Small and Medium Enterprises (SMEs)

Small and medium enterprises (SMEs) are businesses that fall below certain thresholds for revenue, assets, or employee count—though here's the thing: federal procurement policies don't actually define those thresholds explicitly. Instead, they broadly encourage SME participation to foster competition and support economic growth across Canada, with dedicated resources like the Office of Small and Medium Enterprises (OSME) helping smaller suppliers navigate what can be a complex system.

How It Works

The Supply Manual doesn't dedicate a specific section to SMEs, but PSPC's Office of Small and Medium Enterprises steps in to reduce barriers and guide businesses through federal procurement opportunities on buyandsell.gc.ca. Statistics Canada typically defines medium-sized enterprises as having fewer than 100 employees, but procurement policies take a more flexible approach—focusing less on rigid definitions and more on creating accessible pathways for smaller players.

In practice, this means contracting authorities often look to procurement below trade agreement thresholds—like the $203,000 limit for goods or $5.053 million for services under the WTO Government Procurement Agreement—to simplify processes that favor smaller suppliers. Recent parliamentary reviews have pushed for further reforms: subdividing larger contracts into manageable lots, reducing administrative red tape, and designing supplier-oriented processes that don't automatically disadvantage businesses without dedicated procurement teams.

Your agency might also encounter recommendations to set aside certain opportunities specifically for SMEs or to consider their participation as part of broader socio-economic procurement goals under the Treasury Board Contracting Policy. The Financial Administration Act provides the underlying authority, but day-to-day guidance comes from PSPC resources and departmental procurement teams working with OSME.

Key Considerations

• No universal definition: Federal policies don't specify exact employee counts or revenue caps for SMEs. You'll need to align with industry standards or Statistics Canada classifications depending on your context, which can create ambiguity when designing opportunities.

• Administrative burden matters: Even simplified processes can overwhelm smaller suppliers unfamiliar with government requirements. Security clearances, bonding, insurance requirements, and past performance criteria often pose bigger barriers than the technical work itself.

• Trade agreements complicate things: While you might want to favor domestic SMEs, international obligations under CETA, CUSMA, or the WTO GPA limit how explicitly you can preference Canadian small businesses once thresholds are exceeded.

• OSME as your first resource: If you're structuring opportunities to increase SME access or a supplier asks about navigating federal procurement, the Office of Small and Medium Enterprises provides dedicated support. Don't reinvent guidance they already offer.

Related Terms

Set-Asides, Trade Agreement Thresholds, Contracting Policy, Socio-Economic Procurement

Sources

• Office of Small and Medium Enterprises (OSME) - CanadaBuys

• Supply Manual - Public Services and Procurement Canada

• Modernizing Federal Procurement for Small and Medium Enterprises - House of Commons

When structuring your next opportunity, consider whether breaking it into smaller components or adjusting qualification criteria might open the door to capable SMEs who'd otherwise sit on the sidelines.