least 5% of federal contracts awarded to businesses managed and led by Indigenous Peoples.”
Indigenous Peoples in Canada, as well as their business ventures, face unique challenges, and this is reflected in lowered levels of participation in federal contracting. Indigenous Peoples in Canada comprise approximately 5% of the overall Canadian population; however, they are consistently awarded a lower percentage of federal contracts.
The 5% target seeks to leverage government spending to help grow Indigenous businesses and improve the socio-economic conditions of Indigenous communities. This has the potential to improve the lives of not just Indigenous Peoples, but all Canadians.
Public procurement in Canada (federal, provincial, municipal) represents approximately $200 billion in annual economic activity. Of this, federal spending averages $22 billion per year. Around the world, governments are leveraging public procurement spending to meet public social and economic objectives. The Organization for Economic Cooperation and Development (OECD), highlights the importance of social procurement, noting that “from an economic perspective, public procurement is recognised as a lever for improving the efficiency and effectiveness of public spending.”
Research from the National Aboriginal Economic Development Board suggests that if the socio-economic conditions of Indigenous Peoples were such that they had the same access to economic opportunities as the average Canadian, over $27 billion would be added to Canada’s gross domestic product (GDP). In this light, using federal government procurement as a tool to effect socio-economic change for Indigenous Peoples should be thought of as an investment in Canada, as well as an important step in improving the relationship described by the prime minister in his mandate letters for each minister as being the most important to him—the relationship between Indigenous Peoples and Canada.
Developing a strategy to implement the new government-wide policy: 5 per cent of federal contracts awarded to Indigenous businesses
As the Government of Canada’s central purchasing agent, there are many opportunities for PSPC to set new strategies and implement meaningful approaches and tools, within its existing authorities, to further support the socio-economic goals of Indigenous communities.
“I am directing every single minister to determine what they can do in their specific portfolio to accelerate and build on the progress we have made with First Nations, Inuit and Métis Peoples”—Prime Minister of Canada, Minister Anand’s mandate letter, December 13, 2019.
Task teams comprising members from PSPC, Indigenous Services Canada, (ISC) and Treasury Board of Canada Secretariat (TBS) as well as the Department of National Defence (DND), Defence Construction Canada (DCC) and Shared Services Canada (SSC) have been established to examine and develop options to allow the government to achieve its 5% target.
Final review of the policy options by the task teams will take place in the summer with a goal of finalizing the way forward by fall 2020.
These task teams are examining a number of key issues including:
- value and volume: There are a number of ways to define a 5% target. Options currently being examined are to either have it based on the number of contracts awarded (volume), or another way could be based on the proportional value of contracts awarded to Indigenous businesses out of Canada’s annual spend (value)
- definition of ‘Indigenous”: Defining what is meant by a business “managed and led” by Indigenous Peoples is challenging. There are multiple definitions of what constitutes an Indigenous business with no one definition considered authoritative:
- as part of the Government of Canada’s response to the COVID-19 pandemic, ISC is funding the development of an ecosystem (database) of existing businesses certified by the Procurement Strategy for Aboriginal Business of ISC and directories owned and managed by Indigenous associations, this will provide the Government of Canada with an authoritative source for Indigenous suppliers of various COVID-19 related goods and services
- as part of its response to COVID-19, PSPC recently issued a request for proposal (RFP) for face masks in which it tested a new and simpler definition of 51% ownership for “Indigenous business”, previous definitions included a measurement of the number of Indigenous employees as well as ownership of the business
- tracking and reporting: Current financial and procurement systems do not capture and allow for accurate reporting of data related to contracts awarded to Indigenous businesses. Much work has been done to address these data gaps in PSPC’s new electronic procurement solution (EPS). Although the data is somewhat uncertain (year-to-year spend varies widely, and large projects can skew data), PSPC’s departmental statistics do appear promising. Over the last 2 fiscal years, PSPC as a common service provider awarded 844 contracts (including call ups and amendments) on average per year, valued at $492 million annually, to Indigenous suppliers. This represents nearly 4% of PSPC-Acquisitions Program total awarded procurement (based on value). And over the same 2 fiscal years, PSPC, under its own delegation, awarded 465 contracts (including call ups and amendments) on average per year, valued at $18.3 million annually to Indigenous suppliers, which represents 3% of PSPC total awarded procurement (based on value under its own delegation)
- engagement and consultations: In the process of developing a government-wide strategy for achieving the 5% target, consultations with Indigenous partners will take place with the assistance of ISC through established mechanisms and advisory bodies. In addition to the work being undertaken by the task teams, PSPC is also engaging with other government departments, especially those with large procurement budgets such as DND, Department of Fisheries and Oceans and Environment Canada to assist them with specific large procurements
- Indigenous business capacity: Aboriginal Peoples and communities are increasingly turning to economic development to improve their quality of life and build a bright future for their community members. According to the 2011 National Household Survey (NHS), there are more than 43,000 First Nations, Inuit and Métis in Canada who are business owners:
- the Indigenous economy contributes $32 billion dollars to Canada’s GDP annually, a figure that has been growing quickly in recent years. In 2017, there were nearly 19,000 businesses located in Indigenous communities (approximately 17,000 in First Nations communities and 2,000 in Inuit communities)
- according to the Canadian Council for Aboriginal Business (CCAB), and accounting for the distribution of Indigenous businesses across industries from which the federal government purchases goods and services, Indigenous businesses have the capacity to supply 24.2% of the goods and services purchased by the federal government annually—far in excess of the 5% target proposed
Current contracting efforts with Indigenous businesses
Over the last 2 fiscal years, PSPC under its own delegation, has awarded an average of 465 contracts (including call ups and amendments) per year to Indigenous suppliers, valued at $18.3M annually. This represents 3% of PSPC’s total awarded procurement under its own delegation (based on value). During that same timeframe, PSPC, as a common service provider, has awarded an average of 844 contracts (including call ups and amendments) per year to Indigenous suppliers, valued at $492 million annually. This represents 3.8% of PSPC’s total awarded procurement on behalf of other departments (based on value).
To support Indigenous businesses, PSPC increasingly incorporates requirements for benefits for Indigenous Peoples and businesses into federal procurement, such as through Indigenous benefits plans (IBP). These plans increase the possibility of Indigenous Peoples and businesses competing successfully for contracts and/or of participating in employment and training opportunities. For example:
- the Department of National Defence’ remediation work at Y-Jetty and Lang Cove in Esquimalt Harbour, British Columbia included direct training and labour hours, as well as sub-contracting to companies owned by members of the 2 Songhees and Esquimalt Nations
- a $2.8 million contract was awarded in July 2019 for seabed surveys in Hudson Bay, Québec, the contractor included an IBP to the requirement which utilized local Indigenous labour, training/skills and sub-contracts
- PSPC awarded a contract for sea urchin removal in Gwaii Haanas on behalf of Parks Canada which required commercial divers and vessels to conduct the removal of invasive sea urchins around an island in Gwaii Haanas National Park Reserve (Haida Gwaii). The RFP closed on January 28, 2019 and included an IBP
In addition, in response to the COVID-19 pandemic, PSPC has awarded 12 contracts to 10 Indigenous businesses, logistics and air charter services, accommodation and cleaning services, IT professional services, masks and thermometers. These contracts are collectively worth nearly $40 million. In addition, PSPC recently issued a request for proposal for 25 million non-medical face masks that is limited to Indigenous businesses only.
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