‘Buy Canadian’ Contracts Are Going to Foreign-Owned Firms More Than 70% of the Time: Report

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Ottawa’s promise to use federal purchasing power to strengthen Canadian businesses is running into an uncomfortable question: what exactly makes a company Canadian? An analysis published by The Logic found that, during the first six months of the federal Buy Canadian procurement policy, more than 70% of awarded contracts went to subsidiaries of foreign-owned companies.

That figure appears sharply at odds with the policy’s patriotic branding. Yet the results are partly explained by rules that emphasize a company’s operations inside Canada rather than the location of its ultimate owner. A multinational with Canadian employees, offices and taxable operations can qualify for preferential treatment, even when its headquarters, intellectual property and controlling shareholders remain abroad. The controversy is therefore about more than contract awards. It is a debate over whether Canadian economic value should be measured through local activity, domestic ownership or some combination of both.

A Headline That Exposes a Definition Problem

The finding that foreign-owned companies received more than 70% of the contracts examined is politically explosive because the policy was presented as a way to prioritize Canadian workers, industries and suppliers. To many taxpayers, “Buy Canadian” naturally suggests purchasing from businesses founded, headquartered and controlled in Canada. The federal definition is considerably broader, allowing foreign-owned subsidiaries to be treated as Canadian suppliers when they maintain substantial operations in the country.

The reported percentage also needs to be interpreted carefully. It refers to the number of contracts awarded during the period examined, not necessarily more than 70% of their combined dollar value. One large contract won by a Canadian-controlled business could be worth more than several smaller awards to multinational subsidiaries. Even with that distinction, the pattern raises a legitimate policy question. If most winning bidders are controlled outside Canada, the government must demonstrate how much employment, production, research and long-term commercial value each contract actually leaves behind.

What Ottawa Officially Considers a Canadian Supplier

Under the federal policy, a business does not need a Canadian head office or Canadian shareholders to qualify as a Canadian supplier. It must have a permanent and clearly identifiable place of business in Canada, file Canadian taxes, maintain a registered Canadian address and employ people or conduct day-to-day operations in the country. A mailbox or nominal sales address is not supposed to be sufficient.

The company must also avoid subcontracting so much of the work abroad that only minimal value is created in Canada. Procurement officials can examine the normal practices of the industry, the supplier’s location and the level of Canadian activity performed by competing firms. This structure helps explain why a corporation headquartered in the United States, Europe or Asia can win a Buy Canadian contract through its Canadian subsidiary. From Ottawa’s perspective, the subsidiary may still support Canadian payrolls and services. Critics argue that this operational test does not adequately capture ownership, strategic control or where the largest financial rewards ultimately accumulate.

Canadian Content and Canadian Ownership Are Separate Tests

The policy attempts to reward two related but distinct things: qualifying as a Canadian supplier and including Canadian content in the bid. An eligible Canadian supplier can receive a notional 10% reduction in its proposed price during the evaluation process. A $100-million bid, for example, could be evaluated as though it cost $90 million, even though the government would still pay the actual contracted amount.

Canadian value-added can also account for 25% of the total bid evaluation. That value may include goods manufactured in Canada, work performed by Canadian-based employees, domestic research, customization, installation, distribution, training and after-sales support. Canadian steel, aluminum and wood can be mandatory in certain construction and defence procurements. None of those provisions, however, automatically requires Canadian ownership. A foreign-controlled company can score strongly by employing Canadian workers and purchasing Canadian materials, while a domestically owned bidder could score poorly if much of its production or subcontracting occurs outside the country.

Foreign Subsidiaries Already Dominate Many Supply Chains

Foreign-owned companies have long played a major role in sectors where governments are large buyers, including technology, pharmaceuticals, aerospace, telecommunications and transportation equipment. Many of the world’s biggest suppliers have Canadian subsidiaries with established workforces, distribution systems and technical-support teams. Excluding those companies entirely could reduce competition or leave departments without access to products that are not manufactured at scale by Canadian-owned firms.

Before the new policy took effect, federal officials said more than 93% of contract value in 2023–24 had already gone to suppliers with Canadian addresses. That impressive-sounding figure did not reveal who ultimately owned those suppliers or how much work was subcontracted abroad. The Buy Canadian policy was intended to move beyond a simple address test, but the latest findings suggest ownership remains largely outside its scope. Ottawa therefore faces the same problem in a more sophisticated form: a Canadian office can show domestic activity without proving that the contract strengthens a Canadian-controlled company.

Billions in Purchasing Power Are at Stake

The federal government purchases approximately $37 billion in goods and services in a typical year, making procurement a potentially powerful form of industrial policy. Across all levels of Canadian government, public procurement represents a much larger economic footprint. Internationally, procurement spending averages close to 13% of gross domestic product across OECD countries, illustrating why governments increasingly use contracts to pursue goals beyond obtaining the lowest immediate price.

Canada’s 2026 spring economic update said the Buy Canadian policy had been applied to solicitations worth roughly $3.6 billion by mid-April, with approximately $527.9 million in contracts already awarded. Those figures show that the policy is not merely symbolic. However, applying Buy Canadian language to a procurement does not prove that the award changed the winner or produced additional Canadian economic activity. A contract may have gone to the same multinational subsidiary under the previous rules. Measuring success therefore requires a comparison with what likely would have happened without the preference, not simply counting every contract covered by the policy.

Trade Agreements Limit How Far Ottawa Can Go

Canada cannot automatically reserve every major public contract for Canadian-owned companies. Commitments under the World Trade Organization’s Agreement on Government Procurement and several free-trade agreements require covered federal procurements to remain open to suppliers from participating countries. The government’s policy consequently allows eligible suppliers from applicable trading partners to compete when those agreements cover the purchase.

Ottawa has concentrated stronger Canadian preferences in strategic fields and in areas where trade rules provide more flexibility, including defence, health, infrastructure and information technology. The policy initially applied to strategic procurements worth at least $25 million and was expanded to those worth $5 million or more on June 15, 2026. Exceptions are available when Canadian requirements would increase costs by 25% or more, create serious delays or involve products unavailable domestically. Other governments have already questioned Canada’s approach at the WTO, demonstrating the delicate balance between supporting domestic industry and maintaining access to foreign procurement markets for Canadian exporters.

Foreign Ownership Does Not Mean Canada Receives Nothing

A contract awarded to a foreign-owned subsidiary can still create meaningful benefits inside Canada. The winning company may employ engineers in Ontario, manufacture components in Quebec, operate warehouses in Alberta or purchase Canadian steel and aluminum. Canadian employees pay income taxes, local suppliers receive business and governments collect sales and corporate taxes connected to domestic operations. In industries with highly integrated global supply chains, those contributions can be substantial.

The concern is that local activity does not tell the entire economic story. Strategic decisions can remain with the foreign parent, while intellectual property, proprietary data and future product development may be controlled elsewhere. Dividends and some profits can also flow to international owners. A domestically controlled company that wins a government reference contract may use it to attract investment, expand internationally and keep key intellectual property in Canada. Ottawa’s current model recognizes immediate employment and Canadian content, but gives far less weight to whether the contract helps build a lasting Canadian corporate champion.

Smaller Canadian Firms Still Face Structural Barriers

One objective of federal procurement reform is to make government contracts more accessible to small and medium-sized businesses. These firms often struggle with lengthy applications, costly compliance requirements, insurance conditions and the need to demonstrate experience on contracts similar to the one they are trying to win. Large multinational suppliers generally have dedicated government-relations teams, legal departments and years of experience navigating complex tenders.

Ottawa is developing a Small Business Procurement Program and has promised simpler requirements and improved digital tools. Yet preferential scoring alone may not overcome the underlying scale disadvantage. A small Canadian technology company might offer an innovative product but lack the financial capacity to support a nationwide rollout or wait through a prolonged payment process. Governments can respond by dividing large projects into smaller components, using pilot contracts and evaluating whether bidders support Canadian intellectual property and research. Without those measures, Buy Canadian could continue favouring companies that operate in Canada while doing little to help Canadian-controlled businesses grow into serious international competitors.

Better Reporting Will Determine Whether the Policy Works

Federal officials acknowledged during parliamentary testimony that they have not always had visibility into how much contract work is subcontracted outside Canada. That makes it difficult to establish whether a supplier’s Canadian address translates into Canadian manufacturing, employment or innovation. The policy now requires bidders to attest to their Canadian status and describe the value added in Canada, with penalties possible for false or misleading information. Those requirements are useful, but their effectiveness depends on verification and public reporting.

A stronger scorecard could disclose the ownership of winning suppliers, Canadian payroll supported, domestic materials purchased, work subcontracted abroad, intellectual property created and research conducted in Canada. The Council of Canadian Innovators has argued that procurement should recognize Canadian-controlled intellectual property, data stewardship, research and strategic decision-making. Such measures would not require excluding every multinational. They would show taxpayers what each contract actually delivers. Without transparent results, the phrase “Buy Canadian” risks becoming a flexible label that means one thing to the public and something much narrower inside federal procurement rules.

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