In fall 2025, in response to trade uncertainty, the Government of Canada introduced the Buy Canadian Procurement Policy Framework (the Framework) to support domestic suppliers in public procurement. The Framework includes:
- the Policy on Prioritizing Canadian Materials in Federal Procurements;
- the Policy on Prioritizing Canadian Suppliers and Canadian Content in Strategic Federal Procurements;
- the Interim Policy on Reciprocal Procurement; and
- the Small Business Procurement Program.
Domestic Preferences in Federal Procurement
The federal government buys tens of billions of dollars worth of goods and services annually. Buying from Canadian suppliers supports local industry and keeps more money in the country. However, the government is often legally required to hold fair, open and transparent competitions to choose a supplier. Domestic suppliers are not always able to meet the government’s needs or provide the best value for money. Trade agreements may also limit Canada’s ability to buy local.
Nevertheless, Canada’s procurement system sometimes allows for, and occasionally requires, domestic preference. The Framework is not the first or only federal measure that favours Canadian goods or suppliers in procurement. The interactive tool presented in Figure 1 explores how the Framework fits into existing domestic preference measures, such as the Canadian Content Policy.
Figure 1 – “Buy Canadian” Policy Explorer
Text Version
This policy explorer provides an overview of new and existing measures related to domestic preferences in procurement.
First, the Policy on Prioritizing Canadian Suppliers and Canadian Content in Strategic Federal Procurement is a new policy that gives priority to Canadian businesses and content for large contracts in strategic sectors; it applies to federal procurements of $5 million or more in sectors such as defence and security, infrastructure and construction.
Second, the Policy on Prioritizing Canadian Materials in Federal Procurements is a new policy that requires large federal construction and defence purchases to use Canadian steel, aluminum and wood; it applies to federal procurements of $25 million or more for defence and construction goods containing at least $250,000 worth of steel, aluminum or wood.
Third, the Interim Policy on Reciprocal Procurement is a new policy under which non-defence procurements are only open to domestic suppliers and foreign suppliers that are subject to reciprocal trade agreements; it applies to federal non-defence procurements of $10,000 or more (the Interim Policy is to be replaced by a permanent one based on commodity origin rather than supplier origin).
Fourth, the Small Business Procurement Program is a new program that reduces administrative barriers and tailors procurement requirements to small businesses to help them participate in federal procurement.
Existing measures include the Canadian Content Policy (which limits competition for some contracts to suppliers of Canadian goods and services), the Industrial and Technological Benefits Policy (which encourages industrial offsets for large defence contracts) and the Procurement Strategy for Indigenous Business (which allows contracts to be set aside, or reserved, for Indigenous businesses).
Modern treaties may impose procurement obligations that vary depending on the treaty, for example, set-asides. Federal procurement must also abide by the obligations established by Canada’s foreign trade agreements, which limit Canada’s ability to favour its own suppliers. However, those limits only apply to procurements that are covered by the trade agreement, and Canada may invoke general or security exceptions.
Note: This interactive figure provides a high-level overview of the “Buy Canadian” framework and its interaction with other Canadian procurement policy tools; it does not aim to capture all provisions, exceptions or contract-specific variations. Hover over each box to learn about key policy areas and related considerations.
Sources: Interactive figure prepared by Olivier Leblanc-Laurendeau, Emmanuel Preville and Ryan van den Berg, Library of Parliament, using data obtained from Government of Canada, “Buy Canadian Procurement Policy Framework”; and Government of Canada, “Supply Manual.”
Legal and Trade Constraints
Trade agreements, including the World Trade Organization’s Agreement on Government Procurement (GPA), establishes rules for government procurement, meaning that the Framework applies only to procurement not covered by these treaties. Simplifying Canada’s market access schedules where possible, ideally by aligning them with the GPA baseline, has been suggested as one way to “maximize localism.” This change would mean pulling back on voluntary commitments in trade agreements to create more room for domestic preference policies.
However, where Canada limits access to its public procurement, other countries may do the same to Canadian businesses. This creates a trade-off: the more Canada restricts procurement, the harder it may be for Canadian companies to win contracts abroad. This trade-off is significant: according to the Government of Canada, “[f]oreign government procurement markets are worth hundreds of billions of dollars annually.”
Still, other commentators argue that Canada is “clinging to the fiction that ‘free markets’ still exist while competitors build protected ecosystems” and needs to adapt to the new realities. This adaptation requires a complete retooling of the system to support economic sovereignty and national security.
Notably, in November 2025, the government amended the Canadian International Trade Tribunal Procurement Inquiry Regulations to help implement the Framework. These amendments insulate domestic preference measures in federal procurement from legal challenges based on trade agreements before the Tribunal.
Contract Value
The government estimates that the Framework will support “as much as $70 billion in additional public investment [in] Canadian-made products and services,” but it is not clear what timeframe or contracts were considered in this estimate. Due to the limited quality of publicly available contracting data, it is not possible to independently estimate how much value the Framework may support beyond pre-existing measures. Nevertheless, 2024–2025 contracting data allows for some broad observations, albeit with some important caveats:
- Around 90% of all contract value was awarded to suppliers with a Canadian address.
- Contracts over $5 million represented nearly $40 billion in value. Around 90% of these contracts were awarded to suppliers with a Canadian address. It is not clear how many relate to “strategic sectors” or “strategic commodities.”
- Contracts for construction and defence goods valued over $5 million likely accounted for over $10 billion, but the value of steel, aluminum and wood in those projects is not clear. Nearly all this value was awarded to suppliers with a Canadian address.
- Less than $70 million in contract value appears to have been awarded to suppliers with an address outside a country with which Canada has a trade agreement; this amount is even lower if contracts for defence and missions abroad are excluded.
These observations suggest that most of the federal contract value – including high-value contracts for construction and defence goods – was awarded to suppliers with addresses in Canada even before the Framework was in place. However, having a Canadian address does not necessarily mean that all value-added activities are happening in Canada. As such, it is not clear how much of this value remained in Canada. The Framework’s new criteria for “Canadian-ness” (discussed below) could increase the proportion of contract value sourced from Canada.
Also, if major projects and defence initiatives proceed as planned, they will likely increase total federal procurement spending. While the Framework appears likely to apply to many of those procurements, it is not clear how much contract value is already awarded to Canadian suppliers in the targeted industries and sectors.
Is it really “Canadian”?
The Framework aims to reduce “leakage” of contract value outside of Canada by defining what counts as Canadian. New definitions included in the Framework consider the supplier’s physical presence in Canada, its tax registration in Canada and whether labour or goods are sourced in Canada. These definitions still allow many suppliers with a Canadian presence to bid, even if owned or controlled abroad. However, they prevent businesses in Canada from benefiting from domestic preferences during bid evaluation if they propose to subcontract value-added work outside Canada.
New definitions include only suppliers with a permanent and accessible place of business in Canada. These definitions risk excluding many small businesses lacking a brick-and-mortar presence in the country. Small businesses are disproportionately owned by women, Indigenous people and racialized people.
Encouraging New Entrants
The Framework could encourage new or existing domestic businesses to participate in federal contracting, particularly where Canadian suppliers could not previously compete with foreign businesses. However, by restricting competition, domestic preferences may increase procurement costs. To counter potential significant cost increases, the new policies allow a procurement process to exclude domestic preferences if applying them results in a 25% increase or unreasonable pricing.
Of note, men are more likely to own businesses or be employed in the sectors targeted by the Framework. These include mining and forestry industries, as well as the defence and security, infrastructure, construction and transportation, and information and communications technology sectors.
Procurement Complexity
Many interested parties, including the Office of the Procurement Ombud and the House of Commons Standing Committee on Government Operations and Estimates, have repeatedly described federal procurement as complex and difficult to navigate. Similarly, in an article on this subject, Michael Howlett and Andrea Migone of Simon Fraser University note that
[g]overnment procurement is not just a complex administrative task, often with long lead times and involving very large sums of money, but also typically involves a wide range of other “strategic” goals such as […] Indigenous prioritization, regional or industrial benefits, national origin or “green” environment clauses and other similar criteria. … This creates layers of complexity and political needs that invariably create conflicts and endanger what otherwise might be a much more straightforward purchasing process.
The authors note that, rather than trying to improve efficiency, Ottawa’s “efforts instead have often focussed on layering additional requirements […] on top of an already complex set of bid requirements.” Observers, including the Procurement Ombud and the Auditor General, have reported gaps in public servants’ compliance with certain procurement policies. It is to be expected that more rules will increase the administrative burden for contracting authorities and suppliers alike.
By Olivier Leblanc-Laurendeau and Ryan van den Berg, Library of Parliament
Categories: Business, industry and trade, Economics and finance, Government, Parliament and politics