If You Build It, They Will Come -Canada's Defence Industrial Strategy And The Build-Partner-Buy Approach

On February 17, 2026, the federal government released not only its most profound defence strategy in decades, but also earmarked billions of dollars to make it happen.

We provide the essential highlights below.

Who's leading the implementation:

The Ministers of National Defence (DND), Industry (ISED), and the Secretary of State (Defence Procurement) (currently under PSPC, soon to be moved).

What's changed:

To build Canada's defence strategy, the Defence Industrial Strategy (DIS) will (if implemented as advertised) significantly change how Canada will acquire defence goods and services through a Build-Partner-Buy framework:

• Build in Canada as a first priority.
• Partner with trusted allies.
• Buy from abroad only when necessary.

How's it being implemented:

The framework will be implemented through Five Strategic Pillars.

Pillar I - Renewing the Relationship with Industry

• Centralizing fragmented interactions with the defence industry to the DIA.
• Establishing a Defence Advisory Forum, for regular consultations with defence companies.
• Accelerating security clearances and accreditation of secure facilities.
• Engaging earlier in capability development.
• Structured participation in defence procurement processes.
• Involving industry in wargames and exercises (potentially).
• Assisting with government processes such as:

• regularly scheduled "industry days" between DND, the DIA and ISED
• regularly updated inventory of anticipated procurements
• a single-window government service to direct firms to the most appropriate resource in government
• dedicated ISED "concierge" service for companies working on defence and dual-use technologies

Pillar II - Procuring Strategically: The Defence Investment Agency & "Build-Partner-Buy"

• Consolidation of procurement functions within the Defence Investment Agency (DIA) previously spread across DND, ISED, and PSPC.
• Consideration of sovereign capability, domestic industrial development, and long‑term economic impact - not solely cost and transparency – in procurement decisions.
• Consistent with the recently established Buy Canadian Framework, prioritizing Canadian suppliers and products through the Build–Partner–Buy framework:

1. Build (preferential domestic sourcing)
   • The default rule where Canada has existing industrial strength or where sovereign control is essential.
   • Contracts will be awarded to Canadian firms, including use of the national security exception to set aside trade agreement obligations and exclude foreign bidders.
2. Partner (with trusted allies)
   • If Canada lacks the capability to build domestically, Canada will partner with trusted allies, initially focusing on Europe, the UK, and the Indo‑Pacific.
   • Partnerships will be defined by joint work, joint building, and sharing key IP and technologies.
3. Buy (if Build or Partner are not feasible)
   
   If the build or partner options are not feasible, Canada will buy from allies but will require reinvestment into the Canadian defence industrial base and ensure Canadian sovereign control over the operation and sustainment of the newly acquired assets.
   

Reforms to the Industrial and Technological Benefits (ITB) Policy

The ITB Policy will be reformed in 5 main areas (for release in early 2026):

• Alignment with key sovereign capabilities: existing Key Industrial Capabilities will be updated and aligned with Canada's key Sovereign Capabilities (with potential adjustments to Value Proposition).
• Strengthening Canadian innovation and industrial capacity; introducing mechanisms, such as Strategic Investment Transactions, enhanced multipliers, and a Canadian Company Boost.
• Supporting exports and deeper integration into allied supply chains: Reviewing and easing the ITB Policy's rules on causality and incrementality to allow firms to claim exports and supply‑chain activities as ITB credits.
• Rewarding skills development: Re‑examining and expanding the multipliers for skills development, training, and Indigenous participation.
• Simplifying administration: Clarifying approval processes, simplifying credit verification, and adjusting rules that burden small and mid‑sized businesses.

Pillar III - Investing Purposefully to Strengthen an Innovative Canadian Defence Sector

To align federal innovation spending with future defence procurements and create predictable commercialization routes for Canadian companies, Canada will:

• invest purposefully to strengthen an innovative Canadian defence sector, accelerating the path from research to actual procurement;
• support the entire innovation pipeline, from university research to prototyping to commercialization, through enhanced integration between DND, ISED, NRC, and the DIA;
• set down new governance bodies and programs to shape future decision‑making, including a Science and Research Defence Advisory Council, a Defence Industry Assist stream under NRC‑IRAP, and a national network of secure research hubs under the Bureau of Research, Engineering and Advanced Leadership in Innovation and Science (BOREALIS¹);
• expand access to test ranges for Canadian firms, scale up prototyping support, and create faster procurement pathways within Innovative Solutions Canada and other programs;
• provide specialized investments including a new Drone Innovation Hub and a $460 million R&D platform;
• provide targeted financial tools, including operationalization of a $4 billion BDC Defence Platform providing loans, venture capital, and advisory services to SMBs; a $357.7 million Regional Defence Investment Initiative to help SMBs integrate into domestic and international supply chains;
• prioritize Canadian ownership, protection, and access to IP;
• expand defence exports through new whole‑of‑government coordination teams, more trade commissioners in Europe and the UK, and strengthen Canadian participation at global trade shows; and
• promote workforce development through a new Canada Defence Skills Agenda, focusing on training pipelines, immigration pathways, and partnerships with provinces, territories, and Indigenous organizations.

Pillar IV: Securing Supply Chains for Key Inputs and Goods

Focusing on securing supply chains for critical defence inputs through regulatory safeguards and targeted industrial investment including:

• protecting sensitive technologies, research, and assets from hostile actors through the use of existing national‑security legislation, such as the Investment Canada Act and export‑control frameworks;
• creation of the Canadian Defence Industry Resilience (CDIR) Program to provide direct support to expand domestic production capacity (the initial mandate is to address munitions supply‑chain vulnerabilities);
• prioritizing securing steel, aluminum, and defence‑critical minerals;
• using federal funds to help industries retool and expand;
• coordinating with allies through the G7 Critical Minerals Production Alliance and NATO stockpiling initiatives; and
• strengthening biodefence capabilities, including medical countermeasures and stockpiling.

Pillar V: Working with Key Domestic Partners, Including in Canada's North and Arctic

Strengthening domestic partnerships to support defence priorities including:

• closer coordination with provinces and territories on defence infrastructure, workforce development, and skilled‑trades planning;
• early, meaningful and respectful consultation with First Nations, Inuit, and Métis rights‑holders, emphasizing treaty obligations, UNDRIP, and distinctions‑based approaches;
• prioritizing Indigenous participation in procurement and infrastructure; and
• investing in Northern and Arctic infrastructure investments, anchored by the Northern Operational Support Hubs (NOSH) program, a 10-to-20-year, $2.67 billion initiative to build dual‑use logistics and operational sites in partnership with northern and Indigenous communities.

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Footnote

1. A new defence innovation agency meant to accelerate R&D in frontier technologies such as AI, quantum, drones, and cybersecurity

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