The move was motivated in part by recent fatalities in Iqaluit involving vehicles contracted by the city.
Council voted 6-2 in favour of a bylaw to repeal the current contract with Kavanaugh Bros., due to run out in 2005, and replace it with a new five-year contract. As part of the new contract the city will increase what it pays Kavanaugh by 7.9 per cent and will be covered for future accidents by and indemnification clause.
Councillors Alan Woytiuk and David McCann voted against the bylaw, saying it set a bad precedent.
"We're setting a very bad precedent here by opening this contract midstream," said Woytiuk. "A contract is a contract."
Woytiuk was also concerned that the contract had been held by Kavanaugh Bros. for several decades. He suggested the contract should go out on a request for proposal to see if Yellowknife was paying a fair amount against what the market can offer.
"If this contract hasn't been opened for bid for 20 or 30 years it's high time we did that."
Coun. Ben McDonald said he opposed opening the contract up for bid without first ensuring that a local company would be given first crack at it. He said major national companies could bid and undercut local companies for the service.
"Other communities have had nothing but trouble from this sort of thing," he said. "Companies like Laidlaw low-ball the first bid and the next time the contract comes up the local guys aren't in a position to bid."
Coun. Wendy Bisaro thanked administration for suggesting the change.
"We should be happy we have a proactive administration working for us," she said.
"If they see a gap in something they work to fill it."
Bisaro also noted that the city was getting a good deal, considering the last increase Kavanaugh received was in 1995 and the consumer price index in Yellowknife has increased by 13.2 per cent since that year.
Acting city administrator Tim Mercer said the contract is worth close to $1 million a year.