Procurement Strategy for Aboriginal Business: 2013 Annual Report - Business Development Directorate

Executive Summary

Indigenous and Northern Affairs Canada (INAC) is pleased to present the Procurement Strategy for Aboriginal Business (PSAB) Report for 2013.Footnote 1 The report for 2013 highlights the Government of Canada's continued progress and success in enhancing procurement opportunities for Aboriginal businesses across Canada. It also illustrates the continued strengthening and leveraging of the PSAB as a key catalyst in supporting Aboriginal business participation in the broader Canadian economy.  Since the inception of the PSAB in 1996, Aboriginal businesses competed for, and won, over $1 billion of set aside contracts. This active participation and contribution to Canada's economy also represents significant wealth, employment and income generation for Aboriginal people, businesses and communities.

After three consecutive years of growth in terms of set aside contracts, the value of set aside contracts for 2013 were to $82M from a previous high of $108M.  The report will explain the reason for the recent downturn, which should not be perceived as ineffectiveness of the program, rather the result of external events that impacted federal procurement as a whole.

PSAB continues to create networks and identify opportunities for Aboriginal business and, at the same time, collaborates with many levels of stakeholders, including

"At a relatively small cost to government and taxpayers, PSAB helps to strengthen Aboriginal business bidding capacity, competitiveness, and Aboriginal employment."

Canadian Council for Aboriginal Business

Provinces, Aboriginal organizations and the national PSAB Coordinators network.  The network is a collection of departments and agencies who, in concert, work to enhance the participation of Aboriginal businesses as suppliers of goods and services to federal departments and agencies.

PSAB continues to be linked to other programs internally at INAC and across the federal government to build Aboriginal Business capacity.

We thank you for taking the time to review the 2013 PSAB Annual Report and welcome any questions or suggestions you may have to improve the report. 

The Procurement Strategy for Aboriginal Business
10 Wellington Street, 11th Floor, Gatineau, QC
Telephone: 1-800-400-7677   /    Facsimile: 819-956-9837
Email: saea-psab@aadnc-aandc.gc.ca

Background

The Government of Canada launched the Procurement Strategy for Aboriginal Business (PSAB) in 1996 to help Aboriginal firms gain access to the federal procurement process.  The initiative is designed to increase the number of Aboriginal firms competing for and winning federal contracts, and more recently, in the private sector. It is administered by Indigenous and Northern Affairs Canada (INAC), in partnership with Public Services and Procurement Canada (PSPC), Innovation, Science and Economic Development Canada (ISED) and Treasury Board Secretariat (TBS) as well as all federal government departments and agencies with a contracting budget in excess of $1 million. The PSAB program utilizes four key elements to reach program objectives.  These elements are:

A full description of these elements can be found in Annex A at the end of the report.
The program elements, underpinned by the Aboriginal Business Directory (ABD), are key in advancing the participation and the ability of Aboriginal businesses to compete for various contracts, both federal and in the private sector.  The increased participation and success leads to an increase in capacity and creating expertise in diverse sectors.

Business Processes and Analysis

PSPC collects data from 108 federal department and agencies with the goal of obtaining data that is concise and reliable and verifies the information it receives.  Once the verification process is complete, the results are approved by the Treasury Board Secretariat.  It should be noted that the time frame from the start of the data collection process to the distribution of same data has a lag period of approximately 24 months.

INAC and PSPC have entered into an agreement whereby data shared by PSPC, would be scrutinized and verified to ensure reporting numbers were more accurate.  The results of the 2013 report reflect that process, and some data that may have been included in the past was verified and in some cases, removed as a result of this enhanced due diligence.

Figure 1 – Set Aside Contracts Awarded to Aboriginal Business, 1997 – 2013
This text represents the long description of Figure 1 – Set Aside Contracts Awarded to Aboriginal Business, 1997 – 2013

Figure 1 demonstrates the value of contracts awarded to Aboriginal companies.  Set-asides increased from $49 Million in 2009 to $84 Million in 2011, a 71% increase over two years. After increasing to almost $109 Million in 2012, the value of set asides fell back to just over $82 Million for 2013. The 23% decrease between 2012 and 2013 is the result of a combination of factors, including the bundling of contracts for larger procurements.

When analyzing open data sets for the 2012 and 2013 calendar years, it was found that overall procurement decreased from $11.0B in 2012 to $10.1B in 2013.  This represents a decrease of nearly $1B.

In analyzing the proportion of contracts won by Small and Medium Enterprises (SMEs), for the 2012 data, SMEs (fewer than 500 employees) won $6.4B in federal contracts (58% of total).  In 2013, SMEs won only $4.5B in federal contracts (45% of total). The reduction from $6.4B to $4.5B represents a 30% decrease.

As overall procurement is down; this decline has disproportionately affected SMEs, due, to the introduction of Shared Services Canada and the bundling of contracts, as well as comprehensive strategies, like the Defence Procurement Strategy and National Shipbuilding Procurement Strategy, which are consolidating requirements at a higher level.

Other events such as the introduction of the Deficit Reduction Action Plan and the data verification process have led to a reduction in the value of Aboriginal contracts.

Since the Procurement Strategy for Aboriginal Businesses (PSAB) inception in 1996, Aboriginal businesses competed for and won over $1B in set-asides In 2012-13, approximately $1.66M was spent on delivering the PSAB (and other procurement activities). 2012 set-asides amounted to $108M, indicating a return on investment of approximately 65:1.

While there has been an overall decrease in procurement, Aboriginal businesses have not been as adversely affected as other Canadian SMEs, due to the effectiveness of the PSAB program.

Aboriginal Business Directory

INAC is mandated to maintain a national Aboriginal Business Directory  (ABD), where all PSAB-registered Aboriginal businesses are listed.  This direction is outlined in the Roles and Responsibilities: Interpretation Bulletin within the Government of Canada.

The ABD is housed within ISED's, Canadian Companies Capabilities database and is a publicly available search engine for identifying Aboriginal, business suppliers. Since migrating, the ABD to IC's Canadian Companies Capabilities (CCC) database in 2011, INAC has ensured better integrity with data collection and verification methods while increasing awareness of the ABD. As a result, INAC registered 467 Aboriginal businesses in 2010, 565 in 2011 and 496 in 2012. As illustrated, in 2013 there were more than 1600 businesses registered. The ABD has been an effective tool for non-federal stakeholders such as provincial government and the private sector. This is reflected in the cooperation of partners in sharing hyperlinks on their respective websites.  The partners include Federal partners such as ISED and the Canada Business Network to non-government organizations (NGO's) such as University of British Columbia to the Private Sector including Hydro One, Union Gas and Businesslink.ca.  Efforts will continue to enhance the sharing of the ABD.

The maintenance and continued modernization of the directory is a key objective as there is significant work to do as a result of the ever changing participation of Aboriginal business.  Each year, roughly 30% of businesses enter or exit the ABD.

The diagram represents a snap shot of registration as of 2013.

Figure 2 – 2013 Aboriginal Registration in Aboriginal Business Directory
Province # of Registered
Businesses
Alberta 143
British Columbia 269
Manitoba 183
New Brunswick 22
Newfoundland and Labrador 55
Northwest Territories 87
Nova Scotia 34
Nunavut 73
Ontario 432
Prince Edward Island 4
Quebec 198
Saskatchewan 75
Yukon 28
TOTAL 1603

Collaboration/Partnering

PSAB as a Catalyst for Aboriginal Businesses Success

In line with the Federal Framework for Aboriginal Economic Development (FFAED), INAC 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.

INAC assists federal departments in applying PSAB policy by participating in Procurement Review Committees (PRCs), assessing Aboriginal business capacity, and identifying opportunities for set-asides.  Documentation is sent to members of the PRC for federal contracts valued at between $2 million and $100 million.

INAC reviewed a total of 322 Procurement Review Committee requirements in 2013-14.  28 of these (8.7%) already included provisions for a set-aside.  INAC intervened in a number of other requirements and, as a result, 7 more requirements (2.2%) were set aside under the PSAB.

Provincial Networking

In 2013, INAC continued working with other provinces to promote Aboriginal procurement for the benefit of Aboriginal businesses across Canada. In particular, the negotiation of a five-year MOU with the Manitoba Department of Infrastructure and Transportation was undertaken, which was signed in early 2013.

Manitoba

As part of a broader approach to intergovernmental cooperation, INAC initiated the development of a Memorandum of Understanding (MOU) with the Province of Manitoba's Procurement Services Branch.  Both organizations share an interest in promoting and fostering economic development through procurement among Aboriginal businesses, individuals and communities in Manitoba Region.   The five-year MOU formalizes the strong working relationship that currently exists and commits both parties to sharing information, best practices and strategies to assist Aboriginal businesses in accessing federal and provincial procurement opportunities.

Ontario

In January 2011, a Memorandum of Understand (MOU) was signed between INAC and the Province of Ontario's, Ministry of Aboriginal Affairs (MAA).   Discussions, based on the MOU, led to the launch of a two-year provincial Aboriginal procurement pilot in March 2012.  INAC  worked closely with Ministry of Aboriginal Affair MAA to share information on Aboriginal business directories, best practices, lessons learned on how to build and implement an Aboriginal procurement strategy that will increase Aboriginal business participation in bidding for and winning Federal and Provincial contracting opportunities.

The impacts of this MOU are:

  • Increased outreach activities to promote both the Federal and Provincial Aboriginal procurement programs.
  • Through an unofficial Provincial Network created by INAC, MAA has taken a leadership role by providing information and insight to other Provincial governments considering implementing an Aboriginal Procurement policy.  MAA has also shared documents including their Procurement tool kits with other provinces.
  • Promoting Inter provincial cooperation in increasing Aboriginal Business capacity

Partnerships with the Private Sector

In managing the PSAB, INAC 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. INAC 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.

Communication and Outreach

In efforts to increase the visibility of Aboriginal businesses, INAC has conducted, participated or organized several events or activities, such as enhancing and streamlining the PSAB registration process and signing Memoranda of Understanding (MOU).  The activities listed below demonstrate a commitment to the advancement of the PSAB as well as an increase in capacity of Aboriginal businesses, while adhering to legislation and regulations, both, within Canada and Internationally.

Despite the success of the PSAB, challenges remain for some departments and agencies to set and meet PSAB targets. Challenges include changes in human resources; negative perceptions of the PSAB, and a reluctance to set goals that might not be met. In order to help departments establish or increase PSAB performance objectives, INAC continues to provide comprehensive advice and recommendations addressing misperceptions of the PSAB process, assisting in the development of purchasing strategies, defining requirements and identifying Aboriginal business capacity.

This capacity building has led to successful relations with Canadian Council for Aboriginal Business, Native Women's Association of Canada and the Aboriginal Financial Institutions (AFI's) across Canada.

National Focus

Promotion and outreach activities are a necessity, to inform stakeholders, Aboriginal businesses and federal officials on the benefits of the PSAB. The purpose is to raise awareness, not only of the PSAB, but of Aboriginal business capacity and the procurement opportunities taking place through different vehicles in the federal procurement system. In 2013, the PSAB team participated in 41 separate events across Canada to provide awareness, provide updates and attend various shows to share information with government officials and Aboriginal businesses.  The total number of events attended since 2009 is close to 300.

Conferences

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

In 2013, PSAB and INAC participated in several Conferences and Trade shows.  These included: the Prospectors and Developers Association of Canada Convention, the Aboriginal Women's Business Entrepreneurship Network Conference and the Aboriginal Entrepreneurs Conference and Tradeshow.

Memorandum of Understanding with Public Works and Government Services Canada

PSAB and the Office of Small and Medium Enterprise (OSME) have continued to coordinate the delivery of educational PSAB material at outreach events and activities pursuant to an MOU established between the two in 2011. Under the MOU, OSME and PSAB have coordinated the delivery of PSAB presentations to industry and government stakeholders, informing them on the processes and policies of the strategy.

Overall, PSAB and OSME participated in seven joint sessions in 2013 where the two delivered information regarding their respective programs. These sessions spanned across Canada and included presentations to Aboriginal communities in Kamloops, Prince George, and Lillooet and to private and public stakeholders at conferences and awareness sessions in a number of provinces.

PSAB Coordinators Network

In 2009, INAC 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. In 2013, there were 61 PSAB Coordinators across government. 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, 2012 and 2013. PSAB coordinators had the opportunity to meet one another and also meet with Aboriginal businesses attending the event. INAC continues to work towards increasing departmental awareness about PSAB and to increase the number of representatives within the federal departments and agencies. 

 

Program Integrity

INAC is responsible to conduct compliance audits of Aboriginal businesses, which include joint ventures and partnerships, who declare they meet the PSAB criteria by registering in the ABD.  Compliance audits are conducted to ensure the integrity of the PSAB. These audits include pre-award, post-award and random audits of Aboriginal businesses (including joint ventures) to validate that they meet the PSAB criteria which enables them to bid on set asides.

In the past, Consulting and Audit Canada (CAC) and Auditing Services Canada (ASC) performed the PSAB audits. However, due to various reasons, including changes in federal government structures, in 2012 INAC hired a third party auditor to perform this function. In late 2012, the first of the compliance audits performed by a third party auditor were undertaken. Seven audits were initiated: two were post-award audits; one was a pre-award audit and four were random.

In 2013 the breakdown was as follows; Pre-award (6), Post award (2), Random (12), for a total of 20. With the appropriate level of capacity, a greater number of audits could be completed.  Of the 20 audits completed, 80% were found to be compliant. Of the four that were not found to be compliant; one failed to meet criteria, two businesses did not respond and one business closed.

There are plans to increase the audit process to ensure even greater program integrity.

Results

Regional

The PSAB can now track the number and value of set aside contracts by region. As can be seen in Figure 3, no set-aside contracts were awarded in 2013 within Prince Edward Island or Northwest Territories.  That is not to say that Aboriginal businesses from these areas were not awarded contracts in other areas of the country.

The majority of the contracts were awarded by Other Government Departments, as opposed to the Public Service and Procurement Canada, Acquisition Program (PSPC-AP), directly, by a ratio of approximately 3:1.

Figure 3 – Set Aside Contracts by Region
Provinces PSPC-AP) Other Government Departments Totals
N/A – Region not identified. $0.25 $30.11Footnote 2 $30.35
British Columbia $3.48 $10.83 $14.31
Manitoba $8.49 $4.95 $13.44
Alberta $1.16 $7.15 $8.31
Ontario $3.91 $3.83 $7.74
Quebec $2.42 $1.46 $3.88
Saskatchewan $0.00 $2.16 $2.16
New‐Brunswick $0.00 $1.68 $1.68
Nova Scotia $0.03 $0.40 $0.43
Newfoundland Labrador $0.00 $0.38 $0.38
Nunavut $0.05 $0.12 $0.16
Yukon $0.00 $0.03 $0.03
Grand Total ($M) $19.79 $63.10 $82.87

Industry

Set aside contracts for 2013 were awarded under a wide variety of commodities.  As demonstrated in Figure 4, the greatest amounts spent were on Health and Social Services, followed by diverse purchases such as Automation equipment, furniture and health equipment.  Contracts were also obtained in the IM/IT field and construction.

There were smaller numerous contracts to which the values were not significant and these were grouped together in a category named "Other".  The commodities represented in this category included mostly services in the environmental, natural resource and education sectors.

Figure 4 – Set Aside Values by Industry
Long text description for Figure 4 – Set Aside Values by Industry

Contract values for each industry sector, represents a breakdown of the type of contracts with the cumulative value in millions of dollars for each industry sector.

Health and Social Services - $39.13 million
Goods Purchased of Leased - $15.54 million
Professional and Management Services -$ 8.45 million
Construction - $5.28 millions
IM/IT - $4.9 millions
Travel/Transportation - $3.72 million
Other - $5.83 million

Departmental Breakdown

For the calendar year, 2013, set-aside contracts, worth more than $82M, were initiated by 49 federal departments or agencies.  The total accumulated values for the contracts ranged from $852 to more than $34M, with the bulk being awarded by Correctional Services Canada, Health Canada, Shared Services Canada and Aboriginal Affairs and Northern Development Canada.  These four departments awarded almost 77% of the total value of the contracts with a combined value of $63,616,685.

Department/Agency Set Aside Values
Correctional Service $34,647,476
Health Canada $14,038,979
Shared Services Canada $7,582,953
Aboriginal Affairs and Northern Development Canada $7,347,277
Public Works and Government Services $5,787,349
Fisheries and Oceans $3,762,907
National Defence $2,577,207
Transport Canada $1,257,445
Royal Canadian Mounted Police $870,968
Office of Director of Public Prosecution $575,717
Parks Canada Agency $562,234
Canada Revenue Agency $465,103
Treasury Board Secretariat $428,084
Industry Canada $425,306
Natural Resources Canada $269,374
Canadian Food Inspection Agency $256,255
Canadian Nuclear Safety Commission $207,394
Statistics Canada $199,570
Public Health Agency of Canada $186,970
Office of the Superintendent of Financial Institute $167,021
Foreign Affairs $160,727
Canada Border Services Agency $137,303
Immigration and Refugee Board of Canada $122,246
Privy Council Office $116,139
Agriculture and Agri-Food $109,883
Citizenship and Immigration Canada $80,181
Environment Canada $70,315
Commissioner of Official Languages $70,153
Veterans Affairs Canada $58,061
Library and Archives Canada $55,591
Public Safety Canada $52,097
Canadian Intergovernmental Conference Secretariat $33,787
Finance Canada $29,167
Veterans Review and Appeal Board $26,798
Governor General of Canada $22,276
National Parole Board $19,442
Canadian International Trade Tribunal $14,995
Economic Development Agency of Canada $14,875
Canadian Heritage $12,776
Canadian Human Rights Commission $8,044
Canada Industrial Relations Board $7,334
Chief Electoral Officer $7,231
Financial Consumer Agency of Canada $5,756
National Energy Board $5,556
Commissioner for Federal Judicial Affairs $2,018
Canadian Forces Grievance Board $1,742
Transportation Safety Board of Canada $1,741
Supreme Court of Canada $864
Office of the Public Sector Integrity Commissioner $852
Grand Total $82,863,539

Enhancing PSAB Reach and Impact

The success of the PSAB program is due to its effective leveraging of program dollars.  As demonstrated, the returns of investments have been significant with ratios ranging from 65:1 to 145:1. This success can be translated to other program areas and integrated with other PSAB tools.

National Shipbuilding Procurement Strategy

In 2013, INAC continued to work with other federal departments, Aboriginal organizations, provincial governments, and private industry to enhance Aboriginal participation in projects related to the National Shipbuilding Procurement Strategy (NSPS). In support of this project, INAC participated in Western Canada's Shipbuilding Symposium, organized by Western Economic Diversification Canada, and organized an Aboriginal supplier development, with panelists from Seaspan Marine Corporation, Tale'awtxw Aboriginal Capital Corporation and the Industry Council for Aboriginal Business.  Over 15 Aboriginal businesses participated in the session. 

Additionally, in 2013, over $2 million in funding was secured under the Strategic Partnerships Initiative to support Aboriginal business participation in shipbuilding in both the Atlantic region and British Columbia.  Funded activities will include opportunity identification/analysis, supplier information sessions, and certification activities. 

Nursing Care Services

In 2013, Health Canada approached INAC with questions regarding Aboriginal procurement for a Nursing Care Services requirement that would serve three provinces (Manitoba, Ontario and Quebec). This requirement was valued at over $120M.

As the contract value was over $5K and the primary recipients were an Aboriginal population, INAC sought to apply a PSAB set-aside. INAC officials worked closely with Health Canada and PSPC on the contract and made a presentation at an Industry Day, outlining the key components and requirements of the PSAB, to interested bidders, who were receptive to the inclusion of a set-aside.

This is a success story that carries into 2014 when the contract was actually awarded.

National Aboriginal Women's Business Entrepreneurship Network

In 2012-13 and 2013-14, the Business Development directorate of INAC supported the Native Women's Association of Canada in developing and maintaining the National Aboriginal Women's Business Entrepreneurship Network, which aims to increase representation of Aboriginal women in business. The Network fosters mentor relationships for Inuit, Métis and First Nations women across Canada. Each of the Network projects concluded with an annual conference, and included business training and financial literacy.

2013 Aboriginal Entrepreneurs Conference and Tradeshow

The power and impact of procurement were highlighted at the 2013 Aboriginal Entrepreneurs Conference and Tradeshow, which was hosted by the Canadian Council for Aboriginal Business and supported by INAC.  Presentations included a workshop outlining, "The Ins and Outs of PSAB Set-aside Contracting Opportunities," which featured insight from a successful Aboriginal entrepreneur on how to compete for and win PSAB set-aside contracts, as well as a moderated panel on "The Power of Procurement – Prosperity in Partnerships," which included panelists from Seaspan Marine, CN, Brookfield Renewable Power Inc., Gemini Power Corp and Regulus Investments Inc.

Conclusion

PSAB continues to improve both its efficiency and relevance in the economic development space.

By creating opportunities through outreach and communications, MOUs and the development of a nationwide network, the PSAB has demonstrated, since its inception, impressive returns on investments.

The program goal is to encourage an environment for Aboriginal business success, though the use of networking, technology and research, with the intent of equalizing opportunity and access for Aboriginal businesses.

As part of the regular program management process the PSAB will undergo a program evaluation in 2013-14 fiscal year. INAC 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.

The PSAB team will continue to work with its partners within the Economic and Business Opportunities Branch to advance economic participation of Aboriginal business across departmental and federal partners, which will extend to improved community wellbeing.

As a result of PSAB efforts, the program has created a competitive and useful environment for Aboriginal business.  This is demonstrated by the favourable results of Aboriginal businesses compared to non-Aboriginal business in the Small and Medium Enterprise sector.

PSAB strives to advance Aboriginal Business opportunities by enhancing competitiveness of businesses, encouraging growth and building capacity.

Annex A: Main Elements of the PSAB

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 rated evaluation criteria. The Aboriginal criteria can be applied only if International Trade Agreements are exempt.

Annex B: PSAB Criteria

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 33% 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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