On December 16, the federal government’s Buy Canadian Policy officially came into effect. This is the first step towards fulfilling the Buy Canadian Policy as laid out in September, when the federal government announced its intent to favour Canadian suppliers and materials within public contracting—otherwise known as procurement localism.
Buy Canada is not so much a single policy, but rather multiple overlapping ones. It starts with the Buy Canadian Procurement Policy Framework, which establishes Buy Canada’s goals and applicability. Beneath this framework are two active policies: first, the Policy on Prioritizing Canadian Supplier and Canadian Content in Strategic Federal Procurements (which prioritizes Canadian suppliers and content for major strategic purchases) and then the Policy on Prioritizing Canadian Materials in Federal Procurement (which aims to source Canadian aluminum, steel and wood in major construction and defence contracts).
Two other policies are anticipated later in 2026: an updated Reciprocal Procurement Policy and a new Small Business Procurement Program.
Buy Canadian now joins a set of provincial Buy Local efforts, including the recently announced Buy Ontario. But while Buy Canadian shares the same goal as its provincial equivalents, it is distinct in its approach. Here, there are some welcome positives, administrative challenges, and notable scoping and coverage problems.
Good: Origin and detail
When it was first announced, there were concerns that a Buy Canadian policy would be undermined by an “origin loophole.” That is, Buy Canadian only works if its definition of a “Canadian supplier” excludes middleman vendors who subcontract work abroad. On the face of it, the vast majority of federal contract value goes to suppliers with Canadian addresses. But, it is unclear how much work is actually completed by Canadians with Canadian materials.
To their credit, the federal government actually has a comprehensive definition of origin. Under the policies, a Canadian supplier must file taxes in Canada, have a domestic address with employees (or at least “conducts day-to-day business activities in Canada”), and “not subcontract work to non-Canadian suppliers or individuals.” It further clarifies that each member within a joint venture must be Canadian.
This definition of “origin” directly addresses the loophole. It will be much harder for foreign firms to indirectly claim contract value. The joint ventures restriction also minimizes international free-riding through a domestic counterpart. There may still be room for slight adjustments, especially for unionized labour and emissions targets, but this definition is arguably better than what Ontario has offered.
Another strength to these policies is its prescriptive content: the policies are specific in their suggested methodologies and data collection. While the federal government does not currently collect sufficient data on sourcing, it appears the Canadian Content Attestation Form could fill that gap. Both policies contain language around monitoring and enforcement, which will be sorely needed if these initiatives are to succeed.
Bad: Administrative overload
These strengths notwithstanding, there are still red flags. While the policy’s definition of origin is more comprehensive than a worst-case scenario, it is still vague. In particular, what counts as too much subcontracting? Public Services and Procurement Canada has itself argued subcontracting is normal in some sectors like IT. The policy anticipates contracting entities will collect enough information to make that judgment. This ambiguity will lead to inconsistencies and information heap on procurement officers.
This is in tension with a critical advantage of most Buy Local policies: they are meant to be administratively simple. Rather than create complicated assessment methodologies, we could limit competition to suppliers we deem to have an intrinsic benefit. The Buy Canadian policy does not do this. Instead, it largely insists on a weighted advantage up to 25 per cent (or points). Here, we are not limiting competition. In fact, suppliers “of an applicable trading partner” can still participate in procurement covered by Buy Canadian.
Our international trade commitments are to blame. Those agreements guarantee that non-Canadian companies can access our public procurement, with a few exceptions. The federal government is aiming to avoid infringing upon those commitments, though they may encounter pushback regardless. The policies themselves employ language around “national security” and “strategic procurement” presumably to stave off a potential dispute.
Of course, this assumes the federal government actually puts the Buy Canadian policy into practice routinely. Under the policy, there are five exception conditions, which could be abused. This includes a best value exception “where application of the Policy is expected to result in a cost increase of 25 per cent or more above current market rates.” The federal government may only tolerate so much of a price increase. But, again, we must establish “current market rates” first.
Ugly: Scope and application
Buy Canadian’s coverage is worse than its administrative challenges. When it was first announced, we were told “the Government will introduce new measures to make sure that Canadian suppliers, and their products are prioritized in all federal spending” (emphasis added). This was an ambitious promise. Today, it remains unfilled.
The new policies are only applicable above a set contract value within specific sectors for specific entities. To break that down, the floor for the two new policies is $25 million. This will drop to $5 million later. Anything below the floor in contract value is not covered by the policy, which is then further minimized to “strategic procurements.” For the Buy Canadian supplier policy, this includes select commodities in defence and security, health and pharma, infrastructure and transport, ICT, and consumer and industrial goods/materials. For the sourcing policy, we are focused on defence and construction. In brief, we are only talking about a subset of federal public procurement.
The policy trims this subset even further. Under the framework policy, Buy Canadian (to date) only applies to ” Schedules I, I.1, II of the Financial Administration Act, R.S.C., 1985, c. F-11.” Many critical and resourced Crown corporations, like the Canadian Infrastructure Bank, are in Schedule III and are therefore omitted.
In fairness, this is only the first phase of Buy Canadian. Later, the federal government intends to introduce its Small Business Procurement Program (SBPP). Here, the government seeks to create “mandatory set-asides where feasible” for small businesses. Set-asides limit supplier participation by select criteria. The “where feasible” is, however, doing a lot of heavy lifting. No such exception was included in CETA, which severely undercuts any potential set-aside.
Altogether, the rhetoric of Buy Canadian has not yet been matched in practice. Its scoping and applicability limitations are especially consequential. But there is both merit in the idea and in some of its policy design. The next phases will need to expand Buy Canadian’s coverage and close administrative gaps to succeed.
