BIP reform goes to cabinet
Grandfather clause causes concern
by Nancy Gardiner
NNSL (Feb 24/97) - The government of the NWT should seriously consider scaling back the Business Incentive Policy (BIP) support, says Jake Ootes, MLA for Yellowknife Centre.
"We're spending at least $15 million on (BIP) government support provided to contracts. I feel we can cut that support system in half and not hurt any competitors."
Ootes (left) believes the policy, which is designed to give Northern businesses financial advantages over southern firm when bidding on government contracts, has become "somewhat redundant." In certain cases, BIP may be necessary in small communities, he said. But it may not be necessary for larger ones where competition is more on par, he added
Ootes isn't alone. The Report of the Joint Working Group on BIP suggests making serious reforms to the plan.
Roy Erasmus, MLA for Yellowknife North, agrees that a lot of people in larger communities feel it can be done away with. He also questions the current grandfather clause.
"I cannot understand how the Royal Bank of Canada can be classified as a Northern firm. The same with Canadian Airlines. A Northern firm should be owned by Northerners if you're going to classify a firm as Northern," Erasmus told the legislature in February.
Under the clause, businesses that have operated for at least 10 consecutive years in the NWT, have invested in overhead and employ NWT residents but are not majority-owned by NWT residents may be approved under BIP if they meet the "spirit and intent" of the policy.
Seamus Henry, MLA for Yellowknife South, told the legislature that, "although BIP was set up initially to protect Northerners from southerners, what's happening now is we're protecting Northerners from Northerners. We're not that big that we need protection from each other."
There are currently 42 grandfathered firms in the NWT.
Stephen Kakfwi, a member of the joint working group on the BIP review, said that the report of the working group recognizes the lack of consensus on the grandfather clause. It recommends a review of the criteria used for approving grandfathered firms.
The working group came up with a number of other recommendations and Kakfwi (left) said he feels the process should "move along."
The working group also suggested consideration be given to the use of a "fair wage scale" similar to one used in Yukon.
The group also recommends the current "Northern Only" tender limit of $30,000 be reduced to $25,000.
Under BIP, the commercial room and board directive currently requires all non-local contractors to use local hotels. However, it forbids using bed and breakfasts when local hotels have accommodation available.
Members of the working group said the directive has created a monopoly in many communities resulting in "high prices and poor service."
They suggested legitimate bed and breakfasts become eligible under this directive.
To do this, it recommends the Department of Resources, Wildlife and Economic Development rewrite the tourist establishment regulations and replace the classification of "tourist home" with "bed and breakfast."
The issue of GNWT support for NWT-produced goods received close scrutiny in the last phase of public consultation on the BIP.
Earlier this summer, the department drafted a manufacturing directive. Cabinet approved it for consultation with NWT manufacturers and land claim organizations.
The department proposes instituting the directive on an interim basis until the fall of 1997.
The directive would permit a 20-per-cent bid adjustment for Northern-manufactured goods versus southern suppliers.
Consultations with NWT manufacturers and relevant land claim groups have been completed. According to the report, there is general consensus that the proposed directive will address the industry's short-term needs.
The working group recommends the current bid adjustment for the proposed use of Northern and local labor be discontinued. In its place, contracting departments would specify a minimum amount of Northern and local labor to be used.
Contractors who exceed the minimum labor requirement would receive a cash bonus. Those who fail to meet the minimum mark would be subject to monetary damages.
The current BIP provides one incentive rate to all registered businesses of 15 per cent and another five per cent for firms bidding in their own communities.
The working group recommends options of changing the bid adjustment percentages be considered. They include a split of 10 per cent each for local and Northern, an overall reduction of the percentage discounts, no adjustment or a sliding scale option.
Kakfwi stated all recommendations made in the report will be considered by cabinet and a decision will be made "as soon as we can."
Any changes that are made would only affect new contracts, Kakfwi stated.