Ottawa removed 1,100 organizations from a list of Indigenous-owned businesses that were not eligible for a multi-billion-dollar procurement program that has been criticized for lax oversight and loose rules.
The Indigenous Business Directory (IBD) is a government database intended to list First Nations, Inuit or Métis-owned businesses eligible to access “set aside” contracts only accessible to Indigenous companies.
Indigenous Services Canada Minister Patty Hajdu told MPs Tuesday that in 2022, 1,100 companies were removed from that list. Hajdu was not pressed on why the companies were removed, and gave no indication which companies were not eligible.
As of Tuesday, there were a total of 2,945 companies listed on the IBD.
“Every two years the department audits the Indigeneity of businesses, just because businesses transform quite a bit between audits,” Hajdu told a House of Commons committee Tuesday morning.
“In 2022, 1,100 Indigenous businesses were removed from the Indigenous Business Directory as part of a cleanup of businesses that were registered before 2019.”
The department previously couldn’t say how many audits it had conducted on companies listed on the IBD in response to a Global News investigation, in collaboration with researchers at First Nations University, into the Indigenous procurement program.
The Procurement Strategy for Indigenous Business was set up in the late 1990s in order to help First Nations, Métis and Inuit companies compete for federal work.
The joint investigation found it was an open secret within Ottawa’s procurement community that non-Indigenous companies have been finding ways to get around the program’s rules in order to gain access to billions in annual contracts meant for First Nations, Métis and Inuit business.
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Global News also revealed that, until 2022, Indigenous Services Canada allowed companies to self-identify as Indigenous with little demand for proof. That’s despite decades of warnings from Indigenous leaders – and the federal government’s own program reviews – that the program risked being undermined by “fronts” and “shell companies” claiming to be Indigenous.
There is no indication that the 1,100 companies removed from the list in recent years were not Indigenous-owned or controlled when they applied for the IBD.
Hajdu noted that companies change ownership over time. Other companies may have ceased operations but still may be included on the IBD.
The minister also noted challenges with the federal government determining who is and is not Indigenous.
“The challenge is, of course, those definitions evolve,” Hajdu said.
“There (are) criteria for inclusion on the Indigenous Business Directory … These are the commitments we’ve made as a government is to continue to have these complicated conversations with Indigenous people as they define for themselves how to define their memberships.”
The Procurement Strategy for Indigenous Business was created in 1996 by the former Liberal government with the intention of helping Indigenous companies compete for federal contracts against multinationals and more established vendors.
The idea was that by “setting aside” a certain percentage of federal contracts for Indigenous firms, it would give those companies experience with the lucrative world of government procurement, help grow the businesses and have knock-on effects for First Nations, Inuit and Métis communities.
However, internal federal reviews obtained by Global News show that as early as 1999, there were warnings that the program risked being undermined unless the government verified the companies getting the contracts were, in fact, Indigenous-owned and controlled.
The current Liberal government has upped the percentage of federal work going to Indigenous firms to at least five per cent, or about $1.6 billion annually.
After Global News’ investigation, three Indigenous groups — the Assembly of First Nations, the Algonquin Anishinabeg Nation Tribal Council, and the Assembly of First Nations Québec and Labrador — called on Auditor General Karen Hogan’s office to probe the program.
Hogan’s office confirmed in September that they’re considering an audit.
Indigenous business leaders have long asked Ottawa to be involved in who gets to an be on the Indigenous Business Directory, to make sure only legitimate First Nations, Inuit and Metis are included. Hajdu says the government will hand over responsibility for the directory in 2025 or sooner though she didn’t say to whom.
Shannin Metatawabin, CEO of the National Aboriginal Capital Corporations Association (NACCA), told MPs last month it’s possible that as much as 70 per cent of the directory has businesses pretending to be Indigenous.
“What we have to do first is find out how big this problem is and what are some pathways to have a solution,” Metatawabin told Global News.
NACCA has proposed an Indigenous procurement authority be created to take over from Indigenous Services Canada to make sure actual Indigenous businesses are benefitting from the program.
© 2024 Global News, a division of Corus Entertainment Inc.
