Buy Canadian Policy & Buy Ontario Act: Federal And Provincial Procurement Is Going Local

The Government of Canada (the GOC) has commenced the implementation of its Buy Canadian Policy, aimed at prioritizing Canadian suppliers and goods in federal procurement processes. The Ontario government has also passed the Buy Ontario Act aimed at giving precedence to Ontario businesses.

Federal Policies

Buy Canadian Policy

The Buy Canadian Policy is a strategic suite of policies designed to strengthen Canada's economic resilience by prioritizing Canadian suppliers, Canadian content and reciprocal market access in federal procurements. The Buy Canadian Policy mandates that federal departments and agencies prioritize Canadian suppliers and content in strategic procurements. It also requires that specific materials like steel, aluminum, and wood products used in federal contracts must be Canadian produced.

As part of the Buy Canadian Policy, the GOC introduced the Buy Canadian Procurement Policy Framework (the Framework), effective December 16, 2025. The Framework provides an overarching foundation for procurement policies and programs being introduced by the federal government. It applies to federal departments and agencies and is anticipated to include most Crown corporations. Under the Framework, the GOC established three policies and one program: (i) Policy on Prioritizing Canadian Materials in Federal Procurement; (ii) Policy on Prioritizing Canadian Suppliers and Canadian Content in Strategic Procurements; (iii) Policy on Reciprocal Procurement; and (iv) Small Business Procurement Program. These policies and the program are discussed below.

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

The Policy on Prioritizing Canadian Suppliers and Canadian Content in Strategic Federal Procurements (the Strategic Procurement Policy) gives priority to Canadian businesses and Canadian-made content for large federal purchases in strategic economic sectors. It applies to procurements with a value of over $25 million (reducing to $5 million on June 15, 2026) in the following five primary sectors: (i) Defence and Security; (ii) Health and Pharmaceuticals; (iii) Infrastructure, Construction, and Transportation; (iv) Information and Communications Technology; and (v) Consumer and Industrial Goods and Materials.

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 procurement. However, Canadian suppliers will receive additional points in their bid evaluation; and all bids will be assessed based on the inclusion of Canadian goods, services, and value-added content, with additional points awarded for higher proportions of Canadian content, including intellectual property and research and development. These preferences, which will result in the reduction of the total value of the financial proposal for evaluating the bids, include the following:

• When compliant offers are received from Canadian suppliers, procuring entities will apply a 10% reduction to the total value of each Canadian Supplier's financial proposal.
• In cases where bids are evaluated based on the allocation of points, procuring entities will be required to allocate 25% of the total evaluation score to criteria that measure Canadian content.
• In cases where a point-based evaluation process is not suitable and a price-based evaluation is used, procuring entities will be required to apply a 25% credit to the financial proposal where the bid has Canadian content.

In both points-based and price-based evaluation methodologies, the use of mandatory Canadian materials is excluded from consideration in determining whether the bid has Canadian content.

Policy on Prioritizing Canadian Materials in Federal Procurement

The Policy on Prioritizing Canadian Materials in Federal Procurement (the Canadian Material Policy), effective December 16, 2025, requires defence and construction procurements valued at $25 million or greater that require at least $250,000 worth of steel, wood products, or aluminum must, where available, use materials that are manufactured or processed in Canada. Suppliers must certify compliance and maintain supporting records throughout contract performance. Procuring entities are mandated to enforce non-compliance through several key administrative and contractual measures including: liquidated damages in the event of a failure to meet material certification requirements; retaining holdbacks until compliance standards are verified; termination of contracts for default; and debarment and/or, disqualification from future procurement opportunities.

Definition of "Canadian Supplier"

Canadian Suppliers are defined as those suppliers with a place of business in Canada where they conduct activities on a permanent basis, clearly identified by name or a joint venture where each member of the venture does the same and where such suppliers:

• file taxes in Canada;
• maintain a registered address in Canada and employ persons and/or conduct day-to-day business in Canada; and
• will not subcontract work to non-Canadian suppliers in a way that Canadian activity is minimized.

Key Exceptions

A federal procurement may be exempt from the above two policies (with approval from the Minister) if at least one of the following criteria is met by the procurement:

• Best value for Canadians – where applying the policy will raise costs by at least 25% or more;
• Public Interest – where applying the policy is inconsistent with public interest;
• No capacity or availability in Canada – where the required goods or services are not available in Canada;
• Undue Delay – where applying the policy will result in delays of critical defence or national security equipment; or
• Commercial Off-The-Shelf and Military-Off-The-Shelf products.

Policy on Reciprocal Procurement

As set out in our previous note, Amidst Trade Tensions, Canada Fights Back With New "Reciprocal" Procurement Policy For Federal Government Contracts, under the Interim Policy on Reciprocal Procurement, foreign suppliers from jurisdictions that do not offer Canadian companies equivalent access to their government procurement markets will no longer be eligible to compete for most federal contracts in Canada.

Small Business Procurement Program

The Small Business Procurement Program, which has not been released yet, will support small and medium businesses and help them navigate federal procurements.

Amendments to CITT Regulations

As of January 2026, recent amendments to the Canadian International Trade Tribunal Procurement Inquiry Regulations have formally removed the jurisdiction of the Canadian International Trade Tribunal (the CITT) to review and address challenges to federal procurement challenges involving the Framework. As a result, foreign suppliers will be unable to file a complaint to the CITT on the grounds that the "Buy Canadian" requirements violate non-discrimination provisions in the procurement chapters of Canada's international trade agreements.

Province of Ontario Policies

Buy Ontario Act

The Buy Ontario Act, 2025 (the Act) received royal assent on December 11, 2025. The Act grants the Management Board of Cabinet (the Board) the authority to issue directives requiring public sector entities to prioritize Ontario and Canadian goods and services in their procurements. As of late January 2026, the Board has not yet released any directives setting out the details of any such prioritization.

The Building Ontario Businesses Initiative Act, 2022 (the BOBIA), passed by the Ontario government under its Building Ontario Businesses Initiative (the BOBI), is repealed as part of this transition to the Act, though its specific repeal date is to be named by the Lieutenant Governor in Council. Until new regulations are finalized, the previous BOBIA definitions and thresholds continue to apply.

The Act does not define what businesses will qualify as Ontario or Canadian businesses. The term "Ontario business" is defined in the Guide for Buyers (the Guide) issued by the BOBI as one that conducts its activities on a permanent basis in Ontario and that has either its headquarters or main office in Ontario or at least 250 full-time employees in Ontario.

Procurement Restriction Policy

As discussed in our previous note, As US-Canada Trade Tensions Persist Ontario Continues to Restrict US Businesses from Provincial Government Contracts, the Procurement Restriction Policy imposes a broad obligation on certain government entities and broader public sector organizations to exclude 'US businesses' from participating in all new procurements of goods and services (consulting and non-consulting) at any value in Ontario. It has been in effect since November 20, 2025.

Conversely to BOBI's Guide, the Procurement Restriction Policy maintains a specific definition for "US businesses" to manage reciprocal trade restrictions. A business is classified as a US entity if its headquarters are in the US and it employs fewer than 250 full-time staff within Canada at the time of the bid. Subsidiaries of corporations with headquarters or main offices located in the US are considered US businesses unless they have 250 full-time employees in Canada.

In light of the above, while we await further directives under the Act, the Procurement Restriction Policy as well as the rules supporting the BOBI discussed above are in effect in Ontario's public procurements.

Key Takeaways

• Suppliers should expect further federal and provincial policy development and implementation guidance in 2026. Close monitoring of these developments will ensure compliance and may necessitate changes to procurement strategies and structures. These measures include reviewing supply chains to prioritize Canadian content and preparing for lower phase-in thresholds in strategic sectors in mid-2026.
• In an M&A context, advisors should carefully consider the impact of these developments on targets: the Buy Canadian Policy and the Act could impact contract eligibility. Both the Buy Canadian Policy and the Act will require further diligence, particularly for procurements where compliance with Canadian value-add rules is required.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.