Canada - Country Commercial Guide
Defense Equipment

This is a best prospect industry sector for this country. Includes a market overview and trade data.

Last published date: 2020-08-03


In 2019, Canada was the 14th largest military spender worldwide. Within NATO, Canada contributed an estimated US$22,485 billion, accounting for an estimated 1.31% of Canada’s GDP. Total exports of U.S. defense products to Canada increased from US$638 million in 2018 to US$679 million in 2019.

The Department of National Defence (DND) is the largest federal department in Canada with a budget that accounts for approximately 7.3% of the total Government of Canada budget. DND’s Strong, Secure, Engaged defense policy prioritizes spending for 20 years commencing in 2017. Canada’s Defense Investment Plan includes current funding authorities and future investment capabilities valued at US$92.1billion.

DND awards approximately 12,000 contracts and spends up to US$4.52 billion dollars annually on capital projects. As of May 2019, DND’s contracting authority for competitive service contracts increased from US$750,000 to US$3.8 million, allowing DND to directly procure over 80% of its requirements. The remaining procurements are made by Public Services and Procurement Canada (PSP). U.S. exporters can find current and upcoming defense opportunities on the federal government’s official tender portal BuyandSell managed by PSP. U.S. firms can subscribe to, and receive online notifications on procurement projects, industry day announcements, requests for qualifications, advance contract awards, and information on how to do business in Canada.

The Canadian government implemented the Industrial and Technological Benefits (ITB) policy to stimulate economic growth and it requires for companies awarded defense procurement contracts to undertake business activities in Canada equal to the value of the contract. The ITB policy is administered by Innovation, Science and Economic Development (ISED) and assessed on a project-by-project basis. The Value Propositions (VP) is an integral part of the ITB policy. For each defense contract, the applicability of the VP will vary depending on the following thresholds:

  • Defense procurements over US$75 million;
  • Canadian Coast Guard procurement over US$75 million and for which the National Security Exception applies; and
  • Procurements valued at US$15 million and above will be reviewed for the application of a VP to determine eligibility when assessing capability, cost and benefit to Canada.

Once a contract is awarded, the contractor must begin fulfilling its commitments by identify business activities in Canada equal to 100% of the contract value. It is important to note that the VP applies to both, competitive and non-competitive procurement programs. In the case of non-competitive projects, whether these are sole source contracts, Foreign Military Sales (FMS), or other non-competitive projects, Canada will negotiate directly with the contractor the maximum value possible to benefit Canada’s economy.

Potential impacts of COVID-19

At the time of writing, countries around the world, including Canada, have sharply increased fiscal spending to fight the COVID-19 epidemic. On March 19, 2020, following the U.S. Department of Homeland Security’s Guidance on the Essential Critical Infrastructure Workforce, Public Safety Canada issued official guidance to provinces and territories clearly designating “defense” in its definition of essential services and functions. As Canada increases its fiscal spending to fight the pandemic, it is unknown how defense programs will be affected.

Leading Sub-Sectors

The Defence Capabilities Blueprint (DCB) lists DND’s approximately 240 current and future projects and contracts for major capital equipment, IT, and infrastructure. DCB outlines a total of 16 key industrial capabilities including

· Emerging Technologies

    • Advanced Materials
    • Artificial Intelligence
    • Cyber Resilience
    • Remotely piloted Systems and Autonomous Technologies
    • Space Systems

· Leading Competencies and Critical Industrial Services

    • Aerospace Systems and Components
    • Armor
    • Defense Systems Integration
    • Electro-Optical / Infrared (EO/IR) Systems
    • Ground Vehicle Solutions
    • In-Service Support
    • Marine Ship-Borne Mission and Platform Systems
    • Munitions
    • Shipbuilding, Design and Engineering Services
    • Sonar and Acoustic Systems
    • Training and Simulation


Shipbuilding Projects

· Canadian Surface Combatant (CSC) – In February 2019 Lockheed Martin Canada (LMC) was awarded the design contract of 15 CSC ships, based on the BAE Systems Type 26 Global Combat Ship. The new ships will be built at Irving Shipbuilding yard in Halifax. The projected budget for the program is between US$42.2 billion to US$45.2 billion. The Industrial and Technological Benefits (ITB) Policy applies to this procurement and LMC must provide benefits to Canada equal to their scope of work, along with Value Proposition commitments) U.S. firms can register with Irving Shipbuilding’s Supplier Registry to work with LMC’s tier partners to explore business opportunities in Canada. As of November 2019, LMC and Irving Shipyard are in the Preliminary Design phase, the second of four design phases.

· Chantier Davie was awarded a contract on June 19, 2019 to build two new ferries for Transport Canada.

· Vancouver Shipyards was awarded a contract on May 22, 2019 for the construction of up to 16 Multi-Purpose Vessels (MPVs). Constructions is expected to begin in mid-2020.

· Construction of a sixth Arctic Offshore Patrol Ship (AOPS) at Irving Shipbuilding was announced by the Canadian government in November 2018. Additionally, Irving will also build two more AOPS for the Canadian Coast Guard.

Aerospace Projects

· Future Fighter Capability Project (FFCP) - The Future Fighter Capability Project will acquire 88 advanced fighter jets, along with associated equipment, weapons and sustainment capability at an approximate cost between US$11 – 14.3 billion. Contract award is anticipated in 2022, first delivery is expected in 2025 and the aircraft is projected to remain operational beyond 2060. At the time of writing this report, Public Services and Procurement expect bid responses by July 31, 2020.

· Remotely Piloted Aircraft System (RPAS) - The RPAS program is for the acquisition of a medium altitude and armed Remotely Piloted Aircraft System along with associated equipment, weapons, infrastructure and in-service sustainment capability that will support up to three concurrent lines of operation, domestic or international. The procurement budget is between US$753 million and US$3.76 billion, and it includes project management costs, infrastructure, contracts and contingency. A draft RFP is expected in summer 2020, and a formal RFP is expected in spring 2021.


Major Events and Trade Shows in Canada

· DEFSEC Atlantic, September 29, 30 & October 1, 2020, Halifax, Nova Scotia -

· ADSE Abborsford 2020, August 6-7, 2020, Abbotsford, British Columbia

· Canadian Armed Forces Outlooks, Ottawa, Ontario, Spring 2021

· CANSEC 2020, Ottawa, Ontario, June 2-3, 2021

COVID-19 Suggested Reading Impacting the Global Defense Sector

· Impact of COVID-19 on Military Readiness, April 8, 2020

· COVID-19 Disruptions to Defense Supply Chain, April 7, 2020

· COVID-19’s Impact on Defense Companies, April 6, 2020

Commercial Service

· For additional information on this sector, please contact Commercial Specialist Luz Betancur at or by phone at (613) 688-5411.