Canada’s new defence investment strategy: Key legal context for defence contractors

On June 9, 2025, Canada’s Prime Minister announced the government’s plan to increase and accelerate Canada’s investments in defence.  In addition to announcing Canada’s intention to meet defence spending targets of 2% of GDP by the end of this fiscal year (2025-26), the Prime Minister also announced the creation of a new defence procurement agency, investments in Armed Forces personnel and equipment, enhancements to military capabilities, strengthening the Canadian defence industry and diversifying its partnerships. Much of the announcement focussed on Canada expanding its existing domestic defence capabilities to reduce reliance on foreign suppliers.

The legal context for this announcement is discussed below.

Government has more discretion over national defence and security procurement than other types of government procurement

DND and PSPC currently have joint responsibility for defence procurement

Under the existing defence procurement regime, DND and the department of Public Works and Government Services, styled Public Services and Procurement Canada (PSPC) have joint responsibility for defence procurement.  The Defence Production Act provides that the Minister of Public Works and Government Services has exclusive authority to purchase  defence supplies and construct defence projects required by DND, except for defence projects to be constructed by persons in the employ of the government and for the purchase of defence supplies or defence projects “as the Minister of National Defence or any other Minister designated by the Governor in Council may procure or construct at the request of the Minister”. 

In some cases, defence-related programs such as the National Shipbuilding Strategy (NSS) or Canada’s defence offsets program (the Industrial and Technological Benefits Program) also includes procurement by the Canadian Coast Guard. The Coast Guard is currently an agency within the Department of Fisheries and Oceans (DFO). 

The Prime Minister announced on Monday that a new defence procurement agency would be created, under Secretary of State for Defence Procurement Stephen Fuhr. 

The creation of a new defence procurement agency does not come as a surprise, with recommendations for a unified defence procurement authority having been made – but never implemented – over many years. It is still unclear how the new agency will operate and whether it will resolve some of the tensions in the current system between DND’s operational requirements and PSPC’s procurement goals, with the resulting purchasing processes failing to optimize results for either department. 

Canada also plans to expand the reach, security mandate, and abilities of the Canadian Coast Guard and integrating it into Canada’s NATO defence capabilities, possibly reflecting an intention to transfer responsibility for the Coast Guard from DFO to DND, though this was not immediately apparent from official announcements.

Legislation for the creation of the new agency has not yet been tabled but can be expected in the coming weeks. Instruments likely to be amended include the Defence Production Act, Financial Administration Act, and the Department of Public Works and Government Services Act.