Indigenous procurement program vulnerable to abuses, CEO warns

A First Nations business owner told MPs that Ottawa has not done enough to prevent abuses of an Indigenous procurement program, despite his own warnings to Parliament 18 years ago.
During a Thursday meeting of the House of Commons public-accounts committee, which is examining spending on the ArriveCan mobile app, John Bernard, chief executive officer of Donna Cona Inc., took aim at the Procurement Strategy for Indigenous Business.
The program – meant to encourage the development of Indigenous businesses and workers – ensures that a certain percentage of federal contracts goes to those companies. It allows those enterprises to work together with non-Indigenous businesses under certain scenarios. These arrangements, known as joint ventures, were at the heart of Mr. Bernard’s concerns.
In 2006, Mr. Bernard told a Senate committee that non-Indigenous companies were joint-venturing with Indigenous “shell companies” to qualify for the preferential procurement program – a point he restated at Thursday’s meeting.
“Donna Cona has been in business 28 years, and we find ourselves up against aboriginal firms that just got into business and are running multimillion-dollar contracts,” he told MPs. “Back in 2006, I warned of the potential abuse of joint ventures. Eighteen years later, we are seeing the results of that.”
Parliamentarians have zeroed in on the PSIB in large part because one of the suspended contractors in the ArriveCan saga, Dalian Enterprises Inc., participated in the program.
Donna Cona was founded in 1996, the same year the government launched the PSIB, and its website says it is “the largest Aboriginal-owned and -operated business and technology consulting service company in Canada.” Mr. Bernard told The Globe his company has 84 employees and “about 200 to 300 subcontractors.”
Under the PSIB’s joint venture rules, Indigenous companies have no motivation to grow, he told the public-accounts committee. “If you can become a joint venture, you don’t have to do anything. You don’t even need staff or admin staff, because your joint venture partner has all that.”
“Being aboriginal is not a skill,” Mr. Bernard said. “But yet, in aboriginal procurement with joint ventures, it’s almost like, if you’re aboriginal, all of a sudden that’s a quality you’re bringing to the joint venture – and we just don’t agree with that. Obviously, you have to start somewhere – that should be small – but we believe that the aboriginal side of the joint venture, it should progress.
“They shouldn’t be going after a $100-million contract when they were running an ice cream truck the week before.”
Members of Parliament are reviewing spending on the ArriveCan app, which was developed during the pandemic, and examining Ottawa’s billions in spending on outside contractors. During these hearings, MPs have also examined the PSIB.
In 2021, the federal government established a target rate for Indigenous procurement, stating that, at a minimum, 5 per cent of the total value of contracts departments and agencies issue go to Indigenous businesses. That target came into effect for some departments earlier this year, and is expected to come into force for all federal institutions in 2025.
To access procurement under the PSIB, companies must first be listed on a federal directory of Indigenous business. In early May, The Globe reported that the number of businesses listed on that directory had grown rapidly – by more than 40 per cent – over the past year.
According to Mr. Bernard, there simply aren’t enough Indigenous workers to fulfill the demand created by these Indigenous procurement contracts, however.
The public-accounts committee heard on Thursday from three contracting companies that worked on ArriveCan: Donna Cona Inc., KPMG and TEKsystems.
In February, a report on ArriveCan spending by Auditor-General Karen Hogan said the government spent about $59.5-million on the app and provided a breakdown of 11 companies that received $1-million or more.
At the top of the list was GCStrategies, which received $19.1-million, followed by Dalian Enterprises Inc. and Amazon Web Services Inc., which both received $7.9-million. Microsoft was next at $3.8-million, followed by TEKsystems, with $3.2-million. KPMG was not on the Auditor-General’s list, but the company worked as a subcontractor to GCStrategies.
Donna Cona was listed as having received $3-million. Mr. Bernard disputes that. Donna Cona president Barry Dowdall, who also testified, said the company provided about $500,000 of cloud infrastructure work for ArriveCan.
Officials with GCStrategies and Dalian have also said the Auditor-General’s figures exceed their own estimates of how much they received. The Auditor-General has said determining the true cost of ArriveCan was challenging because of poor internal record-keeping by the Canada Border Services Agency.