The Good, The Bad, and The Canadian

I am very sorry - this is going to be a LONG newsletter on the new Buy Canada policy. The good, the bad, the ugly, the unknown, and most importantly, the Canadian.

We spend a lot of time thinking about procurement policy, analyzing contract data, and talking to vendors and government buyers about what works and what doesn't. The Buy Canadian framework is the biggest policy shift we've seen since we started this company. It deserves a thorough breakdown.

What follows is our attempt to explain what actually changed, what it means for vendors competing for federal contracts, how government buyers should think about implementation, and where we see gaps and risks. We've included worked examples with real math so you can see how the evaluation adjustments play out in practice.

Fair warning: we have opinions. We think the direction is right but the definitions are flawed. We think the CVA mechanism has real teeth but enforcement will be a challenge. And we think the policy misses the mark on ownership in ways that matter for Canada's long-term economic sovereignty. We'll explain why.

Whether you're a Canadian business hoping to benefit, a multinational figuring out how to adapt, or a procurement officer trying to implement this, we hope this helps.

What Changed

On December 16, 2025, Canada's Buy Canadian Procurement Policy Framework took effect. This is the most significant shift in federal procurement policy in decades. The government moved from an "open-by-default" system where anyone could bid to a "Canada-first" approach through five interconnected policies.

The Framework establishes the foundation. Four instruments sit beneath it: 

• mandatory Canadian materials for construction and defence, 

• preferential scoring for Canadian suppliers and content, 

• reciprocal access limited to trade agreement partners, 

• and reserved opportunities for small business.

The core mechanisms:

What "Canadian" Actually Means

The policies contain two definitions of "Canadian" with very different implications.

Canadian Supplier is a weak test based on operational presence. A company qualifies if it has a permanent Canadian office, files Canadian taxes, and employs people here. Ownership is irrelevant. Microsoft Canada, Accenture Canada, and AECOM Canada all qualify despite being subsidiaries of foreign parent companies. This definition controls the 10% evaluation credit.

Canadian Value-Added is the stronger mechanism. It measures actual economic activity in Canada as a percentage of contract value. For services, it's the proportion performed by individuals based in Canada. For goods, it includes Canadian manufacturing plus Canadian costs for R&D, customization, support, training, and similar activities.

The gap between these definitions matters. Analysis of federal procurement shows approximately 90% of the value of contracts is captured by businesses with Canadian addresses, but only 46-50% are actually Canadian-controlled when you examine ownership structures. This gap in ownership matters - it is the profits our country does not capture, the IP we do not own, the sovereignty we give up. 

Implications for Vendors

How the Evaluation Math Works

Two adjustments apply to every bid on strategic procurements above threshold.

Step 1: Canadian Supplier Credit (10%)

If you qualify as a Canadian Supplier (office + taxes + employees in Canada), your bid price is reduced by 10% for evaluation purposes only. The actual contract price stays the same.

Step 2: Canadian Value-Added Credit (up to 25%)

Your bid receives an additional reduction based on how much of the contract value represents Canadian content. The formula:

CVA Credit = (Canadian Value-Added $ ÷ Total Bid $) × 25%

If 80% of your bid is Canadian content, you get an additional 20% evaluation reduction (80% × 25%).

Combined effect: A Canadian company with high Canadian content can receive up to 35% in evaluation adjustments (10% supplier + 25% CVA).

Worked Example: Three Bidders on a $10M Contract

Step 1: Apply 10% Canadian Supplier Credit

All three qualify as Canadian Suppliers because they have Canadian offices and pay taxes here:

At this point, Company C (cheapest bid, offshore delivery) is winning.

Step 2: Calculate CVA Credit

Step 3: Apply CVA Credit to Get Final Evaluated Price

Result: Company B wins narrowly over Company A. Company C, despite being $2M cheaper at sticker price, finishes last.

Technology Example: Microsoft vs. Salesforce vs. Canadian CRM

Consider a $5M CRM implementation contract. Three vendors bid:

Microsoft has substantial Canadian operations: a major Vancouver development center, Toronto AI research labs, Canadian data centers in Quebec and Toronto, and a large Canadian sales and support organization. Conservatively, Microsoft Canada represents about 3-4% of Microsoft's global cost base.

Salesforce has a smaller Canadian footprint: sales offices in Toronto and Vancouver, some customer success staff, but minimal R&D presence in Canada. Their Canadian operations represent roughly 1-2% of global costs.

A Canadian CRM vendor (hypothetical) is headquartered in Canada with Canadian developers, Canadian support staff, and Canadian data centers. Nearly all their costs are Canadian.

CVA Breakdown:

Evaluation Math:

Result: In a straight price competition, Salesforce wins at $4.8M versus Microsoft's $5.0M and the Canadian vendor's $5.8M. But after CVA scoring, Microsoft's larger Canadian investment closes the gap with Salesforce. And the Canadian CRM vendor, despite bidding 21% higher than Salesforce, ties for the win.

If the Canadian vendor had bid $5.6M instead of $5.8M, they win outright despite being nearly $1M more expensive than Salesforce.

The lesson: Canadian investment matters at every level. Between two foreign vendors, the one with more Canadian operations gains an edge. But a genuinely Canadian solution can overcome substantial price premiums because their CVA percentage is so much higher.

Implications for Government Buyers

Evaluation Complexity

Procurement officers must now evaluate CVA attestations without clear guidance on acceptable methodologies. Different bidders will calculate CVA differently. A services contract might measure Canadian content by labor dollars, by hours worked, or by headcount. Each method produces different results. This is going to be the greatest challenge and issue. I am sure PSPC/the Government is cooking some method of one time evaluation and credentialing for goods, potentially services as well to speed this up. To any government readers, we are happy to help and have data that can support this effort :D. 

The COTS Decision

For commercial technology, buyers face a choice: request Ministerial approval to exempt the procurement from CVA requirements, or apply CVA scoring. Exempting the procurement makes it easier to buy dominant platforms like Microsoft or AWS. Applying CVA scoring gives Canadian alternatives a better chance to compete. That tradeoff will play out differently depending on the procurement and the Minister. I really hope this is not overused in the context of software, and businesses are forced to invest more to have a competitive advantage bidding. I am confident that Canadian businesses and press will make noise the first time this is used, and hopefully every time, given the politicization of procurement we have seen in BC and other provinces.

Documentation and Audit

The policy relies on self-attestation. Bidders certify their CVA calculations are "true, accurate, and complete" with penalties for false statements. But contracting authorities have limited capacity to verify claims, and the policy provides no standard methodology to audit against. I am sure they will build one out over the coming months, but we know contractors cannot be trusted (ArriveCAN, Fake Indigenous Businesses, etc….) and there will need to be formal, external verifications. The issue is procurement already takes forever - this will only slow it down further.

Potential Issues and Risks

Ambiguity in CVA Calculation

The policy defines what categories count as CVA but not how to calculate them. For services, is Canadian content measured by dollars, hours, or headcount? For software resale, is CVA the reseller margin, or a proportional allocation of the vendor's Canadian operations? For cloud, what portion of a Canadian-region deployment counts?

PSPC will need to issue standardized methodology guidance. That takes time, and we shouldn't expect perfection immediately. But until that guidance arrives, bidders are guessing and evaluators are comparing inconsistent calculations. The devil will be in the details.

Gaming Through Cost Structure

This is the most significant risk.

CVA measures costs incurred in Canada, not profits retained in Canada. A foreign subsidiary can employ Canadians, use Canadian subcontractors, and rent Canadian offices while still extracting all profits to the parent company through management fees, intercompany charges, and transfer pricing.

Example: A global firm wins a $10M contract with 60% claimed CVA ($6M). Of that $6M:

• $4M goes to Canadian employee salaries (genuinely stays in Canada)

• $2M is "methodology licensing fees" paid to the US parent (leaves Canada)

• The remaining $4M of contract value is profit, which also flows to the US parent

The CVA attestation looks good. The actual Canadian economic benefit is far less than it appears.

This is difficult to prevent. Transfer pricing and intercompany arrangements are normal business practice for multinationals. Procurement officers aren't equipped to audit corporate structures. And the policy provides no mechanism to track where profits ultimately flow.

There's no perfect policy here. But if government could build robust, automated monitoring of CVA outcomes over time, they could identify patterns and anomalies. That would make the mechanism more potent. Without monitoring, gaming will be widespread and invisible.