From Dominion’s pre-budget submission to the Government of Canada
The trade dispute with the United States will leave marks on Canada’s economy that will outlast any government. It’s created a sense of urgency to strengthen Canada’s ability to act independently and in its own interest. That requires Canada to move swiftly and deliberately towards industries of the future. Defence is the one sector where the spending commitment has already been made and the strategy has already been published. What now remains is execution.
Accelerating defence spending is one of the most effective responses available to Canada in this moment. Done right, it creates quality jobs for skilled workers in exactly the regions and trades most under pressure from tariffs. It reinforces our security and commitments to allies. It gives Canada greater economic resilience, industrial capacity and negotiating strength at precisely the moment all three are most needed. When we invest in ourselves, we gain leverage.
Earlier this year, Canada introduced its Build–Partner–Buy Framework under the Defence Industrial Strategy. Significant progress has been made on partner and buy, which enabled speed of action within the existing defence procurement system. Now, Canada needs a new approach. Build–Partner–Buy should operate as a genuine hierarchy, not merely as an ordering of the options. The Defence Industrial Strategy should be accelerated with a renewed focus on the first pillar: build.
Build is a longer-term approach. The pipeline to results will be slower. The support needed more robust. The political reward not as immediate. But the outcome will be what the strategy promised and what Canadians voted for: to award 70 per cent of federal defence acquisitions to Canadian companies within a decade.
Canada must reject the status quo. If procurement rules, thresholds, approval authorities, evaluation criteria, and the operating culture of government institutions remain largely unchanged, new money will move through old pathways. The strategy will reinforce the procurement patterns we already have rather than build the next generation of Canadian defence industrial capacity.
The Defence Industrial Strategy and the Defence Investment Agency have given Canada a strong foundation. As time passes, industry is looking for concrete shifts in how the machinery of government operates, aligning with the level of stated ambition. Despite an increased budget, the constraint on Canadian defence capability is now the speed at which decisions get made and capability reaches operators.
A procurement system built for multi-national primes measures its cycles in years. Autonomous systems move in months. A capability specified today and delivered in seven years is a capability delivered to a threat scenario that no longer exists.
Change at the working level — easy to ignore but critical for delivery — is the signal now most needed. Budget 2026 offers an opportunity to ensure that procurement frameworks, enabling legislation, fiscal tools and oversight are coordinated effectively to deliver timely capability for the Canadian Armed Forces, value for taxpayers and durable growth in Canada's domestic defence sector.
The DIA has to be accessible to the firms Canada says it wants to scale. With its current contract threshold size of $100 million, it is not. A high contract threshold has a predictable effect. It excludes small and medium-sized Canadian-controlled firms from acting as prime contractors, including in the categories where they are best positioned to deliver. The DIA's mandate today is contracts above $100 million, plus administering Industrial Technological Benefits — another program that keeps Canadian companies permanently secondary to a foreign prime. These are not policy choices that will grow domestic champions. Budget 2026 is an opportunity to refine that mandate: three DIA acquisition lanes rather than one. Major platforms and complex procurements above $100 million need the rigour they get today. Spiral upgrades, capability scale-up and continuous sustainment between $25 million and $100 million need something faster. Rapid commercial exploitation below $25 million needs to move at commercial speed, with paid trials, limited production and a defined pathway to larger follow-on contracts where firms meet agreed performance thresholds.
Those pathways only help firms that can survive long enough to reach them. Milestone-based contracts, repayable financing and strategic capital all have a role. For emerging Canadian-controlled firms, non-dilutive mechanisms — grants and direct contracts — should come first.
At the same time, the mandate should make procurement as a service the default. Traditional procurement assumes that requirements can be fully specified at the outset and that the capability is bought once as a capital asset, then maintained. Neither assumption holds for software, autonomy, sensing, data, AI and other fast-moving technologies. These capabilities are typically built and delivered the way commercial software is delivered: as a service that is licensed, updated and supported continuously. Similarly, governance changes are needed to support continuous capability sustainment for legacy projects so they can also catch up to this approach. The agency can be equipped for modern procurement from the day it stands up. The alternative is an agency that starts life with an outdated model.
Budget 2026 should also clearly define what counts as a Canadian supplier. Canadian-controlled firms and foreign-controlled subsidiaries are treated equally today. That is hard to square with the commitment to end the era of Canada's military sending 70 cents of every dollar abroad. Canadian ownership has to mean control in fact. The federal government already applies control-in-fact tests in other corporate contexts, and defence procurement should apply an equally substantive one where sovereignty is at issue. The Defence Industrial Strategy is right to emphasize sovereign control, Canadian intellectual property and supply-chain resilience. General policy language isn’t enough. Those principles belong in evaluation criteria, scored and weighted.
Canada must raise its risk tolerance if it wants to accelerate the development of Canadian defence capabilities. It can do so by structuring risk so it can be taken in small, recoverable increments. Before committing $500 million over several years, the system should be able to issue funding for a $5-million pilot project within weeks.
That includes pushing procurement authority for lower-value, time-sensitive or experimental procurement down to qualified project teams, technical authorities and operational users, and funding operational test environments, including Canadian Armed Forces ranges, secure digital testbeds and Arctic operating environments, so firms can validate technology with the people who will use it before a full procurement is on the table.
Canada has the policy foundation for a stronger defence industrial base. Budget 2026 decides whether new defence spending produces deployable capability built by firms Canada controls, and whether Canada can set the course for an industrial pivot. The Defence Investment Agency should be structured, mandated and measured accordingly.