Trade War Strikes Again: New Ontario Legislation Harnesses Public Procurement To Boost Provincial Economy

In a recent article, we reviewed how on December 16, 2025, Ottawa passed legislation to upgrade the federal procurement laws to prioritize Canadian goods in select strategic sectors and to support Canadian workers and businesses (see article here on the new Buy Canadian Policy). At about the same time, on December 11, Ontario passed new legislation, the Buy Ontario Act (Public Sector Procurement) 2025, (the “Act”), to establish a framework to regulate procurement within the public sector in the province.

Both pieces of legislation were prompted by President Trump’s willful destruction of the world trading order in 2025, which has severely damaged Canada’s position with its main trading partner, the United States.

This article outlines the main principles of the Act, but the specific requirements and regulations around several components of the Act remain to be developed and released by the government. This will likely take some months.  

Purpose of the Act

The Act aims “to establish a framework for regulating procurement within the public sector” with a view to “supporting economic development and supply chain resilience” by leveraging “public sector procurement as a means of promoting, protecting and building Ontario’s economy and businesses and safeguarding its supply chain.” In short, procurement is the government’s latest tool to boost economic prosperity in Ontario.

While the Act re-affirms the well-established principles of integrity and value-for-money in public procurement, it is not clear how this will square with the Act’s avowed objective of giving a preference to Ontario or Canadian made goods or services. As is well known to public procurement specialists in Canada, local preferences have long been frowned upon. This, it is to be hoped, will be clarified later this year when the Management Board of Cabinet makes directives outlining procurement policies, procedures and standards for which public sector entities in Ontario must comply with.

Scope of Directives

The scope of the future directives may be extensive, and seemingly without restriction, provided they relate to the procurement of goods and services of a public sector entity to which the Act applies. The scope of the proposed directives could include:

• requiring that preference be given to Ontario or Canadian-made goods and services;
• imposing requirements to either support and promote Ontario businesses and their goods and services, or protect Ontario businesses by limiting eligibility to participate in public sector procurements;
• requiring implementation of vendor performance standards and practices;
• establishing reporting requirements or procedures; or
• requiring public sector entities to use specified compliance/enforcement measures and to impose those measures on vendors.

In addition, under the Act a directive could incorporate by reference any other government policy or directive – including, as the Act emphasizes, a policy or directive issued by a government other than the Government of Ontario – and it could direct that amendments be made over time to such other policy or directive. It is possible, for example, that the Buy Canadian Policy, noted above, could be incorporated in whole or in part into the Act. How the Act and the Buy Canadian Policy interact with each other will become clearer later this year when directives and regulations are introduced by each level of government.

Public Sector Entities

The term “public sector entities” is defined broadly under the Act. It includes:

1. a government entity as defined in the Supply Chain Management Act (Government, Broader Public Sector and Health Sector Entities), 2019;
2. a designated broader public sector organization, or
3. any other person or entity prescribed by the regulations made under this Act.

The language captures an expansive range of entities, including the broader public sector organizations, such as hospitals, school boards, universities and colleges, as well as provincial agencies. According to Supply Ontario (the centralized Crown agency that modernizes procurement for the province’s public sector), the Act also applies to municipalities, a noteworthy development since municipalities have historically not been subject to the province’s procurement legislation. They have been subject to the requirements of some trade agreements, such as the domestic Canadian Free Trade Agreement (CFTA) and the international Canada-EU Comprehensive Economic and Trade Agreement (CETA), which both came into force in 2017. It remains to be seen how the Act will harmonize, or not, with Ontario’s trade obligations.

A large focus of the Act is on major procurement and infrastructure projects, feeding into the province’s more than $220 billion plan to build, initially announced in fall 2021. 

Where Ontario or Canadian goods and services cannot be procured at a reasonable cost or within a timeframe that ensures value for taxpayers, procurements outside Canada will be permitted. Currently, to avoid out-of-country procurement, the province is working to set up vendor lists of Ontario and Canadian suppliers and contractors to create additional local capacity to participate in provincial infrastructure and procurement processes. Contractors and subcontractors are also subject to the Act’s requirements.

Supply Chain Managers

The Act makes clear that an entity subject to the Act that outsources its procurement requirements to a supply chain manager needs to ensure that the Act’s requirements are complied with by the supply chain manager. This in turn will put obligations on the various parties down the contractual chain.

Failure to Comply

The Act prescribes measures rarely seen to ensure compliance under procurement legislation. In an event of non-compliance the Management Board of Cabinet “may direct a minister of the Crown to withhold part or all of any amount authorized by law to be paid to that organization or entity” until the organization complies. If the organization continues not to comply, the organization may lose its funding permanently.  

Actionable Compliance Takeaways

Particularly for Ontario contractors and subcontractors, the Act creates some new opportunities as well as some administrative obligations. To avoid running afoul of the Act, prime contractors will need to ensure their obligations are passed down to subcontractors and that records are maintained to be able to demonstrate compliance in the event of an audit under the Act.

Depending on the specific project, prime contractors may need to develop tracking mechanisms to be able to identify the origin of materials and services across the supply chain. They may also need to adjust their bidding/pricing strategies to ensure they can meet project requirements at a reasonable cost and within the required timeframes, or consider seeking a dispensation from the Act’s requirements.

Concluding Remarks

The Act has received royal assent, but as was noted earlier, no draft directives or regulations have been published at this time. Important details remain unclear, including which businesses will qualify as Ontario or Canadian businesses, how the Act will interface with the trade agreements, which new organizations will be brought within the scope of the Act, and how the Act will interface with the Procurement Restriction Policy passed into legislation in 2025, which restricts the participation of US suppliers in Ontario procurements.

The success of the Act will turn on how it is implemented, and in particular on whether the value created will justify the additional cost of conducting procurement projects. In other words, the government will need to show that local preference, a conventional bugbear in public procurement, is truly able to protect and build Ontario’s economy. And it remains to be seen whether the government can develop the tools to assess when and how the anticipated benefits appear.  

The Act introduces far-reaching changes to the procurement environment in Ontario, which will take some time to clarify and absorb. Both private sector participants and public sector organizations should monitor and review their procurement processes and documents to ensure they are well positioned to take advantage of the new opportunities.

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.