Industrial And Technological Benefits Policy: What Defence Suppliers Should Be Watching

This article appears in our 2026 Defence Outlook guide, which explores the key trends shaping Canada’s aerospace and defence sectors. Read the full outlook and download our guide here.

Amid heightened geopolitical uncertainty, Canada is renewing its focus on defence, boosting NATO commitments, accelerating spending, and modernizing infrastructure and industrial capacity. For defence suppliers, this expansion brings increased opportunity, but also a heightened emphasis on compliance with the Industrial and Technological Benefits (“ITB”) Policy.¹

In this article, we examine how the ITB Policy is currently applied, how it is shaping bid strategy and contract execution today, and what suppliers should be watching as the policy continues to evolve in 2026.

What is the ITB Policy?

Canada’s ITB Policy is an economic-benefits framework applied to major defence and Canadian Coast Guard procurements. At its core, it contractually requires companies awarded certain defence and security contracts to undertake business activity in Canada equal to the value of the contract awarded.

The objective of the policy is to deliver jobs, innovation, and long-term economic growth in Canada.

When and how the ITB Policy applies

The ITB Policy applies automatically to defence and Coast Guard procurements valued at over $100 million that are not subject to trade agreements or where a national security exception is invoked.²

Procurements valued between $20 million³ and $100 million may also be reviewed for possible application of the policy.⁴

In practice, this captures many of the government’s significant procurements, often tying ITB obligations to contracts that extend over decades.

ITB within bid evaluation

ITB commitments are assessed through the bidder’s Value Proposition, which is a weighted and rated component of bid evaluation, scored alongside technical and financial criteria.⁵

The Value Proposition sets out how a bidder proposes to deliver economic benefits in Canada, typically across the following five pillars⁶:

1. Long-term growth and sustainability of Canada’s defence industry
2. Development of Canadian suppliers
3. Research & Development (“R&D”) performed in Canada
4. Exports and international competitiveness of Canadian firms
5. Skills development and training

The weighting assigned to the Value Proposition is determined on a procurement-by-procurement basis and will generally represent at least 10% of the overall bid score.⁷

As a result, the strength of a bidder’s commitments to Canada’s economic development can play a meaningful role in award decisions. In cases where bidders are closely aligned on price and technical merit, a stronger Value Proposition may act as a key differentiator, and, in some circumstances, may allow a bidder offering a higher price but stronger benefits for Canada to be selected.

Credit multipliers and banking

Credit multipliers are a key feature of the ITB framework, designed to amplify the impact of qualifying investments. They allow contractors to claim ITB credits worth more than the actual cash or in-kind contribution, making each dollar go further. Multipliers are most commonly applied to activities that are considered of high-value and the amount of the multiplier varies depending on the nature of the investment and typically ranges from five to nine times its value.⁸

For instance, a $1 million cash investment in an eligible R&D project with a 9x multiplier can generate $9 million in ITB credits toward a contractor’s obligation. Other typical examples, based on the ITB Model Terms and Conditions, include⁹:

• In-kind contribution of a licences for intellectual property other than trademarks (9x)
• Cash to purchase, or in-kind transfer of, equipment (7x)
• In-kind transfer of knowledge or marketing/sales support through the lending of an employee (4x)
• In-kind contribution of a licence for brands or trademarks (4x)

These incentives are further enhanced through banking,¹⁰ which is designed to address the practical reality that government procurement cycles and business investment timelines do not always align. Banking allows companies to earn and retain ITB credits outside the timing of a specific contract, encouraging early investment in Canadian industry and supporting the continuation of successful business relationships beyond existing contractual obligations. ITB credits may be banked either in advance of an upcoming procurement or as overachievement on a completed ITB obligation.¹¹

Eligible participants, including potential contractors and tier-1 subcontractors, may open ITB bank accounts with the public authority prior to a procurement and apply to bank specific qualifying activities, which are then available to be applied toward future ITB obligations. Banked activities may generally be retained for up to 10 years, providing companies with flexibility to align long-term investment strategies with future procurement opportunities.¹² Used strategically, multipliers and banking can support early supplier engagement, reduce compliance risk, and strengthen bid competitiveness.

Upcoming updates to Canada’s ITB Policy

In Canada’s Defence Industrial Strategy,¹³ released on February 17, 2026, the government confirmed that the ITB Policy will remain a core lever to ensure that defence procurements deliver tangible benefits to Canada’s defence industrial base, particularly where major contracts are awarded to a foreign prime contractor. The strategy also signals a clear intent to modernize the ITB framework to maximize value for Canada’s industrial capacity.¹⁴

The modernization is framed as a shift from a largely compliance-driven model toward a more outcomes-oriented approach. Innovation, Science and Economic Development Canada (ISED) is expected to publish updated ITB terms in early 2026, and the strategy identifies five reform areas:

1. alignment with key sovereign capabilities,
2. strengthening Canadian innovation and industrial capacity,
3. supporting exports and deeper integration into allied supply chains,
4. rewarding skills development, and
5. simplifying administration.¹⁵

The annex, “ITB Policy – Key Proposed Changes,” already points to concrete tools, including a new Strategic Investment Transaction to credit investments that expand sovereign capabilities, improved multipliers for high-impact contributions, and enhanced incentives to drive direct work with Canadian firms, particularly SMBs.¹⁶ We expect the updated ITB terms to directly affect bid strategy and contract execution under the ITB program.

Gowling WLG will continue to monitor developments related to the ITB Policy and its application as Canada’s defence procurement framework continues to evolve.

Footnotes

1. Government of Canada, “Industrial and Technological Benefits (ITB) Policy,” (July 5, 2025).

2. Ibid.

3. Canada’s Defence Industrial Strategy (released February 17, 2026) signals the government’s intent to raise the ITB Policy’s minimum discretionary threshold from $20 million to $25 million. Until revised ITB terms are formally issued, the existing $20 million threshold continues to apply.

4. Government of Canada, “Industrial and Technological Benefits (ITB) Policy,” (July 5, 2025).

5. Government of Canada, “Industrial and Technological Benefits Policy: Value Proposition Guide” (May 2022) at p.3.

6. Ibid. at p. 6.

7. Ibid. at Annex A3.

8. Government of Canada, Industrial and Technological Benefits: Model Terms and Conditions (September 2025), at s. 7.

9. Supra note 9, ss. 7.9.4.2.

10. Ibid, s. 12.

11. Government of Canada, “Introduction to banking” (August 12, 2020).

12. Ibid.

13. Government of Canada, Canada’s Defence Industrial Strategy (February 2026). ADD REFERENCE TO CYRUS’ PIECE HERE.

14. Ibid. at p. 20.

15. Ibid., at p.22.

16. Ibid., at p. 55.

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