On July 14, 2025, the Government of Canada introduced a landmark Interim Policy on Reciprocal Procurement, marking a significant departure from its longstanding “open-by-default” approach to government procurement.
This policy shift is based on a principle of reciprocity: countries that do not provide Canadian suppliers, goods, and services with comparable access to their procurement markets will no longer enjoy unfettered access to Canada’s federal procurement opportunities. In other words, if foreign suppliers come from jurisdictions lacking a trade agreement with Canada, they may now be ineligible to compete for federal contracts—subject to specific exceptions.
Key Policy Features
In contrast to the anti-US approach used Ontario’s Procurement Restriction Policy, the federal policy intentionally promotes Canada’s trade commitments.
The policy requires that procurements be limited to Canadian suppliers and as applicable, suppliers of an applicable international trading partner. Exceptions to the policy include situations where:
- No Canadian suppliers have the capacity or availability to meet the requirement;
- Competitive pricing cannot otherwise be achieved; or
- It is not in the public interest to apply the restriction (though this exception requires higher-level approval due to its broad scope).
Definition of Canadian Supplier
The policy defines Canadian supplier in a manner that is consistent with the Supreme Court of Canada’s decision in Northrop Grumman (2007–2008), ensuring consistency with Canadian jurisprudence. Specifically, it defines a Canadian supplier as “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”.
Canada’s definition may make it easy for foreign suppliers to gain eligibility to participate in government procurements. All they need to do is open a corporation (takes a few minutes) and establish a permanent office in Canada. While some may view this as an unacceptable loophole, the silver lining is it encourages foreign investment and local economic participation—which overall may provide a strategic benefit.
Implications for Ontario’s Public Sector
For procurement professionals working in Ontario’s public sector, the new federal policy provides welcome certainty around whether a practice of exclusion of U.S. suppliers could be challenged under Ontario’s Discriminatory Business Practices Act (ODBPA). The ODBPA generally prohibits discriminatory practices but excludes actions taken in accordance with a federal trade policy.
Until July, no such federal policy existed, potentially leaving Ontario public sector entities exposed to legal risk if they favored domestic suppliers over those from foreign jurisdictions. With the federal government’s adoption of this reciprocal procurement policy, that ambiguity has been resolved. Ontario entities can now rely on the “exclusion from application” clause under the ODBPA to justify aligning their practices with the new federal government policy.
Why This Matters
This provides another example of how a policy can be structured to achieve the goal of prioritizing Canadian suppliers and for Ontario public sector entities it alleviates concerns of potential challenges under Ontario’s anti-discrimination legislation.
Perhaps most importantly, the policy is drafted in plain language making it easy to understand, is grounded in clear legal precedent, and balances protectionism with pragmatic exceptions, all of which makes it a great benchmark for organizations still considering how best to handle the new way of doing business.
Disclaimer: The above is provided for information purposes and is not intended to be relied upon as legal advice. Readers are encouraged to consult with legal counsel prior to.