A conditional set-aside under the Procurement Strategy for Indigenous Business (PSIB) lets contracting authorities hedge their bets when they're unsure whether there's enough Indigenous business capacity in the market. You open the competition to everyone, but if two or more qualified Indigenous businesses submit compliant bids, the procurement automatically becomes exclusive to those Indigenous suppliers. It's a middle ground between full set-asides and standard open competition.
How It Works
When a contracting officer posts a conditional set-aside on the Government Electronic Tendering System (GETS), they must clearly advise all potential suppliers that the procurement has been set aside under the PSIB and that suppliers must certify they qualify as an Indigenous business as defined under the program. This notification requirement is spelled out in Section 9.40.35 of PSPC's Supply Manual. Non-Indigenous suppliers can submit bids—nothing stops them. But the moment two or more Indigenous businesses submit compliant proposals, the competition closes to everyone else and those Indigenous suppliers compete among themselves.
The Office of the Procurement Ombudsman notes in their Procurement Practice Review that this two-or-more threshold is what triggers the conversion from conditional to exclusive. In practice, this means your procurement team needs to evaluate Indigenous business certifications early in the process, before you've invested significant effort evaluating all bids. Annex 9.4 of the Supply Manual contains the detailed requirements and standard clauses you'll need to include, covering bidder certifications and ongoing obligations through contract performance.
Here's the thing: departments often don't know whether qualified Indigenous suppliers exist for specialized requirements. A niche IT system? Specialized engineering services? It's hard to say. Rather than risk a failed mandatory set-aside or bypass PSIB entirely, the conditional model tests the market. Indigenous Services Canada verifies eligibility of businesses receiving PSIB contracts, and suppliers must attest they meet the 51% Indigenous ownership and control threshold—plus the requirement that at least 33% of contract value be performed by Indigenous entities—at bid submission and throughout performance.
Key Considerations
- The Office of the Procurement Ombudsman has observed that the Supply Manual doesn't currently provide detailed guidance on when to apply a conditional set-aside or how to clearly communicate to all bidders that the process may convert to Indigenous-only competition. You'll need to draft your solicitation carefully to avoid confusion and potential challenges.
- PSIB set-asides are exempt from Canada's trade agreement obligations, which means the Canadian International Trade Tribunal and the Procurement Ombudsman generally lack jurisdiction to review complaints about these processes. This gives you more flexibility but also more responsibility to ensure fairness.
- There's no dollar threshold for conditional set-asides under PSIB. Whether you're procuring $25,000 in services or a multi-million dollar construction project, the same framework applies if you choose this approach.
- Non-Indigenous suppliers who invest time preparing bids need to understand upfront that their proposal may not be evaluated if enough qualified Indigenous businesses respond. Clear communication in your solicitation documents prevents frustration and potential disputes down the line.
Related Terms
Procurement Strategy for Indigenous Business (PSIB), Mandatory Set-Aside, Government Electronic Tendering System (GETS), Indigenous Business Directory
Sources
- PSPC Supply Manual – Section 9.40.35: Set-aside program for Indigenous business
- PSPC Supply Manual – Annex 9.4: Requirements for the Set-aside Program for Indigenous Business
- Office of the Procurement Ombudsman – Procurement Practice Review of Contracts Awarded to Indigenous Businesses
When you're uncertain about Indigenous business capacity but want to maximize PSIB opportunities, the conditional set-aside offers a practical path forward. Just make sure your solicitation documents clearly explain how the process works to all potential bidders.