Billions in federal contracts awarded to ‘Indigenous’ enterprises without verification
The Canadian government awarded billions of dollars in contracts earmarked for Indigenous enterprises without always requiring bidders to prove that they were First Nations, Métis, or Inuit, a Global News investigation has found.
A program that now helps Indigenous businesses land more than $1.6 billion in contract awards annually, the Procurement Strategy for Indigenous Business (PSIB), used to rely largely on an honour system, said Anispiragas Piragasanathar, a spokesman representing federal departments.
Indigenous Services Canada (ISC), which currently vets applicants, and the departments that preceded it going back to 1996, did not always demand status cards or other documents from vendors until 2022, according to Piragasanathar’s statement.
I wonder if they had to show a Liberal Party membership card? Sorry! I'm just a bit cynical. But Liberals are awfully generous to their friends.
“In years past,” he explained, “businesses were required to sign an attestation” that they were Indigenous. They also faced the possibility of an audit, he said.
In 2022, ISC tightened the requirements by demanding documentation from new applicants, Piragasanathar said. He did not explain why.
The Trudeau government has directed billions of dollars to Indigenous businesses over the past two years, but never addressed the PSIB’s underlying problems, according to a collaborative investigation between Global News and researchers at First Nations University of Canada. (Learn more about how the investigation unfolded.)
The program has recently come under fire from federal MPs for negligent auditing practices that potentially allow non-Indigenous businesses to exploit the system at the expense of Indigenous enterprises — and their communities.
In the absence of consistent scrutiny, the joint investigation revealed widespread reports of non-Indigenous enterprises using questionable methods to get around the PSIB’s minimum requirements. The program stipulates that Indigenous peoples must have 51 per cent ownership and control of the business.
The alleged schemes include a non-Indigenous company paying an Indigenous-identifying person to pose as its owner or using an Indigenous company as a front to access the PSIB.
Indigenous leaders and organizations have warned federal officials about the “shell companies” taking advantage of the PSIB since 1999, but ISC has not closed these gaps.
The program’s guidelines also do not clearly define who qualifies as Indigenous, and Indigenous Services Minister Patty Hadju told the CBC in February that vetting is challenging.
Billions of dollars in public funds — and Ottawa’s attempts at economic reconciliation — are at stake.
Beginning in 2022, the Trudeau government ordered federal workers in up to 96 departments to begin purchasing at least five per cent of all goods and services from Indigenous businesses.
Contracts awarded to Indigenous businesses skyrocketed from $100 million in 2018 to $1.6 billion — 6.3 per cent of all eligible federal spending — in fiscal year 2022-2023, boasts a recent government report.
Thawennontie Thomas, co-owner of LaFlesche Inc., a plastics manufacturing company based on Kahnawake Mohawk Territory near Montreal, said it’s “commonly known” among Indigenous executives that non-Indigenous businesses are taking advantage of the PSIB.
In the community of Indigenous federal contractors, he occasionally spots competitors who set off “red flags,” he said, because he and his team never meet the Indigenous owner.
And when LaFlesche applied to join the PSIB early in the pandemic, he said, ISC did not require proof of his or his co-owners’ Indigeneity.
“No question asked,” Thomas said.
Piragasanathar responded that ISC had asked LaFlesche for documents proving its Indigeneity, and had always required proof of Indigeneity. But, he noted, “the department’s methods of verifying eligibility have changed over the years and ISC cannot speak to past practices.”
And ISC employees have been working to verify that the more than 2,800 businesses listed in the Indigenous Business Directory are indeed eligible for the program, Piragasanathar said, referring to the registry that federal workers use to search for Indigenous suppliers.
Piragasanathar did not respond directly when asked how many non-Indigenous enterprises ISC’s checks have revealed.
If ISC employees find any, those businesses “would no longer be eligible for procurement set asides for Indigenous business,” he said.
Who is benefiting?
Little information is available publicly about whether the PSIB has uplifted First Nations, Métis and Inuit communities though it has been in operation for nearly three decades.
Indigenous leaders asked in 2019 for this information to be posted publicly. ISC said it would look into ways to collect this data.
Adding to the lack of transparency, the federal government’s public-facing contract databases are unreliable — they include countless duplicate entries that can inflate totals and provide a misleading picture of how Ottawa spends taxpayer dollars.
To determine which Indigenous communities benefit from the PSIB, the collaborative team identified the government’s top 10 Indigenous contractors over the past five years and asked them which communities their owners belonged to. (Learn more about how the investigation unfolded.)
This question is generally welcome among Indigenous people. For many citizens of the more than 600 federally recognized First Nations, Métis and Inuit communities, the term “Indigenous” does not capture the diversity of their languages, cultures and traditions.
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