Canada's 'Build-First' Defence Strategy Aims for Industrial Overhaul

OTTAWA, ON – February 17, 2026 – The Canadian government today unveiled a sweeping new Defence Industrial Strategy (DIS), a landmark policy shift designed to overhaul the nation's historically sluggish procurement system and place domestic manufacturing at the heart of its national security agenda. Titled "Security, Sovereignty and Prosperity," the strategy, announced by Prime Minister Mark Carney, signals a decisive move away from reliance on foreign suppliers and toward building a more self-sufficient and robust defence industrial base.

Backed by an $81.8 billion commitment in Budget 2025 for increased defence spending, with an additional $6.6 billion allocated specifically to the DIS, the plan aims to ensure Canadian industry plays a central role in modernizing the Canadian Armed Forces (CAF). The move is a direct response to a more volatile global landscape and the recognized risks of depending on fragile international supply chains.

A New Blueprint: The 'Build-Partner-Buy' Framework

At the core of the strategy is a new procurement hierarchy dubbed the 'Build-Partner-Buy' framework, which will now guide all future defence acquisitions. This model fundamentally alters the government's purchasing philosophy.

• BUILD: The government's first priority will be to build capabilities within Canada, especially in sectors where the country has existing strengths or a strategic need for sovereign control. These key areas include shipbuilding, aerospace, land systems, artificial intelligence, quantum computing, and advanced materials. This approach is intended to foster national champions and ensure Canada maintains control over its own equipment and intellectual property.
• PARTNER: When building entirely within Canada is not feasible, the government will seek to partner with trusted allies and multinational firms. These partnerships will be structured to secure commercial opportunities for Canadian companies, strengthen their roles in global supply chains, and support domestic capacity.
• BUY: As a final option, Canada will acquire equipment from foreign suppliers. However, these purchases will come with stringent conditions mandating significant reinvestment into the Canadian defence industry and guaranteeing Canadian sovereign control over the operation and long-term sustainment of the assets.

To drive this new agenda and cut through long-standing bureaucratic delays, the government is establishing a new Defence Investment Agency (DIA). Initially housed within Public Services and Procurement Canada, the DIA is slated to become a stand-alone Crown corporation by this spring. Its mandate is to streamline procurement, accelerate domestic production, and serve as a central hub for coordinating between government, the military, and industry.

Economic Overhaul and Industry Response

The economic ambitions of the Defence Industrial Strategy are immense. Over the next decade, the government projects it will generate an estimated $180 billion in direct investment in defence procurement and create 125,000 new jobs across the economy. The targets are bold: increase the share of defence contracts awarded to Canadian firms from 43% to 70%, boost defence-related R&D investment by 85%, and grow total Canadian defence industry revenues by more than 240% by 2035.

Industry associations have been quick to applaud the new direction. Canadian Manufacturers & Exporters (CME), which represents a vast portion of the country's manufacturing sector, hailed the announcement as a pivotal moment.

"The Defence Industrial Strategy is an important step in aligning Canada's manufacturing strengths with our national security and economic objectives," said Dennis Darby, President and CEO of CME, in a statement. "The government's new 'Build-Partner-Buy' framework sends a clear signal that Canada intends to prioritize domestic production where we have strength and reinforce sovereign capability at home."

Darby added that the strategy could "unlock a new wave of investment, innovation and job creation across the country." While the overall reception is positive, some analysts have expressed cautious optimism, calling the economic projections ambitious and noting that success will require a consistent, long-term demand signal from the government to spur private sector investment.

Empowering Small Business on the Defence Front Line

A significant focus of the new strategy is the integration of Small and Medium-sized Enterprises (SMEs), which form the backbone of Canada's industrial landscape. The government acknowledges that past policies have often created disproportionate administrative burdens for smaller firms, effectively locking them out of major defence contracts.

To reverse this trend, the DIS includes several key support mechanisms. A new $4 billion program within the Business Development Bank of Canada (BDC) will be established to provide venture capital and advisory services to help SMEs scale up new technologies and enter defence supply chains. Additionally, a $379.2 million Regional Defence Investment Initiative (RDII) will channel targeted funds through regional development agencies to help smaller firms grow and integrate.

Other practical measures include investing to accelerate security clearances for industry personnel—a common bottleneck for SMEs—and reforming the Industrial and Technological Benefits (ITB) policy to better leverage procurement spending for domestic economic growth. These initiatives are designed to create a more accessible and navigable ecosystem for the thousands of innovative smaller firms across the country.

A Quest for Sovereignty in a Volatile World

Beyond the economic benefits, the strategy is fundamentally a quest for greater national sovereignty. The policy is an admission that Canada's historical approach to defence procurement—often criticized as slow, overly complex, and too reliant on foreign partners—is no longer tenable. This old system has led to critical equipment shortages and poor serviceability rates for military hardware, with recent figures showing army vehicles at just 51% operational readiness.

The DIS aims to rectify this by ensuring the CAF has the equipment it needs, sustained by a reliable domestic industry. A concrete example of this push for self-reliance is the commitment to establish a Canadian production capability for nitrocellulose, a critical component in munitions, by 2029, thereby ending a key foreign dependency.

The shift to prioritize domestic production and partnerships with trusted allies reflects a broader geopolitical realignment. By strengthening its own industrial base, Canada aims to be a more capable and reliable partner on the world stage while securing its own interests, particularly in the increasingly strategic Arctic region.

Success will ultimately depend on disciplined execution and sustained collaboration between the new Defence Investment Agency, prime contractors, and the vast network of domestic suppliers. CME has affirmed its commitment to this new partnership, stating it will play an expanded role in helping manufacturers prepare for the opportunities ahead. For a nation long overdue for a strategic industrial vision, this strategy represents a clear and ambitious path forward.