Report Slams 'Phantom' Contracts in Indigenous Procurement Failures

TORONTO, ON – March 31, 2026 – A damning report from Canada’s Procurement Ombudsman has exposed systemic failures in the federal government's program for Indigenous businesses, concluding that the system is plagued by a lack of oversight, inconsistent rules, and inflated reporting that masks the true economic benefits flowing to Indigenous communities. The findings, described by the Ombudsman as “deeply and profoundly disappointing,” validate over a decade of advocacy from the Canadian Council for Indigenous Business (CCIB), which is now calling for immediate action to ensure the integrity of the multi-billion dollar initiative.

The “Procurement Practice Review of Contracts Awarded to Indigenous Businesses Report” serves as a stark rebuke of the current state of the Procurement Strategy for Indigenous Business (PSIB). It highlights how well-intentioned policies are being undermined by poor implementation, ultimately failing the very businesses they are designed to support. In response, the CCIB has welcomed the report as a “vital course correction” and has positioned itself as a ready partner to help the government implement the long-overdue reforms.

Systemic Weaknesses and Inflated Numbers

The Ombudsman’s review uncovered a near-total failure by federal departments to enforce a key pillar of the procurement strategy: the requirement that at least one-third of the work on a set-aside contract be performed by an Indigenous business or businesses. Investigators found “no evidence” that departments were verifying this criterion, a critical loophole that allows the value of contracts to be captured by non-Indigenous subcontractors.

This lack of enforcement directly contributes to the overstatement of progress towards the federal government’s flagship commitment to award a minimum of 5% of the total value of its contracts to Indigenous-led businesses. The report criticizes the current methodology, which counts the full value of a contract awarded to an Indigenous business, even when up to two-thirds of the funds may pass through to non-Indigenous partners. This practice, often referred to as “gilding,” creates a misleading picture of economic reconciliation. While federal figures for 2023-2024 boasted that 6.1% of procurements went to Indigenous firms, the Ombudsman’s findings suggest the actual economic benefit is significantly lower.

Further compounding the issue is a fragmented and outdated policy landscape. The review noted the absence of a single, comprehensive, government-wide Indigenous procurement policy. Instead, departments rely on a patchwork of guidelines, leading to inconsistent application, poor documentation, and a lack of clarity on roles and responsibilities. In over 75% of the contract files reviewed, officials could not even clearly identify which type of PSIB set-aside was being used.

The Fight Against 'Phantom Ventures'

The report’s findings give official weight to long-standing concerns within the Indigenous business community about “phantom” or “paper” joint ventures. These arrangements involve non-Indigenous companies creating superficial partnerships with an Indigenous entity to gain access to lucrative set-aside contracts, with little to no meaningful participation, capacity building, or economic benefit flowing to the Indigenous partner.

For years, the CCIB has warned against these practices. In its 2022 report, Reaching 5%, the Council called for measures to hold bidders accountable for meeting mandatory minimum requirements for Indigenous content. More recently, it proposed mandatory audits of all Joint Venture (JV) programs to ensure spending is directed to genuine Indigenous businesses.

The Ombudsman’s review confirms these fears, revealing a system ill-equipped to detect or prevent such arrangements. The failure to verify Indigenous content throughout the life of a contract creates a significant risk that the 5% target is being met on paper only, while the wealth-building opportunities are siphoned off by non-Indigenous firms.

“True Indigenous procurement means Indigenous businesses are doing the work, building long-term capacity, and strengthening their communities,” the CCIB stated in its response. The organization stressed that the 5% target must represent “true Indigenous economic empowerment,” not just a statistical achievement.

A Blueprint for Accountability and Reform

In the wake of its scathing critique, the Office of the Procurement Ombud laid out a clear, three-pronged path toward reform. The recommendations align almost perfectly with policy proposals the CCIB has been advancing for years, creating a powerful consensus for change.

First, the Ombudsman calls on Indigenous Services Canada (ISC) to expedite the creation of a consolidated, government-wide Indigenous procurement policy. This would clarify rules, define roles, and establish clear auditing procedures in partnership with Indigenous organizations.

Second, the report highlights a critical gap in fairness: Indigenous suppliers currently have no effective way to challenge a contract award outside of a costly and complex Federal Court action. The Ombudsman recommends establishing a permanent, impartial, and Indigenous-led recourse mechanism to handle complaints, suggesting its own office could serve as an interim solution.

Finally, to combat “gilding,” the report demands that the 5% target calculation be updated to reflect only the value of the work actually completed by Indigenous businesses and their Indigenous employees. This would provide a transparent and accurate measure of the policy’s true economic impact.

The CCIB has publicly offered its own tools as part of the solution. Its proprietary Supply Change™ program and Indigenous Procurement Marketplace are designed to connect verified Indigenous businesses with buyers, while its Certified Indigenous Business (CIB) program provides an independent, Indigenous-operated verification process—precisely the kind of mechanism recommended in the report to ensure ethical practices.

With the federal government now facing clear, actionable recommendations from an independent oversight body, the pressure to act is immense. The CCIB has affirmed its readiness to co-develop and implement these changes, framing this moment as a critical opportunity to overhaul a broken system and finally deliver on the promise of economic reconciliation for First Nations, Métis, and Inuit businesses across Canada.