Government Operations Committee on Nov. 7th, 2017

[The Chair, Conservative, Tom Lukiwski]

Colleagues, we'll commence now, if we may. I'd like to welcome all our witnesses with us today.

As a bit of housekeeping, colleagues, we'll get as many questions in as we can. We'll have two 10-minute interventions, I believe, and go to regular rounds of questioning. We have a second group of witnesses coming in at noon, so I'll try to suspend about five minutes or so early, so we'll be able to transition from this panel to our next panel without losing too much time.

With that, I would like to welcome Arianne Reza and Sheilagh Murphy, who will be making presentations.

Madam Murphy, I understand you'll be number one.

[Sheilagh Murphy, Assistant Deputy Minister, Lands and Economic Development, Department of Indian Affairs and Northern Development]

Absolutely.

[The Chair, Conservative, Tom Lukiwski]

If you could commence by introducing the witnesses with you, then we'll go to a round of questions as normal.

Take it away.

[Sheilagh Murphy]

Thank you very much, and good morning.

Thank you, Mr. Chair and committee members, for the opportunity to provide an overview of the procurement strategy for aboriginal business, which is managed by Indigenous and Northern Affairs Canada.

I have provided a short deck that contains some key facts about the procurement strategy for aboriginal business and its planned modernization. I will leave it with the committee as something you can look at in more detail.

I am accompanied today by Mohan Denetto, who is the director general of economic and business opportunities in the department.

Before I begin, I would like to recognize that we are meeting on the unceded traditional territory of the Algonquin nation.

Indigenous economic development is crucial to increasing the socio-economic outcomes and self-determination of indigenous peoples. The procurement strategy for aboriginal business is part of a suite of federal programming, which includes a number of initiatives to support indigenous peoples to more fully participate in the Canadian economy.

We view procurement as a key tool to advance indigenous economic development. The federal government spends more than $20 billion annually on procurement. Working with the federal government represents a tremendous opportunity for indigenous businesses to expand products and services and enter into new markets through active economic participation.

The procurement strategy for aboriginal business was launched in 1996 to increase the number of indigenous businesses competing for and winning federal contracts. It includes a number of measures designed to assist indigenous businesses to gain access to the federal market, including mandatory set-asides and voluntary set-asides, joint ventures, and subcontracting criteria.

The department provides advice and guidance to federal departments on the application of the procurement strategy for aboriginal business through a 100-plus member national coordinators network. We register qualified indigenous businesses in an online directory, and we verify the eligibility of firms via compliance pre-award and post-award audits. We leverage grants and contributions to allow indigenous organizations to build and explore business strategies with other jurisdictions and the private sector.

The value of set-asides reached $227 million in 2014, representing a 300% increase over five years since 2009. This has largely been achieved through departmental target setting and ongoing meetings with key departments, including Public Services and Procurement Canada; and Innovation, Science and Economic Development Canada.

Since 1996, indigenous businesses have won over $1 billion in the “procurement strategy for aboriginal business” set-asides. From 2012 to 2014, the number of indigenous businesses winning set-asides increased by 100%. Over that same period, the number of indigenous businesses winning contracts not set aside under the procurement strategy for aboriginal business also more than doubled, from 153 businesses to 347.

While the value of set-asides and the number of businesses winning them have increased, set-asides still represent a small percentage of the government's total procurement. While we have access to some data on the number of indigenous businesses winning contracts not set aside under the strategy, this data is not currently as comprehensive as it could be. Through the procurement modernization agenda and open data strategy, the quality and scope of data available on the procurement strategy for aboriginal business will improve.

We have also had some success with our proactive work in increasing the number of procurement opportunities available to indigenous businesses, including working with other departments to apply indigenous participation components to large-scale contracts in the areas of defence procurement and health systems.

For these large-scale contracts, there was insufficient indigenous business capacity to set these contracts aside. However, the Government of Canada introduced requirements for prime contractors to provide indigenous subcontracting or employment opportunities. This approach provides a direct economic benefit to indigenous peoples and communities. It also allows indigenous businesses to create partnerships with industry leaders, gain experience, access more complex opportunities, and enter into supply chains.

The department has also worked in collaboration with federal partners, other jurisdictions, indigenous organizations and the private sector to expand the application of the model used in the Procurement Strategy for Aboriginal Business, or PSAB.

For example, through the national shipbuilding procurement strategy, Indigenous and Northern Affairs Canada and its partners worked with Irving and Seaspan to promote indigenous business, which resulted in a number of indigenous businesses successfully entering the shipbuilding supply chain and creating employment and training opportunities.

We also prepare businesses to compete through grants and contributions funding. For example, the department assisted the Saskatoon Tribal Council to develop a procurement business model, which resulted in significant procurement and labour force opportunities for indigenous people.

It should also be noted that some comprehensive land claim agreements call for the generation of socio-economic benefits. Procurement strategy for aboriginal business officials work closely with comprehensive land claim agreements officials and other departments to ensure that comprehensive land claim agreements' obligations are respected and that indigenous participation is maximized. For example, the department is currently working with Public Services and Procurement Canada, Treasury Board Secretariat, and Nunavut Tunngavik Incorporated to examine how to better meet the set-aside and socio-economic benefit requirements set out in the Nunavut Land Claims Agreement.

Throughout these processes, Indigenous and Northern Affairs Canada also takes steps to ensure Canada's commitments in international trade agreements are respected.

In 2014, the department conducted an internal evaluation of the procurement strategy for aboriginal business. The evaluation found that the strategy was aligned with government priorities, and that it was relevant, efficient and economical, with good performance. However, it also highlighted a number of issues that need to be addressed.

The evaluation noted that the procurement strategy for aboriginal business generally benefits larger and more established firms, and may need to review outreach activities to better target small and medium-sized enterprises. More rigorous data collection and analysis is needed to better monitor the impacts of the procurement strategy for aboriginal business on indigenous business growth and communities.

The evaluation also suggested that approaches be adjusted to address the evolving needs of indigenous businesses. The department will continue to address the findings of this evaluation as part of the government's current procurement modernization agenda.

Last week, presentations to this committee outlined a number of initiatives that are expected to have a positive impact on indigenous procurement, including the simplification of the federal procurement process and increased emphasis on social procurement. These initiatives will clearly benefit indigenous small and medium-sized enterprises, which include over 43,000 self-employed indigenous people in Canada. The key to success will be to work with partners that have close ties and regular contact with indigenous businesses and business owners.

In addition to the government's broader efforts, indigenous services is undertaking its own review of the procurement strategy for aboriginal business to leverage and enhance procurement policies, guidelines, and mechanisms to maximize the participation and benefit of indigenous people, businesses, and communities from federal programs, expenditures, and investments.

Over the next six months, we will undertake a review of the procurement strategy for aboriginal business, and engage with our federal colleagues and external stakeholders through an online process and two round tables. We will develop an options paper in spring 2018 for policy consideration.

Before I make my closing remarks, I would like to take a moment to share how we see indigenous procurement improving.

Going forward, we would like to increase the number and value of procurement opportunities available for indigenous businesses. To complement this, we want to grow the number of indigenous small and medium-sized enterprises bidding on, and winning, federal contracts that are not set aside. Some of the potential actions to achieve this vision are presented in slide 10 of what I've provided. We will also work to better monitor and measure impacts of indigenous procurement.

We look forward to working collaboratively with other federal departments to better match indigenous business capacity to their procurement requirements. The impacts of all these actions will be monitored and measured through improved performance measurement so that we understand the longer-term impacts of federal indigenous procurement initiatives.

Thank you for the opportunity to present to your committee. We look forward to the final report of this study and incorporating your recommendations into our modernization program.

I look forward to any questions and comments you may have.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

Our next presenter will be Madam Reza.

Welcome back to our committee.

[Arianne Reza, Assistant Deputy Minister, Procurement, Department of Public Works and Government Services]

Thank you for having me back.

Thank you, Mr. Chair and committee members. Accompanying me today is Carolyne Blain, director general of strategic policy for PSPC's acquisitions program. We will outline the work we do with client departments and indigenous suppliers with respect to federal procurement opportunities.

By way of a quick recap from last week's presentation to the committee, PSPC is the government's common service provider for the acquisition of goods and services for about 100 client departments. We deliver against a complex backdrop of legislative and regulatory requirements, Treasury Board policies, and trade agreement obligations.

Specific and legally binding procurement obligations arise out of the comprehensive land claim agreements, also known as modern treaties. Of the 25 modern treaties that Canada has signed with indigenous groups and territorial or provincial governments, 20 contain specific federal government contracting obligations. These obligations are not in effect across the whole country, but are applicable in large areas within the Yukon, British Columbia, the Northwest Territories, Nunavut, northern Quebec, and northern Labrador.

For each and every procurement, PSPC must first determine whether any such obligations apply, and if so, how they will affect the procurement strategy. The determination is applied by answering a series of questions—i.e., does the proposed procurement involve goods, services, real property, or construction in a geographic area subject to one or more treaties? Although the obligations are not identical in the various agreements, they are all aimed at enhancing economic opportunities of the indigenous groups benefiting from the agreement in their settlement areas. In 2016-17, a total of 365 federal contracts were awarded to indigenous firms in modern treaty areas, with a contracting value of approximately $31 million.

Ms. Murphy provided a detailed overview and a handout on the procurement strategy for aboriginal business, PSAB, so I do not propose to go through the material in detail. I would just like to highlight the following points and share some examples of procurements awarded through PSAB.

PSAB is intended to encourage aboriginal suppliers and the federal government to do business with each other. A contract that is set aside under PSAB means that only aboriginal businesses registered with INAC are acceptable bidders. The decision to use PSAB, where applicable, rests with the client departments. PSPC's role is to help its client departments identify and define indigenous opportunities in their business requirements or scope of work. Under PSAB, as in all our procurements, open competition is the default, both in regulation and in practice. Bids are prepared and submitted by aboriginal businesses, and are evaluated in keeping with the principles of federal government contracting, which are fairness, openness, integrity, and best value.

As a reference point, between 2009 and 2015, PSPC issued approximately $500 million in total contract value for 1,265 PSAB contracts. The highest-value contracts under PSAB are typically found in the following commodity groupings: health services, construction, accommodations, office supplies, IT equipment and software, and informatics professional services.

In circumstances where the prime contractor is not an aboriginal business, the PSAB allows for socio-economic benefit clauses, such as indigenous participation components to be incorporated into its procurements. For example, client departments may designate that a proportion of subcontracts on projects be reserved for aboriginal business, or that additional evaluation points be given to the bid to incentivize the hiring of aboriginal suppliers and subcontractors. However, the inclusion of aboriginal suppliers or subcontractors must be clearly identified in the solicitation as an evaluation criterion.

We are encouraging aboriginal firms to create joint ventures with other aboriginal or non-aboriginal firms in bidding for federal government contracts. If a firm is starting a joint venture, at least 51% of the joint venture must be owned and controlled by an aboriginal business or businesses. A firm must demonstrate a level of aboriginal content amounting to 33% of the value of the work performed by the aboriginal business.

I thought it would be helpful to quickly highlight some of the PSAB procurements underway.

In March 2016, as part of the Centre Block Rehabilitation Project, two professional services contracts were awarded to indigenous firms; one was awarded to the Mobile Resource Group Inc., for the provision of real property management support services valued at $750,000. A second contract was awarded to the Naut'sa mawt Resources Group for the provision of leadership development services, valued at $345,000 to date.

Public Services and Procurement Canada, or PSPC, has several air carrier agreements with indigenous owned airlines, including First Air, Canadian North, Wasaya Airways and Yukon Air North. In 2016-2017, federal spending for these air carriers totalled approximately $10 million.

The contract for the Canada Student Loans Program contains a voluntary set-aside in which the prime contractor selected under a competitive process entered into a relationship with Tribal Wi-Chi-Way-Win Capital Corporation to manage the customer contact centres for the administration of the program.

I spoke earlier of how we seek to encourage joint venture partnerships between indigenous and non-indigenous firms. One example of this was the recent Esquimalt graving dock remediation in BC, valued at approximately $28 million. The indigenous firm Malahat Nation and the non-indigenous firm Quantum Murray combined to do business. The Malahat nation derived economic benefits through this relationship and members of the Malahat nation were involved in the performance of the work. This enabled the indigenous firm to acquire training and experience in the field of marine sediment remediation. Indigenous Services worked closely with the PSPC regional office to provide a PSAB set-aside for the project.

Canada's national shipbuilding strategy provides economic benefits to communities across Canada, including for indigenous peoples. For example, the Canadian shipyards have trained approximately 1,500 indigenous people as ironworkers and sheet metal fabricators, which are highly skilled and marketable trades.

PSPC's office of small and medium enterprises, OSME, is instrumental in outreach efforts to build capacity in indigenous enterprises, and to provide information and tools on how to access federal procurement opportunities with the objective of bringing more indigenous enterprises into the supply chain.

Ongoing OSME activities include seminars, one-on-one meetings with indigenous suppliers to explain how government works, how to identify opportunities in the procurement process, and how to compete. We host indigenous-specific events during the course of the year to match businesses interested in partnering. OSME's MOU within INAC allows for the coordination of indigenous outreach at a national level, and for indigenous-specific events to take place.

Last year, OSME participated in over 120 indigenous events held locally in many Canadian communities, and reaching more than 2,300 individuals or SMEs. Over and above local and regional events, OSME networked at the annual Assembly of First Nations conference, partnered with the Canadian Aboriginal and Minority Supplier Council, and collaborated with the Canadian Council for Aboriginal Business to deliver a national webinar on doing business with the government, including how to obtain security clearances.

OSME's outreach helps identify, analyze, and reduce the barriers that can make doing business with the government unnecessarily difficult for indigenous suppliers. We share this feedback broadly for the awareness of relevant stakeholders.

Taken together and over time, these measures are intended to increase the capacity of indigenous firms to compete and participate in government contracts, and increase indigenous economic development.

Thank you.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

Colleagues, we have about 40 minutes left, slightly less than that actually if we want to suspend to hear our next witnesses. We'll go through one complete round of questions, but I'll give eight minutes each rather than seven, and hopefully, we'll get our next panel of witnesses up on time, and get the rest of you into the question period following that.

Mr. Whalen, you have eight minutes, please.

[Nick Whalen, Liberal, St. John's East, NL]

Thank you very much, Mr. Chair, and thank you all for coming.

It's obviously of importance to us to carry out a review in parallel with your department's evaluation of the procurement strategy for aboriginal business. I'm not sure if everyone has received a copy of the slides that Ms. Murphy had mentioned, but on slide 11 she talks about the trajectory, the timeline, of the work plan. There's been a literature review done to this point, I'm assuming, and some statistical analysis.

What type of statistics are you measuring?

[Sheilagh Murphy]

We have certainly all of the reports we've had through the procurement strategy, our annual reports, and we are going to be looking at what OSME has, as well.

Certainly we have our databases and the ISED databases that we can look at, but I think a good portion of what we need to be looking at is actually talking to indigenous businesses.

[Nick Whalen, Liberal, St. John's East, NL]

Is that statistical, though?

[Sheilagh Murphy]

Yes.

[Nick Whalen, Liberal, St. John's East, NL]

I'm asking about the statistical. Is that talking to statistical or getting comprehensive data from them?

[Sheilagh Murphy]

We do have data in our database. We have data from the research the Canadian Council for Aboriginal Business has done as well.

[Nick Whalen, Liberal, St. John's East, NL]

Okay.

[Sheilagh Murphy]

We have the ISED database. We can look at procurement and what has happened through the statistics that we collect. We do that data analysis on an ongoing basis, and through that we've noticed that we have challenges in terms of larger companies participating in the procurement strategy more than small and medium-sized enterprises, and so why is that?

We've identified gaps in that work, so that's what we now need to go out and figure out with communities and with our partners as to how we can close those gaps.

[Nick Whalen, Liberal, St. John's East, NL]

Okay.

Are you through stage one now, the information-gathering stage, or are you still in progress with that?

[Sheilagh Murphy]

We're still looking at that. I think we'll continue to look at that, and then we will launch into the engagement phase as well.

The statistical review is giving us some line of sight of the types of questions we want to put in the survey, so based on the performance through the data, asking indigenous entrepreneurs and businesses certain questions that we've observed through the analysis of the data.

[Nick Whalen, Liberal, St. John's East, NL]

That's great, so I look forward to you maybe depositing with the committee the statistical analysis when it's complete so that we have it for our records as well as the bibliography that comes out of your literature review. It might help inform us.

[Sheilagh Murphy]

Yes.

[Nick Whalen, Liberal, St. John's East, NL]

One of the things that always struck me as a strange threshold—and perhaps your statistical analysis will help us with this—is that in order for a business to be considered aboriginal there needs to be 51% control, but only one-third of the employees need to be indigenous.

In terms of measuring the impact of the economic benefit to indigenous communities, it goes beyond just whether or not the business is indigenous-controlled, obviously. It's what percentage of the salaries is paid to workers from those communities, and what percentage of the profits is returned to the communities.

Do you do additional statistical analysis beyond the threshold to determine whether or not a business is actually leveraging, and how much they're leveraging, the value of these federal contracts for their indigenous communities, because I would like to see something more detailed than whether or not it's aboriginal. I'd like to know how much of the salaries are being paid to aboriginal workers.

[Mohan Denetto, Director General, Economic and Business Opportunities, Lands and Economic Development, Department of Indian Affairs and Northern Development]

Perhaps I can illustrate a bit how we're approaching this. Definitely the criteria you mentioned are for entry into the program to get into the database, but of course there are other factors, like the economic benefits from the work.

Currently we don't specifically track that data, but it's definitely something we need to look at in terms of improving our dataset and improving the data we do gather to assess the impacts of the program.

At the same time we talked a little bit about what happens outside of PSAB. Through our work we're not only ensuring the businesses are eligible for PSAB, but also through other mechanisms, through the regular procurement process, we do look at the percentage of subcontracts to aboriginal businesses.

[Nick Whalen, Liberal, St. John's East, NL]

When you do that, is it aboriginal businesses or how much of the economic value is being returned to these communities, because, again, the threshold is only one-third. If you have a $17-million contract but only one-third of the salaries are being paid to indigenous communities—or worse, only one-third of the employees are but it's all the low-level employees—then there are very few actual dollars being returned to those communities.

I'm very interested in that more impactful information, so maybe I'll just go back to my first question, which was this. What information are you planning to collect to make sure that PSAB is working? What types of statistics are you proposing to collect to add to your dataset to make it more useful?

[Mohan Denetto]

With regard to direct impacts, we do have some data, for example, on local hiring targets, so we can collect that. We're looking at the dataset right now and we'll have to establish, in discussion with our partners, exactly what data we'll be able to collect in order to conduct the analysis.

[Nick Whalen, Liberal, St. John's East, NL]

In terms of other aspects of the criteria, I'm assuming when you say “aboriginal” it means somebody who has some type of status, or is it a more broad term to also include people who don't have status but have some cultural ties to the community?

[Sheilagh Murphy]

It's self-identification, so we're not in there measuring and saying who's Métis and who's not Métis. People self-identify. We look at that, and we accept that as self-identification. We're not asking for status cards and those other things.

I mean, we will do an audit and look at the information that says that this is indigenous, but we don't question when someone says they are Métis. It's a bit of a challenge because it is self-identification, but we trust—