9.4. Annex: Requirements for the Set-aside Program for Indigenous Business
(See 9.40.45 Certification by Suppliers)
- Who is eligible?
- An Indigenous business, which can be:
- a band as defined by the Indian Act
- a sole proprietorship
- a limited company
- a co-operative
- a partnership
- a not-for-profit organization
- A joint venture consisting of two or more Indigenous businesses or an Indigenous business and a non-Indigenous business(es), provided that the Indigenous business(es) has at least 51 percent ownership and control of the joint venture.
- An Indigenous business, which can be:
- Are there any other requirements attached to suppliers in the Set-Aside Program for Indigenous Business?
- In respect of a contract, (goods, service or construction), on which a supplier is making a proposal which involves subcontracting, the supplier must certify in its bid that at least thirty-three percent of the value of the work performed under the contract will be performed by an Indigenous business. Value of the work performed is considered to be the total value of the contract less any materials directly purchased by the contractor for the performance of the contract. Therefore, the supplier must notify and, where applicable, bind the subcontractor in writing with respect to the requirements that the Indigenous Set-Aside Program (the Program) may impose on the subcontractor or subcontractors.
- The supplier's contract with a subcontractor must also, where applicable, include a provision in which the subcontractor agrees to provide the supplier with information, substantiating its compliance with the Program, and authorize the supplier to have an audit performed by Canada to examine the subcontractor's records to verify the information provided. Failure by the supplier to exact or enforce such a provision will be deemed to be a breach of contract and subject to the civil consequences referred to in this document.
- As part of its bid, the supplier must complete the Certification of Requirements for the Set-Aside Program for Indigenous Business(certification) stating that it:
- meets the requirements for the Program and will continue to do so throughout the duration of the contract;
- will, upon request, provide evidence that it meets the eligibility criteria;
- is willing to be audited regarding the certification; and
- acknowledges that if it is found NOT to meet the eligibility criteria, the supplier shall be subject to one or more of the civil consequences set out in the certification and the contract.
- How must the business prove that it meets the requirements?
- It is not necessary to provide evidence of eligibility at the time the bid is submitted. However, the business should have evidence of eligibility ready in case it is audited.
- The civil consequences of making an untrue statement in the bid documents, or of not complying with the requirements of the Program or failing to produce satisfactory evidence to Canada regarding the requirements of the Program, may include: forfeiture of the bid deposit; retention of the holdback; disqualification of the business from participating in future contracts under the program; and/or termination of the contract. In the event that the contract is terminated because of an untrue statement or non-compliance with the requirements of the Program, Canada may engage another contractor to complete the performance of the contract and any additional costs incurred by Canada shall, upon the request of Canada, be borne by the business.
- What evidence may be required from the business?
- Ownership and control
- Evidence of ownership and control of an Indigenous business or joint venture may include incorporation documents, shareholders' or members' register; partnership agreements; joint venture agreements; business name registration; banking arrangements; governance documents; minutes of meetings of Board of Directors and Management Committees; or other legal documents.
- Ownership of an Indigenous business refers to "beneficial ownership" i.e., who is the real owner of the business. Canada may consider a variety of factors to satisfy whether Indigenous persons have true and effective control of an Indigenous business. (See Appendix A Set-aside Program for Indigenous Business for a list of the factors, which may be considered by Canada.)
- Ownership and control
- Evidence of the proportion of work done by subcontractors may include contracts between the contractor and subcontractors, invoices, and paid cheques.
- Evidence that a subcontractor is an Indigenous business (where this is required to meet the minimum Indigenous content of the contract) is the same as evidence that a prime contractor is an Indigenous business.
- Who is an Indigenous Person for Purposes of the Set-Aside Program for Indigenous Business?
- An Indigenous person is an Indian, Metis or Inuit who is ordinarily resident in Canada.
- Evidence of being an Indigenous person will consist of such proof as:
- Indian registration in Canada;
- membership in an affiliate of the Metis National Council or the Congress of Indigenous Peoples, or other recognized Indigenous organizations in Canada;
- acceptance as an Indigenous person by an established Indigenous community in Canada;
- enrollment or entitlement to be enrolled pursuant to a comprehensive land claim agreement;
- membership or entitlement to membership in a group with an accepted comprehensive claim;
- evidence of being resident in Canada includes a provincial or territorial driver's license, a lease or other appropriate document.
Appendix A Set-aside Program for Indigenous Business
(Excerpt from Treasury Board Contracting Policy Notice 1996-6, Annex A.)
Factors that may be considered in determining whether Indigenous persons have at least 51% ownership and control of an Indigenous business include:
- capital stock and equity accounts, i.e., preferred stock, convertible securities, classes of common stock, warrants, options;
- dividend policy and payments;
- existence of stock options to employees;
- different treatment of equity transactions for corporations, partnerships, joint ventures, community organizations, cooperatives, etc.;
- examination of charter documents, i.e., corporate charter, partnership agreement, financial structure;
- concentration of ownership or managerial control in partners, stockholders, officers trustees and directors-based definition of duties;
- principal occupations and employer of the officers and directors to determine who they represent, i.e., banker, vested ownerships;
- minutes of directors meetings and stockholders meetings for significant decisions that affect operations and direction;
- executive and employee compensation records for indication of level of efforts associated with position;
- nature of the business in comparison with the type of contract being negotiated;
- cash management practices, i.e., payment of dividends - preferred dividends in arrears;
- tax returns to identify ownership and business history;
- goodwill contribution/contributed asset valuation to examine and ascertain the fair market value of non-cash capital contributions;
- contracts with owners, officers and employees to be fair and reasonable;
- stockholder authority, i.e., appointments of officers, directors, auditors;
- trust agreements made between parties to influence ownership and control decisions;
- partnership - allocation and distribution of net income, i.e., provision for salaries, interest on capital and distribution share ratios;
- litigation proceedings over ownership;
- transfer pricing from non-Indigenous joint venture;
- payment of management or administrative fees;
- guarantees made by the Indigenous business;
- collateral agreements.