Authored By Kishan Dhanjal (with a nod to Claude).

At Davos in January, Prime Minister Carney delivered a blunt message to Canadian businesses: the rules-based international order is over — and to “take your signs down”.¹ The Government of Canada’s Buy Canadian Policy is one answer supporting this call to action to protect Canada’s businesses and economic interests.

For Canada’s 1.1 million Small and Mid Sized Enterprises (SMEs), this policy arrives at a critical moment. According to the Canadian Federation of Independent Business, nearly one in five small businesses say they won’t survive this year if tariff conditions don’t change.^¹³ The policy’s main objective is to help businesses become more self-sufficient and resilient to changes in our global economy, or what Carney defines as “a rupture in the world order.”  

But policy alone doesn’t win government contracts — and federal procurement award records reveal important implications for SMEs. Analysis of Public Service and Procurement Canada’s (PSPC) departmental reports and more than 7,000 federal contract awards, totalling over $21 billion, shows that SMEs are under-represented and that their share of awards has fallen considerably over the past five years.

This article examines the Buy Canadian Policy, PSPC procurement data, and recent trends to understand the barriers facing Canadian SMEs in pursuing federal work — and offers recommendations for how they can better compete.

What Is the Buy Canadian Policy?

Launched in December 2025 and actively expanding through 2026, the Buy Canadian Policy is the most significant restructuring of federal procurement in decades. It systematically directs federal spending toward Canadian suppliers and domestically produced goods and services through five interconnected mechanisms^³:

1. Reciprocal Procurement restricts federal contract eligibility to Canadian suppliers and those from trade-agreement partner countries.^⁴
2. Canadian Supplier Credit gives qualifying Canadian suppliers a 10% reduction to their evaluated financial proposal — a direct scoring advantage over non-Canadian competitors.
3. Canadian Value-Added (CVA) allocates 25% of evaluation weight to Canadian content: labour performed in Canada, Canadian R&D, and domestic service delivery — not just a registered address.^⁵
4. Canadian Materials mandates Canadian-produced steel, aluminum, and wood products in federal construction and defence contracts over $25M where a Canadian supply source exists.
5. SME Reserved Opportunities — A dedicated Small and Medium Business Procurement Program launches spring 2026, carving out federal contracts specifically for Canadian SMEs and streamlining their access to the system.^⁶

The policy is still expanding.Currently applying to contracts of $25M or more in five (5) strategic sectors — infrastructure, construction, defence, information & communications tech (ICT), health, and professional services. The threshold drops to $5M by June 15, 2026, bringing a materially larger share of federal spending under Buy Canadian rules.^⁴

An element of the policy worth noting is “Canadian supplier” is defined by a firm’s operational presence — a permanent Canadian office, taxes, and employees. Parent ownership is irrelevant, meaning large multinationals with Canadian subsidiaries will be eligible for the 10% scoring advantage.^⁵  

However, the CVA scoring — which allocates 25% of evaluation weight — rewards labour and R&D performed in Canada, and services delivered by Canadian-based workers. A multinational with a thin Canadian office that subcontracts work abroad will score poorly on CVA. A Canadian-owned SME whose entire delivery team, R&D, and operations are domestic will take the full 25 points.

Implications for Canadian SMEs

Under the Government of Canada’s definition, an SME is any business with fewer than 500 paid employees — a category that, as of December 2024, encompasses 99.7% of all private, employer businesses in Canada. SMEs employ 5.8 million Canadians in the private sector and contributing over 48% of the nation’s GDP.^²

In an article written by Senator Danièle Henkel, she noted the share of federal contracts awarded to SMEs has fallen from 38% in 2008 to just 20% in 2024.^⁹ Having spent 14 years working for a SME selling to the government, I decided to investigate.

PSPC’s procurement portal, CanadaBuys, contains information on historical Government of Canada contract awards. I pulled several publicly available PSPC datasets and used Claude to analyze federal contract awards from FY 2022 to March 2026. An analysis of 7,257 PSPC contract awards for this period — representing $21.1 billion in federal procurement across approximately 60 federal contracting entities — reveals trends, opportunities and implications for Canadian SMEs.^¹¹

2022-2026 PSPC Public Contract Awards Analysis

Table A provides a summary of the data extracted from the publicly available CanadaBuys Contract Award reports. CanadaBuys does not record supplier employee counts, SME classification or any organizational size indicator in its public contract award datasets – its primary focus is on contract values, categories, and the awarding departments.

Metric

Value (FY 2022 to March 2026)

Total contracts awarded	7,257
Total value awarded	$21.1 billion
Unique vendors	4,177
Average contract value	$2.91M
Median contract value	$215,450
Top 5 vendor market share	34.2% — $7.2B
Market concentration (HHI)	426 — Moderately Concentrated
Contracts awarded below $5M	93.4% of all contracts (6,779 of 7,257) — $3.7B
Contracts in the $25K–$500K range	61.5% (4,465 of 7,257) — 2,758 unique vendors awarded
Competitive Awards	51.6% — $10.89B (4,578 contracts)
Non-Competitive Awards*	46.5% — $9.81B (2,507 contracts)
Ontario & Quebec Share of Value	82.6% — $14.5B
Services category share of total value	53.4% (3,013 of 7,257 contracts) — $11.3B

Table A — PSPC Federal Procurement Summary, FY 2022–2026. Source: PSPC CanadaBuys Open Data — Contract Award Notices. https://open.canada.ca/data/en/dataset/a1acb126-9ce8-40a9-b889-5da2b1dd20cb

Key Findings from the PSPC Award Data:

• Median Value: half of federal contracts awarded during the period were valued at $215K or below. The average contract value of $2.91M is skewed upward by a handful of mega-contracts in defence and shipbuilding — like the Chantier Davie $3.7B Polar Icebreaker Contract.
• Concentrated Spending: Five vendors capture more than a third of contract award value during the period. The top 5 — Chantier Davie, Leonardo UK, Bell Textron, Bombardier, and Sun Life — all large multinationals that account for 34.2% of contracts awarded ($7.2B of $21.1B), and all but one were defence or shipbuilding contracts.
• Competitive vs. Sole-Source: Competitively tendered awards ($10.89B across 4,578 contracts) flew through an unconcentrated market of 3,002 vendors.  79.3% of vendors won only one competitively awarded contract throughout the period.  However, only 51.6% of procurement value was awarded competitively — the other 46.5% was non-competitive. Non-competitive awards ($9.81B across 2,507 contracts) were highly concentrated — the top 5 vendors alone, large multinationals, captured 67.8% of the value. 58.2% of non-competitive contracts cite “Exclusive Rights” — the vendor is the sole entity capable of supplying a goods or services, such as a proprietary technology. 38.4% of non-competitive awards have no reason recorded, and the remainder are various sole-source justifications. An additional 54 ACANs ($61.8M) and 118 unclassified contracts ($338.1M) are excluded from both categories.

The Herfindahl-Hirschman Index (HHI) measures how evenly contract value is distributed across vendors – below 100 is highly competitive and above 1,500 is highly concentrated. Our analysis scores all award data an HHI of 426, indicating a moderately concentrated market. However, the competitively tendered awards were unconcentrated (HHI 170; 3,002 vendors), while sole-source procurement was concentrated (HHI 1,728), with the top five vendors accounting for 67.8% of value in this category.

• Geography matters. 82.6% of contract value flows to Ontario (32.9%) and Quebec (49.7%) firms, driven by National Capital Region (NCR) concentration. For SMEs outside these provinces, federal procurement is materially harder to access without presence or a defined niche. The Buy Canadian CVA mechanism does not change this geographic reality — but it does advantage firms delivering genuinely Canadian work regardless of geography.
• Services. Services account for 53.4% of total value awarded, with a median contract of $379K. A relevant stat, given that 76.6% of all Canadian businesses are in the services-producing sector. ² The professional, scientific and technical services sector has the single largest SME concentration in Canada (155,350 firms).
• Standing Offers. 606 contracts ($1.31B) were awarded through PSPC standing offers — competitively established agreements where the government pre-qualifies vendors through open bidding, then “calls up” work at pre-negotiated rates without re-competing each time. 97% of standing offer call ups were competitively awarded, the median $395K, with 434 unique vendors. For SMEs, getting onto a standing offer list is an efficient and effective path into federal work.
• Size Matters. Table B classifies vendors into tiers by their cumulative awarded value across the dataset period. Since the PSPC award data contains firm names but does not contain firm size, this table may be used as a directional proxy for firm size. This is because larger firms do win small contracts, and SMEs do win large contracts.

Contracts $ Size	# of Vendors	% of Vendors	# Contracts Won	% of Awarded Value
Micro (<$100K total)	1,069	25.6%	1,135	0.3%
Small ($100K–$500K)	1,357	32.5%	1,794	1.6%
Mid ($500K–$2M)	998	23.9%	1,761	4.9%
Large ($2M–$10M)	526	12.6%	1,509	10.7%
Enterprise (>$10M)	227	5.4%	1,058	82.4%

Table B – 2022-2026 PSPC Awards: Vendor Tier Analysis by Cumulative Award Value. Based on            data collected from source stated in Table A.

The table reveals that 82% of winning vendors are distributed across the Micro, Small and Mid tiers combined, but they capture just 6.8% of total award value. In contrast, the Enterprise tier—5.4% of vendors—captures 82.4% of value.

PSPC’s SME Participation Data

PSPC reports in their departmental plans the percentage of contract value awarded to small and medium businesses as represented in Table C below.

Period	Contract Value Awarded to SMEs
2021 to 2022	32%
2022 to 2023	24%
2023 to 2024	20%
2024 to 2025	5%

Table C – Percentage of contract value awarded to small and medium businesses. Sourced from PSPC 2024-2025 and 2025-2026 Departmental Plans.

While our analysis of PSPC’s public contract award data cannot directly verify the business classification of each award recipient, PSPC’s own reporting makes clear that SMEs are capturing a rapidly declining share of federal procurement value. Table C shows a steep and accelerating decline in the share of contract value awarded to SMEs. SME awards fell by 25% from 2021–2023, declining by a further 16.7% in 2023–2024, before dropping by a whopping 75% to just 5% in 2024–2025.¹² Overall, this represents an 84.4% decline over the full period.

SMEs Have Been Historically Under-Represented in Federal Contract Awards

For the 2024 to 2025 period, PSPC notes in its department plan that the awarding of several high-value defence procurements “limited the opportunities for contracts to be awarded to small and medium enterprises.” ^¹² This raises serious concerns, and I did some homework. In a 2024 Government of Canada publication, the State of Canada’s Defence Industry, it was noted that firms with fewer than 250 employees represented over 85% of firms in the Canadian defence industry.¹⁶ 

The real question is not whether these procurements are too “high value” for SMEs, but why the government has not built in terms that ensure smaller firms still have a way in—through mandated subcontracting, supply-chain participation, innovation streams, or targeted set-asides. If high-value contracts continue to bypass SMEs entirely, that is not simply a market outcome; it is an intentional barrier.

As Senator Henkel notes in her article, Federal contracts favour big companies — let’s flip the script for SMEs, they face familiar barriers to winning federal work: overly complex processes, dense administrative language, inconsistent information between English and French, tendering costs that can exceed the value of the contract, delayed payment, and perception biases. She notes these issues affect all small firms, but they hit underrepresented entrepreneurs especially hard, including women, visible minorities, Indigenous Peoples, and younger founders without established networks or experience in public sector bidding.⁹

If PSPC wants to seriously improve representation of SMEs in awards, better programs and clearer guidance may be useful, but they are not enough on their own. PSPC will need to change how procurement is designed. That means looking seriously at mandatory SME participation requirements in major contracts, requiring prime contractors to partner or subcontract to SMEs, and reporting results publicly in a way that creates real accountability. None of this would be about giving SMEs special treatment. It would be about making sure the federal procurement system reflects the significant representation and contributions of SMEs to the Canadian economy.

This echoes the structure of federal procurement south of the border. The U.S. Small Business Administration and federal law mandates federal agencies to award at least 23% of all prime contracting dollars to flow to small businesses since 1953 — supported by legally mandated sub-targets for women-owned firms (5%), historically underutilized zoned businesses (3%), and veteran-owned companies (5%).¹⁷ Many state level agencies also mandate that a percentage of prime contract award values flow to small and other disadvantaged businesses.

The Trade War Impacts to SMEs and Buy Canadian Policy

The Canadian Federation of Independent Business (CFIB) reports that nearly two-thirds (62%) of Canadian SMEs are facing higher expenses due to tariffs, 48% are seeing lower revenues, 41% report supply chain disruptions, and 36% have paused investments. Critically, nearly one in five (19%) firms are dealing with extra tariff costs report they will not be able to last more than six months if the tariff status quo remains; 38% say they would last less than a year.¹³

For many SMEs, government contracting is not just a growth opportunity; it can provide stability at a time when trade pressures are squeezing margins, disrupting operations, and delaying investment. In that context, the Buy Canadian Policy matters because it signals an intention to strengthen domestic participation in public procurement. The policy’s main objective is to help Canadian businesses be resilient towards trade impacts and economic pressures.

If the Buy Canadian Policy is to truly strengthen the domestic economy amid growing market pressures, PSPC needs to redefine how it procures. It needs to ensure that procurements under the policy deliver real opportunities by rethinking procurement design and embedding meaningful, enforceable terms—such as mandatory subcontracting, supply-chain participation, and other clear SME access requirements—directly into its contracts.

How SMEs Can Compete for Work Under the Buy Canadian Policy

Competing for federal work, and public sector work in general, has lot more to do than just responding to a tender. The firms that succeed consistently in winning public work have done the groundwork: they understand the buyer’s needs and where they fit, how to position their value, which partners strengthen their offer, and have a process to develop a compelling proposal aligned with PSPC’s rigorous evaluation criteria, compliance and administrative requirements.

While federal procurement can seem complex and difficult to break into, smaller firms can build meaningful government practices by following recommendations outlined in this section.

The PSPC data in this report illustrates that vendors that focus on defined niches can build significant federal practices by competing in the $25K–$500K contract tier (61.5% of all contracts awarded).¹¹ As the data previously also suggests, standing offer arrangements are an effective path for SMEs to pursue federal work. PSPC claims that standing offers underpin 38% of federal procurement spending, estimated $7.6 billion annual market.⁸

The recommendations below come from over a decade of selling professional services as an SME to federal, provincial, and municipal governments across Canada. They are organized around the three capabilities that separates consistent winners from firms that bid reactively and lose: business model clarity, pursuit readiness and bid program management.

1. Adapt Your Business Model for Government Selling

A business model defines how an organization creates, captures, and delivers value to its customers.¹⁵ Government procurement demands a clear value proposition, not a broad service offering. Evaluators reward firms with evaluation points who can articulate a tailored, value-based response to a specific buyer’s problem in their proposals. That requires clarity on who the government customer is, your positioning relative to a scoring criterion and scope of work, and a value proposition built around measurable outcomes.

Under Buy Canadian, the CVA mechanism reinforces that a firm’s value proposition will need to explicitly qualify and quantify the Canadian content and delivery — Canadian labour, Canadian subcontractors, Canadian R&D — as these elements carry 25% of the procurement’s evaluation weight.

Public buyers are difficult to influence by private firms. Agencies must maintain a perception of equity, fairness and unbiased vendor relations. This poses a challenge for private sector firms to position themselves for winning government work.  It is almost always against agency policies to allow vendors to purchase virtually anything for staff.  That said, speaking engagements, industry events and networking are great ways to build relationships with public sector clients.  At the end of the day, public servants are people who have jobs, goals, objectives and pain points which require the support of the private sector. Being a known entity when they open your bid is helpful.

For public sector work, your competitors today can also be allies tomorrow and vice versa — and the data proves it. 70 joint venture contracts totalling $540.2M were awarded during the period, with a median size of $3.7M — 17x the overall median and 90% of them were competitively awarded. The partnerships range from Indigenous firms teaming with IT consultancies, smaller staffing firms pooling capacity, to niche defence SMEs combining capabilities. Joint ventures, prime/sub arrangements, and teaming agreements are competitive levers that give SMEs access to contracts sized beyond their individual reach — and build the past performance record that can open the door tor to larger prime contracting opportunities over time.

2. Competitive Bidding Readiness

Successful public sector bidding typically starts well before the client’s competitive tender is in-market. When a competitive tender (e.g. RFP) is live on PSPC’s procurement portals, CanadaBuys or MERX, the competitive ground has often already been shaped by suppliers who invested early in client insight, positioning, teaming, and solution development. The PSPC data studied in this report shows that $9.8 billion of contracts were awarded “non-competitively” through existing standing offers, sole-source justifications, and other existing supplier relationships.¹¹

The lesson is clear: preparation before competitive tenders hit the market matters. Firms that have a high win rate will have strong client relationships, studied their competitors, identified, tracked and qualified new prospects, lined up the right partners, and shaped solutions around the buyer’s unique requirements, pain points and gains expected.

Firms that win government work consistently will use a structured pursuit readiness assessment, sometimes referred to by the industry as a “go/no-go” assessment, to determine whether they are positioned to compete credibly. The factors that are key to assess before competitively bidding include:

• Do we understand the buyer’s and their associated department’s goals?
• Do we have a clear win strategy, solution and a proposal evaluator(s) will identify with and score highly against their tender evaluation requirements and scoring criteria?
• Have we assessed the competition, secured the right resources or partners, and backed our offer with relevant past performance?
• Is our solution tailored, deliverable, and commercially sound from a cost, schedule, quality and risk perspective?
• Have we tested our pricing of the offering or solution? Fixed price, time and material and cost-reimbursable contracts all require unique strategies and competitive assessments to “price to win.”

Without the intelligence or preparedness above, it is still possible to bid and win government work. The probability of winning the contract will be significantly higher if SMEs have done a readiness assessment, positioned themselves well and submit a compelling, high scoring proposal.

3. Prepare for the Administrative Complexity of Federal Bidding

The federal procurement process is complex and can be difficult to navigate for SMEs. The Canadian Chamber of Commerce has identified structural barriers that disproportionately affect SMEs: unclear evaluation standards that make bid assessment unpredictable, long delays for contract awards that create uncertainty, and timelines that frequently misalign with project delivery needs.¹⁴ Security clearance requirements add a further layer of complexity—creating incumbent advantages that are difficult for new entrants.

Building the capacity to compete requires dedicated resources. First, a business development resource focused on federal market intelligence — building relationships with federal procurement contacts, attending industry days and networking events, maintaining a live pipeline of prospective opportunities and monitoring CanadaBuys and MERX for aligned opportunities.

Second, a proposal or bid management resource who understands the length, structure, and documentation requirements of public tenders — should work alongside your BD and subject matter experts to build the firm a compelling proposal offering.  PSPC solicitations involve complicated evaluation criteria and compliance requirements that requires dedicated administrative capacity.  Proposal staff should maintain a digital content library — corporate documents, CVs, references, insurance certificates, pricing structures, and security-related information.

Concluding Perspectives

The Buy Canadian Policy signals a meaningful shift in federal procurement, but its success will ultimately be measured not by policy language, but by whether it changes outcomes for Canadian SMEs. Its intent is directionally positive: reciprocal procurement, Canadian supplier credits, Canadian value-added scoring, domestic material requirements, and upcoming SME-reserved opportunities create stronger commercial mechanisms for Canadian firms.

But PSPC’s procurement reports and data tells a harder truth for SMEs. Federal contract awards remain heavily concentrated among large vendors, non-competitive awards continue to account for a substantial share of spending, and SMEs capture a rapidly decreasing portion of federal procurement value. If this trajectory continues, Buy Canadian risks reinforcing domestic eligibility but maintaining historical procurement barriers for SMEs — despite representing nearly the entire Canadian business base. PSPC must do more to design procurements that remove barriers such as enforceable SME participation requirements, subcontracting pathways, and clearer accountability for participation results.

At the same time, SMEs cannot approach federal work opportunistically or reactively. The firms most likely to win will be those that define a clear value proposition, invest early in market intelligence and pursuit readiness, build the right partnerships, and have the internal discipline and capacity to manage complex PSPC bids, win and deliver successfully. SMEs not only compete — they also partner to create enhanced value for buyer requirements. Joint ventures and prime/sub arrangements are how smaller firms access larger contracts and build the track record to eventually pursue larger contracts independently.

Kishan Dhanjal is a big-picture thinker who loves detail just as much. He is a professional services leader with 19 years of experience working with inspired owners and leaders of SMEs. For over a decade, he was a business development executive at an Ontario-based SME helping grow it from a boutique consultancy into a leading professional services organization, with majority of its revenue coming from public sector clients in the Canadian market. During his tenure he helped the firm triple in size before its acquisition by one of the largest management consultancies in the world. He now enjoys helping Canadian entrepreneurs and SMEs innovate their business models and go-to-market strategies to open new opportunities for growth.

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