Open For (Local) Business – Ontario Is Expanding The Application Of Buy Local Rules With Buy Ontario Legislation

On November 20, 2025, the Government of Ontario tabled Bill 72, the Buy Ontario Act (Public Sector Procurement), 2025. The legislation represents the province's latest response to U.S. economic protectionism by further prioritizing the procurement of goods and services from Ontario and Canada. Most significantly, the Ontario government's press release announcing the legislation indicates these buy local rules will be extended to municipalities, contractors and subcontractors, not just all Ontario ministries, agencies, and public sector organizations—including hospitals, school boards, and colleges.¹

Currently, the Building Ontario Businesses Initiative Act, 2022 ("BOBIA") and the Procurement Restriction Policy—Ontario's existing frameworks for prioritizing the purchase of Ontario goods and services and limiting opportunities for US businesses (including many Canadian subsidiaries of US businesses)—do not apply to municipalities or procurement by third parties.

The Buy Ontario Act will repeal BOBIA and replace its regulation-based approach with a centralized, directive-driven regime. The Act delegates broad directive-making authority to the Management Board of Cabinet and therefore contains limited operational detail at this stage; however, several features of the bill provide insight into the government's intended procurement framework going forward.

Delegation of Directive-Making Powers to Cabinet

At the core of the Act is a sweeping delegation of power to the Management Board of Cabinet. The Board is empowered to issue binding directives requiring all public sector entities to comply with new procurement standards, policies and requirements. These directives may:

• Require that public entities give preference for goods and services from Ontario or Canada;
• Restrict vendor eligibility to Ontario or Canadian businesses for certain procurements;
• Impose supplier performance and reporting requirements; and
• Establish compliance and enforcement tools to be used by public sector entities in managing vendors.

Directives can apply to "public sector entities" which captures all Ontario ministries and agencies, public sector organizations—including hospitals, school boards, and colleges—and, as noted in the government's press release, municipalities, and contractors and subcontractors delivering publicly funded projects.

Because the Act delegates decision-making to the Board, the practical implications for vendors remain largely undefined. Notably, the legislation does not clarify how "Ontario" or "Canadian" businesses will be defined, nor does it specify when or how preference rules will be applied. However, it is reasonable to assume that Ontario will maintain measures that are at least as strict as the BOBIA and the Procurement Restriction Policy.

Deeper Regulation of Supply Chains

The Act introduces heightened financial and administrative oversight across the procurement supply chain. Under section 4, public sector entities must ensure that any third-party supply chain managers they engage are contractually bound to comply with all requirements imposed under the Act. This extends the reach of procurement directives beyond direct vendors to intermediaries and subcontractors, creating a system-wide compliance framework.

Penalties for Non-Compliance

The Act also gives the Board the authority to direct a minister of the Crown to withhold payments to a subject public procuring entity that does not comply with any procurement requirements. Withheld payments will be released only once the entity comes into compliance. If non-compliance persists until March 31, the entity loses entitlement to the withheld funds, which are then transferred permanently to the Consolidated Revenue Fund. This mechanism signals the government's intention to enforce procurement rules through financial consequences where necessary.

Centralized Vendor List of Qualitied Vendors

In parallel to the legislation itself, the Government of Ontario announced² that it is developing centralized lists of qualified Ontario and Canadian suppliers. These vendor lists are expected to serve as authoritative tools for accessing procurement opportunities and may ultimately become prerequisites for doing business with the province. Vendors should carefully monitor forthcoming transition guidelines and any directives issued under the Act to understand qualification requirements and timelines.

Looking Ahead

With Premier Doug Ford's Progressive Conservative Party of Ontario holding a strong majority in the legislature, the prompt passage of the Buy Ontario Act seems likely. The implementation of the Act, through transition guidelines, regulations, and new directives will ultimately determine the impact of the Act on businesses. It also remains to be seen the extent to which new buy local rules will align with Ontario's free trade obligations, or if the rules will be susceptible to legal challenge.

McMillan's public procurement team will continue to monitor developments related to the Buy Ontario Act and is available to assist companies with public procurement-related questions and compliance considerations.

Footnotes

1. Government of Ontario, "Province Protecting Ontario with the Buy Ontario Act" (November 20, 2025).
2. ibid.

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2025