Indigenous procurement is a growing priority for the Government of Canada. Rooted in the broader commitment to reconciliation and economic participation, federal procurement policy increasingly directs contract opportunities toward Indigenous-owned businesses. The centrepiece of this effort is the Procurement Strategy for Aboriginal Business (PSAB), which has been in place since 1996 and continues to expand in scope and ambition.
For firms bidding on federal contracts — whether Indigenous-owned or not — understanding PSAB, the 5% procurement target, and the rules around set-asides and joint ventures is essential. These policies affect who can bid on certain contracts, how proposals are evaluated, and where partnership opportunities exist.
This page provides general information about Indigenous procurement policy in Canada and is not legal advice. Consult Indigenous Services Canada and legal counsel for compliance-specific questions.
What Is PSAB?
The Procurement Strategy for Aboriginal Business (PSAB) is a federal procurement policy established in 1996 to increase Indigenous participation in the federal procurement process. It is administered by Indigenous Services Canada and applies to all federal departments and agencies.
PSAB creates a framework of mandatory and voluntary set-asides — procurements that are limited to competition among qualified Indigenous businesses. The policy recognizes that Indigenous businesses face systemic barriers to participating in government procurement and provides a structured mechanism to address those barriers.
Since its introduction, PSAB has been the primary tool the federal government uses to direct procurement spending toward Indigenous communities. It operates alongside other programs such as the Indigenous Business Directory and departmental Indigenous procurement plans, and is referenced in the broader context of the Buy Canadian Policy and federal procurement modernization.
The 5% Federal Procurement Target
In 2021, the Government of Canada committed to ensuring that Indigenous businesses receive at least 5% of the total value of federal contracts. This target applies government-wide and is measured annually across all departments and agencies.
The 5% target represents a significant commitment. Federal procurement spending exceeds $20 billion annually, meaning the target directs over $1 billion per year toward Indigenous businesses. Achieving this requires a combination of mandatory set-asides, voluntary set-asides, Indigenous subcontracting, and joint ventures.
Progress toward the target has been increasing. Departments are required to develop Indigenous procurement plans and report their results. Indigenous Services Canada publishes annual progress reports, and procurement officers are encouraged to proactively identify opportunities that can be directed to Indigenous suppliers.
How the Target Affects Procurement Officers
Federal procurement officers are expected to consider whether each procurement opportunity can be set aside for Indigenous businesses. When mandatory set-aside criteria are not met, officers are encouraged to use voluntary set-asides where a sufficient number of qualified Indigenous suppliers exist. This creates a procurement environment where Indigenous businesses are actively sought for opportunities across all commodity categories.
Mandatory Set-Asides: When They Apply
Under PSAB, federal procurements must be set aside for Indigenous businesses when all of the following conditions are met: the contract value is over $5,000, and at least one of the set-aside criteria applies.
Set-Aside Criteria
Indigenous Population Threshold
When the contract is for delivery of goods or services to a geographic area where the Indigenous population represents 80% or more of the total population, the procurement must be set aside. This criterion is most commonly applied in northern and remote communities.
Requirements Serving Indigenous Peoples
When the goods or services being procured are specifically directed at Indigenous populations — for example, health services for First Nations communities, education programs for Indigenous students, or infrastructure for reserves — the procurement must be set aside.
Comprehensive Land Claims Agreement Areas
Procurements for delivery in areas covered by Comprehensive Land Claims Agreements (modern treaties) may be subject to specific procurement obligations outlined in those agreements. These obligations often include set-asides or preference for businesses owned by the signatory Indigenous group.
Voluntary Set-Asides
Even when mandatory criteria are not met, departments can voluntarily set aside procurements for Indigenous businesses. Voluntary set-asides are encouraged when there are a sufficient number of qualified Indigenous suppliers to ensure competitive bidding. These voluntary measures are a key mechanism for departments to meet the 5% target.
Identifying Set-Asides on CanadaBuys
PSAB set-aside opportunities are flagged on CanadaBuys and in tender notices. Look for references to “PSAB set-aside,” “limited to Aboriginal businesses,” or “Indigenous business set-aside” in the solicitation documents. Departments are required to clearly indicate when a procurement is set aside under PSAB.
How to Qualify as an Indigenous Business
To participate in PSAB set-aside procurements, a business must meet specific ownership and registration requirements.
51% Indigenous Ownership and Control
The business must be at least 51% owned and controlled by First Nations, Inuit, or Métis peoples. Ownership must be genuine and reflect actual control over business operations, not a nominal arrangement. Indigenous owners must participate in the day-to-day management and strategic direction of the business.
Registration in the Indigenous Business Directory
Businesses must register in the Indigenous Business Directory (IBD) maintained by Indigenous Services Canada. Registration is free and requires documentation of Indigenous ownership. The IBD serves as the official registry used by federal procurement officers to verify eligibility for PSAB set-asides.
Certification and Verification
Upon registration, businesses may be subject to verification of ownership claims. This can include documentation of Indigenous identity (such as Status cards, Inuit beneficiary status, or Métis membership), corporate registration documents showing ownership percentages, and shareholder agreements. Businesses should maintain current documentation to avoid delays in procurement eligibility.
Joint Ventures with Indigenous Businesses
Joint ventures can qualify for PSAB set-asides provided the Indigenous partner holds at least 51% of the joint venture. In some cases, a joint venture with a minimum 33% Indigenous participation may qualify under specific departmental guidelines. The joint venture agreement must clearly demonstrate Indigenous control and meaningful participation in the contract work, not merely a financial arrangement.
Subcontracting and Partnership Opportunities
Non-Indigenous firms cannot bid directly on PSAB set-asides, but there are several ways to participate in Indigenous procurement and support the 5% target.
Joint Ventures
Non-Indigenous firms can form joint ventures with Indigenous businesses where the Indigenous partner holds at least 33% of the joint venture (and in many cases, 51% for PSAB eligibility). Joint ventures must demonstrate genuine Indigenous participation in both governance and contract delivery. The Indigenous partner must be involved in project management and decision-making, not merely lending their name to the arrangement.
Subcontracting to Indigenous Businesses
When a non-Indigenous firm wins a federal contract, subcontracting portions of the work to Indigenous businesses contributes to the department's Indigenous procurement reporting. Some solicitations include evaluation criteria that award additional points for Indigenous subcontracting plans. This is an increasingly common approach, particularly for large contracts where multiple subcontractors are involved.
Mentor-Protégé Arrangements
Some federal programs encourage established firms to enter mentor-protégé relationships with Indigenous businesses. In these arrangements, the established firm provides capacity building, training, and operational support to the Indigenous business while collaborating on contract delivery. These relationships build long-term Indigenous procurement capacity and can position both firms for future opportunities.
Key Programs and Resources
Several federal programs and tools support Indigenous procurement in Canada.
| Program / Resource | Purpose | Administered By |
|---|---|---|
| Indigenous Business Directory (IBD) | Official registry of Indigenous businesses eligible for PSAB set-asides | Indigenous Services Canada |
| PSAB Coordinators | Each federal department has a designated PSAB coordinator to identify set-aside opportunities and support Indigenous suppliers | Individual federal departments |
| Procurement Assistance Canada | Provides guidance to businesses (including Indigenous firms) on how to navigate federal procurement processes | Public Services and Procurement Canada |
| Indigenous Services Canada Procurement Resources | Policy guidance, reporting, and tools for implementing PSAB across departments | Indigenous Services Canada |
| Provincial / Territorial Programs | Many provinces have parallel Indigenous procurement frameworks, particularly for resource development and infrastructure | Provincial and territorial governments |
What This Means for Proposal Writers
Indigenous procurement requirements have direct implications for how proposals are structured and evaluated. Here is what proposal teams should consider.
Identifying PSAB Opportunities
Monitor CanadaBuys and federal contract award data for PSAB set-aside opportunities. Set-asides are clearly marked in solicitation documents. Understanding which departments have the largest Indigenous procurement targets can help firms prioritize their business development efforts.
Indigenous Participation Plans in Proposals
Increasingly, federal solicitations include evaluation criteria for Indigenous participation plans, even on contracts that are not set aside under PSAB. Proposals that include credible Indigenous subcontracting commitments, joint venture structures, or community benefit plans can receive additional evaluation points. Build these elements into your proposal templates.
Demonstrating Genuine Partnerships
Evaluators look for evidence of genuine, substantive Indigenous partnerships — not paper arrangements created solely for procurement advantage. Proposals should describe the Indigenous partner's role in contract delivery, their relevant experience, and how the partnership provides mutual benefit. Letters of support from Indigenous partners and detailed work-sharing arrangements strengthen the proposal.
Compliance with Land Claims Obligations
When bidding on contracts in Comprehensive Land Claims Agreement areas, proposals must address the specific procurement obligations in the applicable agreement. These requirements vary by agreement and may include specific hiring commitments, local sourcing requirements, or preference for businesses owned by the signatory group. Failure to address these requirements can result in proposal disqualification.
Frequently Asked Questions
What qualifies as an Indigenous business under PSAB?
An Indigenous business is one that is at least 51% owned and controlled by First Nations, Inuit, or Métis peoples. The business must be listed in the Indigenous Business Directory maintained by Indigenous Services Canada. For joint ventures, the Indigenous partner must hold at least 51% of the joint venture (or 33% in certain teaming arrangements). Ownership and control must be genuine and ongoing, not created solely for the purpose of qualifying for a specific procurement.
Does PSAB apply to all federal contracts?
No. PSAB applies to federal contracts over $5,000 where mandatory set-aside criteria are met. Set-asides are mandatory when the contract is for delivery to an area with an Indigenous population of 80% or more, when the requirement specifically serves Indigenous peoples, or in Comprehensive Land Claims Agreement areas. Outside of mandatory set-asides, departments can voluntarily set aside procurements for Indigenous businesses to help meet the 5% target.
Can non-Indigenous firms participate in PSAB set-asides?
Non-Indigenous firms cannot bid directly on mandatory PSAB set-asides. However, they can participate through joint ventures where the Indigenous partner holds at least 33% of the joint venture. They can also serve as subcontractors to Indigenous prime contractors. Some departments encourage mentor-protégé arrangements where established firms support Indigenous businesses in building procurement capacity while participating in contract delivery.
What is the Indigenous Business Directory?
The Indigenous Business Directory (IBD) is maintained by Indigenous Services Canada and serves as the official registry of businesses eligible for PSAB set-asides. To be listed, a business must demonstrate at least 51% Indigenous ownership and control. Registration is free. The directory is used by federal procurement officers to verify eligibility and to identify potential Indigenous suppliers when planning set-aside procurements. Businesses can register online through the Indigenous Services Canada website.
How does the 5% Indigenous procurement target work in practice?
The federal government committed to awarding at least 5% of the total value of federal contracts to Indigenous businesses. This is a government-wide target, not a per-contract requirement. Departments report their Indigenous procurement spending annually. To reach the target, departments use mandatory set-asides where criteria are met, voluntary set-asides for other procurements, and encourage Indigenous subcontracting and joint ventures. Progress is tracked through the annual Indigenous Procurement Report published by Indigenous Services Canada.
Does PSAB apply to provincial and territorial procurement?
PSAB is a federal policy and applies only to federal government procurement. However, many provinces and territories have their own Indigenous procurement programs. British Columbia, Ontario, Saskatchewan, and Manitoba all have frameworks that encourage or require procurement from Indigenous businesses in certain contexts. Some provinces link Indigenous procurement requirements to specific projects such as natural resource development or infrastructure. Suppliers should check the procurement rules for each jurisdiction they operate in.
Track Indigenous Procurement Opportunities with Proposal Forge
Proposal Forge helps firms identify PSAB set-asides, build compliant proposals with Indigenous participation plans, and manage the entire response lifecycle — all with Canadian data residency and Protected B-ready controls.