The announcement this week by Minister Joel Lightbound, on the details of the federal government’s Buy Canadian policy marks the clearest articulation yet of a federal procurement strategy that has been signaled since Prime Minister Carney’s initial remarks in September. Rather than a blunt “Buy Canadian” directive, the framework reflects a calibrated shift in how Ottawa leverages its purchasing power, prioritizing higher Canadian content and greater participation by Canadian firms in major federal projects and programs while remaining mindful of international trade obligations.
This approach is reflective of where Canadians are on the issue, with public opinion polling this fall indicating that roughly 6 in 10 Canadians now choose Canadian or avoid American products and services, engaging in their own Buy Canadian policies at home.
Ottawa’s move is not happening in isolation. Provinces, particularly Ontario, have already launched their own domestic procurement initiatives, contributing to a procurement landscape where governments at all levels are rethinking how best to ensure the most significant Canadian benefit from each public dollar.
What’s New
Defining a Canadian Supplier
The federal government has defined a Canadian Supplier as one that demonstrates a substantive and ongoing business presence in Canada. This includes maintaining a permanent, clearly identified place of business in Canada that is accessible during regular business hours or participating in a joint venture in which each member meets this requirement. The supplier must be registered and tax-compliant in Canada, including filing GST/HST and corporate income taxes, maintain a registered Canadian address, and employ personnel or conduct day-to-day business activities domestically. To ensure meaningful Canadian economic benefit, suppliers may not subcontract work to non-Canadian entities or individuals located outside Canada where doing so would result in limited value-added activity occurring within Canada.
To assess whether a supplier is Canadian, the contracting authority may consider the nature of the industry or sector, the supplier’s location, and the level of activity typically performed by other suppliers in the same industry. In that evaluation, the supplier must be given an opportunity to provide relevant evidence, and the authority must clearly document the rationale and supporting evidence for its decision.
Two-Pronged Approach:
The government’s approach initially includes two core policies, with additional measures to follow. The framework applies to federal departments and agencies and to federal grants and contributions programs, and will be extended, where possible, to Crown corporations and their subsidiaries.
Policy 1: Prioritizing Canadian Suppliers and Canadian Content
For major federal procurements valued at $25 million or more, and expanding to $5 million or more by June 15, 2026, bid evaluation processes will explicitly prioritize Canadian suppliers and Canadian content. Under the policy, Canadian suppliers receive additional evaluation points during bid scoring, with further points awarded based on the level of Canadian content. Canadian content includes manufacturing, research and development, and other economic activities occurring in Canada. Canadian value added will account for 25% of the total evaluation score going forward (with the remainder for technical and financial criteria. The policy applies to procurement considered core to Canada’s industrial base and economic resilience; the sectors included are:
- Defence and security
- Health and pharmaceutical
- Infrastructure, Construction and Transportation
- Information and Communications Technology (ICT)
- Consumer and Industrial Goods and Materials
Exceptions are permitted only in narrowly defined circumstances, such as unreasonable cost increases or where the application would be inconsistent with the public interest. Any exception must be approved by the responsible minister and fully documented to ensure transparency and accountability.
Policy 2: Prioritizing Canadian Materials
The second policy applies to large federal construction and defence contracts valued at $25 million or more that require $250,000 or more in steel, aluminum, or wood products. Where a domestic source of supply is available, contractors must use Canadian-made steel, aluminum, and wood. Materials must be manufactured or processed in Canada, not simply sold by Canadian companies. The policy applies to infrastructure projects such as buildings, bridges, and roads, as well as defence procurements, including ships and aircraft components. Suppliers must certify compliance before bidding and maintain records throughout the contract delivery period. Exceptions are limited and subject to Ministerial approval. These approvals must be issued by the Minister responsible of the department or agency for which the procurement is being undertaken.
What’s Next
Canadian and non-Canadian companies alike that participate in the federal procurement process will need to take a hard look at the level of Canadian content embedded in their products and service offerings to the federal government. These changes will require reassessing bid-scoring assumptions, material-sourcing strategies, and the broader supply chain, including research and development. Companies that move early to align internal procurement processes with the new framework and begin assembling the evidence needed to substantiate Canadian supplier status will be better positioned to manage risk, compliance and preserve their competitiveness as requirements evolve.
U.S.-based and multinational firms can remain viable participants in federal procurement, but eligibility will increasingly hinge on the depth and credibility of their domestic economic footprint. Rather than treating Canadian content as a threshold requirement, firms should see it as a strategic differentiator: demonstrable investments in Canada, whether that be manufacturing, employment, or research and development, could strengthen bids and help position companies for long-term success as domestic procurement priorities continue to evolve.
Conclusion
While much of this policy is effective today, with additional measures in the Small and Medium Business Procurement Program and the full implementation of the Policy on Reciprocal Procurement set to be introduced in spring 2026, key questions remain unresolved. These include:
- How narrowly or broadly exceptions will be applied in practice
- How non-material Canadian content, such as workforce presence, domestic partnerships, and research and development, will be defined and assessed
- and how reciprocal procurement rules will interact with existing trade obligations
If you’re looking for clarity on this important policy and need to know what it means for your organization, or for active procurements, contact us today at info@mcmillanvantage.com.
Team Vantage is here to help you navigate this fast-changing environment and position your company for success amid an increasingly uncertain trade and procurement landscape.
