Government Operations Committee on April 16th, 2026

[Alexander Jeglic]

This committee and others have pointed out concerns around potentially non-indigenous businesses being qualified under the directory. There was some concern around the integrity of the directory, and because that is the seminal tool used to validate an indigenous business as being eligible for the PSIB set-aside, it's incredibly important that this validation be accurate.

When ISC was going through and revalidating, they were finding a number of issues with some of the suppliers who were identified. I'm not suggesting that it's all fraudulent. I'm suggesting that there were a variety of reasons.

There might have been some duplication, for example. There might have been suppliers who were no longer interested in participating. There was a significant removal of entities. There may have been some who were not eligible. Those were all removed. That starts to enhance the integrity of the directory.

Consultation with indigenous communities to ensure the integrity of how indigeneity is defined is that process that we're undergoing right now with ISC. I believe that those timelines I cited before around fall 2026 and spring 2027 start to address some of the eligibility requirements as well.

[Pauline Rochefort, Liberal, Nipissing—Timiskaming, ON]

I noted one figure I saw. In 2024, the number of businesses that were registered amounted to 2,900.

Do you have any comment on the size of the pool and what impact that might have on the actual program?

[Alexander Jeglic]

Again, the size of the pool is probably not where it needs to be. When you're identifying indigenous capacity, you're also using that directory to validate capacity. If that doesn't reflect indigenous capacity, it might necessarily result in a muting of the actual indigenous capacity in certain areas. That dampens the impact of the strategy. The more indigenous suppliers that make themselves available for the set-aside projects by registering on the directory means it changes the analysis. All of a sudden, now you can use voluntary set-asides because the capacity looks very different.

Again, this is where it's important for indigenous suppliers to see themselves in the federal supply chain. Part of that is making sure that we can offer a system that has integrity.

[Pauline Rochefort, Liberal, Nipissing—Timiskaming, ON]

That's a good point.

I was going through the statement by the Canadian Council for Indigenous Business. When you put out your report, they put out an excellent response, and they said it was a good report.

They were talking about developing a comprehensive indigenous procurement policy. Some of their recommendations were to advise government to “simplify language, processes, and requirements”. There was also mention of “poor communication and rigid policies”.

If we have so much structure, does that in any way limit the ability to grow the pool and the opportunity?

[Alexander Jeglic]

My comment can go hand in hand with the answer, which is, if we ever lose sight of simplification.... We're losing suppliers, indigenous or otherwise, as a result of having an overly complex federal procurement system. I would challenge anyone to tell me that they describe the system as easy to navigate. It's not.

Even when we do these reviews, we're constantly challenging one another to offer our interpretation of what we're seeing. We're paid to know federal procurement, yet we still have significant differences of opinion as to how to interpret certain provisions of a policy.

Your question specifically was whether the creation of a policy in and of itself adds to the complexity. It shouldn't. The policy should be straightforward, but it needs to create accountability and responsibility.

Who does what and when is what the policy needs to set out. It has to be binding and central. Therefore, all of the departments and agencies that are subject to the strategy would then know exactly where to look for instruction, rather than having a piecemeal of rules, guidelines or websites that they're to consult in order to determine what compliance looks like.

[Pauline Rochefort, Liberal, Nipissing—Timiskaming, ON]

You mentioned as well in your review of the sample you had, that some of the contracts did not specify the 33%.

Did you assess those and try to understand why that was? What were some of the reasons behind that?

[Alexander Jeglic]

In the report, we actually cited the difference of opinion that we had with some of the departments. That aligns with the philosophy that the 33% is only applicable if there's any identifiable subcontracting at the solicitation phase, meaning that a supplier is saying they won't necessarily be the one to deliver all of the services and that there will be additional entities doing that.

If that doesn't exist, there's the perception that the 33% requirement doesn't exist. However, we make it clear in the report that this is not our understanding and is not our interpretation of how the 33% is meant to be policed.

Because that doesn't exist by way of contract clauses in any circumstance, no one's tracking it. ISC says it's ultimately the responsibility of departments to determine compliance with the 33%, which we fundamentally agree with; however, ISC has not told departments that it's also their responsibility to monitor the 33% compliance. As a result, it shouldn't be shocking that no one is monitoring the 33% compliance.

What it does do—and this is one of the seminal tenets of the strategy and why I truthfully don't understand the interpretation—is use a design that is set up so that if you have indigenous capacity, but not necessarily at the prime level, and therefore, while you don't have the capacity to deliver on the entirety of the obligation, you can deliver a significant component—in other words, 33%—you're able to use the information that you glean as a significant contributor to a contract to grow and eventually become a prime contractor.

That's an inherent positive of the strategy, so why take that away from indigenous suppliers by not enforcing? When you don't enforce, then when there is subcontracting or there is a joint venture, there is no final determination. Did the joint venture non-indigenous partner perform 99% of the work? That testing isn't now being done.

[Pauline Rochefort, Liberal, Nipissing—Timiskaming, ON]

As a final question, I just want to know what—

[The Chair, Conservative, Kelly McCauley]

We're about two minutes over, but if it can be really quick....

[Pauline Rochefort, Liberal, Nipissing—Timiskaming, ON]

You mentioned that there's going to be a further review. Did you say you're going to be doing something further?

[Alexander Jeglic]

Normally we follow up after two years, but because of the nature of this report, it's six months.

[The Chair, Conservative, Kelly McCauley]

Thanks.

We're going to our final round.

We've been running late every time. I think we're all fine with that, because it's important to hear and it's very interesting, but because we promised to get Mr. Jeglic out in 30 minutes, we're going to keep to our times for the last round, so watch your clock, please.

Go ahead, Mrs. Block.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you very much, Chair.

Perhaps my questions in follow-up to my colleague Ms. Rochefort's will allow you to expand a little on her question.

In your report, you acknowledge that the decision to undertake this review was made due in part to the work being done by this committee back in the fall of 2024. Over the course of that study, we heard testimony that painted a picture of significant abuse going on in indigenous procurement.

I want to make it clear, as you have today, that what we were hearing about was not abuse by indigenous businesses but particularly by non-indigenous businesses that were getting access to that 5% set-aside. In fact, we heard from the Assembly of First Nations that a significant portion of the money being spent through the procurement strategy was going to shell companies, and we had a number of witnesses come in and confirm that. I think an example that was brought forward during that study was Dalian and Coradix. Dalian was acting as the go-between, acting as the indigenous business to win contracts, and then subcontracting all the work to Coradix, which, if I remember correctly, did not have indigenous employees doing the work. Perhaps that speaks to the integrity of the 33%.

In your review, did you find a number of instances of indigenous businesses that were subcontracting without realizing that the set-aside would be going to non-indigenous businesses to do most of the work?

[Alexander Jeglic]

I can give you somewhat of an anecdotal answer.

Of the 27 files we reviewed, seven were joint ventures, so we know definitively that in seven instances, there was a component that was 51% indigenous, and then the remainder was non-indigenous. In those situations in which there isn't that 33% requirement, there is nothing stopping those individual entities from parcelling out the work in a way that doesn't equate to 33% value to the indigenous entity.

That's why I go back to the 5%. When I was providing my explanation of the 5%, I was presuming there was integrity associated with the 33%. If the integrity of that 33% is lost, then that number drops even more. What happens if it's a 99:1 split and it's truly a flow-through? Then it's the non-indigenous prime that benefits, receiving 99% of the value. That is why, again, inherently, I think most of the work to be done is in regard to that 33% criterion. I think it's really important that we have a fundamental understanding as to why it's important to monitor that 33%. I will echo my previous comment, which is that I do think that it's the responsibility of the individual departments, because they are best positioned to do that monitoring.

However, if you don't have training, if you don't have awareness, you don't know about it, and that's something we also saw. There are seminal tenets of the policy, such as the mandatory pre-award audit. CSC, Correctional Service Canada, one of the biggest users of the set-aside, was unaware of its obligation to request that audit, which tells me that somehow awareness is not being built up in the way that it needs to be. That's where training becomes the pre-eminent tool. We owe it to all of our procurement officers to give them clarity in the rule set. That's what the first recommendation is meant to establish. Let's provide clarity for the rule set.

Then we owe it to those same purchasers to ensure that they have the training to successfully implement it. That includes the entire tool kit from A to Z, so document your decisions.

You might see instances where you're confronted with a dilemma. We have one identified in our report. It is likely an indigenous entity, but they're not actually on the IBD, so they're not on the directory. What do you do? You want to award them the contract. You believe they're indigenous, and they've told you that they're indigenous. You encourage them to register, and they do not register, but you know that they will deliver and you know in all likelihood that they are indigenous. In that circumstance, we found no documentation—

[The Chair, Conservative, Kelly McCauley]

I need you to wrap up quickly.

[Alexander Jeglic]

In that circumstance, we found no documentation demonstrating that decision. Had it not been for our review, I'm not sure that this issue would have been uncovered. A situation that may be well intentioned perhaps turns out to look less like something with integrity.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you. I'm going to make one comment to close out my time.

I just want to say that I do hope, as you have stated in this report, that this should serve as a turning point.

[The Chair, Conservative, Kelly McCauley]

Thanks.

Go ahead, Ms. Khalid.

[Iqra Khalid, Liberal, Mississauga—Erin Mills, ON]

Thank you very much, Chair, and thank you to the witnesses for being here today.

I want to walk through the recommendations that you've provided and get a little bit of understanding as to the scope of them.

Recommendation 1 is that ISC and PSPC should develop a comprehensive indigenous procurement policy with indigenous partners to consolidate government-wide roles, eligibility verification, audit mechanisms and documentation standards.

How do you think that should be implemented? Who should be consulted in putting that kind of framework together? Can you please help us understand the logic behind this?

[Alexander Jeglic]

I can, absolutely.

I think one of the first things you'll see in our report is the fragmentation of the rule set. It's a central strategy, but it was allowed to remain a strategy for 30 years, without implementation tools from a policy perspective. Therefore, as I mentioned, there are a variety of different sources that one would look to in determining compliance with the strategy.

If you were looking for the strategy as a document, it's next to impossible to find a document that cites the strategy verbatim. There are multiple references to this strategy, but actually finding the strategy that identifies all of the elements is essentially very difficult. It's something that we asked for, and it was very difficult to obtain. That's the starting point.

As for who needs to be consulted, the way the recommendation is worded is specific. It's “in consultation with”. That's really important, because this is not for the government to do alone. It's also respecting what's already happening. ISC is already working in the background—not even in the background, but in the forefront—on implementing this recommendation.

The recommendation just brings accountability to the process. Again, I'll cite those timelines that ISC puts forward in terms of implementation of a response to the recommendation. We are hopeful that we'll see both movement in fall 2026 and successful implementation in 2027. They are doing the requisite consultation.

On the first recommendation, I think there are steps in motion to ensure that all of the seminal tenets of the strategy are going to be captured in a respectful way in the policy. Just to echo the simplification component, it has to be done in a simple way so that everyone can glean what their responsibilities are without confusion.

[Iqra Khalid, Liberal, Mississauga—Erin Mills, ON]

I appreciate that.

Ms. Kilrea, did you want to add something?

[Kelly Kilrea, Senior Risk Advisor, Office of the Procurement Ombud]

No, I think that covers it.

[Iqra Khalid, Liberal, Mississauga—Erin Mills, ON]

I appreciate that. Thank you.

Recommendation 2 is that PSPC and Justice Canada should designate the OPO as the interim complaints body for PSIB set-aside disputes until a permanent mechanism exists. Can you walk us through the justification for that and the mechanisms that are already in existence that should be addressing the challenges that you're trying to address?

[Alexander Jeglic]

I'll be very quick.

In terms of not having a dispute resolution mechanism, if you're a non-indigenous business, you can come to our office and you can go to the CITT. Those recourse mechanisms are available to you.

If the procurement is set aside pursuant to the strategy, by virtue of how our respective jurisdictions were created, both the CITT and ours, we don't have jurisdiction to review PSIB set-aside contract complaints. That means indigenous suppliers cannot come to either one of us, yet both of us offer these dispute resolution mechanisms for all other suppliers.

From a fairness standpoint, a review should be offered if you're an indigenous supplier under these set-aside circumstances. We offer it on an interim basis because we already offer these same services to all other small and medium-sized suppliers or large suppliers. Why would we not offer these same services to indigenous suppliers?

I will say that in all other aspects of our mandate, we can offer services to indigenous suppliers, so there's also a logic gap: I can take a complaint on administration of indigenous contracts, yet I cannot hear complaints about the award process. There's a logical disconnect.

That's why we say it's an interim mechanism, but if the outcome is an indigenous-led authority that will ultimately review disputes, we support that as well. I have proactively tried to reach out to say that we will absolutely share all of our documentation and share how we resolve these disputes to allow that entity the benefit of not having the start-up pains of not having standard operating procedures and not having been able to think through some of the issues that will inevitably come.

[Iqra Khalid, Liberal, Mississauga—Erin Mills, ON]

Are you worried that people are taking unfair advantage of the program?