The Defence Gold Rush Is On: What We Learned from 29K Federal Contracts

Our analysis of $75.6 billion in federal defence contracts reveals a market that's grown 565% since 2021. Five contractors control half of all spending. The top ten hold 75%.

Ottawa knows this concentration is a problem. This month brought Canada's entry into the EU's €150 billion SAFE initiative, the $357.7 million Regional Defence Investment Initiative for SMEs, and confirmation that Buy Canadian requirements hit contracts over $25 million next year.

The message: incumbents will keep winning major platforms, but the government is building on-ramps for everyone else. Understanding how to use them starts with understanding the market.

Federal Defence & Marine Spending: $75.6 Billion Reshaping Canadian Industry Source: Publicus Analysis of Federal Contract Data | Period: 2020-2025

What's Happening: We analyzed 28,938 federal contracts in aerospace, defence, and marine sectors worth $75.6 billion over five years. This market operates nothing like IT services. It's dominated by shipbuilding mega-contracts, a small club of prime contractors, and spending growth that's accelerating faster than any other federal category.

The Numbers That Matter:

National Defence commands 76% of sector spending ($57.2 billion), with Coast Guard/DFO taking 18% ($13.3 billion) and the Canadian Space Agency at 3% ($2.5 billion). This is a two-customer market, and DND is the only one that really matters for most contractors.

The concentration at the top is striking. The top five vendors capture 53% of all spending. Expand to the top ten and you're at 75%. The top twenty control 88% of the market. For context, IT services' top twenty only held 58%.

Three shipyards alone account for $23.3 billion: Seaspan ($11.0B), Halifax Shipyard/Irving ($8.4B), and Davie ($3.8B). Add SkyAlyne's $11.2 billion FAcT training contract and CAE's $5.0 billion, and five vendors control half the entire market.

The Growth Story:

This is where it gets interesting. Annual spending has exploded from $3.4 billion in 2021 to $22.6 billion in 2024. That's a 565% increase in three years. Even with 2025 not yet complete, we're already at $17.1 billion.

Average contract values tell the same story: from $782K in 2021 to $4.4 million in 2025. The government isn't just spending more; it's consolidating into larger, more complex procurements.

The Mega-Contract Reality:

Here's the number that defines this market: 46 contracts worth $100 million or more represent 84% of all sector spending. That's $63 billion flowing through fewer than 50 procurement vehicles. Another 78 contracts in the $25-100 million range add just 5% more.

This means the overwhelming majority of the 28,938 contracts in our dataset are fighting over roughly 11% of available dollars.

What It Means For You:

• For Canadian primes: The National Shipbuilding Strategy and major platform acquisitions (F-35, Future Fighter, surface combatants) are driving consolidation. If you're not already positioned on these programs, your window is closing. The RDII funding announced this month is explicitly designed to build the supply chain capacity these programs need.

• For SMEs: Forget competing for primes. The path forward is through Industrial and Technological Benefits (ITB) obligations. Every major contract over $100 million requires dollar-for-dollar Canadian investment. Seaspan, Irving, CAE, and the other top vendors need Canadian subcontractors to meet these commitments. Make yourself essential to their compliance.

• For foreign firms: The data shows significant international participation (Airbus, KNDS, General Atomics, Leonardo UK), but increasingly through Canadian subsidiaries or partnership structures. Pure foreign bidding without Canadian presence is becoming untenable given ITB requirements and the Buy Canadian policy direction.

Between Us: The technical HHI score (761) still classifies this as "unconcentrated," which is absurd given that ten vendors control three-quarters of spending. The reality is that federal defence procurement is a closed ecosystem with extremely high barriers to entry. The $357.7 million RDII program and the forthcoming Defence Industrial Strategy are the government's acknowledgment that there is a market structure that excludes most Canadian businesses. 

Canada Makes Historic Move into EU Defence Market Source: Al Jazeera | Date: December 2, 2025

What's Happening: Canada became the first non-European country to join the EU's Security Action for Europe (SAFE) defence initiative, gaining access to a €150 billion rearmament fund. Prime Minister Carney framed this as a deliberate pivot away from U.S. defence dependence, noting over 70% of Canada's military capital spending will no longer flow south.

What It Means For You:

• Canadian defence contractors can now bid on SAFE-funded joint projects, but must navigate the 65% EU-origin component requirement (exemptions possible for partner countries)

• Aerospace, cybersecurity, and drone technology firms should prioritize building relationships with European manufacturers now

• Expect increased competition domestically as European contractors gain reciprocal interest in Canadian markets

Our Take: Joint ventures and consortia with EU primes will become the standard model for participation. Start those conversations now.

Federal "Buy Canadian" Policy Gets Teeth: $25M Threshold Coming Source: TBS | Date: November 28, 2025

What's Happening: The Government confirmed its Buy Canadian Policy will be implemented by year-end: all contracts over $25 million must prioritize Canadian materials, including steel, aluminum, and wood products. The same threshold applies to federal grants and contributions. Officials project over $1 billion in new demand for Canadian steel.

What It Means For You:

• Major procurements above $25M will require Canadian content plans and certifications in 2026 RFPs

• Supply chain audits and material origin documentation are becoming standard

• Contractors reliant on imported materials need to reassess sourcing or risk competitive disadvantage

Pro Tip: Get your steel provenance certifications and supply chain documentation in order before 2026 RFPs drop.

$357.7M Regional Defence Investment Initiative Opens for Applications Source: Government of Canada | Date: December 2025

What's Happening: The Government launched the Regional Defence Investment Initiative (RDII), a $357.7 million program delivered through Regional Development Agencies to expand Canada's defence industrial capacity. Southern Ontario alone is receiving nearly $200 million ($94.7M through RDII plus $106M in additional FedDev Ontario resources). The initiative targets SMEs and dual-use businesses looking to pivot into or scale within defence supply chains.

What It Means For You:

• Small and medium enterprises represent 92% of the defence industry but only 40% of jobs. This funding is designed to change that ratio by helping SMEs scale and integrate into domestic and global defence markets.

• Dual-use technology companies take note: you don't need to be a traditional defence contractor to qualify. Businesses with products applicable to defence can access funding to pivot their activities.

• Regional allocations mean opportunities across the country, with dedicated streams for Atlantic Canada, Quebec, Ontario, Prairies, BC, and the North.

Between Us: This is the groundwork for the forthcoming Defence Industrial Strategy, which has $6.6 billion allocated over five years. The RDII is essentially the government's way of building the supplier base before the major contracts start flowing. If you're an SME with any defence-adjacent capabilities, this is your entry point into the ecosystem.

Alberta Health Cancels Clinic Negotiations Amid Procurement Controversy Source: The Globe and Mail | Date: December 2, 2025

What's Happening: Alberta Health Services terminated advanced-stage negotiations with two private health firms tied to entrepreneur Sam Mraiche for surgical clinics in Red Deer and Lethbridge. The Minister announced the decision in the legislature after conflicts of interest and procurement irregularities were identified.

What It Means For You:

• Vendor vetting and conflict-of-interest disclosure requirements are tightening across health sector procurement

• Even late-stage negotiations can be voided if ethical concerns surface

• Re-tendering likely, creating fresh opportunities for competitors with clean records

Our Take: The Alberta Health Services saga just continues to drip, drip, drip...If Danielle Smith is half as resistant as Doug Ford, she will be just fine. All she has to do is ride this out and let some others take the fall. However, there will definitely be new processes and guidelines around the sole sourcing processes within Alberta and procurement more generally. Civil servants will not want to seem like they're involved. Similarly, sole-source happy provinces like Nova Scotia may have to follow in suit before a scandal erupts.

MDA Lands $44.7M RADARSAT Contract, Larger Award on Horizon Source: Canadian Space Agency | Date: December 4, 2025

What's Happening: MDA Space Ltd. secured $44.7 million to procure long-lead satellite parts for a RADARSAT Constellation Mission replenishment satellite, with the full mission contract expected in 2026. This is part of a $1.012 billion, 15-year investment in Earth observation capabilities. Three Canadian firms (C-CORE, Kepler, MDA) also received up to $747,000 each for next-generation radar satellite concept studies.

What It Means For You:

• Over 10 federal departments rely on RCM data for maritime monitoring, disaster response, and environmental tracking

• The phased procurement approach (parts first, full mission later) provides earlier cash flow while managing technical risk

• Smaller tech firms have a clear pathway through concept study contracts alongside prime relationships

Between Us: MDA continues to dominate Canada's space procurement. Since returning to Canadian ownership in 2020, they've positioned themselves as the go-to for both space and defence. We simply don't have deep Canadian capacity in this sector, so the opportunity for others is in building relationships with MDA rather than competing against them.

Your Procurement Action Plan

1. Defence SMEs: Apply for RDII funding now. This is your entry point into the ecosystem before major Defence Industrial Strategy contracts flow. The $357.7 million won't last forever.

2. Document your Canadian content. The $25M threshold is coming. Get material sourcing documentation, steel certifications, and supply chain tracking ready before 2026 RFPs require it.

3. Build EU relationships. SAFE partnership means Canadian firms can bid on European defence projects, but the 65% EU content requirement means you'll need consortium partners. Start those conversations.

4. Position with the primes, not against them. The data is clear: 46 contracts over $100M represent 84% of defence spending. SMEs win by becoming essential to ITB compliance for Seaspan, Irving, CAE, and the other major players.

5. Review your ethics and disclosure policies. The Alberta AHS situation shows procurement integrity is under the microscope everywhere. Clean records are becoming competitive advantages.

The Bottom Line

Defence procurement is no longer a niche market. It's the fastest-growing segment of federal spending, and the government is actively reshaping who gets to participate. The concentration at the top is real, but so are the policy interventions designed to break it up.

Understanding this market requires data. We analyzed 28,938 contracts to bring you these insights. If you want to know where the opportunities are in your sector, we're your people.

Publicus helps government contractors find, qualify, and win more contracts with less effort. Our AI-powered platform monitors every opportunity across all government levels, with analytics on pricing and competition so you can understand your market like never before.