Bill C-40 Canada's Defense
C-40 An Act Respecting Production, Procurement and Investment in Relation to National Defense and National Security
Short Title: Strengthening Canada's Defense Sector Act
Bill Type: House Government Bill
Bill Sponsor: Minister of Government Transformation, Public Works and Procurement and Quebec Lieutenant Joël Lightbound
Status: At Second-Reading in the House of Commons
Latest activity: Debate at Second-Reading on Tuesday, October 20, 2026 (House of Commons)
Estimated Read Time: 4 minutes
What is this Bill For?
Bill C-40, the Strengthening Canada’s Defense Sector Act, would change how the Federal Government buys, finances and supports things needed for National Defense and National Security.
It would establish the Canadian Corporation for Defense Investment, also called the Defense Investment Agency. The Corporation could buy supplies, support projects, make loans and advance payments and carry out investment activities within its mandate.
The Bill would also expand the existing Defense Production Act and rename it the Defense and National Security Production and Procurement Act. Its scope would expressly include National Security, services, data and intangible property.
The stated goal is to support Defense and Security production, procurement and investment.
The public policy question is how much discretion Government should have over contracts, business support and public financial risk.
WHO GAINS POWER
The responsible Minister would direct the new Corporation. The Corporation must follow those directions and following them would be deemed to be in its best interests.
The Corporation could make loans and advance payments within its mandate. Finance Minister approval would be required for guarantees, loan insurance, credit insurance and transactions involving Corporate shares and other financial instruments. Other financial arrangements would require additional Government authorization.
The procurement Minister would gain expanded authority covering National Security supplies, services and projects, subject to the Bill’s exceptions and delegation rules.
Government could also authorize stockpiling for economic security, shortage prevention and the Defense or Security needs of other states.
WHO LOSES POWER
Departments covered by the Minister’s exclusive procurement authority would have less direct control over purchasing covered supplies and services, subject to the Corporation’s Act, specified exceptions and delegated authority.
Businesses could face expanded requirements to provide information about supplies, services and facilities. This includes businesses the Minister considers suitable for providing Defense services.
Bidders could be excluded where the Minister has reasonable grounds to believe there is a Defense, Security or public safety risk. The Minister would not be required to give the excluded bidder reasons.
During the Corporation’s startup period, its Executive Chairperson could exercise all Board powers until the Chairperson and at least two other Directors are in office.
WHO GAINS MONEY
Businesses receiving contracts, loans, advance payments and other authorized financial support could benefit.
The Corporation could acquire shares and other financial instruments with Finance Minister approval. This would allow public investment in businesses, not just purchases from them.
The Bill would also allow the Corporation to charge service fees and receive up to $30 million for expenses within the specified 180-day transition period.
These are permissions, not promises that particular businesses will receive funding.
WHO LOSES MONEY
Public funds would finance the authorized activities. Taxpayers would bear financial risk if supported projects fail, borrowers do not repay and guarantees are called in.
The Bill creates two separate funding mechanisms with an initial $1 billion limit each: one for specified Corporation activities and one for specified Ministerial activities.
Both allow specified deductions that restore room under their limits. Parliament could change either limit through an Appropriation Act.
The Bill also separately authorizes Finance Minister loans to the Corporation.
The Corporation could forgive qualifying debts only with the responsible Minister’s approval and the Finance Minister’s concurrence.
THE CATCH
⚠️ Competitive bidding has broad exceptions.
The Bill requires competitive procurement for covered contracts but allows the Minister to dispense with it on numerous grounds. These include urgent operational needs, National Security, support for an important economic sector, inter-operability, sensitive technology, research and development. Further exceptions could be prescribed by Regulation.
⚠️ An excluded bidder does not have to receive reasons.
The Minister must have reasonable grounds for the specified risk, but the Bill expressly removes a requirement to provide reasons to the excluded person. That limits the explanation the bidder is guaranteed under this provision.
⚠️ Some compulsory powers and penalties would be built through Regulations.
Government could make Regulations authorizing the Minister to require people to carry out stockpiling related activities under Ministerial control for specified Defense, Security and emergency purposes.
A Regulation-based administrative penalty scheme could cover those requirements and contract-costing information rules. The maximum would be $2 million per violation. The Regulations must provide a right to request Ministerial review.
The Bill requires the responsible Ministers to undertake a review within five years. A report must then be tabled in both Houses as soon as feasible after completion. It does not set a fixed report completion deadline.
The proposal therefore combines industrial support and procurement tools with substantial Ministerial discretion. Its safeguards need to be considered alongside those powers, not treated as proof that every decision will receive advance Parliamentary scrutiny.