A scathing watchdog report into the federal government’s multi-billion-dollar Indigenous procurement system has led to renewed calls for the program to be run by First Nations, Inuit and Métis people rather than public servants.

Dawn Madhabee Leach with the First Nations Procurement Authority told Global News that the federal government should make Indigenous people responsible for managing the Procurement Strategy for Indigenous Business (PSIB).

That’s particularly the case in verifying businesses are legitimately majority-owned by First Nations, Métis or Inuit people before gaining preferential access to government contracts.

“When Indigenous people deliver the programs themselves, there’s a higher success rate rather than having the government deliver programs, especially business and economic programs,” Madhabee Leach said.

“We have had the successful delivery of programs over the years where we’ve proven that we’re in a better position to deliver and still be fully accountable to the federal government on all funding … I really believe that we need to have Indigenous people manage the (Indigenous Business Directory) because we can better assess who is an Indigenous person.”

In a report released Thursday, Procurement Ombud Alexander Jeglic’s office found Indigenous Services Canada and other government departments were failing to administer a program that’s supposed to guarantee five per cent of Ottawa’s contracts go to Indigenous firms.

The government’s “systemic disregard” for the principles behind the Procurement Strategy for Indigenous Business (PSIB) meant that mandatory audits were not performed, departments did not ensure Indigenous businesses were actually benefiting, and the government’s claims that departments are hitting their targets are unsupported by hard numbers.

Indigenous business leaders have long warned the federal government about problems with the PSIB process, in particular that non-Indigenous businesses are gaming the system to gain access to work otherwise meant for First Nations, Métis and Inuit companies.

Madhabee Leach said she wasn’t surprised by Thursday’s report, which she said reflects the “concerns and the feelings that Indigenous people have had for many years.”

“We really thought that this whole initiative was going to be an amazing boost to Indigenous businesses across the country, but it hasn’t really turned out that way,” Madhabee Leach said in an interview with Global News.

“The dollars aren’t really reaching our people in the way that we were hoping (they) would.”

Jeglic’s office found that Indigenous Services Canada, which is responsible for administering the PSIB, failed to perform mandatory audits to confirm that businesses awarded PSIB contracts were at least 51 per cent owned and operated, and repeatedly ignored departments’ queries about the program .

Because the government did not track if the work was actually done by Indigenous firms, Jeglic’s office said they had no way to “credibly” claim departments were hitting the five per cent target for Indigenous procurement.

The ombud report broadly confirmed the findings of a joint investigation by Global News and the First Nations University of Canada into the PSIB in 2024. Those stories revealed the federal government was not only aware of the issues, but had been warned that failing to ensure only legitimate Indigenous businesses benefitted could erode public support for the program.

“There are some great stories about procurement across this country that have brought small, medium and large Indigenous businesses to success stories … (they) need to be highlighted,” said Billy Morin, the Conservative MP for Edmonton Northwest and former chief of the Enoch Cree Nation.

“But too often (Indigenous Services Canada’s) negligence is getting in the way of that. And who is suffering? The Canadian taxpayer is suffering, Indigenous businesses are suffering,  and reconciliation takes one step forward … but five steps back. This contributes to the radical racism out there.”

Morin said his party supports transferring responsibility for the PSIB to Indigenous leadership — something he said would improve the system and result in smaller government.

Indigenous Services Canada accepted Jeglic’s recommendations to overhaul the system, but despite knowing about these issues for years, changes are not expected any time soon.

The department also said it is currently in talks with First Nations, Inuit and Métis groups about significant changes to the PSIB, and is expected to outline new policy guidance for government departments later this year.

More structural changes like transferring some responsibilities to Indigenous groups, however, are not expected until 2027.

ISC also said it would advocate to the Treasury Board for reforming how government departments report their results against the five per cent target. While Jeglic’s office finds fault with  the PSIB’s current calculations, Indigenous Services Canada still boasted that departments exceeded their targets in 2023-24.

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