Internal federal documents reveal that Health Canada is seeking exemptions from the federal government’s mandatory 5 per cent Indigenous procurement target, citing Indigenous capacity gap in scientific and mental health services. 

Since 2021, federal departments have been obligated to award at least 5 per cent of their annual contracts to Indigenous businesses to support economic reconciliation. While Health Canada met the federal target this year, internal briefing notes obtained by Canada’s National Observer through the federal Access to Information Act reveal the department is facing supplier shortages in certain specialized areas. As a result, the department has asked for exemptions for 2025-26 that would exclude about $20 million in lab equipment, $21 million in mental health services and $8 million in health science consulting from the spending target.

Indigenous leaders say the exemptions reflect systemic barriers, not a lack of capacity.

Tamara Goddard, of Saulteau and Cree heritage and founder of Four Our Future, an Indigenous economic consulting firm who has worked with several federal departments including Health Canada, said there is a “total blackout” in communication between Indigenous suppliers and procurement officials. “The procurement industry in the government does not understand what is needed from Indigenous suppliers, and Indigenous suppliers do not know what is needed by procurement,” she said. 

Too often, she said the narrative presented by the departments is one of exclusion and overlooks the readiness and specialization of Indigenous suppliers: “‘These people don’t exist, where we’ve tried, we can’t find them’ … it’s such an old story.” 

Shannin Metatawabin, CEO of the National Aboriginal Capital Corporations Association (NACCA) and Cree/Inninow from Fort Albany First Nation said Indigenous businesses have the capacity to thrive — if they can trust the system and access an efficient way to be registered and recognized. But the current process is bogged down by a slow and complex verification system that discourages participation, he said. As a result, too many Indigenous entrepreneurs with the skills to succeed choose not to register or renew their profiles, limiting their opportunities.

“There’s just not a transition that has happened in a timely fashion to enable all those businesses to be found,” he said. 

In a joint response emailed to Canada’s National Observer, Anispiragas Piragasanathar, a spokesperson for Indigenous Services Canada (ISC), as well as Crown-Indigenous Relations and Northern Affairs Canada, said their findings come from searches of the Indigenous business directory maintained by ISC, which Health Canada consults both during procurement planning and before awarding contracts. “These searches confirmed limited or no Indigenous capacity in the specified areas,” he said. 

Piragasanathar said laboratory repair and maintenance work usually has to be done by manufacturers in order to keep warranties and certifications valid. When it comes to psychological services, a few Indigenous psychologists have been contracted, but demand in other areas remains much higher than the current Indigenous supply. For health science consulting, most contracts still go to universities or highly specialized firms, since these roles generally require advanced qualifications and expertise.

According to the briefing notes, when gaps are identified, exemptions may be sought and require deputy minister approval annually.

Piragasanathar said ISC is encouraging Indigenous businesses to register or update their profiles in the directory, which lists more than 3,000 businesses, while reviewing existing entries to confirm eligibility. He added that resources are being added to clear backlogs. 

“In the long term, we are exploring a risk-based approach to revalidation, similar to the approach taken for auditing recipients of federal grants and contributions,” he added. 

In 2022, ISC removed 1,100 companies from the business directory as part of a cleanup due to concerns about fraudulent listings and lax verification processes. Prior to that, companies could self-identify as Indigenous with minimal proof, leading to concerns about misuse by non-Indigenous firms. 

The National Aboriginal Capital Corporations Association and allied groups have been working since 2018 to create a First Nations-led procurement authority that would verify businesses and link Indigenous entrepreneurs to federal contracts. “We want to take over the Indigenous business directory,” Metatawabin said. “But we need to be ready for this transfer and transition, and we’re just looking for the government to make the call to support the First Nations Procurement Authority.”

Piragasanathar confirmed ISC is co-developing an Indigenous procurement strategy with the association and other partners. The department has engaged about 550 Indigenous organizations over the past two years, focusing on transferring control of the directory to Indigenous governance. 

Despite the First Nations Procurement Authority launching in May 2025, Metatawabin said the government has not made any decisions on providing support and it appears the process is being delayed, resulting in current issues where the government struggles to identify Indigenous entrepreneurs.

Metatawabin said federal backing remains critical to build the infrastructure needed to certify businesses and create a reliable database for procurement. “[The Indigenous-led infrastructure] will ensure every business that is out there is on a database that the government, when they procure something, there’ll be a business there,” he said. 

Sonal Gupta / Local Journalism Initiative / Canada’s National Observer

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