Online engagement on Indigenous procurement modernization 2019, what we heard

Background

As part of the federal government-wide procurement modernization agenda, Indigenous Services Canada (ISC) is reviewing the federal approach to Indigenous procurement, including the Procurement Strategy for Aboriginal Business (PSAB) which has been active for over 20 years.

The purpose of the review is to:

To date ISC has:

Engagement

The Government of Canada launched a wider public engagement to validate the findings from the discussion paper by posting it online for public comment. Indigenous people and businesses (and other interested parties) were given the opportunity to have a say in the policy that governs federal Indigenous procurement. Several in-person roundtable discussions were also held.

The engagement period was from April 15th to May 15th, 2019 and was posted on the Consultation and Engagement page of the Crown-Indigenous Relations and Northern Affairs Canada (CIRNAC) and Indigenous Services Canada (ISC) website.

The discussion paper was arranged into seven themes:

To elicit feedback and suggestions from all relevant parties, ISC sent out invitations to all registered Indigenous businesses in the Indigenous Business Directory and Indigenous partners. Separately, to meet constitutional requirements, Comprehensive Land Claims Agreement (CLCA) holders were also formally consulted through a separate process. ISC also invited the general public to participate in the engagement by posting on Facebook and Twitter over the span of the engagement period.

Interested parties were invited to provide input through three methods: email, fax, or by mail. Overall ISC received comments from 21 interested parties. These parties include: five CLCA holders, three non-Indigenous private sector organizations, four national Indigenous organizations and eight Indigenous businesses. All comments have been reviewed, summarized, and organized to correspond with the seven themes from the discussion paper.

What we heard

Theme 1: mandatory targets

Overall, several respondents from Indigenous and non-Indigenous organizations indicated that they want the federal government to adopt and implement mandatory targets. They believe that mandatory targets are an effective tool to increase accountability and that processes should be implemented to ensure targets are met. The majority of respondents agreed that a target should be set at 5% for each department and agency. Some respondents indicated that the target should be split to distinguish by product and services with a 4% minimum for services. Other respondents suggested that targets should be a "floor to build from" and "not a ceiling to achieve," thereby prompting departments and agencies to strive to go above and beyond what is set for them. The majority of these organizations agreed that reporting should be done on an annual basis. Some respondents suggested that reporting on targets may be either on an annual basis or longer term depending on the organizational capacity of the department or agency.

Theme 2: fostering a culture of awareness, trust and understanding

Overall, there is recognition from respondents that the federal government needs to foster a culture of awareness and understanding. All respondents agreed that a federal champion with the authority to affect change was necessary. Also, respondents indicated that federal procurement officers should be made more aware of Indigenous business capacity, build better relationships, and government should work to eliminate behavioral biases. To implement this change, one respondent suggested that training for procurement officers be done in collaboration with Indigenous groups. Another suggested that more awareness should be created for potential Indigenous business capacity.

There was general support for the re-evaluation of the concept of "value for money". One respondent indicated that many Indigenous businesses have higher costs, especially businesses directly connected to communities and tribal councils, and often find themselves serving 2 purposes: the contract cost containment and the Indigenous leadership or council’s need to see immediate financial benefits. They, in turn, are under a lot of pressure to provide socio-economic benefit to their communities. It was suggested that a revised system be integrated to acknowledge prospective suppliers that have Indigenous content in their business, and that the federal government’s request for proposal process include incentives for larger suppliers to have regional Indigenous partners.

Indigenous organizations and businesses suggested that a core set of social impact measures be developed into a measurement framework. Based on this measurement framework, Indigenous economic development initiatives can be measured for success and compare themselves to other initiatives in the Indigenous and non-Indigenous business sectors.

Systematically and regularly reassessing the federal procurement demand to identify opportunity areas was generally supported by Indigenous organizations. It was suggested that the federal government identify procurement trends that would allow Indigenous institutions, businesses and other parties to proactively engage with Indigenous communities in order to prepare for future opportunities in the supply chain.

Theme 3: Data collection

Respondents clearly indicated that there is a need for the federal government to improve its data collection practices and reporting requirements. Indigenous business respondents unanimously agreed that establishing an effective and timely data collection and reporting system would ensure all federal departments and agencies are engaged and can track against their mandated targets.

Indigenous organizations suggested that the federal government create an oversight committee that would include Indigenous participation to provide accountability and governance on data collection, along with annual public reports.

Indigenous businesses were more focused on tracking information in relation to how many Indigenous people were employed and how many sub-contractors were involved in a given project, how businesses qualified as Indigenous and where Indigenous peoples were engaged in the project.

Theme 4: Indigenous Business criteria and business directories

Several respondents indicated that the current criteria for Indigenous businesses are rigid and should be more flexible; modifying it would create more opportunities to participate in federal procurement. However, respondents also cautioned about making the definition more flexible. Some respondents indicated that flexible criteria could create situations where joint-ventures between Indigenous businesses and larger non-Indigenous businesses are created with no accountability for the Indigenous resources used in a contract. One respondent indicated that many non-Indigenous companies develop a partnership with Indigenous individuals then win the contract and do not hire any Indigenous employees. One respondent suggested that a policy should establish a certification process to qualify eligible businesses and how Indigenous peoples and communities will benefit. Another respondent suggested that the federal government consider adding a minimum percentage of Indigenous resources to be used or contracted through the resulting arrangements, in addition to changing the definition of Indigenous business.

Respondents generally supported a point-system to support a definition, because it is believed that it would expand the number of eligible Indigenous businesses. Furthermore, it would provide incentives for minority-owned and managed Indigenous businesses to increase Indigenous ownership, recruit and promote Indigenous managers, and employ more Indigenous staff. Some respondents cautioned that a points system would disadvantage smaller, more remote communities who have less access to specialized labour. One respondent suggested that the federal government should consider increasing capacity-building components into contracts such as training, social and economic community contributions, and Indigenous content.

Most respondents agreed that a centralized business directory is needed as it facilitates the search for Indigenous suppliers, and that CLCA business directories should also be recognized and used. However, respondents were less unified regarding third-party control and rights-bearing nations or organizations setting the criteria for identifying an Indigenous business. Although some respondents indicated that an Indigenous-run business directory would promote empowerment, trust and transparency, others cautioned that a third-party would reap all the benefits and set criteria creating biases which would disadvantage certain groups. It was suggested that a neutral third party be created and operated at arm’s length by the federal government with a more inclusive structure.

Theme 5: simplifying processes and reducing barriers to Indigenous participation in federal procurement process

Respondents indicated that they wanted to see the procurement process simplified, as this would effectively help Indigenous businesses. Generally, respondents favored Indigenous community or organization involvement earlier in the planning stages, and to better communicate procurement offers of set-asides for Indigenous businesses. They also cautioned that while simplifying the process may reduce barriers, reducing technical requirements would create a pool of underqualified businesses, thus promoting a race to the bottom and opening up the federal government to unnecessary risk. The goal should be to create favorable conditions for qualified first time bidders, ensuring technical capacity is maintained. It was suggested that notifications on set-asides be communicated earlier, and for the federal government to learn from other jurisdictions and work with the Office of Small and Medium Enterprises and PSPC to address issues raised by Indigenous businesses and small and medium-sized enterprises across Canada.

There is overall support for institution-building and third-party delivery led by Indigenous organizations on procurement services for businesses. The range of services suggested by respondents include training on federal government relations technical support and certification, matchmaking and forums where Indigenous businesses can build relationships and see contract projects on an annual basis. Suggestions for third party delivery included leveraging existing relationships by supporting existing organizations or support communities to deliver services.

Theme 6: building capacity

There is recognition by federal departments and agencies to identify Indigenous business capacity in opportune areas, so long as any changes honour CLCAs. It was suggested that Indigenous organizations provide systematic assessments of capacity to meet emerging federal contract demands. It was indicated that the government be mindful of businesses’ financial capacity when creating the conditions for increasing Indigenous participation in the federal supply chain.

Respondents support systematically and regularly assessing Indigenous business participation in procurement, while trying to increase the number of registered businesses in the Indigenous business directory. It was expressed that the current data does not capture all Indigenous procurement done by the federal government. There also seems to be a lack of willingness to enroll in the directory, which impacts the number of available and visible businesses in the directory. It was suggested that an Indigenous organization manage the business directory, thereby motivating businesses to register and making them more visible.

Respondents agreed that capacity building is necessary to increase Indigenous participation in the federal supply chain. This includes funding for training, education, and apprenticeship for Indigenous employees and employers. It was suggested that ISC lead the charge to increase awareness across the federal government.

Theme 7: Considerations on transforming the federal procurement process

In general, respondents were mixed over the use of set-asides. Those who disagreed believed that set-asides can have negative impacts since it could leave some communities disadvantaged, and can perpetuate the view that Indigenous businesses can only fulfill contracts that are directed at them. One respondent did agree in the broadening of mandatory set-asides and suggested that penalties be more severe for contractors who do not generate business, employment, and training opportunities for Indigenous communities.

Respondents were generally in agreement for requiring Indigenous benefit plans in larger contracts. It was suggested that the federal government place particular emphasis on the benefits rather than the number or value of contracts, as well as how the benefits are measured and reviewed. Another respondent indicated that while Indigenous benefits plans are a good idea, the monitoring and measuring after contract award is where the problem lies, and that joint-ventures must also be reviewed.

Overall, respondents did not provide clear indication as to whether they supported regional and distinctions-based approaches. Respondents did, however, provide caution when implementing such an approach and gave suggestions for making it more effective. Some respondents also cautioned that a regional and distinction-based approach would yield unexpected consequences when looking to maximize benefits to communities, particularly if a contract was awarded to an Indigenous business from outside of the contract area.

Furthermore, one respondent indicated that an effective Indigenous procurement policy recognizes the obligations contained in CLCAs related to procurement through policy provisions. Other respondents’ suggestions for this type of approach include: integrating incentives for larger businesses to have regional partners in their request for proposals, creating a pre-qualified list of regional Indigenous businesses, and setting regional targets.

Respondents all agree that the federal government needs to apply Indigenous procurement requirements to entities outside of the core federal government. Respondents suggested that the federal government require large contractors and suppliers to use diverse subcontractors and develop a federal-provincial/territorial approach in consultation with Indigenous communities to provide businesses more procurement opportunities. This could be done by establishing a committee within their respective province or territory.

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