Government of Ontario Restricts United States Businesses from Participation in Public Sector Procurements

The Government of Ontario has issued the Procurement Restriction Policy (the “Policy”) which aims to restrict U.S. businesses from accessing public sector procurements in Ontario, including public procurements administered by the IESO and OPG.

The Procurement Restriction Policy

Effective as of March 4, 2025, the Government of Ontario has issued the Policy in response to the U.S. Government’s decision to impose tariffs on Canadian goods and services. The Policy restricts public sector buyers from procuring goods and services from U.S. businesses under public sector procurements. If the U.S. tariffs are lifted, the Policy may be revised or rescinded.

Application

The Policy applies to all public sector entities, encompassing government entities and designated broader public sector organizations. Entities subject to the Policy include:

• all ministries and provincial agencies (including those under the OPS Procurement Directive);
• Ontario Power Generation (“OPG”);
• the Independent Electricity System Operator (“IESO”); and
• organizations subject to Ontario’s Broader Public Sector Procurement Directive.

Scope

The Policy applies to:

• all new procurements of goods and services (consulting and non-consulting) at any value posted from the day the Policy comes into effect; and
• any procurement method – invitational, open competitive, or non-competitive.

The Policy does not apply:

• to any procurement already in progress at the time that the Policy came into effect, meaning that it has been posted (i.e. on an electronic tendering system) or has been issued to vendors to submit a response;
• when public sector entities use an existing Vendor of Record arrangement or other available arrangements;
• to the exercise of options to extend a contract term under an agreement (provided that the Policy would apply to contract term extensions beyond the original agreement); and
• to unforeseen situations of urgency.

Exceptions

Procuring from a U.S. business under a public procurement will be allowed if all of the following conditions are met:

1. the U.S. business is the only viable source for the good/service;
2. the procurement cannot be delayed (i.e. due to risks to public health and safety); and
3. the relevant approvals set out in the Policy are obtained.

U.S. Business Definition

A “U.S. business” means a supplier, manufacturer, or distributor that:

1. has its headquarters or main office located in the U.S., and
2. has fewer than 250 full-time employees in Canada at the time of the applicable procurement process.

If a bidder or vendor is a subsidiary of another corporation, part 1 of the definition above is met if that bidder or vendor is controlled by a corporation that has its headquarters or main office located in the U.S.

Conclusion

The Policy represents a significant shift in Ontario's approach to public sector procurement in response to the imposition of tariffs by the U.S. Government. Proponents who qualify as U.S. businesses should be aware of these restrictions when considering new projects under provincial procurements in Ontario, including energy projects. We expect that the Policy may be subject to further change and adjustment as the tariff situation evolves in North America.

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