When your department is looking at a major defence or security procurement—say, new fighter jets or cybersecurity infrastructure—you'll encounter Mandatory Offsetting Transactions (MOTs). These are requirements under Canada's Industrial and Technological Benefits (ITB) Policy that force winning contractors to invest back into the Canadian economy. The deal is straightforward: if you win a contract above certain thresholds, you're obligated to undertake business activities in Canada equal to 100% of the contract value.
How It Works
According to Canadabuys, the ITB Policy kicks in at specific dollar thresholds. For procurements subject to the International Commercial Fighter and Refrigerator (ICFR) framework, MOTs apply at $20 million CAD or greater. Everything else in defence and security? You're looking at $100 million or more. Once triggered, the prime contractor must deliver economic benefits to Canada through investments, supplier development, or technology transfer.
Here's the thing: these aren't suggestions. The contractor has to demonstrate real business activity—think establishing R&D facilities in Canada, developing Canadian suppliers in their global supply chain, or transferring proprietary technology to Canadian firms. Innovation, Science and Economic Development Canada (ISED) administers the policy and monitors compliance. The Industrial and Technological Benefits Policy page outlines four main categories of acceptable activities: direct investment, supplier development, technology development and transfer, and strategic innovation. Contractors typically have multiple years to fulfill their obligations, but they're on the hook for the full value.
In practice, this changes how bidders approach major defence competitions. A company bidding on a $500 million contract knows they need to create $500 million in qualifying business activities in Canada—which often means partnerships with Canadian firms get negotiated long before contract award. The Treasury Board's Policy on Defence Procurement reinforces this requirement as part of broader procurement policy for major Crown procurements in the defence and security sector.
Key Considerations
- Threshold confusion: The dual thresholds ($20M for ICFR, $100M otherwise) catch people off guard. Make sure you're applying the right one based on what you're procuring.
- 100% means 100%: Unlike some offset programs that require a percentage, MOTs demand dollar-for-dollar value. A $300 million contract means $300 million in Canadian business activities. Period.
- Compliance is long-term: Contractors typically have years to fulfill their obligations, which means ISED tracks these commitments well beyond contract award. Your department isn't directly responsible for monitoring, but understanding this timeline helps during negotiations.
- Not covered in the Supply Manual: The Supply Manual defers to sector-specific policies like the ITB Policy for major procurements, so you'll need to consult the ITB Policy documentation directly rather than relying on general procurement guidance.
Related Terms
Industrial and Regional Benefits (IRB), Value Proposition, Trade Agreements, Economic Benefits, Offset Requirements
Sources
- Canadabuys - Industrial and Technological Benefits
- Industrial and Technological Benefits Policy (ISED)
- Policy on Defence Procurement (Treasury Board)
If you're involved in planning major defence or security procurements, factor MOT requirements into your timeline and evaluation criteria early. They fundamentally shape how bidders structure their proposals.