Background
The Government of Canada is introducing several changes to how it buys goods and services, as part of its efforts to protect Canadian businesses and workers and promote a “Buy Canada” agenda.
Until very recently, foreign suppliers and suppliers providing foreign goods and services have been eligible to compete for federal procurement opportunities, with very few exceptions. However, the Government of Canada has determined that Canadian suppliers as well as Canadian goods and services often do not receive an equivalent level of access to foreign procurement markets. In response, it is adopting the Interim Policy on Reciprocal Procurement (Interim Policy) to ensure that countries that do not provide Canadian suppliers, goods and services with a similar level of market access do not unfairly benefit from access to federal contracts.
This marks a significant policy shift in the Government of Canada’s trade and procurement policy.
Implementation of Supplier Restrictions
The Interim Policy, which limits access to procurement opportunities based on the location of suppliers, became effective on July 14, 2025. Canadian suppliers remain eligible for all federal procurement opportunities, subject to any conditions from other federal policies or programs.
Unlike some similar “Buy Canada” policies recently implemented by other levels of government, there is a broad definition of Canadian supplier here, namely, a supplier that has a place of business in Canada where it conducts activities on a permanent basis that is clearly identified by name and accessible during normal business hours. A supplier of an applicable trading partner is similarly defined as a supplier that has a place of business in an applicable trading partner where it conducts activities on a permanent basis that is clearly identified by name and accessible during normal business hours. Applicable trading partner means a supplier of jurisdiction with whom Canada has a trade agreement that is applicable to the procurement process.
Application and Scope of the Interim Policy
The Interim Policy applies to all new procurements by or on behalf of any federal departments or agencies where the estimated value of the procurement is greater than C$10,000 — subject to certain categories of excluded goods and services, including specified defence goods and services and contracts for deliverables solely delivered outside of Canada.
Procurements may be excluded from the Interim Policy, on a case-by-case basis, where (1) the goods and services are not available from a Canadian supplier or a supplier of a trading partner, (2) there is limited competition that will result in unreasonable pricing, or (3) limiting competition is not in the public interest.
If the Interim Policy applies and no exception is applicable, a procurement process must be limited to Canadian suppliers and, if any international trade agreements apply to the procurement, suppliers of an applicable trading partner, meaning that suppliers from other jurisdictions will not be eligible to participate. Notably, the list of ineligible jurisdictions includes suppliers from China, India, Brazil, Saudi Arabia and South Africa.
Changes to CITT Regulations
Concurrently with the rollout of the Interim Policy, amendments to the Canadian International Trade Tribunal Procurement Inquiry Regulations (Regulations) came into force. These amendments change how suppliers access the procurement inquiry and complaint system for Government of Canada procurements. The amendments apply to all procurement inquiries initiated by the Canadian International Trade Tribunal (CITT) after June 13, 2025.
The amendments to the Regulations clarify that only Canadian suppliers or suppliers of a jurisdiction that has procurement trade obligations to Canada may bring a complaint. This aligns with the Interim Policy in that only Canadian suppliers and suppliers of an applicable trading partner are eligible to bring a procurement complaint to the CITT.
The amendments also include important changes to the compensation that the CITT may award a successful complainant. Compensation for lost profits is now capped at 10% of the complainant’s bid price, and compensation for bid preparation costs is capped at 2%. In codifying these amounts, the Regulations now set a clear limitation on what a successful complainant can expect from a procurement challenge.
Key Takeaways
Both the introduction of the Interim Policy and the updates to the Regulations send a clear signal to foreign suppliers wishing to access federal government contracts that such opportunities are only available through reciprocal trade obligations. For federal departments and federal agencies, this realignment of policy expectations to favour Canadian suppliers and suppliers of Canada’s trading partners needs careful review when assessing market interest and participation in future procurement processes.
Our team is closely monitoring developments, and we will provide updates when more details are made available.
For more information, please contact the authors or any other member of our Procurement group.
