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Investigations from both media and government into the ArriveCan app have laid bare much rot at the heart of the federal government’s procurement. There have been concerns about how costs can balloon out of control, or how middlemen can pocket millions of dollars for doing little work.

Another troubling thread has been the apparent exploitation of a program meant to support Indigenous businesses.

Dalian, one of the contractors implicated in the ArriveCan debacle, has received $139-million in government contracts over the past 20 years. It is also, for the purposes of federal procurement, an Indigenous business – even though its benefit to Indigenous communities is tenuous. Its registered address, in the Alderville First Nation, is a house that appears to be abandoned.

These revelations should not call into question Ottawa’s Indigenous set-aside programs. But how Ottawa administers those programs is due for an overhaul.

In particular, Ottawa must meet its target of directing 5 per cent of federal procurement spending to Indigenous-owned businesses. But it must do it in a way that makes sure that First Nations, Métis and Inuit communities actually benefit.

The government has a special responsibility here because it has had a hand – historically and currently – in creating barriers between Indigenous communities and the wider economy. For example, there are restrictions on owning land that make it more difficult for First Nations entrepreneurs to secure loans to start or expand their businesses.

Reforming procurement is one piece of an economic reconciliation in which the federal government can come to terms with discrimination against Indigenous people and seek to redress harms. “Part of reconciliation is ensuring we can rebuild that generational wealth that we have been excluded from,” said Tabatha Bull, president of the Canadian Council for Aboriginal Business.

Ottawa first committed in 2021 to direct 5 per cent of procurement spending to Indigenous businesses, in line with the Indigenous proportion of Canada’s total population.

The original goal was to meet the target by 2024, but that was missed. The Department of Public Services and Procurement reported it had reached 2.7 per cent – about $140-million of $5.2-billion – during the 2022-23 fiscal year. A new report from the government said 106 agencies and departments were on track to hit 5 per cent by the end of the 2024-25 fiscal year.

But there is reason to doubt Ottawa’s figures. As the example of Dalian and ArriveCan shows, a company can claim a measure of Indigeneity and act as a front for other contractors who are not – an arrangement that defeats the purpose of an Indigenous procurement strategy. “They say they are approaching their 5-per-cent target,” said Shannin Metatawabin, CEO of the National Aboriginal Capital Corporation Association, a network of Indigenous financial institutions. “But what are their metrics, and are they real Indigenous businesses or not? We’re not at that stage yet.”

The issue of Indigenous identity is fraught, as some high-profile examples of so-called Pretendians have shown in recent years.

That’s why Ottawa must work closely with Indigenous groups that have experience in adjudicating these claims. The Aboriginal business council, which maintains its own directory of Indigenous businesses, recommends annual recertification and regular audits to make sure owners are who they say they are, and ownership hasn’t changed hands. The business council also has a policy to collect and investigate whistle-blower complaints.

Federal departments must have full visibility into the chain of contractors and subcontractors. This allows them to crack down on bad actors. But it also allows them to give credit to large non-Indigenous companies that subcontract to Indigenous ones.

Indigenous-owned businesses are disproportionately small- or medium-sized, and may not be well positioned to handle the largest and most complex contracts. This is the kind of subcontracting that Ottawa could encourage.

Procurement, even if done correctly, is no panacea. But it can be a powerful tool for advancing economic reconciliation and speeding the growth of Indigenous entrepreneurs.

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