Indigenous Services Minister Patty Hajdu rises during Question Period, Nov. 21, in Ottawa.Adrian Wyld/The Canadian Press
Indigenous Services Minister Patty Hajdu is calling for an external review of an Indigenous procurement program after a former auditor for the program said he had repeatedly raised concerns about alleged fraud and abuse by non-Indigenous companies.
In an interview, Ms. Hajdu said the revelations, which were reported in The Globe and Mail on Monday, were “concerning” and “quite shocking.”
“I have actually begun the conversation with the department about an external audit of the entire program so that we can actually look at what’s working, what’s not working,” she said. “If proper checks and balances are not in place to protect the integrity of a program like that, then it undermines confidence in that program.”
“If there’s this much noise about this program, then clearly something is not working well,” Ms. Hajdu said. “And so we need to get to the bottom of it. From my perspective, this is worth protecting.”
The Procurement Strategy for Indigenous Business is a federal policy meant to foster the growth of Indigenous businesses in Canada. It allows government departments to “set aside” certain contracts for Indigenous companies registered with Indigenous Services Canada, significantly reducing the competition pool.
Crucially, the PSIB allows for Indigenous and non-Indigenous companies to enter into joint ventures to bid on government contracts, so long as the Indigenous company retains ownership and control of the enterprise.
This mechanism has come under scrutiny, however, as Indigenous business owners and leaders have said in repeated interviews and House of Commons committee testimony that many of the joint ventures under the program are not actually benefiting Indigenous people, and that contracts are being won by shell companies connected to non-Indigenous businesses.
In a Globe and Mail exclusive on Monday, Garry Hartle, a former auditor for the PSIB program from 2016 to 2023, said he had repeatedly warned Indigenous Services Canada about problems with the joint venture system. “If you do away with the joint ventures, the program wouldn’t be abused,” he said.
Mr. Hartle, a long-time auditor who worked under contract to the government, also said Indigenous Services Canada had made several changes that undermined auditors’ ability to do their work. For instance: In 2021, high-ranking staff at Indigenous Services Canada allegedly decided auditors would no longer be responsible for confirming a business’s indigeneity ahead of a contract being awarded.
Mr. Hartle was also told auditors could no longer communicate directly with the businesses they were examining; instead, they’d have to work through a government go-between. In practice, however, this led to delays and misunderstandings, since the government staff relaying messages between auditors and companies were “junior staff,” he said.
Mr. Hartle is scheduled to speak before a House of Commons committee on Tuesday.
At a meeting of the Commons committee on Indigenous and Northern Affairs on Monday evening, Conservative MPs pressed Ms. Hajdu about Mr. Hartle’s statements, and about the status of the program.
“Minister, is it your belief today that the program has integrity?” asked Conservative MP Michael Barrett.
“It is my belief that there are many aspects of the program that are delivering for Indigenous companies,” Ms. Hajdu said. “But look, even some misuse of the program puts the program at risk. And so for me, an allegation like what the auditor has made, it’s very serious, and I think we should all take it seriously and we should act on it.”
The Indigenous procurement strategy came under scrutiny earlier this year after revelations that some of the contracts for the ArriveCan app were conducted through the program. ArriveCan was a government app designed to simplify the process of making border crossings and pandemic-era health declarations.
The Globe reported in 2023 that two of the main ArriveCan contractors – Coradix Technology Consulting and Dalian Enterprises – were awarded work on the project through the Indigenous procurement program. Dalian is an Indigenous-owned company that has said it has just two employees and it regularly landed contracts under the program through a joint venture with the larger Coradix, which is non-Indigenous. Both have since been suspended from federal contracting and are challenging the decision in court.
Public records show Dalian and Coradix have collectively been paid $635-million through federal contracts since 2003.
The Indigenous procurement program has existed since 1996, but was supercharged in 2021 after the Liberal government told departments they should aim to direct 5 per cent of their contracts to Indigenous businesses.
However, this target may have created an incentive for abuse, according to experts who have given testimony to House of Commons committees.
In September, Assembly of First Nations Regional Chief Joanna Bernard told MPs that she estimates the true percentage of spending going to legitimate Indigenous businesses under the PSIB is closer to 1 per cent.
Ms. Hajdu was also pressed about this at Monday evening’s committee meeting.
“The AFN says that you’re not hitting your 5-per-cent target,” said Conservative MP Garnett Genuis. “Is the AFN correct?”
“Not according to our records,” Ms. Hajdu replied. “But what I can say is that I understand the concern, and we all want this program to work better, including the AFN.”