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Buy North not needed in Yellowknife: Steen

Minister says Yellowknife projects shouldn't come under Business Incentive Policy

Nathan VanderKlippe
Northern News Services

Yellowknife (Aug 14/02) - The territorial government should scrap the Business Incentive Plan for Yellowknife developments, said Vince Steen, minister of municipal and community affairs.

"The indications I have from those bids on that particular project (the North Slave Correctional Centre) suggest that there's no need for the BIP at this time in Yellowknife," said Steen. "It may be necessary in other areas, but it's definitely not needed in Yellowknife."

Dave McPherson, president of the Yellowknife Chamber of Commerce, said, "This statement by Steen is just indicative of the type of reactionary decisions that are being made by this government right now and that's what frightens us. What is he saying, Northern contractors should bid ridiculously high in order to prove that BIP is still required?"

Bill Aho, president of the NWT Construction Association, said the tenders proved the BIP is still needed for some time to come.

"Considering less than one out of three disciplines (individual contracts) actually came from the North, it shows that we have a long way to go before we have the capacity in the NWT to cover all the disciplines," he said.

Northern companies will pick up almost half of the budget dollars for work on the facility, which should be finished within 18 months. Local companies put in lowest bids on eight bids worth $7.4 million of the $16.25 million worth of contracts, a total of 31 tenders.

Had the BIP been in place, Northern companies would have picked up another $2.1 million of contracts. Those northern bids were only $137,000 higher than the winning prices. That means suspending the BIP meant $137,000 in direct savings for the GNWT.

J/T Electric is one of the local companies that missed out. It bid $1.725 million for an electrical contract, but was beat out by Canem Systems Ltd., which bid $1.640 million. That's a five per cent difference in price.

"I'm very upset about it," said J/T Electric partner Keith Houghton. "It's a long-term project, one of those big projects that can give you a lot of stability. ... It would have been seven man-years worth of work."

He said it's not over yet -- the GNWT is still reviewing the tenders, and further analysis might determine that the J/T deal is in fact better.

But he sure that suspending the BIP drove away northern bidders. He said three local electrical contractors bid on the first phase of construction. This time around, J/T was the only one to submit a tender.

Faced with a construction project that was quickly becoming massively over budget, the territorial government announced earlier this year that it would suspend the BIP on the second phase of construction on the correctional centre.

As it is, the GNWT budgeted $35 million for construction. The current estimate is $49.5 million, or 40 per cent higher than expected.

"We've been hammered on this one," said Bruce Rattray, deputy minister for public works.

Rattray said suspension provided lower bid prices by increasing the amount of competition.

"We do know we got more competition from the south on these contracts," he said. "We can't demonstrate it, but we believe that the more competition we get, the tighter the pricing is."

But Aho ridiculed the notion that suspending the BIP could have lowered bids from Northern companies.

"The thought that somebody may have reduced their profit margin in order to be more competitive on this is a joke," he said.

The process of creating a bid is not hard and fast science, said Aho, making it difficult to simply tack on a higher profit margin.

"The contracting industry is very risky. There's many variables. Your cost is a best guess, and your profit can range from windfall profit to, 'oops! that profit looks like a loss.'"

Money to cover to cover the overruns will be divvied up in the 2003-04 budget by the legislative assembly, said finance minister Joe Handley.

The BIP gives Northern businesses a competitive edge by allowing them a 15 per cent latitude over Southern firms in contract bids. The original intent of the policy, said Aho, was to give northern companies some breathing room to set down roots in different development areas.

The BIP is currently under review by the Department of Resources, Wildlife and Economic Development. A draft revision should be tabled in the legislative assembly this fall.

Robert McLeod, the deputy minister with RWED, said the experience with the correctional centre won't impact on the results of that review.

"But if anything, the North Slave Correctional issue has certainly increased the public understanding of the BIP," he said.

The correctional centre includes one facility for young offenders and another for adults.

The young offenders building will accommodate 27 inmates, while the adult correctional centre will house 154 prisoners.