The Procurement Ombud’s review of Indigenous procurement

On March 26, 2026, the Office of the Procurement Ombud (OPO) released its much-anticipated Procurement Practice Review of Contracts Awarded to Indigenous Businesses, a sweeping examination of how the federal government administers the Procurement Strategy for Indigenous Business (PSIB). The findings are significant.

Whether you are an Indigenous community, an Indigenous-owned business or a non-Indigenous firm participating in the Indigenous procurement supply chain, this report has direct implications for your operations, your compliance obligations and your strategic planning.

Our firm has reviewed the report in detail. Below, we summarize the key findings and explain what they mean for the clients we serve.

A strategy falling short of its promise

The PSIB was established in 1996 to address the systemic barriers that have historically excluded Indigenous businesses from federal procurement. It uses “set-asides” to reserve certain federal contracts exclusively for Indigenous businesses, exempting those contracts from free trade agreement obligations. To qualify, a business must be at least 51% Indigenous-owned and controlled and at least 33% of the resulting contract’s value must be performed by Indigenous entities. As of 2022, federal departments must also ensure that at least 5% of the total value of their contracts are awarded to Indigenous businesses.

Procurement Ombud Alexander Jeglic described the report as “a sobering account” that reveals “a pattern of fragmented guidance, inconsistent application and oversight and missed opportunities to uphold the strategy’s core objective.”

The Ombud was unsparing in his conclusion: these findings reflect “a systemic disregard for the fundamental purpose of the PSIB.”

Fragmented guidance and inconsistent application

A central finding of the review is that Indigenous Services Canada (ISC), the department responsible for implementing the PSIB, has failed to provide coherent, centralized direction to other federal departments.

There is no standalone PSIB policy. Instead, guidance is scattered across ISC’s website, Public Services and Procurement Canada’s (PSPC) Supply Manual, departmental presentations and ad hoc email communications.

The Supply Manual itself is outdated and, in important respects, inaccurate. For instance, it does not reflect the requirement for contracting officers to verify a supplier’s registration on the Indigenous Business Directory (IBD) prior to awarding a set-aside contract.

This fragmentation has cascading effects. The OPO found that in the vast majority of files reviewed, procurement planning documentation did not clearly identify the type of PSIB set-aside being used. In more than 75% of files, the set-aside type was not identified. Departments also lacked evidence of assessing Indigenous capacity before setting aside procurements.

For Indigenous businesses, this means the playing field remains uneven. Opportunities that should be clearly designated and communicated are instead muddled by inconsistent internal processes. For non-Indigenous supply chain participants, the lack of clarity around conditional set-asides, where non-Indigenous firms may bid but can be excluded if two or more compliant Indigenous bids are received, creates significant uncertainty around bid strategy and legal exposure.

Critical compliance failures: Eligibility verification and contract clauses

The review uncovered gaps in how departments verify whether suppliers actually meet PSIB eligibility requirements. In 20 of the 27 files reviewed, there was no evidence that contracting authorities confirmed the supplier was registered on the IBD prior to contract award. Three of the 27 suppliers were confirmed by ISC as never having been listed on the IBD at all. In one case, a department awarded a sole-source Indigenous set-aside contract to a supplier who was not registered on the IBD, proceeding without confirmation of the supplier’s Indigenous status.

The review also identified that mandatory contractual clauses requiring suppliers to certify their Indigenous business status were missing from the majority of files. In 13 procurement processes resulting in 16 contracts, the winning suppliers were never required to certify that they met the definition of an Indigenous business prior to contract award. Only one of 16 awarded contracts included the clause requiring the supplier to maintain Indigenous business status throughout the contract’s life.

These omissions may have significant implications. For legitimate Indigenous businesses, missing clauses and lax verification undermine the protections the PSIB is supposed to provide. For non-Indigenous joint venture partners and subcontractors, the absence of clear contractual obligations around Indigenous content requirements creates ambiguity about their own compliance exposure.

The 33% Indigenous content criterion: A rule without enforcement

Perhaps the most striking finding is the near-total failure to monitor or enforce the 33% Indigenous content criterion, the requirement that at least one-third of a PSIB contract’s value be performed by Indigenous entities.

The OPO found “no evidence” that any of the departments reviewed verified this criterion during contract administration. ISC itself confirmed it “do[es] not currently have guidance documents on the 33% content criterion.” No contract clauses exist in the Supply Manual or elsewhere to enforce this obligation.

The consequences are stark. Without enforcement, the 33% criterion exists only on paper. The Ombud warned that this vacuum enables exploitation: “Non-Indigenous businesses may use Indigenous businesses as shell companies, entities that meet the minimum ownership requirement on paper but do not actually perform the work, allowing them to unfairly access contracts intended to be set aside for Indigenous businesses.”

Pre-award and post-award audits: A broken safeguard

Pre-award audits by ISC are mandatory for PSIB contracts valued at or above $2 million. They are intended to verify that the winning bidder meets the 51% Indigenous ownership and control criterion before the contract is awarded.

Yet in nine of the 13 contracts above $2 million that the OPO reviewed, there was no evidence that ISC was even notified for a required audit. In another case, a department sent multiple requests to ISC and received no response, ultimately proceeding without audit confirmation.

Post-award audits fared no better. All three departments confirmed to the OPO that they have never requested a post-award audit for any contract within the review period. No guidance exists to help contracting officers identify when such an audit should be triggered.

Indigenous suppliers denied meaningful recourse

One of the most consequential findings of the report is the systemic gap in recourse mechanisms available to Indigenous suppliers.

Because PSIB set-aside contracts are exempt from trade agreements, Indigenous suppliers who wish to challenge a contract award cannot access either the Canadian International Trade Tribunal (CITT) or the OPO’s complaint processes. Their only option is the Federal Court, a route that can be costly, time-consuming and legally complex.

The report also found that in eight of the 27 files reviewed, solicitation documents incorrectly told suppliers that the CITT and OPO were available to receive complaints, despite those mechanisms being inaccessible for PSIB contracts. This misinformation compounds the problem, misleading Indigenous suppliers into pursuing complaints that will ultimately go unheard.

The 5% target: Overstating Indigenous benefit

The Government of Canada has reported that Indigenous businesses received more than $1.24 billion in federal contracts in 2023 and 2024, representing 6.1% of all eligible government procurements. However, the OPO found that this figure significantly overstates the actual economic benefit to Indigenous businesses. The current reporting methodology counts the full value of contracts awarded to Indigenous businesses, including up to 67% of the contract value that may be performed by non-Indigenous subcontractors. For contracts awarded outside the PSIB, there is nothing preventing 100% of the work from being subcontracted to non-Indigenous businesses while still being counted toward the 5% target.

The Ombud’s recommendations

The report makes three principal recommendations:

1. Indigenous procurement policy: ISC, in collaboration with First Nations, Inuit and Métis partners and PSPC, should expedite the development of a comprehensive Indigenous Procurement Policy that consolidates and clarifies strategy requirements, roles, procedures, eligibility verification, audit mechanisms and documentation standards. The OPO will publicly report on progress at six-month intervals.
2. Develop a recourse mechanism: PSPC and the Department of Justice should establish the OPO as the interim recourse mechanism for supplier complaints related to PSIB set-aside contracts, while ISC develops a permanent, potentially Indigenous-led, impartial recourse mechanism in consultation with First Nations, Inuit and Métis stakeholders.
3. Updated reporting: ISC should update reporting practices so that the 5% target reflects the value of work actually carried out by Indigenous businesses, rather than the full value of contracts that may include significant non-Indigenous subcontracting.

ISC has agreed to all three recommendations. The transformed procurement policy and strategy are expected to be finalized in winter 2026 and fully implemented by April 1, 2027. The Indigenous-led recourse mechanism is targeted for implementation by April 2028. Notably, PSPC did not support the recommendation to establish the OPO as an interim recourse body, arguing instead that ISC, given its co-development of the Transformative Indigenous Procurement Strategy (TIPS) with Indigenous partners, is best positioned to lead the development of any recourse mechanism.

Our firm will continue to monitor developments as ISC, PSPC and Indigenous partners work toward the implementation timelines set out in the response and action plan. We are committed to advising our clients, Indigenous and non-Indigenous alike, as this evolving policy landscape takes shape.

What this means for you

• For Indigenous communities: This report validates long-standing concerns about the integrity and effectiveness of Indigenous procurement. The commitment to a comprehensive Indigenous Procurement Policy and an Indigenous-led recourse mechanism represents a meaningful, but overdue, step toward ensuring that the economic benefits of federal procurement actually reach Indigenous communities. Communities should actively engage in the consultation processes ISC has committed to undertaking through winter and fall 2026.
• For Indigenous businesses: The findings underscore the importance of ensuring your business is registered on the Indigenous Business Directory and that your contractual arrangements can demonstrate compliance with both the 51% ownership criterion and the 33% content criterion. As the government moves toward stronger enforcement and new audit mechanisms, businesses that have their compliance documentation in order will be best positioned.
• For non-Indigenous supply chain participants: If your organization procures goods or services from Indigenous businesses, these findings should prompt a careful review of your sourcing and due diligence practices. As the government moves toward stronger verification, audit and reporting mechanisms, non-Indigenous firms that rely on Indigenous suppliers should ensure they are conducting meaningful due diligence on their partners’ eligibility and capacity. Organizations that proactively verify the Indigenous status, ownership structure and operational capacity of their Indigenous suppliers will be best positioned to manage compliance risk, protect their reputations and maintain the integrity of their procurement commitments as the regulatory landscape evolves.

How our firm can help

Our team has experience advising First Nations, Métis communities, Indigenous businesses and non-Indigenous supply chain participants on the full range of issues raised by the OPO’s review.

For Indigenous communities and businesses, we can assist with IBD registration and eligibility verification, structuring joint ventures and subcontracting arrangements that satisfy both the 51% ownership and 33% content criteria, preparing for pre-award and post-award audits and advocating on your behalf as new recourse mechanisms are developed. We also help communities engage meaningfully in government consultation processes to ensure their voices shape the forthcoming Indigenous Procurement Policy.

For non-Indigenous supply chain participants, we offer due diligence reviews of your Indigenous sourcing practices, assistance in developing robust Indigenous procurement policies tailored to your organization, compliance assessments of existing PSIB arrangements and guidance on structuring partnerships that reflect genuine Indigenous participation. As the federal government moves toward stronger oversight, taking proactive steps to build sound procurement policies and thorough due diligence frameworks is the most effective way to protect your business relationships, manage compliance risk and safeguard your reputation.

Whether you need a comprehensive review of your procurement practices or strategic advice on a specific contract, our team is ready to help you navigate this changing landscape.

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