12 min read
Scott Dewis
:
Updated on June 16, 2026
If you own a Canadian small or mid-sized business and you make something useful — software, sensors, components, vessels, vehicles, textiles, infrastructure technology, training systems, AI tools, maintenance services, advanced materials, or anything else that could plausibly support defence — you have probably heard someone mention “ITBs,” “IRBs,” “offsets,” “Value Propositions,” or now “Sovereign Capabilities.”
You may have heard it at CANSEC, DEFSEC, Best Defence, an industry day, a prime contractor booth, or from a government economic development person. The pitch usually sounds exciting: international defence primes win big Canadian contracts, and then they need to spend money in Canada.
That is true.
But it is not the whole story.
ITBs are not a pot of gold waiting for Canadian companies to claim. They are a contractual obligation that major defence contractors owe to Canada. The opportunity for your business is real, but only if you understand how the system works, what the prime contractor actually needs, and how your company fits into Canada’s defence industrial priorities. Canada's Defence Industrial Strtagy
And in 2026, that last part matters more than ever.
Canada has moved from a broad “spend in Canada” approach toward a much more strategic defence industrial policy. The new Defence Industrial Strategy, the Defence Investment Agency, the Build–Partner–Buy framework, and the updated ITB Policy are all pointing in the same direction: build Canadian sovereign capability, strengthen Canadian supply chains, grow Canadian-controlled firms, protect Canadian IP, and make it easier for serious Canadian SMBs to scale into defence.
For Canadian SMBs, this is the opportunity. But it is not automatic.
Industrial and Technological Benefits, or ITBs, are contractual requirements attached to major defence and Canadian Coast Guard procurements. In simple terms, companies that win eligible defence contracts in Canada must undertake business activity in Canada equal to the value of the contracts they win. The policy applies to eligible defence and Coast Guard procurements over $100 million, while procurements between $25 million and $100 million are reviewed for possible application.
The older version of this system was called Industrial and Regional Benefits, or IRBs. Some older contracts still operate under IRB terms, which is why you may hear both terms used. Today, most people in the defence market refer to the modern system as ITBs.
The purpose is straightforward: if Canada spends billions buying defence equipment or services, the Canadian economy should benefit. That benefit can come through direct work on the program, Canadian suppliers, R&D, export growth, skills development, technology transfer, manufacturing capacity, or other approved business activity in Canada.
The ITB Policy also includes the Value Proposition, or VP. This is the economic proposal that major contractors submit as part of a bid. It is scored alongside technical and cost requirements, which means the Canadian industrial plan can influence who wins a major defence contract.
That is why this matters.
You are not just selling to a prime contractor. You may be helping that prime contractor win, comply, reduce risk, build Canadian supply chain capacity, and satisfy a contractual obligation to Canada.
From a Canadian SMB’s perspective, ITBs can make you more valuable to international defence primes.
If a prime contractor has a Canadian obligation, and your company provides a useful product, service, or technology in Canada, you may help them solve two problems at once: a business problem and an ITB problem.
But this is where many companies get it wrong.
Simply being Canadian is not enough.
No one at Boeing, Lockheed Martin, Saab, Airbus, Rheinmetall, General Dynamics, Thales, Babcock, Irving, Seaspan, Hanwha, TKMS, or any other prime is sitting around thinking, “I hope a random Canadian company emails me today so I can give them money.”
They have programs to deliver. They have supply-chain risk. They have cost pressure. They have certification requirements. They have Canadian Content Value targets. They have ITB obligations. They have internal approvals. And they have no time for vague pitches.
So your job is not to say, “We are Canadian, and you have ITB obligations.”
Your job is to say:
“We solve a real problem you already care about, in Canada, in a way that aligns with your program, your supply chain, your ITB obligations, and Canada’s defence industrial priorities.”
That is a very different conversation.
The biggest change is that ITBs are no longer just about economic activity in Canada. They are now being aimed more deliberately at Canadian defence industrial capacity.
Canada’s Defence Industrial Strategy says the country needs a stronger domestic defence industrial base, supported by a new Defence Investment Agency and a Build–Partner–Buy framework. The government’s stated direction is to build in Canada first where Canada has key sovereign capability or existing strength, partner with allies where needed, and buy from abroad only under conditions that still strengthen Canadian industry and sovereign control.
The scale is enormous. By 2035, the strategy points to an estimated $180 billion in defence procurement, $290 billion in defence-related infrastructure, and $125 billion in downstream economic activity in Canada.
The strategy also sets a target to increase the share of defence acquisitions awarded to Canadian firms to 70 percent, grow defence revenues for Canadian SMBs by more than $5.1 billion annually, increase defence exports by 50 percent, and create 125,000 new jobs.
That is not a small policy tweak.
That is Canada telling industry where the puck is going.
The new Build–Partner–Buy framework is simple in concept.
Build: If Canada has the capability, or can reasonably develop it, the government wants to build in Canada.
Partner: If Canada cannot build it alone, the government wants to partner with trusted allies in ways that bring work, technology, IP, exports, and supply-chain opportunity back to Canada.
Buy: If Canada must buy from abroad, the government still wants strong domestic reinvestment and Canadian sovereign control over operation, sustainment, and long-term capability.
For Canadian SMBs, this means you should stop positioning yourself as a small vendor looking for a break.
Position yourself as part of Canada’s defence industrial base.
The question is no longer just, “Can we sell something to a prime?”
The better question is, “Can we help Canada build, sustain, protect, or control a capability that matters?”
Canada has identified 10 initial Sovereign Capabilities that will guide build-in-Canada priorities and ITB alignment. These are the areas where Canada wants more domestic strength, more supply-chain control, more Canadian IP, and more industrial capacity.
The 10 areas are:
This list matters because it gives Canadian SMBs a clearer way to explain their relevance.
You may not think you are a “defence company.” But you may already sit inside one of these categories.
A machine shop may be specialized manufacturing.
A drone mapping company may be uncrewed systems, sensors, ISR, or digital systems.
A software company may be AI, secure cloud, C4ISR, decision support, simulation, or cyber-adjacent.
A training company may be training and simulation.
A marine service company may be in-service support or specialized manufacturing.
A textile company may be personnel protection.
A northern infrastructure company may support Arctic sovereignty, logistics, communications, or operational sustainment.
The defence market does not always require you to become something completely different.
Often, the first step is translating what you already do into the language of defence capability.
The updated ITB Policy gives primes stronger reasons to work with serious Canadian companies, especially those that build capacity, support sovereign capabilities, create Canadian-owned IP, develop SMB supply chains, or train the workforce.
Here are the changes that matter most to Canadian SMBs.
Canada’s updated ITB Policy did not replace the long-standing Investment Framework. It added a new tool beside it: the Strategic Investment Transaction.
The distinction matters.
Investment Framework Transactions remain the established pathway for long-term, innovation-related investments made directly into an SMB or qualifying Small Mid-Cap. These transactions must be linked to R&D, commercialization, or both in Canada, and must remain in place for at least five continuous years. Under the current terms, Investment Framework credits can receive multipliers of 9x for cash invested in R&D, 9x for an in-kind licence of IP other than trademarks, 7x for cash used to purchase or transfer equipment, and 4x for in-kind knowledge transfer or marketing/sales support through the lending of an employee.
Strategic Investment Transactions are new. They are broader and more industrial-capacity-focused. They are designed to encourage investments that create new Canadian industrial capacity or expand existing capacity in Canada. That can include establishing a new facility, expanding an existing facility for new product lines, increasing manufacturing capacity, improving productivity, or developing new capacity through R&D or commercialization. To qualify, the transaction must clearly link to Key Industrial Capabilities or priority areas identified in Canada’s Defence Industrial Strategy, and it must have at least $5 million in allowable investment before multipliers.
The multipliers are different from the Investment Framework. Strategic Investment Transactions can receive 5x credit for cash used to establish or expand a facility, cash for R&D or commercialization, cash for Canadian-owned IP development, in-kind transfer of IP ownership to a Canadian company, or an exclusive IP licence to a Canadian company. Equipment purchases or transfers can receive 4x credit, while knowledge transfer or marketing/sales support through the lending of an employee receives 1x credit.
This matters because primes now have a clearer ITB pathway for larger, capacity-building investments that strengthen Canada’s defence industrial base. In plain language, a prime may get more than ordinary 1:1 ITB credit when it helps a Canadian company build or expand capability in an area Canada cares about.
But do not misread this.
This does not mean you should send a prime a note asking for $5 million.
It means that if you can show a credible capacity-building opportunity tied to a real defence program, a real supply-chain gap, a real sovereign capability priority, and a real commercial pathway, you may be much more interesting than you were before.
The Canadian Company Boost is one of the most important changes for domestic suppliers.
For certain direct supplier-development transactions, if a Canadian company’s product or service has at least 70 percent Canadian Content Value, the CCV can be deemed to be 100 percent for reporting and verification. If the recipient is an SMB, the transaction can also receive a 2x credit multiplier.
Plain English: if you do most of the work in Canada, the policy is trying to stop penalizing you for not being perfect. And if you are an SMB doing direct work, the prime may receive more credit for working with you.
That is a big deal.
It makes Canadian content, Canadian labour, Canadian ownership, and Canadian supply chains more than patriotic language. It makes them part of the business case.
Canada has also introduced a Small Mid-Cap category. This gives companies that grow beyond the traditional SMB threshold a transition window so they can keep accessing certain SMB-style crediting for up to five years. The updated definition also clarifies that SMBs generally must not exceed 250 full-time employees, with affiliated entities considered, while Small Mid-Caps can support firms scaling beyond that level.
This is important because Canada says it wants SMBs to scale, but the old system could create awkward cliffs where growing firms lost their attractiveness from an ITB credit perspective.
The new policy appears to recognize that if Canada wants national champions, it cannot punish companies the moment they start becoming one.
The ITB Policy also updates the way investments for future sales can be credited. Contractors can receive credit earlier when they invest in Canadian businesses to support future sales or growth, including supplier development.
This matters because many Canadian SMBs do not just need one contract. They need a pathway into a global supply chain.
A good ITB opportunity is not only “give me work in Canada.”
A better ITB opportunity is “help us become a qualified Canadian supplier that can support your Canadian program and then export into your global programs.”
That is how ITBs become enterprise value.
The updated policy adds stronger incentives for skills development and training. Cash contributions for eligible skills development and training can receive a 5x multiplier. Cash for skills development and training for Indigenous Peoples or majority Indigenous-controlled educational or training facilities can receive a 10x multiplier, which the government describes as the largest available multiplier under the ITB Policy.
For Canadian companies, especially Indigenous-owned firms or firms working with Indigenous communities, this is significant.
But again, the lesson is not “add Indigenous language to your pitch.”
The lesson is to build real, credible, respectful workforce and supply-chain partnerships where there is genuine alignment. Defence needs workers. Canada needs northern and regional capacity. Indigenous communities need meaningful participation, not tokenism.
The government has also announced a 90-day service standard for ITB transaction approvals to improve predictability, transparency, and timeliness.
This matters because timing kills deals.
If a prime cannot get clarity, the transaction stalls. If an SMB cannot understand the process, the opportunity dies in confusion. A clearer approval standard should help, but it does not remove the need for a well-built business case.
From the outside, ITB obligations sound like a gift to Canadian companies.
From the prime contractor’s side, they are more complicated.
A prime has to deliver the equipment or service Canada bought. Then it also has to create business activity in Canada equal to the value of the contract. Some of that can be direct work on the program. Some can be indirect work elsewhere in the Canadian economy. Some can come through supplier development, R&D, future sales, skills, or strategic investment.
The best ITB transaction is not charity. It is useful business activity that also earns ITB credit.
That is why direct work is so valuable. If you are supplying a component, software module, service, training system, sustainment capability, or manufacturing process that the prime already needs, the conversation is easier.
The updated policy makes direct work with Canadian firms, especially Canadian SMBs, more attractive. But it still has to make business sense.
Primes are not generally set up to assess every random Canadian technology that comes their way. Even if the ITB manager likes your company, they still need technical buy-in, procurement buy-in, program relevance, legal approval, and often corporate approval.
So the more relevant your offering is to the prime’s actual program, the better.
Do not start with “we are looking for ITB investment.”
Start with the problem you solve.
What do you make faster, cheaper, safer, lighter, stronger, more secure, more sovereign, more maintainable, more deployable, or more reliable?
Then translate that into defence language.
Are you relevant to Arctic operations? Sustainment? ISR? Secure communications? Training? Autonomy? Shipbuilding? Aerospace? Munitions? Critical infrastructure? Operational readiness? Canadian supply-chain resilience?
That is where the conversation starts.
Before you approach a prime, map your company against the 10 Sovereign Capability areas.
Do not force it. Be honest.
If you are adjacent, say you are adjacent. If you are dual-use, explain the defence application clearly. If you are not a defence company yet, explain what would need to change for you to become defence-ready.
A prime does not need hype. They need clarity.
Canadian Content Value, or CCV, matters more under the updated policy.
If your work is substantially performed in Canada, if your labour is Canadian, if your inputs are Canadian, if your IP is Canadian-owned, or if your supply chain is domestic, you need to understand and communicate that clearly.
The Canadian Company Boost makes 70 percent CCV an important threshold in certain transactions.
Do the math before the meeting.
Do not send the same email to every prime.
Research their Canadian programs, active obligations, supply-chain priorities, Canadian footprint, and likely capability gaps. The government maintains a current obligations by contractor page showing contractor, project, obligation, completed activity, activity in progress, and activity still to be identified.
Then ask:
Where does this prime have Canadian obligations?
Which Canadian program are they delivering or pursuing?
What parts of that program touch my capability?
Are they likely to care about my region, my technology, my certification, my capacity, my Indigenous partnership, my IP, or my export potential?
Can I help them with direct work, supplier development, R&D, future sales, workforce, or strategic investment?
That is the work most companies skip.
It is also the work that makes the outreach credible.
No one cares about your mission statement in the first conversation.
They may care later. They probably care as human beings. But from a buyer’s perspective, your mission statement is not the lead.
Your one-pager should answer:
What do you do?
Who do you help?
What defence problem do you solve?
Where does it fit in the prime’s program or supply chain?
What is your Canadian Content Value?
Are you Canadian-owned or Canadian-controlled?
Are you an SMB, Small Mid-Cap, Indigenous-owned, veteran-owned, regional, or strategically located?
What certifications, security posture, quality systems, past performance, or production capacity do you have?
Which Sovereign Capability area do you support?
What ITB pathway might apply?
Make it easy for the prime to understand you.
Do not make them translate your business for you.
The defence sales cycle is long. The ITB cycle can be even longer.
Attend industry days. Go to CANSEC, DEFSEC, Best Defence, AIAC events, ABCMI events, regional defence events, and prime-hosted supplier days. Meet the ITB managers, but also meet the technical teams, procurement teams, program teams, and Canadian business development teams.
The ITB manager may open the door.
The business unit has to care enough to walk through it.
The government’s own guidance says being a Canadian company does not guarantee success and that companies still need to be competitive on price, quality, and delivery time. It also notes that relationship-building with larger companies can take years.
That is accurate.
ITBs can create leverage, but they do not replace business fundamentals.
You still need to be good.
Do not expect handouts. ITBs are obligations, not charity.
Do not lead with “we are Canadian.” Lead with value.
Do not pitch every prime the same way. Each prime has different programs, obligations, and supply-chain needs.
Do not oversell multipliers. Multipliers are useful, but they are not magic. They require eligibility, approval, verification, documentation, and alignment.
Do not ignore certifications, security, quality, export controls, controlled goods, cyber requirements, or production readiness.
Do not assume the ITB manager can force the business unit to buy from you.
Do not wait until a procurement is awarded. Early positioning matters.
Do not think your commercial language will automatically make sense in defence. You need to translate.
I have seen this work.
In my own company, I used ITB and IRB obligations to help fund R&D, build relationships with international primes, and secure $8.1 million in non-dilutive ITB investments and direct work, reducing prime obligations by $36 million.
For clients, I have helped secure $22 million in non-dilutive ITB investments from multiple international prime contractors, reducing international prime obligations by $117 million and helping generate major defence growth.
Those results did not come from sending generic emails saying, “We are Canadian.”
They came from strategy, positioning, persistence, and alignment.
The companies that win in this system understand three things:
They know what they do.
They know why it matters to defence.
They know how it helps the prime.
That is the work.
If you have a credible product, service, technology, manufacturing capability, or dual-use offering that could support Canada’s defence, aerospace, marine, infrastructure, security, or Arctic priorities, now is the time to assess your fit.
The opportunity is not “free ITB money.”
The opportunity is to become a useful Canadian supplier in a market that is being rebuilt around sovereignty, speed, industrial capacity, and national security.
That means understanding:
Where you fit
Which primes care
Which programs matter
What your Canadian Content Value is
Which Sovereign Capability you support
How your offering helps the prime commercially
How your offering helps the prime meet its ITB obligations
What you need to become prime-ready
That is where Dewis Ventures helps.
We help founder-led Canadian SMBs enter and win in Canada’s defence, aerospace, marine, and dual-use supply chains by translating real commercial capability into defence-market positioning, ITB alignment, prime-ready messaging, and practical outreach.
If you are ready to understand where your company fits, book a Defence Market Fit Assessment.
Schedule your Free ITB Assessment.
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