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Protest over contract to south Yellowknife Chamber of Commerce calls for changes to procurement policies after $30-million project awarded to Ontario company
Cody Punter
Northern News Services
Published Wednesday, July 31, 2013
SOMBA K'E/YELLOWKNIFE
The awarding of a $30-million contract to build Yellowknife's new water treatment facility has members of the business community calling for the city to change its procurement policies to allow it to give preference to local contractors.
"I don't believe the city does enough to ensure this work stays North," said Bob Doherty, president of the NWT and Nunavut Construction Association. "They just take this attitude that we have to follow the provisions of this inter-provincial trade agreement, so we can't do anything, when in fact they can," said Doherty.
"The bottom line is that Northern companies should get Northern contracts," added Leslie Campbell, executive director of the Yellowknife Chamber of Commerce. "We've developed a construction industry that is second to none. These companies know what it's like to build in the North, they understand our local labour force, they are facing higher costs, and they understand the cost of doing business here," said Campbell.
The city recently awarded the contract to Ontario-based NAC Contractors Ltd. which submitted a $30,280,950 bid for the project. Northern companies Det'on Cho Nahanni Construction Ltd. and Clark Builders put in respective bids of $30,978,876 and $31,153,755, but because the procurement for the project had gone through an invitation to tender, the contract had to legally be awarded to the lowest bidder.
Campbell said while there is no point dwelling on the water treatment facility, the city should look at finding ways to keep future contracts from going south.
"The point is what can council do going forward to make sure this doesn't happen again," said Campbell. "It's time to take a look at this."
The greatest barrier to the city's ability to give preference to local contractors is the Agreement on Internal Trade (AIT), which was an inter-provincial agreement signed by all Canadian provinces and territories in 1995.
The purpose of the agreement is to reduce and eliminate barriers to free trade within Canada.
In 1999 all provinces and territories, except for the Yukon and Nunavut, signed Annex 502.4 of the AIT, which binds municipalities to the agreement and prevents them from showing preference toward local businesses when they award contracts.
The GNWT, however, has an exemption written into the AIT, which allows it to apply its Business Incentive Policy (BIP) to the tendering process for territorial projects.
The policy, which was adopted in 1976 and was subsequently grandfathered into the AIT, was created to level the playing field for Northern businesses by compensating contractors for the higher costs associated with operating a business in the North.
"There's a recognition that it is a relatively high cost place to operate. And if you have a bigger domestic business sector it gives a lot of spinoffs in terms of jobs and training and experience. It's a good thing," said Kevin Todd, director of investment and economic analysis with GNWT's Department of Industry, Tourism and Investment.
The BIP allows for a set of fixed percentages to be applied to adjust the cost of bids based on the territorial and local content of certain contracts to a maximum of $500,000.
If the city wanted to develop a policy that would allow it to give preference to local contractors, it would require changes to the either the BIP or an amendment to the AIT. Of the two possible amendments, Todd said it would be easier to change the BIP, because it would not have to be approved by the other provinces and territories who have signed the AIT.
"At least the territorial government has control over it," said Todd.
Minister for the Department on Industry, Tourism and Investment David Ramsay, who also held the chairmanship of the committee on Internal Trade in 2012, declined to comment on the issue. However, during the 4th Session of the 17th legislative assembly on Feb. 8, 2013, Ramsay responded to concerns by MLA Alfred Moses, about contracts being awarded to southern companies. At the time he said the department could look into reviewing BIP.
"Certainly, if the regular members feel strongly enough about the Business Incentive Policy and want us to review it again, that is something that we can work through the Standing Committee on Economic Development and Infrastructure to see something like that happen," stated Ramsay, according to Hansard.
Campbell said the issue of local procurement has been raised by council before, specifically citing discussions about the geothermal plan in 2011.
According to council minutes from Feb. 28, 2011, Coun. Bob Brooks tabled a motion, which carried unanimously, directing administration to find ways for the city to maximize "the amount of local and Northern contracting for goods and services purchased while respecting national and international trade agreements."
Doherty was on the city's asset management task force from 2010 to 2011, during which time he conducted a thorough review of the city's procurement policies.
He said that at the time the city claimed to have a local purchasing policy "when in fact if you read the documentation there really aren't any provisions to balance the field for local contractors," he said.
Doherty added that while he was on the committee, he was critical of both then-mayor God Van Tighem and Bob Long, the senior administrative officer, for not doing enough to reevaluate the city's procurement policies.
"When I was on the infrastructure committee I argued very strongly for the administration to look at ways of delivering the project other than following normal tendering rules so that they could make sure local contractors were involved. But that fell on deaf ears," said Doherty.
"I think that if the city made an effort it could come up with a better way of dealing with this issue," added Doherty.
Mayor Mark Heyck said that the current council has not yet had the opportunity to discuss changes to its procurement policies.
"The discussion surfaced a bit when we talked about awarding the contract for the water treatment plant and there seemed to be some differences of opinion regarding the AIT within council.
"I expect that in the months ahead we'll probably have that discussion with council to see if there's an appetite to see some changes there. We would need to explore with the territorial government to see what's required to make those changes," said Heyck.
Although she did not have an answer on how the city should approach changing its procurement policies, Campbell said council should at least explore its options.
"I just think that council needs to take a look at what they can do to make sure there is local preference included in their procurement policies," she said. "How or if they do that remains to be seen."
Fact File
Water treatment plant by the numbers
Budget: $30,280,950
Amount borrowed: $23.8 million
Contractor: NAC Contractors Ltd.
Points of interest:
* While the NWT has an incentive policy to assist Northern bids, the city does not due to restrictions under the Agreement on Internal Trade (AIT), which is on inter-provincial agreement signed by all Canadian provinces and territories in 1995.
* An amendment by the GNWT to its Business Incentive Program (BIP) or to the AIT would allow the city to apply an incentive policy to give preference to city businesses.
* While the amendment to the BIP can be done by the GNWT, changes to AIT would have to be approved by all its signatories.
Source: City of Yellokwnife/GNWT
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