U.S. firms won $210M in Toronto city contracts in last 2 years. Why a ban on their bids matters

How much business does Toronto give to American-owned companies through city contracts?

To find out, CBC Toronto combed through open data on all of the competitive contracts the city has awarded to suppliers over the last two years — worth a collective $3.2 billion.

In that time, 10 per cent of contracts for city services were secured by American-owned companies, according to the analysis. The 76 contracts are worth a total of about $210 million or six per cent of the funds Toronto doled out through competitive procurement between Dec. 6, 2022 and March 11 of this year.

Those contracts make up just a fraction of the city's procurement. But they provide an idea of what U.S. businesses stand to lose — and what Canadian suppliers could gain — in the trade war going forward if city council approves Mayor Olivia Chow's promised motion to bar American companies from all future city contracts later this month.  

"That'll get noticed," said Drew Fagan, a professor at the Munk School of Global Affairs & Public Policy.

"Toronto is the sixth biggest government in the country. We don't think about it that way, but it is, after the feds and the big four provinces … it's significant."

Economist Colin Mang says the move would have both symbolic and economic impact in the trade war with the U.S.

"It is going to cost Americans business and it's going to cost them jobs," he said.

Even though the vast majority of Toronto's procurement goes to Canadian-owned companies (84 per cent in CBC Toronto's analysis), Mang says banning U.S. bids would have a big impact on some of the city's largest contracts for architectural or engineering services.

"It might increase costs a little bit for the city if they're not able to tap the international markets, but ultimately, tax money then remains in Canada, which is also a good thing," said Mang, an assistant professor of economics at McMaster University in Hamilton.

The Ontario government has already banned U.S. companies from provincial procurement. 

Chow announced her plan to try and implement a similar ban for Toronto on March 6, alongside a move that has already limited bids for city contracts under $353,000 to Canadian companies. 

CBC Toronto's analysis found that 18 of the 76 contracts that went to American-owned businesses fell below the $353,000 threshold. Those contracts were worth a total of only $3 million — or one per cent of the total funds awarded to U.S. companies in the last couple years.

"Her initial plan is a little bit more symbolic," said Mang. "The small-time contracts are for small amounts of construction, or for some materials that some city departments need. This is all stuff that's delivered locally anyway."

How will the city define U.S. businesses?

CBC Toronto's analysis was based on where a contract supplier has its headquarters, and if that company was a subsidiary of an international business, then ownership was determined by the location of the parent company's principal place of business.  

Last week the mayor's office said city staff were still finalizing the definition of what the city would consider a U.S. company for Chow's motion. 

After publication of this story this morning, the mayor released the city's plan to help Toronto handle U.S. tariffs, which includes supplier definitions for procurement. 

Toronto's Economic Action Plan defines an American-based supplier as a company that has its headquarters in the U.S. and has at least 70 per cent of its employees there at the time of the bid submission. 

But unlike in CBC Toronto's analysis, subsidiaries of U.S. companies can be considered Canadian for the purposes of city procurement if the subsidiary has permanent offices or production facilities in Canada and at least 70 per cent of the contracted work will be done by employees based in Canada.

Of the 76 contracts awarded to American-owned companies in CBC's analysis only two went to companies operating without a Canadian subsidiary. It's unclear how many of the Canadian subsidiaries that won contracts in the last two years would meet the threshold the city is proposing — but it's likely some would.

The city's action plan also appears to soften the language for Chow's promised motion to ban all U.S. suppliers from city contracts. Instead of an outright ban, it gives the city "the ability to make US-based suppliers ineligible to bid on competitive procurement when deemed in the best interest of the city."

The plan also includes an additional move to limit all city construction contracts under $8.8 million to Canadian companies and would direct city divisions that rely heavily on U.S.-sourced supplies to come up with alternative procurement strategies. 

Ban could boost job growth at home

Looking ahead, Mang sees a lot of economic benefits for the city — and potentially the rest of the country — if Toronto limits its contracts to Canadian companies. 

"If the city is going to take tax money and they're going to pump that into local businesses that's going to get hiring started again in the Toronto area," he said. "If they're looking at other Canadian suppliers, that's going to be a good thing here in Canada to get job growth started again." 

From a policy perspective, Fagan says the city's plan shows that all levels of government are serious about responding to U.S. President Donald Trump's tariffs.

"You want to be co-ordinated as much as possible to ensure that you're getting maximum value, maximum leverage, out of the steps you take," he said.

"We're a middle-weight and the United States is a super heavy-weight and we have to be smarter and more strategic and more proactive in certain ways as we engage."

Toronto's Economic Action Plan, which includes the changes to city procurement, will go before executive committee Wednesday, and then city council next week.