Introduction

On December 11, 2025, the Government of Ontario passed Bill 72, the Buy Ontario Act (Public Sector Procurement – the “Act“).[1] The Act represents a shift in public sector procurement policy, empowering the Management Board of Cabinet[2] to issue binding directives that prioritize Ontario-made goods and services in public contracts.

What is the Buy Ontario Act and why was it introduced?

The Act applies broadly and impacts construction materials, professional services, and infrastructure projects, positioning Ontario’s $220 billion infrastructure plan as a vehicle for regional economic development. For construction and infrastructure stakeholders, the Act introduces opportunities for Ontario-based businesses, as well as new compliance obligations that will fundamentally reshape procurement practices across the province.

The Act repeals the Building Ontario Businesses Initiative Act, 2022, with a more comprehensive framework that includes application to municipalities, enhanced enforcement mechanisms, and penalties for non-compliance.

There has been significant legislative activity for the construction/infrastructure industry recently, including Bill 60 receiving Royal Assent on November 27th, and the significant amendments to the Construction Act coming into force on January 1, 2026 (i.e. mandatory release of annual holdback). Given the evolving landscape, it is imperative that industry stakeholders remain apprised of all updates and the corresponding impact on the construction/infrastructure industry.

Key provisions of the Act

Binding directives and local preference

Section 3 of the Act grants the Management Board of Cabinet broad authority to issue directives establishing procurement policies, procedures, and standards. The directives may:

  • require preference for Ontario/Canadian goods or services, including construction materials and engineering services;
  • impose restrictions limiting contract eligibility to Ontario businesses and vendor performance standards; and
  • impose mandatory reporting and compliance mechanisms, such as audits and corrective action provisions.

The Act does not prescribe specific definitions of “Ontario business” or “Canadian business,” nor does it establish concrete preference mechanisms or application thresholds. These details will be determined through forthcoming directives issued by the Management Board of Cabinet. However, stakeholders can expect that the directives will build upon the framework established under the Building Ontario Businesses Initiative Act, 2022 and align with the existing Procurement Restriction Policy[3], potentially incorporating similar or more stringent requirements.

Broad application across public entities

“Public sector entity” is defined under the Act to include government ministries, agencies, designated broader public sector organizations, and any additional organizations prescribed by regulation.

This comprehensiveness spans:

  • provincial infrastructure bodies (e.g., Infrastructure Ontario);
  • hospitals, school boards, and universities; and
  • municipal procurement for roads, bridges, transit, and social infrastructure.

The ripple effect makes the Act a systemic shift affecting nearly every stage and actor in the infrastructure value chain.

Contractual enforcement power

Under section 4 of the Act, contractual clauses can bind third-party supply chain managers to comply with directives. This ensures continuity of compliance even when project management is outsourced, placing increased due-diligence obligations on prime contractors.

Withholding of Crown funding and compliance reviews

Section 6 and Section 7 of the Act permit:

  • withholding of Crown funding from entities that fail to comply; and
  • ministerial-led compliance reviews with public reporting and enforcement directives.

The risk of delayed payments or funding cuts elevates the urgency for project owners and contractors to track compliance continuously.

Implications across the industry

What compliance obligations will contractors and subcontractors face?

For local contractors and subcontractors, the Act creates both competitive advantages and administrative challenges. Ontario-based contractors with established local supply chains will be better positioned to bid competitively on public projects, potentially gaining preference over non-Ontario competitors.

However, compliance will require contractors to:

  • implement systems for tracking and documenting the origin of materials and services throughout the supply chain;
  • build compliance requirements into subcontracts and purchase orders, including representations and warranties regarding supplier qualifications;
  • maintain records demonstrating compliance with applicable directives, which may be subject to ministerial audit;
  • adjust bidding strategies to account for potential cost differentials between Ontario-sourced materials and alternatives; and
  • develop contingency plans for situations where Ontario or Canadian suppliers cannot meet project requirements within reasonable cost and timeframe parameters.

Non-compliance carries significant risks, including potential penalties, exclusion from future procurement opportunities, and in some cases, funding delays that could cascade down to prime contractors through payment mechanisms tied to project owner funding.

What does this mean for Ontario-based manufacturers and suppliers?

The Act may create substantial growth opportunities for Ontario-based suppliers and manufacturers, particularly those producing construction materials, equipment, and components. As public sector entities shift procurement toward local suppliers, Ontario construction producers and supply trades may experience increased demand.

However, this increased demand creates corresponding challenges:

  • suppliers may need to rapidly scale production capacity to meet heightened demand from public sector projects;
  • quality standards and delivery timelines must be maintained despite increased volume;
  • smaller suppliers may face barriers to entry if they lack the capacity or certification requirements to participate in large infrastructure projects; and
  • non-Ontario suppliers may find it increasingly difficult to access Ontario’s public sector market, potentially requiring them to establish Ontario operations or partnerships to remain competitive.

How should industry stakeholders prepare now?

The Act represents a shift in Ontario’s approach to public sector procurement, with particular significance for construction and infrastructure stakeholders. While the Act creates a framework for local preference, the specific requirements will be established through forthcoming directives that stakeholders should monitor closely.

Success in this evolving procurement landscape will require:

  • proactive review and updating of procurement and compliance systems;
  • strategic partnerships with Ontario-based suppliers to strengthen local supply chain connections;
  • careful attention to trade agreement thresholds and covered entity requirements;
  • documentation systems that can demonstrate compliance while supporting decisions to procure from non-Ontario or non-Canadian sources where necessary; and
  • ongoing monitoring of directive development and regulatory amendments.

Construction and infrastructure stakeholders who adapt quickly to these new requirements will be better positioned to capitalize on opportunities while managing compliance risks. Those unable to demonstrate compliance may face exclusion from Ontario’s public sector market.

For tailored advice on how the Act may impact your procurement strategies, contractual relationships, and compliance obligations, please contact our Construction and Infrastructure team. In the meantime, our team will continue to monitor forthcoming directives and vendor list requirements.[4]

The authors would like to thank Brandon Bova for his contributions to this article.

[1] Other Provinces and Territories across Canada have tabled similar legislation aimed at promoting local procurement efforts. For example, the Province of Manitoba tabled the Bill 42, the Buy Canadian Act.

[2] Further particulars with respect to the duties of the Management Board of Cabinet are contained in the Management Board of Cabinet Act, R.S.O. 1990, c. M.1

[3] The Procurement Restriction Policy applies to all public sector entities including the designated Broader Public Sector organizations, and is designed to restrict U.S. businesses from accessing public sector procurements in Ontario.

[4] Please note that this article does not provide commentary on issues with respect to trade law conflict, free trade agreements and any associated risks which may arise from the introduction of the Act.