Interpretation Bulletin - Procurement Strategy for Aboriginal Business - Mandatory Set-Aside

Introduction:

The Procurement Strategy for Aboriginal Business (PSAB) is a policy designed to stimulate Aboriginal development and increase Aboriginal business participation through a program of mandatory and selective set-asides, and supplier development activities as approved by cabinet.

Background on the Mandatory Set-Aside for Aboriginal Business

The Federal Government Procurement Community as well as the Aboriginal Business Community have raised concerns about the clarity of the policy on the application of the "Mandatory Set-Aside for Aboriginal Business".

Confusion regarding this component of the PSAB appears to stem from various understandings on how to apply a mandatory set-aside under PSAB.

In the cabinet approved policy for PSAB, the section on Aboriginal Population Set-Aside states: "All procurements over $5,000 for which Aboriginal populations are the primary recipients are to be restricted exclusively to qualified Aboriginal suppliers where operational requirements, best value, prudence, probity and sound contracting management can be assured. There is no upper limit. Procurements under $5,000 may be set aside but it is not mandatory. Procurements over $2 million will continue to be subject to the procurement review process."

Four Treasury Board Contracting Policy Notices (CPN) have been created for PSAB, two of which describe the Mandatory Set-Aside component. These two CPNs are:

CPN 1996-2:

Section 5. "... requires all Contracting Authorities, where a procurement is valued in excess of $5,000, and for which Aboriginal populations are the primary recipients, to restrict this procurement to qualified Aboriginal suppliers where operational requirements, best value, prudence and probity, and sound contracting management can be assured. Contracts valued at less than $5,000 may also be set aside for qualified Aboriginal suppliers if it is practical to do so."

CPN 1997-6

Section 2.6.1: " The PSAB requires all contracting authorities, where the procurement is valued in excess of $5,000, and is destined primarily for Aboriginal populations as defined in TBS Contracting Policy Notice 1996-2, to restrict the procurement exclusively to qualified Aboriginal suppliers where operational requirements, best value, prudence and probity, and sound contracting management can be assured."

It also adds:

Section 2.6.2: "Given the significance of the Aboriginal population set-aside to the PSAB, departments and agencies should always, as an initial step in any procurement destined primarily for Aboriginal populations, set aside the procurement in order to conclusively determine whether there are any qualified Aboriginal suppliers. This can be done by means of appropriate advertising either in the Government Business Opportunities publication or by the electronic bidding methodology, as necessary. Only if this first step fails to identify qualified Aboriginal suppliers, should the procurement be then opened up to a larger market."

Exceptions

CPN 1996-2, Section 10. "Procurements subject to any of the current and future Comprehensive Land Claims, as well as procurements within National Park co-management agreements take precedence over this policy."

"Where the restriction to use Aboriginal business would cause severe economic dislocation, departments and agencies may request authority of the Treasury Board to exclude specific contracts or classes of contracts from the mandatory requirements of this policy."

In consultation with the Treasury Board Secretariat and Public Works and Government Services Canada, Indian and Northern Affairs Canada (INAC), is issuing the following interpretation of the "Mandatory Set-Aside for Aboriginal Business"

In order to qualify as a Mandatory Set-aside, the Aboriginal population has to be the primary recipient or end user of the actual goods or services being procured.

An examples of a Goods contract, where the Aboriginal population is the primary recipient; therefore the mandatory PSAB set-aside applies.

  • Correctional Services buying tepees or sweat lodge equipment for the Aboriginal inmates.

Examples of Goods contract not falling under the Mandatory set-aside component of PSAB as the recipient of the goods is the Government of Canada.

  • RCMP buying cars for its officers. Although the RCMP office is located in an Aboriginal community, the end users are the RCMP officers and not the community members.
  • Health Canada buying heating fuel for its offices located within an Aboriginal community. The fuel is being used to heat Health Canada's offices and not buildings that belong to the Aboriginal community.

Examples of Service contracts, where the Aboriginal population is the primary recipient; therefore the Mandatory PSAB set-aside applies.

  • Health Canada procuring nursing services for an Aboriginal population.
  • National Defence contracting for land clean up in order to return the land to the Aboriginal community. The end user will be the Aboriginal community as the land will belong to them.

Examples of contracting opportunities for services, not falling under the Mandatory set aside component of PSAB as the recipient of the services is the Government of Canada.

  • Natural Resources is contracting for a land survey in an Aboriginal community but the final report is for Natural Resources' internal use.
  • INAC is hiring a consultant for a study relating to Aboriginal programs and or Aboriginal people. The result of the study will be for INAC's use only. This requirement does not fall under the Mandatory set-aside component of PSAB as the Aboriginal people or community will not be receiving the report and none of the results would be used by them.
  • Transport Canada is procuring construction services for an airport building located in an Aboriginal community. This would not fall under the Mandatory set-aside component of PSAB because the recipient is Transport Canada and its employees.

Considerations:

It is the responsibility of the requisitioning office (client department) to decide if a contracting opportunity is to be set aside under this program, including initial determination of a mandatory requirement.

However, when a requisition is received which is not designated as a set-aside, and the recipients of the goods, services or construction to be contracted are for an Aboriginal population, the contracting officer should contact the client department and draw their attention to the potential omission. When the client indicates that the procurement is not to be set aside, the file should be annotated accordingly and the procurement may then proceed.

Definition

Aboriginal Population:

  • an area, community or group of communities in which Aboriginal people make up at least 80% of the population;
  • a group of people for whom the procurement is aimed in which Aboriginal people make up at least 80% of the group.

Recipient:

  • Person who receives the goods or the services, the end user.