By: Chad Eggerman, Janelle Anderson, and Taylor Moroz
This is the third article in a three-part series focused on competitive public procurement in Canada. In the first article we covered the key principles of public procurement law in Canada. The second article addressed Indigenous procurement in Canada. This third article focuses on public defence procurement and the Government of Canada’s recently released Defence Industrial Strategy.
Canada is placing increased emphasis on strengthening domestic defence industrial capacity and supply-chain resilience in response to changing geopolitics.
With the release of Canada’s new defence industrial framework entitled Security, Sovereignty and Prosperity: Canada’s Defence Industrial Strategy (the “Industrial Strategy”) the federal government has signaled that public defence procurement is no longer just about upgrading ship, aircraft, or submarine capability. It is about strengthening domestic industry, protecting supply chains, and aligning national security in Canada with economic development.
For companies in Western Canada, the Industrial Strategy should not be viewed as more abstract policy planks. This presents both opportunity and risk.
This article outlines what Prairie businesses need to understand about the Government of Canada’s Industrial Strategy to capitalize on the opportunities and avoid risk.
You Do Not Need to “Make Weapons” to Be in Defence
The modern defence supply chain is overwhelmingly dual-use.
The policy direction emerging from Ottawa emphasizes domestic capacity, resilience, and technological capability — not just final assembly. That means opportunities for:
- Advanced manufacturing and fabrication;
- Electronics enclosures and components;
- AI, cybersecurity, and data analytics;
- Cold-weather testing and environmental performance solutions;
- Logistics, warehousing, and repair services;
- Industrial construction and infrastructure development; and
- Mining and critical mineral processing.
Western Canada’s industrial base — particularly in energy services, mining, heavy fabrication, aerospace, ag-industrial manufacturing, and resource logistics — is structurally aligned with what modern domestic defence procurement increasingly requires: reliability, environmental resilience, technical capability, and supply chain depth. Across British Columbia, Alberta, Saskatchewan, and Manitoba, companies supporting heavy industry, industrial construction, advanced technology, critical minerals, transportation, and infrastructure are already functionally adjacent to the defence sector. The real question is not whether Western Canadian firms have relevant capabilities, it is whether they are contractually, structurally, and regulatorily prepared to participate.
Industrial and Technological Benefits (ITB) Create Real Deal Flow
When foreign prime contractors win major Canadian defence contracts, they are often subject to Industrial and Technological Benefits (“ITB”) obligations. These ITB obligations require investment in Canadian industry.
That is where Western Canadian firms can enter.
But participation rarely happens automatically.
It requires:
- Capability statements tailored to defence prime contractors;
- Teaming or joint venture agreements and subcontracting structures;
- Clearly defined and audit-ready scopes of work;
- Proper documentation of Canadian value contribution; and
- Alignment with the government’s priority industrial capabilities.
In practical terms, the implementation of the Industrial Strategy means we are likely to see more:
- Joint ventures structured to satisfy Canadian content requirements;
- Subcontracts designed to generate bankable ITB credit;
- Early-stage R&D collaboration agreements; and
- Strategic partnership MOUs that later become formal supply contracts.
These arrangements are not boilerplate commercial contracts. They contain layered compliance, reporting, and audit requirements that, if mishandled, can unwind value or expose SMEs to disproportionate liability.
For Prairie companies unfamiliar with federal defence procurement, the legal framework they must work within matters as much as the technical capability.
Security and Controlled Goods Are Gating Issues
Many Prairie firms will encounter the Controlled Goods Program administered under the Defence Production Act (Canada) for the first time when exploring recently introduced defence opportunities in Canada.
If your business handles regulated components, technical data, or sensitive equipment, registration may be mandatory. That triggers:
- Security plans;
- Personnel screening;
- Compliance audits;
- Physical facility controls; and
- Data governance protocols.
In addition, defence supply chains increasingly require secure facility accreditation and personnel security clearances.
A subcontract can be lost simply because the supplier is not clearance-ready.
From a business development perspective, security compliance is not a back-office issue. It is a market access issue.
Companies that move early to align with compliance expectations will be better positioned when primes begin local supplier searches.
Critical Minerals and Saskatchewan’s Strategic Position
The Industrial Strategy increasingly links national security with secure access to critical minerals and resilient domestic supply chains.
Saskatchewan’s mining ecosystem — including uranium, potash, and emerging mineral sectors — intersects directly with these policy priorities.
This creates downstream implications:
- Long-term offtake agreements;
- Traceability and ESG covenants;
- Indigenous partnership structures;
- Infrastructure development agreements; and
- Export compliance frameworks.
Even companies that never sign a contract with the Department of National Defence (“DND”) may find that their commercial contracts evolve because upstream or downstream partners are participating in defence supply chains.
Contractual sophistication becomes necessary across the value chain in defence public procurement in Canada.
Risk Allocation in Defence Contracts Is Not Typical Commercial Risk
One of the most common misunderstandings is this: companies assume defence subcontracts resemble ordinary industrial supply contracts. They do not.
Common clauses that require careful review include:
- Flow-down obligations: Prime contractors frequently flow down federal requirements, sometimes without proportional risk adjustment.
- Unlimited or broad indemnities: Some defence contracts attempt to shift significant risk downstream.
- IP ownership and improvement rights: Who owns improvements developed during performance? Can the prime contractor use them globally? Can you?
- Audit rights: Defence-related contracts may permit intrusive financial and operational audits.
- Termination for convenience: The federal government commonly retains termination rights that must cascade down through prime contracts.
For Prairie SMEs, the mistake is signing a “standard subcontract” without appreciating that it contains federal-level compliance obligations embedded within it.
The correct approach is not fear but disciplined review and negotiation.
Indigenous and Regional Partnership Expectations Are Increasing
Federal defence policy increasingly signals expectations of domestic and Indigenous economic participation.
For Saskatchewan-based projects — especially those involving infrastructure, resource inputs, or northern development — Indigenous partnerships may be commercially advantageous or practically necessary.
That requires:
- Equity participation structuring;
- Governance agreements;
- Benefit-sharing arrangements; and
- Consultation alignment.
These structures must be legally durable and commercially workable. Tokenism is not bankable. Properly structured partnerships are.
A Practical Defence-Readiness Checklist for Saskatchewan Firms
If your company is exploring defence-related opportunities, consider whether you have:
- A defence-specific capability statement;
- Contract templates designed for federal flow-down environments;
- Controlled goods registration analysis completed;
- Security clearance assessment underway;
- IP ownership and licensing strategy defined;
- A compliance protocol for audit and reporting;
- An Indigenous participation strategy (where relevant); and
- A dispute resolution framework appropriate for federal-linked contracts.
If you cannot confidently answer yes to most of the above, you are not yet defence-ready.
That does not mean you should stay out of the sector: it means preparation is required.
Why This Matters Now
Federal defence procurement is accelerating. Geopolitical volatility, Arctic security priorities, and NATO commitments are driving increased investment.
The Prairie region is being positioned as part of Canada’s industrial response.
Prairie companies that move early — before formal RFP participation — will have the advantage when prime contractors begin structured supplier engagement.
Those who wait until they are presented with a 90-page subcontract to “review quickly” will be negotiating from a weaker position.
Conclusion
The Prairie region’s industrial base is stronger than many assume.
The new federal defence framework does not just create opportunity for aerospace giants in Ontario or shipbuilders on the coasts. It opens structured pathways for Prairie manufacturers, resource suppliers, logistics operators, and technology firms.
But entry into defence supply chains requires early preparation and discipline.
Companies that treat defence work as “just another customer” may find themselves exposed.
Companies that treat it as a strategic shift — with proper legal and compliance infrastructure — can build durable, long-term revenue streams.
If your company is exploring defence-related opportunities, now is the time to ensure your contracts, compliance systems, and partnership structures are aligned.
Because in defence procurement, readiness is not just operational. It’s legal.
How Procido LLP can Assist Prairie Companies Entering Defence Supply Chains
Our work in this space focuses on four pillars:
- Contract Structuring: Structuring teaming agreements, joint ventures, subcontracts, and supply contracts aligned with federal compliance environments.
- Risk Containment: Negotiating indemnities, liability caps, IP provisions, and termination rights consistent with SME risk tolerance.
- Regulatory Alignment: Controlled goods, security compliance coordination, and policy interface.
- Strategic Structuring: Indigenous partnership frameworks, regional investment alignment, and long-term supply positioning.
If you are considering getting involved in defence work, preparing a response to a public competitive defence procurement process, assessing concerns about a recent defence award, or looking to strengthen your internal defence procurement strategy, we invite you to connect directly with our team. Chad Eggerman, Founding Partner of Procido LLP can be reached at chad.eggerman@procido.com or +1 306 380 7664. Janelle Anderson, Senior Associate at Procido LLP can be reached at Janelle.anderson@procido.com or +1 306 380 9316. Taylor Moroz, Associate at Procido LLP can be reached at taylor.moroz@procido.com or +1 306 380 5946.