Thank you, Mr. Moses. Mr. Abernethy.
Thank you, Madam Chair. The department administers contracts on a huge scale from small standing offer agreements, sole-sourced contracts for small amounts of money like $25,000, $30,000; $5,000 and up. We also do major builds such as the East Three School and the new office building in Yellowknife. We have change orders on a regular basis on any number of these types of things, these types of contracts.
In particular I can talk a little bit about the teardown for the school in Inuvik. We have a contract which is well within budget. There are going to be some change orders on that building. We had an assessment on that building that identified all the contaminants in the building, all the things that needed to be taken into consideration when doing the demolition of that building. We awarded that assessment contract to a local vendor here in the Northwest Territories who did that work. Based on that work, we went out for a request for proposal and got a number of bids. We awarded the contract to the lowest bidder who met all the conditions of the request for proposal and moved forward. Then once demolition began, it became obvious that there were a number of items that were not identified in our original assessment by our first contractor. As a result, we are going to experience some change orders on that. We believe that all the change orders that are going to come on that, based on the formulas provided by the proponent on removal of certain items, we’re going to be well within the budget that was allocated for that project.
In the initial assessment, is it common that when the department does get initial assessments on big projects that… On big projects, how often are those assessments not up to standard or up to par in terms of looking at providing the right contracting services to get the project done?
I’ll go to the deputy for some specifics on that, but by way of example, on this particular contract we knew we were doing a teardown on a building and we knew we needed to know what the risks were in that building by way of contaminants such as asbestos and whatnot. The contractor we hired to do the assessment so that we would have the information that we needed to go out for proposal for tender on that project, missed a number of items which, unfortunately, resulted in a couple of the change orders. This isn’t something that happens to us on a regular basis. We usually get pretty solid information that helps us build our requests or tenders. In this case, some specifics were missing, but for the exact detail I’ll go to the deputy minister.
Thank you, Mr. Abernethy. Mr. Guy.
Thank you, Madam Chair. Yes, background on change orders, contracts, we do have change orders on a regular basis. In our performance measures, we do try to track change orders and try to keep the number of change orders as small as possible. We do track that on all our projects.
In this particular case, as the Minister said, we did an ESA, we had a consultant to do ESA work on that project initially a number of years ago before the school was vacated, so that we could get some overall general estimate of the cost of doing remediation work on that building. Once the building was vacated this summer, we went back and hired a consultant to do a detailed ESA which included destructive testing, sampling, lab work and detailed quantities. Unfortunately, as the Minister said, that consultant did miss some of the materials in there.
We’ve had a process in place for a number of years. We’ve done a number of these demolitions, starting back I think with Akaitcho Hall, we’ve done Deh Cho Hall, we’ve done the Tulita school and the Fort Good Hope school, and in each one of those we’ve had some lessons learned that we’ve tried to apply going forward.
In this case, we have another lesson here with the consultant and his ESA, and we’ve decided that at this point, before we proceed with SAMS, we’re going to go back and do another ESA with an independent third party to verify, so that we don’t get into the situation on the next one. As the Minister said, we believe that the change orders that are before us are manageable within the budget of the project and we’re confident that we are going to complete that project within the funds that have been appropriated for it.
Thank you, Mr. Guy. Mr. Moses.
Just one last final question here. Is there any type of clauses that are put into the initial contract for big projects like this when we get an initial contractor doing the assessments? Are there any clauses that would put any change order costs or additional costs on the contractor to ensure that they do a completely thorough assessment of the project that needs to be completed? Is there any type of clause in the contract and, if not, would the Minister be willing to get one completed? Or adding one?
Thank you, Mr. Moses. Mr. Abernethy.
Thank you, Madam Chair. I just have a clarification question. There are two things happening here. There was the ESA which was done originally, which was intended to identify the items in the building so that we could actually get a proper price and that people who were bidding on contracts for the teardown could be informed. Is the Member talking about that contract or is he talking about the contract that was awarded based on the information which… The first one, okay. To Mr. Guy, please.
Thank you, Mr. Abernethy. Mr. Guy.
Thank you, Madam Chair. That is a good question and it is something that we are following up with right now. We’re looking at the terms and conditions of the contract. We have put the consultant on notice that there’s been what we believe to be a miscalculation in the assessment and the quantities of the building. They’ve been put on notice and we will be seeking advice, through both the terms and conditions of the contract, what the provisions are. If we need to go further than that, we will be also looking to contract legal advice to see if we have any recourse there. Certainly, we are pursuing that.
Thank you, Mr. Guy. Mr. Moses.
No further questions. Mr. Guy clarified that and I’m glad that the department is actually looking into something like that that might prevent us from continuing with these change orders and possible supp appropriations. Thanks for the clarification and the answers.
Thank you, Mr. Moses. Next on my list is Mr. Bromley.
Thank you, Madam Chair. I had questions, too, on contracting and procurement. Certainly, there is a very high rate of sole-sourced contracting. I believe it’s close to 25 percent; almost 50 percent when we throw in negotiated contracts.
The last time we looked at these processes, I discovered some shabby processes. For example, two contracts with identical work were issued to two different providers with, again, identical reasons, that reason being there’s only one contractor to provide the work. Obviously, that’s not satisfactory and I think there’s been some work done since then.
There are other concerns about, for example, should there ever be an inappropriate relationship with some suppliers which might give an unfair advantage to those suppliers. The management being contracted out to someone who then ignores the Minister’s direction and doesn’t give fair weight to local providers.
Another practice that the Minister mentioned was changing policy or deciding to implement policy without prior notice to suppliers. And finally, overly specific requirements in contracts right down to the brand name, often based on some individual in a department, when, obviously, an equivalent would do the job, and does in many cases. These are just issues.
I believe the Minister indicated the comptroller is doing a review. I hadn’t been aware of that. I appreciate that information. Do we know what the terms of reference is for this review? Maybe I shouldn’t be asking this Minister that question, but I’d be interested if there are terms of reference for that review, if he knows, and when that review is due. Thank you.
Thank you, Mr. Bromley. Minister Abernethy.
Right now contracts are administered by not just Public Works and Services, they’re administered by every department to some degree. Within Public Works and Services, the contracts awarded in ’12-13, by way of summary, to date, the Public Works and Services has only done 59 sole-source contracts, which is about 2.2 percent of all the contracts; 82.2 have gone out for request of proposal, and in 2013-13 none have been negotiated and we’ve got 199, or 14.3 percent, tendered. So very, very few within Public Works and Services are actually sole-source.
There are criteria for sole-source contracts. The goods and services or construction that are urgently required, and delay would cause injury or be against the public interest, only one party is available or capable of performing the contract, the contract is a consulting service, the contract will not exceed $25,000 in value or is another type of contract that will not exceed $5,000 in value.
I think what the Member is talking about, and the Member can correct me if I’m wrong, I mean, clearly there isn’t total consistency across the Government of the Northwest Territories, which is just another reason why the shared procurement model is valuable and that we need to continue to do the work on the shared procurement.
With respect to the review, the comptroller general is working with the Procurement Procedures Committee to look at these challenges that are coming out of the woodwork, and talk to vendors, talk to the individuals that we’re attempting to contract with, regardless of the method that we’re contracting, to figure out what’s working well and what’s not working well. I have had a number of examples brought to me by Members over the last year and we are sharing those with the comptroller general and the Procurement Procedures Working Group, and we hope to see some improvements on how some of these things are administered.
It’s interesting. As I indicated in my opening comments under standing offer agreements, in some areas we’re finding they’re working really, really well. In other areas we’re having challenges. It’s important for us to identify why we’re challenged in some areas and why we’re working well in other areas. That’s the type of work that’s being done right now in anticipation of moving forward with shared procurement.
I certainly can confirm that I have constituents who have had a number of issues. I’ve brought them forward and I, generally, am satisfied that they are being taken seriously and efforts are being taken to address them with possibly the exception of the overly specific requirements, which I still have not reached satisfaction yet. I guess we don’t know when the comptroller’s review is going to be done, and maybe I’ll save that for Finance.
In terms of the Green Procurement Policy, if I can make a little leap and then I’ll try and bring these two together. Trust me. I mean, I’m looking for the pudding, obviously, right? I’ve asked this a lot of times. When does the Minister think this is going to come forward, the Green Procurement Policy? He sounded pretty positive and actually could see some of the things I’m talking about in terms of potential. Is work actually happening yet on the ground?
Work is happening. I don’t believe it’s gone as far as the Member would like it to go. I would like to see it further along, as well, but given that we’re moving forward with shared procurement, we’ve had to make sure that everything’s going to line up and we need to get the shared procurement down and in place before we change too many other things.
The greening policies, the green procurement I think is important. I think the Member has made a significant number of comments about it and the value of it, so we will move forward on it. I will commit to having something for the Member to look at in the ’13-14 fiscal year, probably closer to the end than the beginning.
I’ll help the Minister remember that. I guess my last one is with general procurement policies and practices. We have the opportunity to have a green element. In fact, we are bringing that lens to our own work now and enjoying, as the Minister reported today in his opening remarks, some significant savings.
Will this Minister work to get the environmental aspect into our general procurement practices so that when we’re asking for something to be done, an important element in the RFP is the environmental practices. An efficient product, how will greenhouse gases be handled in terms of mitigation or offsets, and so on?
I think, as a government, we’re already doing much of that. If you look at the buildings we’re building, we’re building them to meet or exceed some of the national building codes. We’re utilizing technology that is available to us to help us control costs and leave less of a footprint. But I hear what the Member’s saying and as we move forward with the Green Procurement Policy, I will make sure that his comments are considered and utilized where possible.
Thank you, Minister. Next on my list, Mr. Hawkins.
Thank you, Madam Chair. There’s just a question about the Inuvik school and the removal of the old Inuvik schools. I’m just wondering on some detail on that. One of the complaints I’ve received recently was the fact that a southern contractor was used. Could I ask, maybe more so on process, as to what the department does to write our contracts to ensure that southern contractors don’t seem to have the edge or seem to just, by default, get these things. I’m noticing a bit of a trend here.
Thank you, Mr. Hawkins. Minister Abernethy.
Thank you, Madam Chair. Obviously, we’d like the work, as much as possible, to stay in the North, but the NWT is a signatory to the Agreement on Internal Trade, which is a national binding agreement. A key component of the AIT is non-discrimination which establishes equal treatment for all Canadian persons, goods, services and investments. Further, with respect to the GNWT Procurement Policy, demands that the GNWT, in its commercial dealings, observe the highest standards. It must stand the test of public scrutiny in matters of prudence and probity, facilitate access, enhance supplies access to contracts, encourage competition and reflect fairness in spending of public money, and we must comply with the government’s obligations under AIT.
We do have the Business Incentive Policy that provides an incentive to NWT-based businesses that recognizes the higher costs of operating and doing work in the Northwest Territories, and the BIP must comply with intergovernmental agreements such as the AIT, to which the GNWT must adhere, as I’ve already indicated.
In this particular contract, we had the assessment done on the work that was required. We went out for tender and we had a number of submissions submitted. We had five, in total, submitted. We assessed each of them based on the criteria that was outlined in the tender. BIP was applied and adjusted, and the winning bid was for $1.25 million, which was in budget. That company identified under BIP that 55 percent of the work was going to be done by locals, 3.2 percent was going to be done by NWT, and 41.7 percent was going to be done by southern. In total, over $500,000 is scheduled to stay in the North based on the contract provided.
How do you validate those types of things when they create those formulas? Do you do a follow-up or an audit throughout the process to ensure that they’re complying with their BIP document? I mean, quite often we hear that someone lowballs a bid but then they turn around and, you know, right after they get the bid and they sign their contract for that particular project, they then submit a claim for an adjustment. How do we make sure that they’re delivering on what they promise?
The other question at the same time, I guess, is what does Public Works do specifically to try to foster an opportunity that really looks like or draws out a northern partnership to ensure that we do get people on a better footing? You may not be able to write the contract to say you can only be a Northerner to bid on this, but in the same token, it can be written in a manner that means they have to use hotels, local labour, a lot of local things that are open for anyone in a fair, open market bidding process can comply to.
That’s what BIP does. Under this particular process, we have to apply BIP, where appropriate, and the contractors or potential contractors, when they’re submitting their bids, must identify the local vendors that they’re going to use in all situations. If they are going to be using local hotels, they have to identify the companies they are using, that they qualify under BIP.
As far as monitoring, we require regular reports from the vendors, the successful proponents on compliance with the contract that we sign with them, which makes specific reference to the individuals they would have identified in their tenders which gave them the BIP adjustment.
Madam Chair, I have a different view on BIP on how it’s used in that regard. But that said, how do you ensure that the compliance of those types of commitments are when they’re not BIP? What you’re saying is that BIP is the almighty tool, but it isn’t because if a southern contractor said that they would use some northern labour force, how are we ensuring that they’re tackling and using that type of force and how do we make sure that they comply as well? It’s easy to say, well, I think you mentioned 55 percent local, I think, labour. I couldn’t write as fast as you were talking. The point of the matter is, this company that’s doing the work there isn’t local, so how do we know that they’re complying with these so-called local initiatives that their bid originally comprised of? Thank you.
In proposals, the company that submits a proposal indicates the companies that they intend to work with, the work that they plan to have those individual companies doing. We have contracting staff and Public Works and Services staff – sorry; this was a tender – in the community who is reviewing their compliance with the contract that was signed. The contract makes specific reference to the individual local companies and NWT companies that they will be utilizing for services.
By way of example, on this particular project, 50 workers in Inuvik were enrolled in the training course arranged by the successful contractor. On the first day of work, 30 were present to start work on that facility. Twenty-five, from what I understand, are still working on that project. They made a commitment to use local resources. They identified the local resources that they intend to use. We monitor, on a regular basis, their compliance with the contract that they have signed with us to make sure that they are in compliance. That would be true whether BIP applied or not in this particular case.
If we sign a contract with an individual for a project, we monitor those projects to make sure that the individual company or provider is staying true to the contract that they signed.
What type of public reporting do you do when you monitor the compliance of the commitments that some of these contractors make? Thank you.
Madam Chair, can I get the Member to repeat his question? Is it specific to this project or is it overall? I’m not sure I understood completely.
I guess, in this case, what I’m getting at is, you say monitor these types of things. Where is that reported and where is it publicly reported? Thank you.
Madam Chair, we do general contract reports. It is not always a public document, but I’m happy to share the information on individual projects with committee, at the appropriate time, on a requested basis.
Thank you. How do you monitor deficiencies sort of in the same stroke? When you do all of these types of reviews and you monitor these contracts in the context of compliance and follow through, do you do any particular follow-up, in a public reporting sense, as to how contracts have been fulfilled, whether they’ve been fulfilled properly, whether we had a fight with them, whether they complied? What I’m getting at is, is there any type of public disclosure that the public would be able to say, when they did this project, they wanted, we will call it fair and square, they did this project but the public doesn’t know of how many problems were done, were they a good contractor, did they fulfill, or did they walk away from the project, so those types of things. Is there any reporting, and if there isn’t, has there ever been any consideration of reporting that publicly? Thank you.
Madam Chair, there is literally thousands of contracts going on, but I think the Member – and correct me if I’m wrong – is talking about the larger build contracts as opposed to the smaller contracts that we may be administering. As I’ve indicated previously, with the East Three School, by way of example, we will do a complete post-mortem. We are doing a complete post-mortem on that project. It is a significant project. That will certainly be shared with committee and whatnot.
Other projects, ones that are certainly brought up or people are questioning, we are happy to do reviews of those to make sure that we’ve learned best practices and that we learn what has worked well, what isn’t working well on any of our contracts. This particular contract for the teardown of the school, we have identified some challenges that we faced. We had some difficulty in the beginning with the initial assessment of the review. So I’m happy to do a review of this one and share it with committee as well.
Madam Chair, I am very curious so I will certainly see that. Sidestepping this, but sort of along a similar vein, does Public Works ever drop a bit of, and I will just use the term – it may not sound friendly, but – the black listing sort of process where we have had contractors who have been unable to fulfill their obligations, whether they’re architects, engineers, contractors and construction, for major projects? I’m not talking about delivery of stationery. I’m talking about meaningful ones. How do we report on those types of things? Do we have a way of ensuring that we just don’t keep hiring the same people who make the same types of mistakes on and on? That is a critical concern when we get to large projects. Do we have any enforcement tools that can create a list? I hate to use the word “black list,” but I’m going to say create a list to say, look, you screwed up on three projects in a row. We’ve just had nothing but disputes with you. Yes, you’re the low bidder, and yes, theoretically you can say you comply, but at the end of the day it creates a nightmare for us, you can’t do this project. Thank you.
Madam Chair, we are a public government so we can’t actually black list contractors. In many cases, in problems that exist, the GNWT is not always a party to contractual agreements between general contractors and their subs. A lot of the times, issues are coming to me about subs and the issues that a primary contractor may be having with some of their subs. These subs are contracted to the person we’re contracted with. Our relationship is with the contractor, not with the subs.
The GNWT procurement policies and contract regulations do not permit the government to actually black list contractors from competing on public tenders as a result of unsettled disputes that subcontractors may have with other suppliers.
On larger projects, the GNWT requires that the general contractor provide a labour and/or material bond. This bond is specifically in place to provide protection to subcontractors and suppliers with outstanding claims against a general contractor. The GNWT is not in a position to interfere with this legal process established in our contracts for the protection of our subcontractors.
We make sure the bond is there so that subcontractors are safe. If we have an issue with a contractor on the actual delivery of a contract, there are mechanisms in place for us to seek remedy on an individual contractor. But as far as dealing with their subs, and this is where I have seen a number of people have concerns about a primary based on something that a sub is concerned about, and we can’t do that. Thank you, Madam Chair.
Thanks, Mr. Abernethy. Mr. Hawkins, your time is up. I’ll put you back on the list, if you wish. Mr. Dolynny.
Thank you, Madam Chair. This is the sixth department that we’re in the middle of process review for main estimates and I’m always haunted by the voices of our Minister of Finance, baton down the hatches, fiscal restraint, and yet when I look at this directorate in terms of what we’re doing just in compensation and benefits and changes to the overall structure of number of personnel, I find myself at odds with what I’m hearing from the Finance side of our government versus what we’re seeing in this department.
Madam Chair, since 2011-2012 we’ve seen with the main estimates today an 18 – if my calculations are correct – an 18.9 percent increase in compensation and benefits, and even since the revised estimates of last year, we’re seeing a 14 percent increase in our compensation and benefits. Can I get a rationale as to why we need to see such growth given the fact that this exceeds, far exceeds forced growth and where we’ve had issues with some of our other budgets where we can’t even get forced growth in program development, but yet we seem to have more than enough money to deal with more personnel? Can I get a comment on that, Madam Chair?
Thank you, Mr. Dolynny. Minister Abernethy.
Thank you, Madam Chair. Unfortunately, we go page by page, if the Member were to go a few pages in, he would see that we have done a reorganization within the department. Asset management has gone down, the positions in asset management have moved into the directorate. There is zero change at the bottom line of the department other than some forced growth as a result of salary, UNW levels, but we moved a number of positions that used to be in asset management into the directorate. The increases that the Member is talking about are a direct result of that move, not a change in a giant addition of positions into this department.
Okay, I’ll give the Minister that benefit. Maybe I’ll ask my questions more so on the net change in the directorate. We’ve seen an increase in the number of positions in Yellowknife with 70 positions. There’s been a net increase of six positions overall. My question is: Why Yellowknife? Thank you.
Thanks. If the Member goes to page 7-18, which is asset management, he’ll see that six positions have been taken out of asset management, and if he then turns to page 7-14 he will see that six positions have been added into the directorate. These positions haven’t changed their location, they haven’t changed their job. We’ve changed the reporting relationship. There was a restructuring in the department. It isn’t an addition of positions to Yellowknife in any way, shape or form. The positions existed, the incumbents are still sitting in their seats, they’re still sitting on the same floor and they’re still doing the same job.
Okay, strike two for the Member. Alright, I’ve got one more bat here and I’m going to put everything into this swing here. The concern I have is we don’t see any positions here, and I know I’m jumping one page and I apologize, because I’m talking about the directorate here, no representation of directorate in the Sahtu. I found that to be quite odd, given the economic activity in the Sahtu area that we would have seen directorate positions. Now, has that been looked at with respect to a reallocation in decentralization of directorate personnel? Why aren’t we seeing the Sahtu mentioned in this capacity? Thank you.
Thank you, Mr. Dolynny. I’ll allow you to jump ahead a page. Minister Abernethy.
Thank you, Madam Chair. We are committed as a government, not just as a department, to getting positions decentralized where appropriate, and in the Public Works and Services we did create one new position and we located it in Hay River.
With respect to the Sahtu and Public Works and Services, the Sahtu is actually administered out of our Inuvik office, and we do have employees in Public Works and Services in the Sahtu and we’ll continue to do that. As work increases, we may find that we’re in a position where we have to consider additional resources in the Sahtu, but right now the requirements for deferred maintenance, the requirement for the build with respect to the new health centre and long-term care facility, those are being dealt with by our regional office in Inuvik.
Thank you, Minister. Next on my list is Mr. Hawkins.
Thank you. One of the questions I wanted to continue following up on in a similar vein was general contractors not paying their subs. Although I know that the department will have a, I’ll say a canned answer where they’ll say, well, it’s hands off and it’s not their problem, but that sort of speaks to the diligence I talked about earlier. I realize we’re a public government so we cannot necessarily blacklist per se, but how do we deal with that when we have general contractors not fulfilling, well I’ll call it their moral obligation but by all means their financial obligations by paying their subs? The bond will be the answer, but yet in some cases as of recent, I’m aware that one particular one had signed off and said that they did pay them. So what remedies does the GNWT have if we lose our rights under holding their bond in place? I mean, do we have any down-the-road rights to deal with these types of organizations? That’s a major concern. Thank you.
Thank you, Mr. Hawkins. Minister Abernethy.
