To access the Procurement Strategy for Indigenous Business (PSIB) set-aside requirements, a business has to register in the Indigenous Business Directory (IBD) certifying that the business is Indigenous-owned, as defined within the PSIB.
Indigenous businesses are requested to provide proof of meeting the PSIB criteria through the self-declaration certificate when they register in the IBD or when they bid on the PSIB set-aside requirements. For that reason, ISC conducts audits to ensure that Indigenous businesses meet the PSIB criteria and that set-aside requirements are effectively reserved for the PSIB-registered businesses.
What is a compliance audit?
PSIB compliance audit verifies that the Indigenous businesses, joint ventures or partnerships registered in the IBD under the PSIB meet the ownership, control, and Indigenous content criteria where applicable.
Indigenous ownership criterion
The Indigenous ownership criterion requires an Indigenous person or Indigenous firm has at least 51% ownership of the business.
Indigenous control criterion
The Indigenous control criterion requires an Indigenous person or Indigenous business has at least 51% of control of the business.
Indigenous content criterion
In the case of a joint venture between an Indigenous and non-Indigenous business, the Indigenous content criterion dictates at least 33% of the total value of the work must be performed under a contractFootnote 1and is performed by the Indigenous business contractor or by a combination of that contractor and other Indigenous businesses. The value of the work is considered to be the total value of the contract less any material directly purchased by the contractor for the performance of the contract.
Why conduct a compliance audit
ISC is mandated to verify the eligibility of bidders on the PSIB set-aside requirements and maintain the integrity of the IBD. Compliance audits ensure Indigenous businesses registered under PSIB meet the policy's criteria.
ISC communicates audit progress and results to other government departments. Information pertaining to audits is confidential until it is finalized.
What kinds of audits are conducted
For PSIB compliance, ISC conducts 3 types of audits.
1. Pre-award audit
According to Contracting Policy Notice (CPN) 1997-6, section 8.1.4 and 8.2, ISC needs to be notified by the contracting authority for all PSIB set-aside requirements regardless of the value of the contract.
A pre-award audit is mandatory for PSIB set-aside requirements valued at, or greater than, $2 million. However, pre-award audits may be conducted for requirements below the value of $2 million when a need is identified by the requisitioning department, the contracting authority or ISC. A pre-award audit may also be conducted on a random basis.
A pre-award audit is performed to verify that the Indigenous business to be audited meets the ownership and control. Indigenous content is not audited when it is a pre-award audit or a random audit. However, the auditor ensures that the Indigenous joint venture or partnership is aware of the Indigenous content criterion.
When a pre-award audit is conducted, the auditing process can only begin when all the bids have been received and evaluated by the contracting authority. The contracting authority will then notify ISC of the 2 best-assessed bidders, without disclosing the bid price. The audit of the 2 best-assessed bidders will be performed before the requirement is awarded.
Mandatory pre-award audits are prioritized as the award of the contract is dependent on the audit results. If the business fails to provide the required documentation to ISC, their bid is considered non-compliant.
Once the contract is awarded, the contracting authority must provide ISC with the following information:
- name of the business selected
- dollar value of the contract
- description of goods, services, or construction
- solicitation number
- closing date
- buyer name and phone or fax numbers
The information can be emailed to email@example.com.
2. Post-award audit
A post-award audit is conducted to verify if the Indigenous business meets the ownership, control, and Indigenous content criterion. The audit can be random or requested by a contracting authority. The purpose of the post-award audit is to ensure that the contractor meets the PSIB criteria during the contract duration. It also ensures the integrity of the IBD.
3. Random audit
An audit for compliance can be performed on a random basis. It is not related to any pre- or post-awarded requirement. The purpose of the audit for compliance is to ensure the integrity of the IBD by guaranteeing that businesses registered under the PSIB are compliant with the requirements set out in the CPN 1996-6.
The audit for compliance follows the exact same procedure as the pre-award audit procedure.
When a joint venture between an Indigenous business and a non-Indigenous business or a joint venture between 2 Indigenous businesses is to be audited, the PSIB eligibility of the Indigenous businesses must be verified in order for the joint venture to be assessed accurately. The Indigenous partner must meet the ownership and control, criteria before the joint venture or partnership audit can be performed.
Do registered businesses, joint ventures and partnerships agree to be audited?
As part of the PSIB registration process the registered Indigenous business declares it meets the PSIB criteria and agrees to provide all documents to verify compliance when requested by the Government of Canada. Therefore, any registered Indigenous business, joint venture or partnership that has been notified of an audit and is requested to provide documentation and information to assess its compliance with the PSIB criteria. The business is obligated to provide the requested documentation to the Government of Canada.
In addition, with all pre-award or post-award audits, the bidders agree to provide the Government of Canada with any requested information for an audit.
In the case where the Indigenous business, joint venture or partnership does not respond to the auditor's request for information or documents, ISC has the right to remove the Indigenous business, joint venture or partnership from the IBD on behalf of the Government of Canada.
Once the audit is completed: what next
When the audit for compliance is completed the pre and post-award audit results are communicated to the contracting authority where applicable and to the audited business. If the audited business is deemed compliant with the PSIB it will continue to be eligible to bid on set-aside requirements.
If the audited business is deemed non-compliant with the PSIB, the Government of Canada could apply the following civil consequences:
- business profile removed from the IBD
- forfeiture of the bid deposit
- retention of the holdback
- disqualification from participating in future set-aside requirements
- termination of the contract
The business has the opportunity to re-register in the IBD when it complies with the PSIB criteria.
In the event that a contract is terminated, the Government of Canada may engage another contractor to complete the performance of the contract. The Indigenous business or joint venture in fault shall be responsible for any additional costs incurred by the Government of Canada.
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