Trade War Shatters Traditional Approaches To Procurement: The New Buy Canadian Policy

The procurement rules in Canada are not what they used to be. Whereas traditionally value for money was measured by the simple principle of paying the least amount for the highest value, with no allowances for local preferences, set-asides, or carve-outs based on identity, geography or materials' origin, much of that has been overhauled in just a few years.

The latest major change to the procurement landscape is the federal government's Buy Canadian Policy (Policy), which came into effect on December 16, 2025, and which now "makes Canada its own best customer", in the words of the Prime Minister. The Policy changes important aspects of the procurement regulatory framework with a view to prioritizing Canadian goods in select strategic sectors and supporting Canadian workers and businesses. The Policy sets a clear direction and requires federal departments and agencies to adjust their procurement processes accordingly. Its purpose is to encourage self-sufficiency within Canadian industries.

The introduction of the Policy in December is a direct response to President Trump's willful destruction of the world trading order in 2025, which has severely undermined Canada's position with its main trading partner, the United States.

The Buy Canadian Policy Framework (Framework) is the overarching structure of the Policy that establishes the goals, applicability and defines roles and responsibilities. The Framework is explicit that "Canada is among the countries most exposed to the restructuring of global trade." The Framework sets out multiple overlapping policies, some that came into force on December 16, and some that will be introduced later in 2026.

Those that apply immediately are (a) the Policy on Prioritizing Canadian Suppliers and Canadian Content in Strategic Federal Procurements, and (ii) the Policy on Prioritizing Canadian Materials in Federal Procurement.

Policy on Prioritizing Canadian Suppliers and Canadian Content in Strategic Procurements

This supporting policy prioritizes Canadian suppliers and Canadian content in 'Strategic Procurements' valued at $25 million (CAD) or more, with this threshold expected to be lowered to $5 million on June 15, 2026. Strategic Procurements include goods and services in industries such as defence and security, health and pharmaceuticals, infrastructure, transportation, and information and communications technology.

Under this supporting policy federal departments and agencies must encourage the participation of Canadian suppliers through a price-based evaluation preference. Eligible Canadian suppliers must:

• Be registered and file taxes in Canada;
• Maintain a place of business in Canada where they conduct activities on a permanent basis;
• Maintain a registered address in Canada and employ personnel and/or conduct day-to-day business activities in Canada; and
• 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.

This supporting policy also prioritizes the use of Canadian content by encouraging proposal evaluations against the proposed use of Canadian goods and services. This means that federal departments and agencies can evaluate by applying either a point-based or a price-based methodology. Whichever approach is chosen, the greater the proportion of goods or services produced or provided in Canada (that is, Canadian Value-Added, as defined in this supporting policy), the more the proposal will be preferred in the evaluation.

In each case, the applicable department or agency may impose a minimum Canadian Value-Added to procurements, subject to Ministerial approval.

More broadly, and still subject to Ministerial approval, the Policy allows for some exceptions, where the use of materials made in Canada is expected to result in an increase in cost in excess of 25%, or where there is no capacity or availability of supply in Canada, as well as for commercial off-the-shelf and military off-the-shelf products.

Finally, once a contract is awarded, if a Canadian content requirement can no longer be met because of, say, market availability, the supplier will be able to request a derogation from its Canadian content requirement.

Policy on Prioritizing Canadian Materials in Federal Procurement

The second supporting policy is the Policy on Prioritizing Canadian Materials in Federal Procurement, which aims to promote domestic industry by incorporating locally produced materials. The objective here is to reduce dependency on foreign sources by requiring the sourcing of Canadian materials for use in federal procurements.

In particular, this supporting policy mandates the use of Canadian-produced steel, aluminum and wood products in federal construction and defence contracts valued at $25 million or more, where at least $250,000 of the materials are required and a Canadian supplier is available.

Materials such as steel must be melted and poured in Canada, wood products must be solid wood produced in Canada (including finished goods from those inputs) and aluminum must be smelted and cast in Canada.

Federal departments and agencies may also apply this supporting policy to exclude procurements. They are strongly encouraged to apply it below the established thresholds, where possible, particularly where a sizeable use of the covered materials is expected.

Pending Policies

Two other supporting policies are anticipated later in 2026: an updated Reciprocal Procurement Policy and a new Small Business Procurement Program.

The Policy on Reciprocal Procurement aims to ensure that non-defence contracts are only awarded to Canadian suppliers, or to those from trusted partners having reciprocal procurement market access. In short, countries that do not allow access to their markets to Canadian suppliers will make their country's suppliers ineligible to bid on Canadian federal government contracts. The Policy on Reciprocal Procurement came into force on July 14, 2025. As noted earlier, the revised policy is expected to come into force in Spring 2026.

The Small Business Procurement Program (Program) will help smaller Canadian businesses to access federal contracts. The Program is a joint initiative between the Government of Canada and the Department of Innovation, Science and Economic Development Canada. The Program will reserve federal procurement opportunities for Canadian small businesses and streamline their access to procurement. The details will become available when the Program comes into force in Spring 2026.

In addition to the two above just noted supporting policies/programs that will see the light in spring 2026, other considerations relate to the interplay between the new cluster of procurement policies ushered in by the Framework and the requirements of the main trade agreements, such as the Canadian Free Trade Agreement (CFTA) and the Canada-European Union Comprehensive Economic and Trade Agreement (CETA).

Along the same lines, the federal government has already adjusted the rules that support the complaint process under the Canadian International Trade Tribunal to avoid inconsistencies with the requirements of the Buy Canadian Policy. In effect, the rule change prevents foreign suppliers from challenging the Buy Canadian Policy (and its supporting policies) under the international trade agreements.

Concluding Remarks

As a whole, the Framework and its policies represent a substantial departure by the federal government from traditional open access to contracting opportunities. Suppliers that currently conduct business or those that hope to gain contracting opportunities with the federal government should review their position to assess what preference or advantage might be available to them. They may then want to adjust their bidding strategies to make the most of the new federal procurement landscape.

The trade war with the United States has highlighted some of Canada's obvious weaknesses, but for many Canadian suppliers, it will also generate some new significant opportunities at home.

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