OTTAWA — Making Canada’s new defence industrial strategy work will take massive investments in the government’s own capacity—to negotiate and manage contracts, support the right researchers and builders, and keep the strategy current as technology surges ahead, leaders in the sector say.

The strategy, released Tuesday, promises to add up to 125,000 new jobs to the 81,200 the federal government reckons are in the Canadian defence sector now, and to promote Canada’s sovereign capabilities and cutting-edge companies.

“We have relied too heavily on our geography and others to protect us. This has created vulnerabilities that we can no longer afford, and dependencies that we can no longer sustain,” said Prime Minister Mark Carney, announcing the strategy in Montreal.

The Defence Investment Agency will take a lead role in the plan. The agency, created last year and headed by ex-RBC executive Doug Guzman, will move out from under Public Services and Procurement Canada to better work with the whole of government.

Buying, buying, buying

The biggest menace to the plan is bureaucracy, said Samuel Witherspoon, CEO of intelligence-processing company Anvil.

“I think the risk is, fundamentally, can the bureaucracy keep up with the tempo that the prime minister has set out today?” Witherspoon told The Logic in an interview. The top levels of government can lay out a plan that appeals to companies like his, he said, but the “high-friction middle” is the part that needs to execute.

Witherspoon describes Anvil as “the Canadian Palantir” and said it already does extensive business with National Defence. He’s delighted by the plan: “I could not be happier with what they said today.”

Yet to get the domestic economic benefits the strategy talks about means signing multiple contracts a year worth $500 million or more and hundreds of smaller ones, said Eliot Pence, a former executive at U.S. defence contractor Anduril and CEO of Canadian startup Dominion Dynamics.

That’s “a tempo materially higher than Canada has historically sustained,” Pence said in a statement. Traditional processes, heavy on compliance measures, won’t work; success “will depend on disciplined, year-over-year execution.” It’s possible, but only with consistent backing from the prime minister, he said. 

Building mutual understanding between the government authorities with billions to spend and firms that want to earn that money will be difficult, said Alexander Salt, who studies defence innovation and procurement as a postdoctoral fellow with the Canadian Global Affairs Institute. The whole thing has to start big, not small.

“The folks are going to be managing this policy, managing the implementation, they have 10-plus years, likely, of government experience. That means they’re 10-plus years outside of the private sector,” said Salt. “I’m not saying that they won’t be able to do it, but I have concerns about knowledge gaps in government.”

Regular industry engagement

Potential suppliers need to know what the government wants to buy for the military well in advance, the strategy says. Private firms and the Forces need to be involved together in determining needs and how to meet them. The strategy promises “regular and structured touchpoints with key government partners.”

The strategy intends to address a long-standing “dialogue problem” between the military and its suppliers, Salt said. “Just a lack of awareness, a lack of market intelligence as to what’s happening, especially in the innovative space.”

Small companies, in particular, have trouble dealing with complex procurement demands and the need for security clearances in defence work, which the government promises to simplify and streamline for everyone.

Key sovereign capabilities

A defence industrial strategy in, say, the 1990s would have focused on shells and tanks and artillery, Salt said. As much as those still matter, the way wars are fought now makes other capabilities crucial.

The strategy lists types of work and production the government considers vital to protecting Canada’s sovereignty or meeting its commitments to allies. It’s a first take, the strategy says, and will evolve as technology and threats do. The initial list:

• Aerospace
• Ammunition
• Digital systems, such as secure cloud computing and AI
• In-service support for military vehicles and equipment
• Personnel protection
• Sensors
• Space
• Manufacturing for land vehicles and surface ships
• Training and simulators
• Remote-controlled and autonomous drones

Keeping that list current will be critical, said Salt. “We can’t stay cemented to this document for 10 years,” he said. “Six to eight months from now, the AI space [alone] is going to be very different.”

Build-Partner-Buy

Joly said months ago that Canada intended to make for itself what it can, work with other countries and their companies to improve Canada’s domestic capacity where that’s possible, and buy only what it can’t acquire any other way. The defence industrial strategy formalizes that hierarchy as government policy.

It also means moving away from buying from American suppliers, said Carney.

“There are many strengths to this partnership that we have with the United States, but it is a dependency, and it’s a dependency we want to change in a positive way by building up our defence capacities here and our other partnerships abroad.”

“Partner” agreements have to be with “trusted allies and multinational firms” and will focus on Europe, the United Kingdom and certain Indo-Pacific countries such as New Zealand, Japan and South Korea, the strategy says.

Even “buy” deals must include Canadian control of intellectual property, schematics and software updates, the strategy says, so Canada can operate and maintain what it buys—an unmistakable reference to American command of key elements of the F-35 fighter jets that Canada is weighing against competition from Sweden’s Gripens.

“‘Buy Canadian’ is not a slogan,” the document says. “It will be the guiding North Star of a new way of doing business in defence acquisitions.”

Picking winners at home

Late in 2025, the government chose Telesat and MDA to build a new satellite communications system for the military, possibly worth billions of dollars, without knowing what their product will look like.

Joly has talked about promoting Canadian champions like those by favouring them in procurement, and the government now says they’ll also get research and development funding, capital supports and more. Maybe unsurprisingly, this is the kind of thing MDA likes to hear—a promise to favour Canadian companies where Canadian capacity already exists.

“The [strategy] implements many of the key elements of industrial strategy we have been seeking for years,” said Mike Greenley, MDA’s chief executive.

The strategy promises a more systematic way of deciding which companies will get that sort of blessing, with a detailed framework to come no later than this summer.

ITB overhaul

The “industrial and technological benefits” policy, which requires companies that get defence contracts to spend equivalent amounts in Canada, is to get major revisions to prioritize longer-term investments and innovation.

The policy doesn’t require dollar-for-dollar spending in Canada—many expenditures and investments get their value multiplied when the government calculates their benefits. The strategy talks about changing the multipliers, though, so that spending that boosts Canada’s capacity in the sovereign priority areas gets more credit, and so does working with smaller firms. 

Defence contractors will also be allowed to bank spending with Canadian companies even before they win contracts, to encourage them to get the Canadian firms involved in the research and development stages of their proposals.

Exact details are to come “in early 2026.”

Those exact details will matter a great deal, said Dana O’Born, the chief strategy officer at the Council of Canadian Innovators. 

“They’re creating some tools for flexibility,” she said, such as creating a new category of “small mid-cap” companies for top-level contractors to invest in and work with; removing caps on some eligible transactions; and promising more refinements and clarity. That’s all good to hear, O’Born said, but she added: “There’s no specifics on how it’s going to be done.”

Besides these changes, Anvil’s Witherspoon said he’s pleased to see other funding mechanisms for startups talked up in the strategy, especially non-dilutive financing—the kind that doesn’t require selling ownership stakes. Investors are flooding into defence but their money can be dangerous, he said.

“Dual-use” companies, whose products have both military and civilian uses, have an easier time selling to civilians, and that revenue is very tempting when military sales are slow.

“The pressure is almost immediately to pivot that business back into the commercial side,” Witherspoon said. “The risk that it presents is lots of sort of malformed defence startups.”

Government funding for defence-first companies alleviates some of that pressure, he said.

Running from behind

The strategy is long overdue, said Salt. The U.S. defence sector is a behemoth and not a fair comparison for Canada, he said, but peer countries like Australia have been much better attuned to their needs and how to meet them than Canada has.

There is a lot to do and it needs to be done all at once, he said. Still, the government is promising a major acceleration and that’s good news, Salt said. “It’s hard to think of a major country in NATO that has been as behind as we are.”