Procurement Strategy for Aboriginal Business - Report on 2010 and 2011

Executive Summary

Aboriginal Affairs and Northern Development Canada (AANDC) is pleased to release the Procurement Strategy for Aboriginal Business (PSAB) Report for the years 2010 and 2011. Since the last PSAB report, AANDC has continued to make concerted efforts in implementing the Federal Framework for Aboriginal Economic Development (FFAED) commitments that led to success in enhancing procurement opportunities for Aboriginal businesses across Canada.

This report showcases the PSAB achievements for 2010 and 2011,Footnote 1 capturing the delivery of outreach, training, Aboriginal businesses' registration and partnerships within the public sector and with the private sector. AANDC has worked in collaboration with federal departments and agencies to enhance the participation of Aboriginal businesses as suppliers of goods and services to federal departments and agencies through the delivery of the PSAB. In 2010, Aboriginal businesses secured $59 million in PSAB set aside contracts while they won $84 million in 2011, which represents a 42% increase from 2010 and 73% from 2009. Although there have been significant gains in Aboriginal procurement, the PSAB continues to address the gap of economic prosperity between Aboriginal and Non-Aboriginal businesses.

Over the last 15 years, Aboriginal businesses have competed for and won $4.8 billion in overall federal procurement contracts including approximately $1 billion of set aside contracts, representing a significant increase since the implementation of the PSAB. The PSAB serves as a fundamental cornerstone for enabling Aboriginal businesses. It supports the Government of Canada's priority of increasing the self-reliance and prosperity of Aboriginal Canadians and communities and addresses the under-representation of Aboriginal businesses in the federal contracting processes by advancing Aboriginal participation in procurement activity and access to business expertise and services. In addition, AANDC has strategically leveraged PSAB by promoting Aboriginal businesses' capacity outside the federal government and engaging provincial governments and industry's key players.

The success and effectiveness of PSAB continues to be recognized by key stakeholders across Canada. As stated by the Canadian Council for Aboriginal Business in its Promise and Prosperity – The Aboriginal Business Survey: "At a relatively small cost to government and taxpayers, PSAB helps strengthen Aboriginal business bidding capacity, competitiveness, and Aboriginal employment." As well, the Assembly of First Nations in its Public sector Procurement in Canada: Possible Actions to Increase First Nations Opportunities and Benefits came to the conclusion that the PSAB "…has had significant impact. With its strong mandatory set-aside provisions for goods, services and construction destined primarily for Aboriginal populations, and its establishment of Aboriginal business contracting targets for departments, the strategy has made good use of its 'teeth'."

In addition, the demonstrable and continued success of the PSAB and supportive approaches to procurement was reiterated by Tom Jenkins, Special Advisor, in Canada First: Leveraging Defence Procurement through Key Industrial Capabilities, report to the Minister of Public Works and Government Services, February 2013: "The significant number of success stories in Canada demonstrate clearly the value of a supportive, proactive procurement strategy and the exceptional long-run economic impact that can result when government investment is well-targeted"

This report shows how AANDC has continued to commit to Aboriginal businesses' participation in the Canadian economy by strengthening and leveraging the PSAB as a catalyst for Aboriginal economic wellbeing and growth.

The Procurement Strategy for Aboriginal Business: Background

The PSAB, led and implemented by AANDC, is a Government of Canada initiative. Since the PSAB was launched in 1996, AANDC works with other government departments to help Aboriginal firms gain access to the overall federal procurement process. All federal government departments and agencies with a contracting budget in excess of $1 million are encouraged to conduct contracting activities with Aboriginal businesses on behalf of the Government of Canada.

The PSAB is a market-driven solution that is consistent with the Government of Canada Contracting Policy and operates with economy, efficiency and effectiveness (set-asides do not increase costs). The PSAB contributes to business development and viability by setting the stage for Aboriginal businesses to compete and be sustainable at minimal cost to taxpayers (For PSAB criteria please see Annex A). The PSAB promotes active measures by leveraging existing government networks, resources and processes. As well, it helps eligible Aboriginal businesses enhance their business capacity by competing for federal government contracts; establishing partnerships and marketing products (goods, services, construction); demonstrating their capabilities; and entering into supply chains. As a result, Aboriginal procurement has increased more than tenfold since 1996.

AANDC in collaboration with the PSAB coordinators in each participating department has taken steps to increase Departmental awareness of PSAB requirements and benefits and improve performance objective setting and reporting. A more customized relationship with departments, as well as increased outreach activities and PSAB training has led to greater departmental endorsement of the PSAB. In addition, AANDC works closely with Public Works and Government Services Canada (PWGSC) which "provides annual federal Aboriginal business procurement data results from Government departments and agencies to AANDC" (For Roles and responsibilities, please refer to Interpretation Bulletin – Roles and Responsibilities within the Government of Canada).

Aboriginal Businesses Directory (ABD)

As outlined in the Interpretation Bulletin: Roles and Responsibilities within the Government of Canada, AANDC is mandated to maintain a national Aboriginal business directory where all PSAB-registered Aboriginal businesses are listed. The Aboriginal Business Directory (ABD),Footnote 2 which is managed and maintained by AANDC and hosted by Industry Canada (IC) is an online Directory that increases Aboriginal business visibility and helps federal and provincial governments, as well as the private sector, to determine if and where Aboriginal capacity exists.

In 2009, the Federal Framework for Aboriginal Economic Development (FFAED) committed to increasing the number of PSAB registered Aboriginal businesses and enabling them to participate in the federal procurement and the Canadian economy. Therefore, AANDC conducted activities such as enhancing and streamlining the PSAB registration process and signing Memoranda of Understanding with federal partners to increase the Aboriginal businesses visibility. By migrating the Aboriginal Businesses database to Industry Canada's Canadian Companies Capabilities database, AANDC ensured a better data collection and increased awareness of the ABD. As a result, the Aboriginal Procurement Business Partnership Directorate (APBP) registered 467 Aboriginal businesses in 2010 and 565 in 2011. At the end of 2011, a total of 1,148 Aboriginal businesses were registered in the ABD. However, it should be noted that there is a significant number of Aboriginal businesses entering and exiting the ABD for a number of reasons such as business closure, lack of capacity to bid on Federal contracts or business no longer meeting the PSAB criteria.Footnote 3 AANDC continues to work on increasing registration renewal as a part of its strategy to maintain the ABD.

PSAB Highlights for 2010 and 2011

The Government of Canada renewed its commitment to fostering Aboriginal participation in the Canadian economy through the Federal Framework for Aboriginal Economic Development (FFAED). In support of the FFAED commitments, AANDC continues to work closely with federal departments and agencies to increase awareness of the impact of PSAB in enhancing procurement opportunities for Aboriginal businesses as a tool for business empowerment. On an annual basis, AANDC provides guidance to departments and agencies through its national PSAB coordinators network. Members of the PSAB coordinators network work closely with contracting and procurement officials within their departments and agencies. AANDC supports and encourages federal departments and agencies in setting reasonable and achievable objectives and advises on Aboriginal business capacity. The majority of federal departments and agencies (including some departments that do not have a contracting budget in excess of $1 million) encouraged to set up PSAB objectives have been very cooperative and worked with AANDC to improve their PSAB achievements. AANDC continues to work towards the Government Contracting Policy to ensure that PSAB remains an economical, efficient and effective tool that takes into consideration the constant change of the departmental reality and the Aboriginal capacity. AANDC also reports on the previous year's achievements.

Beginning in 2010, there has been an increase of 10% in terms of dollar value of the PSAB departmental performance objectives. As illustrated in Figure 1, in 2010, 95% of the departments and agencies to which PSAB applies reported on their achievements. 86% of them set up PSAB performance objectives of which 67% met their objectives. In 2011, 94% of the departments and agencies committed to PSAB provided their PSAB reports and 83% set performance objectives where 82% met their performance objectives. Despite the vast improvement of departments' and agencies' participation in the PSAB, there are still challenges for some departments and agencies meeting their targets. In order to help increase PSAB performance objectives achievement, AANDC continues to provide comprehensive advice and recommendations addressing the lack of awareness of the PSAB process, the varying purchasing strategies, the requirements and the Aboriginal business capacity.

Figure 1: PSAB Performance Objectives & Achievement

Description of Figure 1

Set Performance Objectives

  • 2010: 86%
  • 2011: 83%

Met/Exceeded Performance Objectives

  • 2010: 67%
  • 2011: 82%

2010 was the first year AANDC began the implementation of the FFAED commitments toward strengthening Aboriginal procurement. The percentage of set aside contracts grew to 20% in 2010 and to 42% in 2011 from FFAED launch. Aboriginal businesses won set aside contracts for a total of $59 million in 2010. They improved upon this by further securing $84 million of set asides in 2011. (See Figure 2) Continued collaboration and support from federal departments and agencies led to a 73% increase in the value of Aboriginal secured set aside contracts from 2009 to 2011. It should be noted that over the last 15 years (1997 to 2011) Aboriginal businesses won a total of $4.8 billion in overall federal procurement contracts, of this amount $1 billion were directly attributed to PSAB. This progress confirms the PSAB's impact upon Aboriginal businesses growth and development.Footnote 4

Figure 2: Value of PSAB Set-asides 2009-2011

Description of Figure 2

Set-asides

  • 2009: $49 million
  • 2010: $59 million
  • 2011: $84 million

It should be noted that PSAB departmental performance objectives vary from year to year depending on variables such as budget levels, procurement needs, Aboriginal capacity, etc.

PSAB in Action

Raising awareness

Promotion and outreach activities are key to informing stakeholders, Aboriginal businesses and Federal officials of the PSAB. The purpose is to raise awareness, not only of the PSAB, but of the Aboriginal business capacity and the procurement opportunities taking place through different vehicles in the federal procurement systems. A total of 109 targeted PSAB information sessions to government officials and Aboriginal businesses were provided in 2010-2011 and 2011-2012. As well, by participating in conferences and events AANDC performed 63 outreach activities in 2010-2011 and another 67 in 2011-2012.

Conferences

Through its participation in national conferences, AANDC has supported the Federal Framework for Aboriginal Economic Development objectives by focusing on procurement-readiness training, business promotion and facilitating network opportunities between Aboriginal businesses, government and industry.

In March 2010, AANDC hosted the PSAB National Training and Exhibition in Ottawa and, in November 2010, it hosted the PSAB conference in Winnipeg. In October 2011, AANDC participated in the Aboriginal Entrepreneurs Conference and Trade show in Ottawa. All three events were attended by over 200 Aboriginal entrepreneurs and Federal officials from across government departments. The participants gained insight and learned from national experts on various topics such as mentorship, business opportunities and the state of the economy. Aboriginal businesses increased their understanding of procurement through training and information sessions. The venues also provided reverse trade shows to encourage information sharing, networking, joint ventures and corporate procurement between Aboriginal businesses, government, industry and key sectoral stakeholders.

PSAB coordinators network

In 2009, AANDC created the PSAB coordinators network in order to establish a closer and more customized relationship with the federal departments and agencies involved with the PSAB. Quarterly meetings are held with PSAB coordinators to provide them with updates and to ensure the continuous availability of the team to all federal entities involved with the PSAB. A face-to-face meeting with the network members was held at the PSAB National Training and exhibition in 2010 and at the Aboriginal Entrepreneurs Conference and Trade Show in 2011. PSAB coordinators had the opportunity to meet among themselves and also meet with Aboriginal businesses attending the event. AANDC continues to work towards increasing departmental awareness about PSAB and to increase the number of representatives within the federal departments and agencies.

PSAB is a Catalyst for Aboriginal Businesses Success

In line with the FFAED, AANDC has focused on strengthening the PSAB by enhancing data and performance measurement as well as policy and program proposal linkages. It is also working to develop integrated, partnership-based approaches to major opportunities and to leverage partnership agreements and strategies to enhance participation of Aboriginal businesses in contracting opportunities inside and outside the federal government.

Collaboration within the federal government to streamline and improve PSAB tools

A Memorandum of Understanding with Public Works and Government Services Canada: Data Collection and analysis improvement

AANDC initiated a Memorandum of Understanding (MOU) with Public Works and Government Services Canada (PWGSC) in 2011 on data collection and analysis improvement. The purpose of the MOU is to provide AANDC with comprehensive data on departments' procurement activity with Aboriginal suppliers and access to contracting data to verify if businesses are eligible under the PSAB and that they are registered in the ABD. Finally, accessing meaningful contracting data allows AANDC to analyze departmental PSAB performance and the gaps and opportunities for each department with respect to Aboriginal procurement.

MOU with Industry Canada: PSAB registration improvement

In 2011, an MOU with IC was signed to provide an online tool for Aboriginal businesses to self-register in the Aboriginal Business Directory and showcase their business information and capacity. The online database also expedited the registration process for Aboriginal businesses and provides an enhanced tool to track registration and business data. The ABD serves as a centralized search engine that can be accessed by Aboriginal businesses, government and industry to identify Aboriginal business capacity and promote procurement opportunities.

The data in the ABD includes business ownership structure, gender, contact information, products and services and exporting information. The ABD is an important tool in helping Aboriginal businesses to access business opportunities.

Collaboration with provincial governments

AANDC has promoted the PSAB model to provincial governments and noted an increased interest in adopting Aboriginal procurement policies. In January 2011, an MOU with the Ministry of Aboriginal Affairs (MAA) of the Province of Ontario was signed. Both AANDC and the MAA worked together to identify and support Aboriginal procurement by strengthening coordination on outreach events in the province of Ontario and committing to sharing information, best practices and lessons learned. The collaboration was also successful in linking the Aboriginal Business Directory with the Ontario database. Based on the MOU, a two-year Provincial Aboriginal procurement pilot was launched in 2012.

AANDC is working closely with other provincial governments such as Manitoba to promote Aboriginal procurement for the benefit of Aboriginal businesses across Canada.

Partnerships with the private sector

In managing the PSAB, AANDC has identified a number of important lessons and best practices which it has begun to apply to identify Aboriginal business opportunities in many other areas. Business partnerships have been initiated in key sectors, such as the marine, mining, energy/electricity and transportation. AANDC has recognized that meaningful Aboriginal participation in major opportunities is multi-dimensional, involves working closely with both government and private sector and exceeds traditional departmental mandates and program authorities. As a result modern institutional relationships and models are evolving in relation to these major opportunities, addressing key governance and coordination gaps within the federal government and with Aboriginal partners. These integrated models support Aboriginal-driven decision-making and provide a more comprehensive approach to relationships with industry.

Some success stories include:

Electricity Sector - Analysis of Aboriginal procurement strategies

AANDC partnered with the Electricity Sector Council to develop a report examining the Aboriginal procurement strategies employed in the electricity and renewable energy sectors which are expected to invest $293.8 billion from 2010 to 2030 to maintain existing assets and meet market demand. This presents significant opportunities for Aboriginal businesses, many of which are already a part of the industry supply chain. The report provides case studies, information and guidelines that other businesses can use to increase Aboriginal procurement such as:

  • Examples of an effective and inclusive enterprise wide Aboriginal procurement requiring the cooperation of several layers within the company
  • A strategic template to assist businesses in developing their own Aboriginal procurement strategy.
  • Increased awareness for Aboriginal businesses of sector opportunities.

AANDC will continue to support the Council to ensure that report findings are analyzed and steps taken to address gap, barriers and opportunities for Aboriginal entrepreneurs within the sector.

Saskatchewan Potash Industry - Feasibility study

AANDC partnered with the Saskatchewan Tribal Council (STC) to perform a feasibility study for the creation of a central Saskatchewan First Nation procurement business model. The feasibility study showed that the Saskatchewan potash industry could follow the successful Alberta Oil Sands model for its Aboriginal procurement. AANDC will continue to support an increased Aboriginal procurement in the potash industry by providing funds and helping Aboriginal businesses and employees to position themselves and benefit from major projects opportunities.

Conclusion

As part of the regular program management process the PSAB will undergo a program evaluation in 2013-2014 fiscal year. AANDC will take advantage of this opportunity to showcase the success of the PSAB in increasing Aboriginal participation in the economy, and to continue improving its policies and practices with regard to procurement.

Increasing business participation is a key driver of economic growth, and an important factor in translating that economic development into poverty reduction and other socio-economic benefits. AANDC will continue to support Aboriginal businesses in increasing their economic impact through strategic activities.

Annex A

The four main elements of the PSAB are:

  1. Mandatory Set Asides: Set Asides are mandatory when federal contracts for goods and services are worth more than $5,000 and delivered to an area, community or group in which Aboriginal people comprise at least 80% of the population.
  2. Voluntary Set asides: Federal departments and agencies may choose to voluntarily set aside procurement opportunities for Aboriginal-owned businesses when operational requirements, best value, prudence, probity and sound contracting management can be assured and where Aboriginal capacity exists.
  3. Joint ventures and partnerships: PSAB encourages joint ventures and partnerships to allow Aboriginal and non Aboriginal partnerships to bid on opportunities that have been set aside for Aboriginal businesses. This is to help Aboriginal businesses build their capacity and benefit from knowledge and competency transfers.
  4. Use of Aboriginal criteria: In awarding contracts, departments are encouraged to request Aboriginal sub-contracting plans, either as a mandatory requirement or a rated evaluation criteria. The Aboriginal criteria can be applied only if International Trade Agreements are exempt.

Aboriginal businesses interested in bidding on PSAB set asides have to register and meet the PSAB criteria. An Aboriginal business, under the PSAB, can be:

or

When an Aboriginal business has six or more full-time employees, at least thirty-three percent of them must be Aboriginal persons, and this ratio must be maintained throughout the duration of the contract. The bidder must certify in its submitted bid that it is an Aboriginal business or a joint venture as described above.

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