The federal government runs a procurement target that every department must hit: a minimum 5 percent of the total value of its annual contracts must go to qualified Indigenous businesses. The target was phased in from 2022 and is delivered through the Procurement Strategy for Indigenous Business. To bid on the work reserved under it, an Indigenous-owned business must be listed on the Indigenous Business Directory. This guide explains who qualifies, how a set-aside works, and the reform now underway that contractors should watch.
The 5 percent target
Since 2022, all federal departments and agencies have been required to direct a minimum 5 percent of the total value of their annual contracts to qualified Indigenous businesses. It is a floor, not a ceiling, and it applies across the federal contracting program rather than to any single tender.
Be aware that the program is under active scrutiny. The Procurement Ombud's review found the reported numbers overstate the real economic benefit reaching Indigenous businesses, because a large share of the work on a counted contract can be subcontracted to non-Indigenous firms while still counting toward the target. A new Indigenous Procurement Policy is being developed in response, with reforms expected to land over the coming year and broader implementation targeted for 2027. Treat the rules below as current but expect change, and confirm the live policy before relying on it.
How a set-aside works
There are two ways the strategy reserves work.
- Mandatory set-aside: a procurement is set aside for Indigenous businesses only when the main recipient or end user is a population that is at least 51 percent Indigenous, the value clears a low minimum, and there is capacity to do the work. There is no upper dollar limit on a mandatory set-aside, because it sits outside the international trade-agreement rules.
- Conditional set-aside: the tender is open to both Indigenous and non-Indigenous bidders. If two or more eligible Indigenous businesses submit bids, the procurement converts to an Indigenous-only competition.
For a non-Indigenous contractor, the practical takeaway is to read every federal tender for set-aside conditions, because they change who you are really competing against.
The Indigenous Business Directory
To bid on set-aside work you must be listed on the Indigenous Business Directory, held by Indigenous Services Canada. The core requirements are:
- The business is at least 51 percent owned and controlled by First Nations, Inuit or Metis persons ordinarily resident in Canada.
- For a joint venture, the Indigenous partner or partners hold at least 51 percent ownership and control.
- You can provide evidence of Indigenous identity, for example registration, citizenship or recognized membership.
Listing is not a one-time stamp. The directory has been the subject of an integrity crackdown: in recent audits Indigenous Services Canada removed hundreds of businesses that did not genuinely meet the ownership and control tests. Before relying on a joint venture or a subcontracting arrangement to claim eligibility, make sure it meets the ownership and control rules in substance, not just on paper.
The subcontracting floor
Where an Indigenous business subcontracts part of a set-aside contract, at least 33 percent of the value of the work performed (not counting direct materials) must be carried out by Indigenous businesses. The rest, up to two-thirds, can go to non-Indigenous subcontractors, but no more. That 33 percent is a minimum, not a guaranteed pass, and the directory is applying closer scrutiny to whether the Indigenous benefit is real.
A note on Buy Canadian
Separately from the Indigenous strategy, the federal Buy Canadian Policy creates set-aside opportunities for Canadian suppliers below certain thresholds, phased in through 2025 and 2026. The thresholds and effective dates are still being rolled out, and above them procurements generally fall under international trade agreements and cannot be reserved for Canadian suppliers. To count as a Canadian supplier a business must be registered and file taxes in Canada, keep a Canadian address, do a substantial portion of the work here and meet domestic-content rules where they apply. Because the dates and thresholds are still settling, confirm the current rule before you plan around it.
Other diversity programs
There is no formal federal set-aside for women-owned, veteran-owned or visible-minority businesses comparable to the Indigenous strategy as of 2026, though federal supplier-diversity initiatives encourage departments to weigh socioeconomic factors. Some provinces and municipalities run their own supplier-diversity goals, and a growing number of provincial and municipal tenders score local employment, apprenticeship commitments and Indigenous participation plans even where there is no formal set-aside. Address these explicitly in a proposal where the tender invites them.
Common mistakes
- Treating the directory listing as permanent. It can be removed if ownership and control do not hold up. Keep your evidence current.
- Faking the 51 percent. A joint venture that does not genuinely meet ownership and control will not survive an audit, and removal can follow.
- Missing the 33 percent floor. An Indigenous prime that subcontracts must keep at least a third of the work value with Indigenous businesses.
- Assuming the rules are fixed. The Indigenous procurement policy is being reformed and Buy Canadian thresholds are still phasing in. Check the live position.
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