On April 4, 2025, the government of Ontario published its new Procurement Restriction Policy (the "Policy"), following Premier Doug Ford's March 4, 2025 statement that Ontario will not do business with US companies as long as US tariffs remain in place. The Policy significantly restricts US businesses from participating in Ontario's public sector procurements. It is retroactive to March 4, 2025, the date of Premier Ford's announcement.
Together with the Policy, the Province has also released a Frequently Asked Questions document (the "FAQ") and a Guide for Public Sector Buyers.
Who is Subject to the Policy? Essentially All Ontario Public Sector Purchasers
The scope of the Policy is broad. It applies to all provincial ministries, entities covered by the Ontario Public Service (OPS) Procurement Directive, Ontario Power Generation (OPG), and the Independent Electricity System Operator (IESO). This includes all Ontario crown agencies and Crown Corporations.
The policy also covers all Broader Public Sector organizations ("BPS") subject to the BPS Procurement Directive, such as provincial health organizations, school boards, and post-secondary institutions.
While municipalities are not directly subject to the Policy, many have adopted their own rules to exclude US businesses from their procurements. In addition, municipalities procuring goods or services that are subject to funding agreements with the Province may be required to comply with the Policy as a condition of funding.
What is a US Business?
The Policy applies to entities regardless of business structure (e.g., corporations, partnerships, sole proprietorships, and other business structures) and creates a two-part test to determine if an entity is a US business. An entity will be a US business if:
- it has its headquarters or main office located in the US; and
- it has fewer than 250 full-time employees in Canada at the time of the applicable procurement process.
Bidders cannot avoid this test or bypass the Policy by setting up a Canadian shell entity to submit bids. The Policy stipulates that if a bidder or vendor is a subsidiary of another corporation, the first part of the test is met if that bidder or vendor is controlled by a corporation that has its headquarters or main office located in the U.S.
Four key aspects of the Policy, based on a plain reading, are as follows:
- Employee Test: The test is not limited to Ontario. A US entity with 200 employees in British Columbia and 50 in Ontario would meet the requirement. This also means the test is effectively fair and non-discriminatory between the Provinces, as required by both the CFTA and the commitments provincial Premiers have recently made to breaking down interprovincial trade barriers.
- Full-Time Employees: The test specifically requires full-time employees, not part-time staff, or contractors. This makes it more difficult for entities to try to circumvent the Policy.
- Not Cumulative: The employee count is not cumulative across related entities or subsidiaries. For example, a US, parent with three Canadian subsidiaries, each with 100 full-time employees, does not appear to have the requisite employees to meet the threshold set out in the test.
- Different from City of Toronto's Policy: The City of Toronto's revised policy is both more and less restrictive. It excludes US suppliers from competitive procurements under $353,300 for goods and services and $8.8 million for construction. US suppliers are defined as being headquartered or having 70% of their employees in the US at the time of bid submission. However, subsidiaries of US companies may be considered non-US based if they have permanent offices outside the US, so long as 70% of the procured deliverables will be provided by non-US employees. This may provide a degree of flexibility for smaller suppliers but may exclude larger entities with significant US operations, even where they would meet the Province's 250-employee threshold.
Prohibition
Under the Policy, public sector entities must exclude US businesses from participating in Ontario's procurement processes. This likely means that no members of a bidding team can be US businesses. However, the Policy does not apply to subcontractors, as clarified in the FAQ, and it is likely that, after the contract is signed, US subcontractors could be engaged as required.
Application of the Policy – Only to New Procurements
The Policy applies to "all new procurements of goods and services (consulting and non-consulting) at any value" undertaken by any method of procurement including open, invitational, and sole source contracts. It also applies to contract extensions beyond those set out in an agreement, which are considered new non-competitive procurements. However, the Policy does not apply to the ongoing use of existing Vendors of Record or other available arrangements.
The FAQ provides additional guidance on what constitutes a "new procurement." It states that the Policy does not apply to any procurements already in progress when the Policy took effect (i.e., where a procurement document has already been issued). The intention is to minimize the impact on existing procurements and contracts. While not explicitly stated, this likely captures any solicitation for which an RFP, RFQ, ITT, or similar document has been issued; but may not include processes that were only at the market sounding or RFI stage as of March 4, 2025.
Exemption – Special Circumstances
The Policy includes an exemption for situations where the US business is the only viable source for the good or service, and where the procurement cannot be delayed (note, the FAQ provides important guidance as to what is meant by "only viable source" and "the procurement cannot be delayed"). This is a conjunctive test - both elements must be met for the exemption to apply. Even then, the decision must be approved at a specified level of authority, in many cases a deputy minister or the CEO, regardless of the procurement value.
Conclusion
The Policy represents a strong condemnation of the actions of the United States government and provides sweeping exclusions for US entities from public sector procurements. In cases where there may be ambiguity, it is best for potential purchasers and suppliers to raise questions as soon as possible in the procurement process to confirm whether they are excluded.
The Procurement Group at McCarthy Tétrault LLP has extensive experience assisting purchasers and suppliers navigate these issues, and we will continue to provide updates as the situation develops.
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