How Buy Canadian and Buy Ontario Are Reshaping Government Contracts

In the span of a few months, both the federal government and the Province of Ontario passed legislation that fundamentally changes how public sector procurement works in Canada. The federal Buy Canadian Policy came into force on December 16, 2025. Ontario's Buy Ontario Act received royal assent on December 11, 2025. Together, these two frameworks create a layered system of domestic preference rules that will affect every company selling goods or services into the Canadian public sector, from federal departments and Crown corporations down to municipal governments, hospitals, universities, and school boards.

This is not a subtle policy shift. Both levels of government have moved from a "best efforts" approach to domestic sourcing to a system of binding obligations, enforceable directives, and real consequences for non-compliance. Companies that understand these changes and position accordingly will gain a significant advantage in one of the largest procurement markets in the country. Companies that ignore them will find themselves locked out of opportunities they previously would have been eligible for.

What the Federal Buy Canadian Policy Actually Requires

The federal policy operates through a framework administered by Public Services and Procurement Canada (PSPC), backed by nearly $186 million in implementation funding from Budget 2025. It currently includes two active policies with more expected to follow.

The first is the Policy on Prioritizing Canadian Materials in Federal Procurement. This requires the use of Canadian-produced steel, aluminum, and wood products in large federal construction and defence projects. It applies to contracts valued at $25 million or more where at least $250,000 worth of those materials is needed and a Canadian source of supply exists. The critical detail here is that the materials must be manufactured or processed in Canada. Simply being sold by a Canadian distributor does not qualify. Suppliers must certify their use of Canadian materials before bidding and maintain records throughout the contract to confirm compliance.

The second is the Policy on Prioritizing Canadian Suppliers and Canadian Content in Strategic Federal Procurements. This applies to strategic procurements valued at $25 million and above, and will extend to contracts at $5 million and above by spring 2026. Under this policy, Canadian suppliers receive a pricing advantage during bid evaluation through a discount applied to their bid price. Additionally, all bids are scored on the percentage of Canadian content they commit to, including manufacturing, research and development, intellectual property, and other value-added activities performed within Canada. More Canadian content means more points.

There is also a reciprocal procurement dimension. The Interim Policy on Reciprocal Procurement, in effect since July 2025, limits access to federal procurements to suppliers from Canada and from countries that provide Canada with equivalent procurement market access through trade agreements. Full implementation of this reciprocal policy is expected by spring 2026. Once fully in place, non-defence federal contracts will only go to Canadian suppliers or to those from reciprocal trading partners.

The Canadian International Trade Tribunal (CITT) Procurement Inquiry Regulations were also amended in December 2025 to exclude Buy Canadian measures from the scope of the Tribunal's review. This means that companies cannot challenge the application of Canadian preference requirements through the CITT. The government has effectively insulated these policies from the traditional procurement complaint mechanism.

A Small and Medium Business Procurement Program is also expected by spring 2026, jointly led by PSPC and Innovation, Science and Economic Development Canada. This program will reserve federal procurement opportunities specifically for Canadian SMBs and streamline how smaller companies access the federal system.

What the Buy Ontario Act Does Differently

Ontario's approach operates through a different structure but with similar intent. Bill 72 grants the Management Board of Cabinet the authority to issue binding directives that dictate how all public sector entities in the province conduct procurement. The Act establishes a hierarchy: Ontario goods and services first, then Canadian, then non-Canadian.

The scope of the Act is broad. It covers all provincial government ministries, Crown agencies as defined under the Supply Chain Management Act, and designated broader public sector organizations under the Broader Public Sector Accountability Act, which includes hospitals, school boards, colleges, universities, and other publicly funded entities receiving $10 million or more in provincial funds. Cabinet can also prescribe additional entities by regulation, meaning the scope can expand without new legislation.

The Act does not itself set the specific procurement rules. Instead, it empowers Cabinet to issue directives that can require preference for Ontario or Canadian goods and services, impose restrictions that limit eligibility for government contracts to Ontario businesses, establish vendor performance standards, mandate reporting requirements, and require compliance and enforcement measures across the entire supply chain. Third-party supply chain managers contracted by public sector entities must also comply with any directive that applies to the entity they serve.

The enforcement provisions are where the Buy Ontario Act diverges most sharply from its predecessor, the Building Ontario Businesses Initiative Act (BOBI). Under BOBI, the requirements existed but enforcement was weak. The Buy Ontario Act gives Cabinet the power to withhold funding from any public sector entity that fails to comply with a procurement directive. Compliance with directives is deemed to be a condition of any funding agreement between the entity and the Crown. The Act also authorizes the Minister of Public and Business Service Delivery and Procurement to conduct compliance reviews, require corrective action, and report findings publicly. To prevent litigation from stalling implementation, the Act includes a statutory bar on proceedings for damages, including lost revenue and profits, arising from compliance with its requirements.

No directives have been published yet, which means the specific definitions of "Ontario business" and "Canadian business" under this framework are still pending. However, the regulations under BOBI defined an Ontario business as one that conducts activities on a permanent basis in Ontario and has either its headquarters or main office in Ontario or at least 250 full-time employees in the province. Future directives under the Buy Ontario Act are expected to build on this definition but may adjust the thresholds.

Alongside the legislation, Ontario also announced that it will establish vendor lists of Ontario and Canadian suppliers to support their inclusion in provincial infrastructure and procurement processes, including as contractors and subcontractors. Getting onto these lists early will matter.

Ontario has also separately announced that public sector organizations will not award new contracts to American companies, with limited exceptions, as a direct response to U.S. tariffs on Canadian goods.

How the Two Frameworks Interact

The federal and Ontario policies are not coordinated through a single mechanism, but they are designed to align. The Buy Ontario Act explicitly allows directives to incorporate by reference other government policies, including those from other levels of government. The federal Buy Canadian Policy is similarly described as providing a roadmap that provinces, territories, and municipalities can adopt.

In practice, this means that a company pursuing a provincially funded infrastructure project in Ontario could face both federal and provincial domestic preference requirements simultaneously. If federal funding flows into a project through a grant or contribution agreement, the federal Buy Canadian Policy applies to those funds. The Buy Ontario Act applies to the provincial procurement decisions governing the same project. A company bidding on that work would need to demonstrate compliance with both frameworks, potentially proving that its materials are manufactured in Canada (federal requirement) and that it meets the definition of an Ontario business (provincial requirement).

This stacking of requirements creates real complexity for companies that operate across multiple jurisdictions or rely on international supply chains. A manufacturer that sources components from the United States, assembles in Ontario, and sells to a provincial hospital will need to evaluate whether its products qualify as Ontario goods, whether its materials meet the federal Canadian content thresholds, and whether its supply chain documentation is robust enough to withstand a compliance review.

What Companies Should Be Doing Now

The directives under the Buy Ontario Act have not yet been published, and the federal Buy Canadian Policy is still expanding its scope. But waiting for complete clarity before acting is a mistake. Companies that want to compete for government contracts at either level should be taking several steps now.

First, assess your supply chain for Canadian and Ontario content. Understand where your materials are manufactured, not just where they are purchased. The federal policy requires that steel, aluminum, and wood be processed in Canada, and the broader Canadian content scoring system will reward companies that can demonstrate value-added activities performed domestically. If your supply chain relies heavily on imported materials or foreign subcontractors, now is the time to evaluate alternatives.

Second, register as a vendor with the relevant procurement platforms. At the federal level, this means CanadaBuys. At the provincial level, it means the Ontario Tenders Portal and the Ontario Vendor Portal. When Ontario establishes its new vendor lists for Ontario and Canadian suppliers, companies that are already registered and active in the system will have a head start.

Third, track the directives as they are published. The Buy Ontario Act is a framework, and the specific rules that will govern procurement decisions will be set through directives issued by the Management Board of Cabinet. These directives will define what qualifies as an Ontario business, what preference mechanisms apply, and what reporting obligations are attached. The details will matter enormously, and they will likely be released incrementally.

Fourth, engage with government relations proactively. Both levels of government have indicated that they are seeking input from industry on how to implement these policies effectively. The federal government has explicitly invited feedback from Canadian businesses, including SMBs, on the Buy Canadian procurement policies through PSPC's consultation process. At the Ontario level, industry associations and companies will have opportunities to shape the directives as they move from framework to operational rules. Companies that participate in these consultations help shape the rules that will govern their market access.

Fifth, evaluate your eligibility under the federal Small and Medium Business Procurement Program, which is expected to launch by spring 2026 with $79.9 million in funding support from ISED. This program is specifically designed to give Canadian SMBs better access to federal contracting opportunities, and early preparation will matter when the application window opens.

The Bigger Picture

Buy Canadian and Buy Ontario represent a structural shift in how public sector procurement works in this country. The old model prioritized open competition and cost efficiency with limited regard for where goods were produced or where suppliers were based. The new model explicitly prioritizes domestic sourcing, domestic content, and domestic economic impact as core evaluation criteria.

For companies based in Ontario and Canada, this is an opportunity. Government procurement at the federal and provincial level represents tens of billions of dollars in annual spending. The new rules tilt that spending toward domestic suppliers in a way that has not existed before at this scale. Companies that can credibly demonstrate Canadian content, Ontario presence, and supply chain compliance will be positioned to capture a growing share of that market.

For companies outside Canada, or those with supply chains heavily dependent on foreign inputs, the landscape has become materially harder. The reciprocal procurement policy limits access to federal contracts. The Buy Ontario Act can restrict eligibility for provincial contracts. And the enforcement mechanisms under both frameworks mean that these are not aspirational guidelines. They are binding requirements with financial consequences for non-compliance.

The companies that move early, document their supply chains, register in the right systems, and engage with the policy development process will be the ones best positioned when the full scope of these reforms takes effect. The window to prepare is now.