Guy Quenneville
Northern News Services
Published Monday, June 9, 2008

SOMBA K'E/YELLOWKNIFE - The GNWT's Business Incentive Plan (BIP) is on shaky ground.

Last week the GNWT announced its intention to remove the application of BIP from GNWT and community infrastructure projects due to a lack of competition or interest from southern construction companies.

The BIP allows businesses that have been located in the NWT for at least 10 years or have 51 per cent NWT ownership to bid up to 15 per cent higher on government contracts than southern firms.

But southern interest in government projects has waned, according to Bob McLeod, minister of Industry, Tourism and Investment (ITI).

"I'd say you could probably count on your hand the number of southern contractors that bid on anything ... any year," said McLeod.

He added it's "premature" to say BIP will be gone for good, because the GNWT still needs to review the program's application to other industries, likes goods and services and trades, as well as consult MLAs and members of the territory's business industry, before making a final decision. But there is a possibility the program will be scrapped.

"What we announced was our intention, but we still have a lot of work to do," said McLeod.

According to statistics presented to the NWT Chamber of Commerce by ITI last December, the total amount of premiums incurred - the amount of money the territorial government pays out to pad Northern bids - has declined in recent years.

In 2007-08, the premiums came to $250,000, a 23 per cent decrease from $326,000 in the fiscal year 2006-07, when 2,019 government contracts were issued for a total value of $230 million.

McLeod said those numbers indicate BIP is no longer an essential service.

The number of businesses registered under BIP has decreased. In 1998, some 2,008 businesses were listed in the registry. That number shrank considerably in 2005 to 985, and only rose 1,167 as of this year.

Don Yamkowy, president of the NWT Chamber of Commerce, said he supports the cancellation of the current BIP program but wants to see a new, improved BIP system put in its place.

Yamkowy said only businesses that pay their taxes in the NWT should be eligible for premiums.

"The existing BIP, when it was put into place in 1984, didn't take into consideration the international, global superstores that have come to Yellowknife," said Yamkowy, adding those companies are often not headquartered in the NWT and thus not paying taxes to the territorial government.

"If you're paying your taxes here, then you are contributing to the well-being of all the social needs."

McLeod said he thought Yamkowy's suggestion was "sensible."

"That's certainly one of the options we could seriously consider," he said.

If the government does eventually scrap the program altogether, Northern construction companies will especially suffer, said Bob Doherty, who helped develop BIP while serving as deputy minister of public services and now serves as president of the NWT Construction Association.

"Removing that one competitive advantage could well precipitate a steady relapse to the pre-BIP days of contractors (and governments) having to order virtually everything from the south," said Doherty.

Contractors, architects and engineers are perhaps the most vulnerable to lower-cost external competition, he added.

"Highly mobile southern construction companies and consultants don't have to be permanently located in the NWT to do business here," he said.

"Putting a stop to cherry-picking was one of the primary reasons for invoking BIP, and it has been successful in this regard."

As an alternative to the BIP, Doherty suggested a two per cent reduction in the small business corporate tax rate.

Glen Klassen, owner of Klassen Contracting in Enterprise, said he hopes the government reconsiders its plan to eliminate the BIP.

If the cut goes forward, "anybody that doesn't have business in the NWT can sell for the same price," said Klassen.

"(The GNWT) always says shop locally and do things locally, but all they're doing now is making it so that they don't have to do that themselves."