Federal government implements the Buy Canadian Policy

The Government of Canada has formally implemented the first phase of the Buy Canadian Policy: a new federal procurement policy framework designed to prioritize Canadian suppliers, Canadian content and Canadian-produced materials in federal procurements¹. The policy represents a major shift in how the federal government conducts its purchasing activities and leverages procurement as a strategic tool for strengthening Canada’s economy, industrial base and supply chain resilience.

What you need to know

• Federal procurement now systematically favours Canadian suppliers and Canadian content. Buy Canadian requirements now apply to major federal procurements and will expand to lower-value contracts in 2026, with limited documented exceptions.
• Certain procurements must use Canadian-produced materials. Large construction and defence contracts may be required to source steel, aluminum and wood products that are manufactured or processed in Canada, with certification and record-keeping obligations.
• Market access for foreign suppliers is increasingly restricted. Supplier eligibility in many non-defence procurements is currently governed by reciprocal market access rules, with a permanent reciprocal procurement regime expected in 2026.

Overview and purpose

Effective December 16, the new policy framework stipulates that federal departments and agencies must prioritize Canadian suppliers and Canadian content in strategic procurements, and that certain materials used in federal contracts must be Canadian-produced—namely steel, aluminum and wood products. The policy framework applies to federal departments and agencies, and is expected to extend to most Crown corporations.

The policy framework is a key deliverable of Budget 2025 and creates an obligation to use federal spending to support domestic industry and workers.

Buy Canadian procurement framework: key elements

The policy framework consists of a suite of interrelated procurement policies that prioritize Canadian suppliers, Canadian content and reciprocal market access in federal procurements².

Policy on Prioritizing Canadian Materials in Federal Procurement

Under the Policy on Prioritizing Canadian Materials in Federal Procurement, all competitive and non-competitive construction and defence procurements valued at $25 million and above that require significant quantities of steel, aluminum or wood products (at least $250,000) must, where available, use materials that are manufactured or processed in Canada. These requirements apply to projects such as buildings, bridges, roads and defence goods, and suppliers must certify compliance and maintain supporting records throughout contract performance.

Procuring entities are required to take appropriate measures to enforce non-compliance, which may include liquidated damages, retaining holdbacks, termination of contracts and/or disqualification from future procurements.

Policy on Prioritizing Canadian Suppliers and Canadian Content in Strategic Federal Procurement

The Policy on Prioritizing Canadian Suppliers and Canadian Content in Strategic Federal Procurement (the Strategic Procurement Policy) applies to procurements with a value over $25 million (reducing to $5 million on June 15, 2026) in the following areas: defence and security; health and pharmaceutical; infrastructure, construction and transportation; information and communications technology; and consumer and industrial goods and materials (as well as professional services directly supporting those sectors).

Where the Strategic Procurement Policy applies, competition will be open to Canadian suppliers and suppliers from applicable trading partners where an international trade agreement applies to the solicitation, with Canadian suppliers receiving a 10% reduction to their financial proposals for purposes of evaluation. Procuring entities will also be required to either allocate 25% of the total evaluation score to a Canadian value-added requirement criterion or apply a 25% credit to the financial proposal, excluding any mandatory Canadian materials in either case. 

In the case of services, Canadian value-added requirements refer to services wholly provided by individuals based in Canada and, in the case of goods, to criteria set forth in the policy, including any costs incurred in Canada related to specific activities such as research and development.

Exceptions

Exceptions from these new policies are limited and require Ministerial approval. The exceptions are:

• where the application of the policy is expected to result in an overall cost increase of 25% or more;
• where it would be inconsistent with the public interest to apply the policy;
• where the goods are not produced in Canada in sufficient and reasonably available quantities or satisfactory quality;
• where it would result in delays for critical defence or national security equipment which could negatively impact Canadian defence or national security operations; and
• commercial and military off-the-shelf products.

Following contract award, exceptions from the Canadian content requirements will require Ministerial approval and may only be granted where it is no longer feasible to meet the requirements due to changes in market availability or other substantiated factors.

Reciprocal procurement policy

These new policies complement the Interim Policy on Reciprocal Procurement (the Interim Reciprocal Policy), implemented earlier this year for new federal procurements above $10,000. Under the Interim Reciprocal Policy, supplier eligibility is based on whether the supplier is located in Canada or in a jurisdiction that provides reciprocal access to Canadian suppliers under an applicable trade agreement. Suppliers from non-reciprocal jurisdictions are generally excluded unless an exception applies. This interim regime is expected to transition in Spring 2026 to a permanent reciprocal procurement policy.

Definition of “Canadian supplier”

The policies define a Canadian supplier as a supplier that has a place of business in Canada, where it conducts activities on a permanent basis and is clearly identified by name and accessible during normal business hours, or a joint venture where each member of the joint venture has a place of business in Canada, where it conducts activities on a permanent basis and is clearly identified by name and accessible during normal business hours.

The Strategic Procurement Policy also requires that a Canadian supplier:

• be registered and file taxes in Canada;
• maintain a registered address in Canada and employ personnel and/or conduct day-to-day business activities in Canada; and
• will not subcontract work to non-Canadian suppliers or individuals located outside Canada in a manner that results in minimal value-added activities being performed within Canada.

Importantly, the definition of “Canadian supplier” does not impose a minimum Canadian employment level to qualify. The policies provide that, in assessing whether a supplier is Canadian, a procuring entity may consider the nature of the industry or sector, the geographical location of the supplier, and the level of activity typically performed by other suppliers competing in the same sector.

Amendments to CITT regulations

In connection with the implementation of the Buy Canadian Policy framework, the federal government amended the Canadian International Trade Tribunal Procurement Inquiry Regulations to remove the jurisdiction of the Canadian Internation Trade Tribunal (CITT) to address challenges to federal government procurement processes based on the application of the policy framework. As a result, foreign suppliers will be unable to use the CITT process to assert that the Buy Canadian policies are violations of the non-discrimination provisions of the government procurement sections of Canada’s international trade agreements.

Future policies

Looking ahead, the government has also announced a forthcoming Small and Medium Business Procurement Program. The program is intended to improve access to federal procurement opportunities for Canadian SMEs through enhanced support, tailored procurement streams and navigation assistance.

Immediate impacts and practical considerations

• Prioritization of Canadian content. Federal bid evaluation processes for qualifying procurements now systematically favour Canadian suppliers and higher Canadian content.
• Canadian material requirements. Contractors bidding on large construction and defence work must source qualifying materials domestically where available.
• Market access. Foreign suppliers continue to face restricted access under the Interim Reciprocal Policy absent reciprocal treatment. Full reciprocal procurement rules will refine eligibility further in 2026.
• Phase-in of thresholds. Lower contract value thresholds for supplier/content prioritization (down to $5 million) in strategic sectors will apply in Spring 2026.

Looking ahead

Further policy development and implementation guidance are expected in 2026. Procuring entities and suppliers should monitor forthcoming regulatory instruments, threshold changes and detailed guidance to ensure compliance and strategic positioning.