FNFA OFFERS SOLUTION TO HELP INDIGENOUS BUSINESSES BID ON GOVERNMENT PROCUREMENT CONTRACTS

Published in The Globe and Mail, January 19, 2025 by Jameson Berkow, Capital Markets Reporter

Fraud is not the only failing of Canada’s Indigenous procurement program.

The program, which Indigenous leaders have criticized for falling well short of its goal to direct 5 per cent of federal government contracts to Indigenous businesses by the end of 2024, has been consistently abused by non-Indigenous companies fraudulently claiming to have Indigenous connections.

But beyond that, according to Jody Anderson, Indigenous contractors based on reserves are effectively ineligible to even bid on those contracts – often referred to as “set-asides” – because they cannot access the necessary bonding.

“While the federal government has opened up this door and has this set aside of 5 per cent, there is a second door, or really a brick wall that is still maintained by the government right behind the door,” Ms. Anderson, strategy and partnerships adviser for First Nations Finance Authority, a non-profit that issues bonds in order to loan money to Indigenous communities across Canada, said in an interview.

The federal Indian Act prohibits assets based on reserves from being used as collateral. That means an Indigenous contractor who might have, for example, $2-million worth of equipment based on a reserve, cannot use those assets to obtain the surety bonding necessary to bid on federal contracts. Surety bonds compensate project owners for losses in situations where contractors do not fulfill the terms of their contract.

“It is once again a racist piece of legislation that is prohibiting the participation of economic growth and wealth building in our communities,” Ms. Anderson said.

But FNFA has a proposed solution: a $100-million backstop that could be used as collateral by Indigenous entrepreneurs who are unable to use their on-reserve assets. The money, which would come from the federal government, would be used as collateral by Indigenous contractors. FNFA would help set up the system, Ms. Anderson said, though she added an ideal permanent home would be the First Nations Procurement Organization, which the National Aboriginal Capital Corporations Association announced plans to launch last year.

Because the funding is a backstop, the same money can be allocated to new projects as old ones are completed, creating a long-term solution.

“The $100-million isn’t actually for us to spend, so it isn’t as though it is going to be gone,” Ms. Anderson said.

The idea has broad support among all political parties, she said, though she was disappointed that the program was not included in the December, 2024, fall economic statement. And given the precarious political situation in Ottawa amid a Liberal Party leadership race and an imminent federal election, the timing has become highly uncertain.

Moving forward without government support is also an option, Ms. Anderson said, as FNFA could likely find private sources for the $100-million required.

“But it is not just about the money,” she said. “It is really the principle of it and what is Canada’s role in removing this barrier, because we just can’t stick with the status quo, that is clearly not working.”

The status quo of the procurement strategy for Indigenous business (PSIB) is already rife with problems. One major concern centres on a provision allowing non-Indigenous companies to qualify for the program if they partner in a joint venture with an Indigenous company and the partner performs at least one-third of the work.

Indigenous entrepreneurs have often been taken advantage of by their non-Indigenous joint venture partners, Ms. Anderson said. In September, 2024, the Assembly of First Nations said the majority of PSIB contracts were going to shell companies that have only loose ties to Indigenous companies.

That same month, the Canadian Council for Indigenous Business published a report that found it was “particularly difficult for individuals living on reserve” to participate in the program because of their limited access to financing. The report included an anonymous survey of Indigenous entrepreneurs, some of whom cited those financial limits as the only reason they agreed to joint ventures with non-Indigenous partners.

“Not having a bond forces me into a sometimes predatory joint venture when I can do everything else required of the contract or job,” the CCIB report quoted one Indigenous entrepreneur as saying.

Even some Indigenous contractors who are fully bonded find bidding on set-asides to be a pointless endeavour. Pete Beaucage Jr., president of Praztek Construction in Timmins, Ont., said his Indigenous-owned business would have more than 100 employees today – more than double his current headcount – if the PSIB program worked as intended.

“In the past two years, with this 5-per-cent inclusion that is supposed to happen on federal projects, I’ve gotten screwed out of $350-million worth of work that went to companies that weren’t even Indigenous,” Mr. Beaucage said in an interview.

“They always say they are giving preference to Indigenous contractors, well I’ve never gotten it. They are just telling you what you want to hear to make themselves look good but then they don’t follow the rules.”

“I stopped bidding on those set-asides,” he said.

For Ms. Anderson and FNFA, the fact that the PSIB program suffers from so many issues is all the more reason Ottawa should move quickly to embrace solutions.

“Canada really needs to sink some teeth into this entire process and situation and this is a real, viable solution that we are looking at,” Ms. Anderson said.

“If Canada is truly committed to truth and reconciliation and economic reconciliation they need to throw some action behind their words and this is one way to do it.”

Photo: Sean Kilpatrick/The Canadian Press