Indigenous Business Set-Aside

When you're planning a federal procurement, you might be required—not just encouraged—to restrict competition to Indigenous businesses listed in the Indigenous Business Directory. This set-aside mechanism is the centerpiece of Canada's Procurement Strategy for Indigenous Business (PSIB), designed to help the federal government reach its target of awarding 5% of total contract value to Indigenous businesses.

How It Works

Not all set-asides are created equal. According to the Office of the Procurement Ombud, there are three distinct types under PSIB—mandatory, voluntary, and conditional. Mandatory set-asides apply when you're procuring for an area where Indigenous people make up at least 51% of the population, or when the Indigenous population will be the primary recipient or end user of what you're buying. That threshold was recently lowered from 80%, which significantly expanded when you're required to use this approach. The minimum contract value triggering mandatory consideration is $5,000, assuming you can still meet operational requirements and sound contracting principles.

Voluntary set-asides give you flexibility to restrict competition even when it's not mandatory—useful when you want to support Indigenous business development in your sector. Conditional set-asides serve a different purpose entirely. In practice, they let you test the waters when you're uncertain about Indigenous business capacity to deliver. You can start with an open competition but convert it to a set-aside if qualified Indigenous bidders come forward.

Eligibility requirements are spelled out in the Supply Manual's Annex 9.4. Businesses must be at least 51% owned and controlled by Indigenous peoples—meaning First Nations, Inuit, or Métis ordinarily resident in Canada. Joint ventures are permitted, but the Indigenous partner must perform at least 33% of the contract value. Most importantly, businesses must be registered in the Indigenous Business Directory or a modern treaty business directory before they can bid. Indigenous Services Canada maintains audit authority throughout the contract delivery period to verify ongoing eligibility, so registration alone doesn't guarantee compliance.

Key Considerations

• The 51% population threshold for mandatory set-asides catches many procurement officers off guard. You need to verify demographic data for your target area or confirm that Indigenous people are the primary end users—this isn't always straightforward for national contracts.

• Directory registration is non-negotiable. Even if you know a business is Indigenous-owned, they cannot bid on a set-aside opportunity without current registration. Build this verification into your solicitation requirements early.

• Conditional set-asides require careful planning in your competitive process. You need to structure your evaluation so you can identify qualified Indigenous bidders and potentially convert the procurement mid-stream without violating trade agreements or government contracting regulations.

• Contract value matters for mandatory consideration, but once you're above $5,000, you must at least consider whether PSIB applies. PSPC and Treasury Board expect documented rationale if you proceed without a set-aside when conditions suggest you should use one.

Related Terms

Indigenous Business Directory, Procurement Strategy for Indigenous Business (PSIB), Conditional Set-Aside, Set-Aside Authority, Indigenous Joint Venture

Sources

• Supply Manual - Annex 9.4: Requirements for the Set-Aside Program for Indigenous Business

• Procurement Strategy for Indigenous Business (PSIB) - Set-Aside Program Overview

• Procurement Set-Aside Programs - Reports and Analysis

When in doubt, consult Annex 9.4 of the Supply Manual before finalizing your procurement strategy. The eligibility requirements and verification processes are detailed enough that you shouldn't be making assumptions about whether a set-aside applies.