Innovative Solutions Canada

Insider Tip

The single most important success factor is directly addressing every Essential Outcome listed in the challenge notice — evaluators cannot infer anything not explicitly stated in your proposal. Do NOT reference external websites or supplementary documents; only information in the submission form is evaluated. The inclusivity criterion is worth 20 points (15% of total) and is often undervalued by applicants — describe concrete recruitment programs, internships, or co-op placements for underrepresented groups. For the state-of-the-art section, name specific competitors and quantify your improvements. DND challenges tend to have higher funding caps ($300K Phase 1, $2M Phase 2). With budget cuts reducing available challenges from 2025-26, consider subscribing to the newsletter immediately and applying to every relevant challenge promptly. Subcontracting limits are strict: you must perform at least 2/3 of Phase 1 R&D internally.

Rejection Pitfalls 12

• Failing to address ALL Essential Outcomes in the challenge notice (mandatory pass/fail — automatic rejection)
• TRL outside the required range (must be TRL 1-4 for Phase 1, TRL 5-9 for Phase 2 entry)
• Innovation does not meet ISC definition (must be new/novel, not incremental improvement of widely available technology)

Success Profile

Typical winners are Canadian-incorporated SMEs with 10-100 employees, existing R&D capabilities, and a technology at TRL 1-4 that directly addresses a posted government challenge. Strong teams have credentials in the relevant domain, prior government contracting or research experience, and can demonstrate concrete competitive advantages over existing solutions. Ontario-based companies receive disproportionate funding (40-50% of all awards). Environment/circular economy (25%), digital/AI (17%), and health/medical (11%) are the most funded sectors. Companies with experience in government procurement processes have a notable advantage. 85% of 2022 applicants self-identified from underrepresented groups. First-time applicants can succeed but benefit from understanding the challenge-response format.

Evaluation Criteria

Two-stage evaluation: (1) Mandatory pass/fail criteria — must address ALL Essential Outcomes listed in challenge notice, meet eligibility, and be within TRL range. (2) Point-rated criteria scored out of 130 — must score at least 65/130 (50%). Criteria include: technical merit and state-of-the-art advancement, implementation team qualifications, project plan feasibility, financial proposal reasonableness, commercialization plan strength, benefits to Canada, and inclusivity (20 points / 15% of total). Innovation must be novel, not an incremental improvement of widely available technology.

Application Steps

Required Documents 21

Eligible Expenses 7

• Internal labour costs (salaries, wages, benefits) for R&D personnel at all-inclusive rates
• Subcontracting costs (capped at 1/3 of Phase 1 R&D budget)
• Materials and supplies consumed during R&D activities
• Equipment rental or lease directly related to the project
• Prototype fabrication and testing costs
• Travel costs directly related to project execution (limited)
• Overhead costs included in all-inclusive labour rates

Ineligible Expenses 6

• Capital equipment purchases (buildings, land, permanent assets)
• Marketing, advertising, and general business development costs
• Costs incurred before the contract start date
• Regular operating expenses not directly tied to the challenge project
• Legal fees for IP filing or patent prosecution
• Costs for preparing the proposal itself

Intake Periods

Challenge-specific — no fixed annual cycle. Federal departments post challenges as needs arise, each with individual closing dates. Volume of new challenges has decreased significantly due to $70M annual budget cuts starting 2025-26. One open challenge as of March 2026 (Space: Advancing Low Earth Orbit Satellite Communication, closing April 7, 2026). Subscribe to ISC newsletter for notifications.

Deadline Notes

ISC operates on a challenge-based model, not a fixed annual deadline. Federal departments post challenges as needs arise. The volume of new challenges has decreased due to significant budget cuts ($70M annually from 2025-26 onwards). Applicants must monitor the ISC website or subscribe to the newsletter. One proposal per challenge unless otherwise stated.

Ineligible Organizations

• Non-Canadian companies or those not incorporated in Canada (federal or provincial)
• Not-for-profit organizations and cooperatives
• Companies with more than 499 full-time equivalent employees
• Companies without majority of operations, wages, and senior executives in Canada
• Academic institutions and research organizations (must apply through an SME partner)
• Sole proprietorships and unincorporated businesses

Compatible Programs

Clawback Risk