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Canada's Defense Moment: Why Every Industry Has a Seat at the Table
- peterscaife
- Apr 28
- 6 min read
A once-in-a-generation federal investment is open for business — and it's not just for defense companies.
Last week I was in North Bay for NORD — a gathering that brought together defense primes, SMEs, government agencies, and innovators from across Northern Ontario and beyond. I left energized. Not in the way a good conference sometimes leaves you — that familiar sugar rush that fades on the drive home — but with the deep, bone-level conviction that something genuinely structural is shifting in Canada's industrial landscape.
We have hit our NATO spending commitments. We have a federal government that has put an $81.8 billion defense reinvestment on the table through Budget 2025, and a Defense Industrial Strategy (DIS) that projects $180 billion in total defense procurement, $290 billion in defense-related infrastructure, and $125 billion in downstream economic benefit by 2035 — more than half a trillion dollars in overall investment. This is not a budget line. It is a generational signal.
The question is whether Canada will turn that signal into something indelible.
Build, Partner, Buy — A Framework Built for Industry
At the centre of the DIS is a deceptively simple framework: Build–Partner–Buy.
Build means the Government of Canada will prioritize Canadian suppliers for sovereign capability areas — including AI, aerospace, munitions, quantum, uncrewed and autonomous systems, and secure digital infrastructure. In these domains, "Buy Canadian" is the stated North Star, not a preference.
Partner means that where Canada can't build alone, it will co-develop with trusted allies — Europe, the UK, Australia, Japan, and Korea are explicitly named — in a way that keeps Canadian IP and capabilities growing, not just serviced.
Buy means that when off-the-shelf procurement is unavoidable, it must come with reinvestment conditions that flow back to Canadian industry.
The mechanism behind this is the Defense Investment Agency (DIA), stood up in October 2025 and on track to become a stand-alone entity through legislation in Spring 2026. The DIA is designed to collapse the fragmentation that has historically made Canadian defense procurement slow and siloed. It consolidates DND, ISED, and PSPC functions into a coordinated procurement engine.
This matters to companies who have never thought of themselves as defense firms.
ITBs: How Defense Primes Become a Bridge for SMEs
One of the most underappreciated mechanisms in the DIS is the Industrial and Technological Benefits (ITB) Policy. Here is the practical translation: when a foreign prime contractor wins a major defense contract in Canada (typically over $100M), they are contractually required to invest an equivalent amount back into the Canadian economy.
That obligation flows through their supply chain — and it creates an on-ramp for Canadian small and medium businesses with no prior defense experience. Currently, over 700 Canadian organizations are benefiting from active ITB projects, including more than 400 SMBs and 55 academic and research organizations. The ITB Policy is estimated to contribute $5 billion to GDP and over 40,000 jobs annually.
Reforms to the ITB are underway and directional. New multipliers will reward direct work with Canadian firms, support R&D, and — critically — increase incentives for Indigenous participation in supply chains. For SMEs in advanced manufacturing, AI, sensors, digital infrastructure, and professional services, this is the policy architecture that makes the door not just open, but structurally designed to bring you through it.
Dual-Use: Why "Defense" Isn't Just for Defense Companies
The term dual-use came up repeatedly at NORD — and for good reason. Canada's DIS explicitly names technologies that are simultaneously commercial and military: AI, quantum computing, autonomous systems, cybersecurity, sensors, advanced manufacturing, and critical minerals.
This framing has practical consequences. It means that a company doing AI-enabled asset monitoring in mining, or autonomous inspection in oil and gas, or cybersecurity for industrial control systems, is operating in a capability domain that the DIS considers sovereign and strategic. You don't need to change what you do. You need to understand how what you already do maps to a national defense priority.
The Ontario Defense Association (ODA) — launched officially on May 7, 2026 at the Royal Canadian Military Institute in Toronto — is a provincial coordination body built precisely for this alignment. Ontario is Canada's largest defense industrial base: 300 companies, 13,000 skilled workers, and over $5 billion in annual revenue. The ODA bridges provincial economic tools with federal procurement pathways, provides market intelligence, and helps SMEs understand where they fit. It is also preparing a FedNor Regional Defense Investment Initiative (RDII) application to fund industry-led SME collaborations in Northern Ontario focused on dual-use technologies including AI, autonomy, sensors, and cyber.
Infrastructure Is Also Defense
Defense Construction Canada (DCC), represented at NORD by their North Bay site manager, offered a grounding reminder: defense isn't only technology — it is physical infrastructure. DCC's national contract expenditures are on a steep trajectory, from $1.158 billion in 2021 to an estimated $3.5 billion by 2028–2029. Base and wing construction, capital infrastructure, energy performance, environmental services — these are contract streams open to Canadian companies today through MERX, with no classified facility or existing DND relationship required to get started.
DCC has also demonstrated leadership on Indigenous procurement — awarding 12.8% ($97.1M) of total contracts to Indigenous businesses in 2024–25, exceeding the federal 5% target. That is not a benchmark to admire from a distance. It is a standard the whole supply chain is being asked to meet.
Indigenous Procurement: Obligation Is Becoming Opportunity
One of the most compelling presentations at NORD came from Maawandoon AI, an Indigenous-owned company whose IndigiMatch® platform is already deployed with a Tier-1 defense contractor on a national aerospace sustainment programme.
The numbers behind the problem are striking: Canada's current PSPC Indigenous procurement rate sits at 3.4% against a mandatory 5% target. There are an estimated 60,000 Indigenous businesses in Canada; fewer than 2,900 appear on the Indigenous Business Directory. Policy reform is arriving by April 2027, with Indigenous-led recourse mechanisms by 2028 and an Auditor General review already underway.
For defense primes and their subcontractors, this is not a compliance footnote — it is a scored bid element. Primes who can document genuine, verifiable Indigenous participation will differentiate their proposals. Tools like IndigiMatch are turning that obligation into a competitive posture, not a checkbox exercise.
AI Is Already in the Room
Canada has real strengths in AI. The DIS names Artificial Intelligence as a sovereign capability priority — one of a small number of areas where the Government intends to direct procurement to Canadian firms as a matter of policy. This is a deliberate signal to Canadian AI companies: your market is not just Silicon Valley or Bay Street. It is national defense, and the government wants to buy from you.
From AI-enabled procurement matching to AI-powered contract analysis to predictive maintenance in aerospace sustainment, the integration of AI into defense workflows is happening now — not in a planning document, not in a pilot. In production. Canadian companies already operating in AI-adjacent industrial applications are closer to this market than most of them realize.
The Window Is Open — But Not Forever
The ODA is forming clusters. FedNor RDII applications have near-term submission deadlines. The ITB Policy reforms are publishing in early 2026. The DIA is becoming legislation. These are not signals that the window is opening — they are signals that it is already open, and that the companies and organizations that act in the next 12–18 months will have structural advantages that compound.
Canada has a defense moment. It is going to take a whole country — manufacturers, technologists, AI builders, service firms, Northern communities, and Indigenous entrepreneurs — to turn it into something lasting.
I'm genuinely excited about what's being built. If you want to talk through how your organization might engage with this landscape — the ITB pathways, the ODA, the dual-use opportunity — reach out. This is the conversation I'm having every day.
Peter Scaife is the founder of Daybreak Strategy, a consultancy focused on digital transformation and innovation in heavy industrial and defense-adjacent sectors. Based in Ontario.
FAQ
What is the Build–Partner–Buy strategy in Canada?
Build–Partner–Buy is the framework at the centre of Canada's Defense
Industrial Strategy (DIS).
"Build" means prioritizing Canadian suppliers for sovereign capabilities like AI, aerospace, and autonomous systems.
"Partner" means co-developing with trusted allies to grow Canadian IP.
"Buy" means off-the-shelf procurement must come with reinvestment
obligations flowing back to Canadian industry.
How do ITBs help Canadian SMEs enter defense contracts?
When a foreign prime contractor wins a major Canadian defence contract
(typically over $100M), they are required to reinvest an equivalent amount
into the Canadian economy. This obligation flows through their supply chain,
creating a direct on-ramp for Canadian SMEs with no prior defence experience.
What is dual-use technology in Canadian defense?
Dual-use refers to technologies that serve both commercial and military
purposes — including AI, autonomous systems, cybersecurity, sensors, quantum computing, and advanced manufacturing. A company operating in mining automation or industrial cybersecurity may already be developing capability that qualifies as a sovereign defence priority under the DIS.
What is the Ontario Defense Association?
The ODA is a provincial not-for-profit established to strengthen Ontario's
defence industrial base. It coordinates between industry, government, and
innovation partners, helps SMEs enter defence procurement pathways, and
provides market intelligence and ecosystem mapping across Ontario's 300+
defense companies.
What is Canada's mandatory Indigenous procurement target?
The federal government requires that 5% of defense procurement value flow to Indigenous-owned businesses through the Procurement Strategy for
Indigenous Business (PSIB). Canada's current rate sits at 3.4%, creating
both a compliance obligation and a competitive differentiator for primes
who can document genuine Indigenous participation.
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