Thank you, Mr. Miltenberger. Committee, we are on page 7, Education, Culture and Employment, capital investment expenditures, education and culture, not previously authorized. Ms. Bisaro.
Thank you, Mr. Chair. I just want to make the same comment on this page that I made yesterday in talking about the operations expenditures. These projects have been completed and yet we are only now being asked to appropriate the funds. I won’t say more than that, but we have violated, I guess, for lack of a better word, a policy that we have as a government, that we don’t spend money until it has gone through an appropriation in this House, and all three of these projects are completed at this point and yet the money is only just now being approved. Just a comment.
Thank you, Ms. Bisaro. I’ll take it as a comment, but if Mr. Miltenberger has any comment to that.
Thank you, Mr. Chairman. The comments that we made yesterday in response to the concerns raised by Ms. Bisaro I’ll let stand so we don’t take up too much needless space in Hansard and chew people’s cabbage twice.
Committee, we’re on page 7, Education, Culture and Employment, capital investment expenditures, education and culture, not previously authorized, $330,000. Total department, not previously authorized, $330,000. Does committee agree?
Agreed.
Committee, continuing on to page 8, Transportation, capital investment expenditures, airports, not previously authorized, $700,000. Highways, not previously authorized, $40.1 million. Total department, not previously authorized, $40.8 million. Mr. Bouchard.
Thank you, Mr. Chair. I, obviously, had some questions about the highway, the Tuk to Inuvik highway, and the expenditures there. I guess we should be celebrating the fact that we’re going to look to accelerate this project and move forward. It sounds like the project could be moved forward and get done earlier than expected. I’m assuming with that we’re on budget, as well, but the difficulty comes in the fact that we’re asked to approve these budgets, and the Tuk to Inuvik highway was one of those dilemmas.
As a Member from the south, is that a project that we would support or not support? We ended up supporting the project because we knew there was going to be economic benefit to the region, which all indications are that the economic opportunities there were limited. There are a lot of people unemployed, and this was going to provide an opportunity for those people. Now that we’re in the midst of the project, now we get the department coming to us and saying, well, we just need to get the job done, the contractor agrees that we can move it forward and get it done. Now we’re wiping away those issues of economic development, the training, the implications of how this project will affect the Beaufort-Delta, and not only the individuals but the companies that are involved.
I guess my concerns are the fact that yes, I’m happy to hear that, but on the other hand, it seems like when we do these projects it’s just “let’s get it done.” We’re seeing some of that dilemma in big contracts, even construction of our hospital in Hay River. It’s a big contract. It seems like we just need to get it done. We have a contractor that seems to push our subcontractors, some of the local and northern contractors, to go let’s just get it done. We need to get this done. You need to put more money to it. We have a schedule but now we need you to ramp it up because we want to get done early and we want to maximize our potential and maybe even take on more profit. My concerns are that we are accelerating this not to the benefit of the Northwest Territories but the benefit of just getting it done and the benefit may be potentially to the contractors.
Thank you, Mr. Bouchard. Minister Miltenberger.
Thank you, Mr. Chairman. Having lived through the construction of the bridge, I can assure the Member that getting it done on time has very many benefits, and preferably on budget, because the Legislature clearly takes a dim view of projects that came in over budget and over time. This particular project has been, from the start, a four-year project, with the first three years focusing where the majority of work is on the building of the embankments and the final year of the finishing and putting in the top layer of gravel. While we are attempting to accelerate the project, the intent is to catch up with what didn’t get built last year so that we can still hit that three-year major embankment work time schedule. There will be no loss of opportunity to anybody affiliated with the project, either the employees or the owners of the company. The whole intent is to still work within that four-year period with the money that’s available.
I guess going forward with this project, obviously, now it seems like we’re accelerating the funds anyway. Maybe the project is going to be close to the anticipated schedule, but I mean, we’re actually accelerating the payment and the funds. Have we talked to the federal government about trying to accelerate payments and will our commitment and the federal government’s commitment match up as far as accelerating now?
There is an arrangement with the federal government where we can put in for payments for every 10 kilometres completed, and the arrangement is quite timely. There is a two to three week turnaround. The $40 million will only be drawn down based on progress, so for every 10 kilometres we’ll go back and we’ll get a payment. I’ll get the deputy minister just to reiterate for us the percentage. The majority of the money that’s going to be coming forward, at least 60 percent will be coming from the federal government. But with your agreement, Mr. Chair, I would ask the deputy minister to speak to that.
Thank you, Minister Miltenberger. Mr. Aumond.
Thank you, Mr. Chair. With the $40 million that’s under discussion today, the department has about $24 million remaining in its budget this year to expend for a total expenditure between now and March 31st of about $64 million. Based upon the progress that will be made, it is anticipated that we will get just over $71 million recovery from the feds which would include the work that was done now and for some previous work, so just over $71 million in federal recoveries.
Thank you, Mr. Aumond. Mr. Bouchard.
Thank you, Mr. Chair. Obviously, as we go through this project, one of the concerns when we first started when we were looking to approval was procurement of northern contractors. Has the department kept up with reporting of how many northern contractors are benefiting from the project, and can we get any of that type of information to date?
Thank you, Mr. Bouchard. For that, we’ll go to Mr. Neudorf.
Thank you, Mr. Chair. The contractor has done a good job in both maximizing local northern employment opportunities and in subcontracting opportunities. Last year he had 338 workers hired, and of that, 78 percent were local and northern workers. At the peak of construction going forward, the contractor anticipates up to 600 workers on site and he is estimating that 70 percent of those will be local and northern.
In terms of subcontractors, last year he had 41 subcontractors hired to various levels and doing various things. About three-quarters of those, 75 percent, were northern local subcontractors. Thank you, Mr. Chair.
Thank you, Mr. Neudorf. Mr. Bouchard.
Yes, thank you, Madam…Mr. Chair. I had it all day yesterday; you can get it today.
I guess the concerns are that we continue to hear a lot of things from contractors and from individuals of the opportunities that are there. I guess these anticipated numbers that we were given when we first got the proposal and the numbers, have we met any of the expectations? They predicted they were going to be hiring 90 percent contractors and 90 percent Northerners. Were there any indicators like that and agreements in place?
Thank you, Mr. Bouchard. Minister Miltenberger.
Thank you, Mr. Chairman. This project has met our expectations and was a construction project with a finite timeline. If we could have that same type of success with a lot of the other, say, operating mines, they would be happier and so would we. So the project has met expectations. Thank you.
Thank you, Minister Miltenberger. Mr. Bouchard.
That’s good. Thank you, Mr. Chair.
Thank you, Mr. Bouchard. Continuing on with the questions here, I have Ms. Bisaro.
Thank you, Mr. Chair. I want to say at the outset – and I’m speaking of the Inuvik to Tuk Highway Project – that I support this project but I have serious concerns about the ask that we’re being asked to consider here in this budget. That’s the $40 million change in cash flow to accommodate the new construction schedule and timetable that has been put before us.
I expressed my concerns the other day. Our cash position is going to require us to do some borrowing that’s going to add to our expenses. It seems to me that this is being done with little regard for our fiscal strategy and our fiscal position. Members are constantly being told there’s no money, there’s no money, there’s no money, and we ask for $100,000 for a particular program or service that we think is important and we’re told there’s no money, and yet it seems that we can turn around and find $40 million or borrow $40 million and find or borrow $20 million pretty much at the drop of a hat. So, it’s not so much the project that I’m concerned about but the way that it’s now being proposed to be funded.
My first question to the Minister is: When did the Minister and government know that there was going to be a need to change the cash flow payments for this project? This $40 million is an increase over what was projected for this budget year. There’s an increase projected for the next budget year as well. So, when did the department or when did the Minister or the government know that there was going to be the need to change how the money was flowing to the contractor? Thank you.
Thank you, Ms. Bisaro. Minister Miltenberger.
Thank you, Mr. Chairman. First I just want to reassure the Member and the people listening in here that we do all this money management with complete regard for our fiscal situation, which is why we get the clean audits and which is why we have the Aa1 credit rating and we managed to absorb some of these unexpected shocks because we always keep in mind looking after the taxpayers’ dollars as if it were our own. So I want to reassure the Member of that.
When the project was started, it was flagged right from the beginning that cash flow adjustment would probably be required, we just didn’t know how much. With a year under our belt, it became clear, once we actually moved dirt, built some roads, put in a lot of culverts and bridges, that we needed to adjust this cash flow to enable us to meet the schedule, the three years of embankment work followed by the fourth year.
Of equal importance is to keep this project on budget. So this is the most economical way to move forward. If we were to have the project run out of money and lay down tools and go away for the rest of the winter after starting up and they’re done in January and we end up paying $30 million to $40 million in fees and extra costs, the contractor’s lost opportunity to meet the targets, the budget, then indeed we would be a case of being penny wise and pound foolish where we would have a few dollars saved maybe in interest, but it would cost us $30 million to $40 million extra not budgeted for. This $40 million is part of the project cost. So it would indeed be an unfortunate circumstance and a bad fiscal decision not to keep this project going. To put a stick in the spokes of the project and the very issues that MLA Bouchard talked about, for example, about all the local employment and local business, that would be a distinct disadvantage for the project and a negative impact on all the workers, all the businesses that are doing business right now. This is, we believe, necessary to keep this project solvent and alive.
I know the Minister said that they knew early on, but I think again this is a situation where Regular Members weren’t advised and if we were advised, it certainly wasn’t spelled out to us that this was going to be coming at us later down the line. The department may have known, the Minister may have known, but I don’t think Regular Members were advised and told this contract is in flux, we’re going to be coming back at you probably at some point in time to ask for a change in how we’re cash-flowing the money. I certainly don’t remember that we got that kind of a firm explanation of the need to change things. It’s one more thing adding up to a list of things that I feel I’m not getting advised of.
My other question has to do with the cost of borrowing this money. I think we determined yesterday that it’s somewhere around $50,000 all told with all the extra amounts we need to borrow. For this particular project, whatever interest is attached to the borrowing of this $40 million for this project, that’s an increase in cost for this project. Is this a cost that the contractor is going to bear because it is a benefit for the contractor for us to speed things up or is this a cost that the government bears? Thank you.
It’s a cost that the government bears. Thank you.
Thank you, Minister, for that. Maybe the Minister doesn’t see it this way, but I get the sense that the contractor is running us and that the contractor is telling us I need to change my schedule and it’s going to cost you an extra whatever, $20,000 or $30,000, but it doesn’t seem as though the government is in control of, not the contract per se, but the way the contract is being managed. I suspect that the government would disagree with me, but I am saying this is the perception that I get, this is the feeling that I get. We are bending over backwards to do what the contractor wants us to do and it’s costing us money. I have a bit of a problem with that. Thanks, Mr. Chair.
This is a design/build contract road project. It’s the set price, $230 million. We need to make sure that we give the contractor all the tools, both fiscal and otherwise, that he needs to get the job done so he can move the design requirements and stay within budget.
This allows us to catch up to the road that wasn’t constructed last year because it was a slow start. This is not a gift or benefit to the contractor. That’s the only reason we are doing it. It’s not because he just decided it would be better off for him just because.
We are all very, very conscious of our obligation and the scrutiny on this project and the need to bring it in on budget, on time and of high quality. To do that, we have to be flexible. We knew right from the start there would be an adjustment required because this was the type of road construction and it hasn’t been done anywhere in this country before. We have a year under our belt. We have a seasoned team of road builders now at both ends working towards the middle. The expectation, I would assume – I assume, we assume, I think the people of the Northwest Territories assume – is that we want this project built on time and on budget.
After, like I said, we lived through the bridge construction and it had its challenges and it was very problematic for all of us, now we have an opportunity in a project that we want to bring in on budget and on time. In order to do that we have to move money within the approved project cost to get that done. Thank you.
One last question. The Minister mentions that it’s a design/build project. It’s a set price. I have great difficulty with these statements for many projects where it’s a set price. I have to ask, if it’s a set price, why are we having to eat the interest cost? Thank you.
Thank you, Ms. Bisaro. Mr. Aumond.
Thank you, Mr. Chair. So, as the Minister said, it’s a design/build process and we want the contractor to be efficient and give him the flexibility and the tools to meet the agreed upon price. It was our original budget cash flow before the project got started that’s resulting in the requirement to adjust the cash flow. So, as the Minister said earlier, our choices are to adjust the cash flow and bring in the project on time and on budget or face delay claims from the contractor because we are deciding we don’t want to progress the project in a manner that would be efficient to do so. So while we are incurring incremental borrowing costs close to the amount the Member has stated, the alternative is to face delay claims in the neighbourhood of between $30 million and $40 million, as the Minister stated earlier. Thank you.
Thank you, Mr. Aumond. Continuing on with questions, I have Mr. Yakeleya.
Thank you, Mr. Chair. This road from Inuvik to Tuk certainly has some national significance. The Member spoke about the support for this road. We’re talking about the request before us. The people up in the Beaufort-Delta certainly did their part with regard to grabbing the federal government’s attention to see this road get started. Today I should talk about building this road.
The federal government, you know, dropped a few million into our pockets to get it going and made arrangements. No small, easy task, considering how difficult at times it is for our government to get funding from the federal government. It was all due to some strong support by the people in the Beaufort-Delta.
As I was looking through this budget, I’m trying to figure out what is the message here. What message are we sending our people? We clearly heard from various sources that the feds want to build one road at a time. We really want to push strong for the Mackenzie Valley Highway. We heard that they are interested in building one road at a time.
This is an unprecedented area. If you look at Russia, they have a similar terrain. They’re building roads in the North and we’re also building roads in the North here. The message is: Can we do this within the prescribed budget that we have and the accounting is set in place? More importantly, we’re building and we’re advancing skills like trades to build those. That’s most important for me, is that we’re developing the young people up there with skills and, looking at that area, how much better off it will be in the future if we continue to build that skill. It’s no different than us building the Deh Cho Bridge or when you have highways down in the southern part here. People benefit from it.
Looking at this road here, what is the message? The federal government is certainly watching us. They’re saying, here, I’ve given you $200 million. We’ve given you money. The next big project, if it goes well and goes through, is $700 million, then so on and so forth.
Can you, as a government, really take on the task of building infrastructure in the Northwest Territories? Do you have it? I know they’re watching. The Prime Minister especially is looking at it.
So I look at this and I’m going to be asking in the future, what have we learned from this experience. There is certainly a lot of experience being learned in the Tuk-Inuvik road. There must be so many checks and balances that it’s crazy. But it’s there because of all the process and regulations. We certainly want to take this learning experience and use it in the Sahtu and build from Norman Wells south to Wrigley and Wrigley to the north. So we want to look at both ends. We want to start, also, but we have to wait. That’s a matter of fact. So we’re looking at this experience.
I’m happy to hear that there are contractors and subcontractors. There were 44 subcontractors. Seventy-five percent were northern subcontractors. We can dig into the details of that and dig into the workers.
The Minister made a comment that we’re looking at this project with the dollars and we’ll look after these dollars as if it were our own. Well, we approved these dollars, so it is our own, on behalf of the taxpayers of Canada and the Northwest Territories. So there’s no higher level to request a $40 million accelerated advance, because these dollars are our own and it comes through the process here.
I’ve been thinking about that and I’m thinking about this road here and I’m looking at our past experience on multi-million dollar infrastructure in the Northwest Territories and bringing that experience to this forefront here and what are the lessons learned about whatever infrastructure we’re going to have. Our regions are going to have millions of dollars of infrastructure money from one department or the next. Here we are asking to accelerate this. I’m hoping that the department is working in conjunction, in partnership, with the contractors, and that we are doing this, because we are at the forefront.
My colleague Ms. Bisaro asked if the contractors were taking the lead. If that’s the case, we need to have a little more discussion, but I’m hoping the government can say we’re working in partnership with them. We are the one taking…because this money is being approved at this level here, the $40 million, to accelerate and to speed it up.
I wanted to make that comment. But overall, the whole infrastructure of the Tuk to Inuvik road, number one, we’re building skills and we’re building opportunities. In Inuvik and Tuk the economics are not very good right now. As my friend Mr. Bromley said earlier, zip is happening in that region, and zip is happening in the Sahtu now.
In the smaller communities and the Inuvik-Tuk road, I’m going to support this infrastructure request because I think it’s very important in the bigger picture. But I also want to say, because I’m just specifically focusing on this road here, all the requests and needs that Ms. Bisaro talked about should also be in the forefront of the minds when there are requests for other regions. This is a huge chunk of money to accelerate the project. I believe the staff are doing the best they can to explain it to us, given the moving project that we have, that it will be okay and the other regions with their infrastructure also being considered that we can look at work at how we support other regions that have similar requests.
So I want to say that I’m going to support the people up in that area and I think they’re doing a good job. I think they have a lot to learn and they have done a lot of work to bring this to the forefront. We would have never done it unless the federal government was involved, and they became involved because of such strong work done by the leadership up there. So we should celebrate them.
Not all things are as smooth as we think sometimes, you know? So I hope we get the same support when we start looking at the Sahtu roads. Let’s celebrate the people. Good on them. We should be working with them. Thank you, Mr. Chair.
Thank you, Mr. Yakeleya. Minister Miltenberger.
Thank you, Mr. Chair. I appreciate the Member’s comments and support and his strategic, broad view of the project and how it’s going to fit into the broader road development and how we are cutting our teeth and earning our spurs on this particular project, when we work things out, and we’ll be taking that experience with us. Thank you.
Thank you, Minister Miltenberger. Continuing on with questions on this page, I have Mr. Bromley.
Thank you, Mr. Chair. To cut to the chase for the record: imprudent, premature. Thank you.
Thank you, Mr. Bromley. Minister Miltenberger.
Thank you, Mr. Chairman. For the record, I appreciate the Member’s comments. We had a fairly lengthy discussion about this yesterday. The comments I made yesterday I just leave stand on the record with regard to the Member’s concerns. Thank you.
Thank you, Mr. Miltenberger. Committee, we are on page 8, Transportation, capital investment expenditures, airports, not previously authorized, $700,000. Highways, not previously authorized, $40.1 million. Mr. Hawkins.
Thank you, Mr. Chairman. I’m not going to spend a lot of time on this issue. I am going to support the $40 million, but I do that with sort of the side comment of saying I feel that we have little choice. By obstructing the $40 million, I feel that we put the project and other types of headaches for us and we view them as let’s frustrate the process by causing a delay, I guess, in some manner or form.
Members have been very unhappy with the $40 million and how it has come about, but at the same time, I’m a realist and know that if we struck this $40 million, what frustrations have we caused? We’re following someone else’s schedule; that seems to be the fact. If we cause delay by stifling this money, stalling it, deleting it, whatever the case may be, we may be on the hook for more money, and in the end, it’s almost like our hands are tied.
I want this road built. It’s going to be on the books sooner than later, we’re committed to this project regardless of how the money flows and I think it’s important to let people know that I don’t think at this point, I’m going to say, and I’m qualifying it in my perspective as opposed to the exact Member for Member, but I’m saying generally Members are in support of this initiative and it’s a reality. That’s just the way it is. But just sort of the way this has come about has caused some concern and frustration and it’s difficult to articulate fully, but many people sort of feel the pressure of, well, if we support the way it has been delivered, what have we done. Are we doing our job, or are we not doing our job, and it has been a challenge. But I’m not any fool on the area that I know that we really just don’t have any other choice but to support the money. I worry about how much more this would cause the process by any potential delay.
I’m going to say, as I finish up here, that I’m hopeful the money will be used. I have no doubt that there’s excellent scrutiny on this project by our team and I have no doubt that they will only let the money flow when it’s necessary. So when this money is authorized, it will be authorized over the period to use it, and I know that it will only be used when it’s needed. So the process is a little frustrating on this one and I think the Minister and certainly his staff got it.
That said, I’m happy to support it to the principle that it has to be done anyway. So that’s sort of my position and I do want to see the eventuality of this highway built and I wouldn’t want us to see any unnecessary hurdles put in front of it.
Thank you, Mr. Hawkins. I’ll treat that as a comment. Thank you. Committee, again, page 8, Transportation, capital investment expenditures, airports, not previously authorized, $700,000. Highways, not previously authorized, $40.1 million. Total department, not previously authorized, $40.8 million. Does committee agree?
Agreed.
Thank you, committee. Page 9, Industry, Tourism and Investment, capital investment expenditures, minerals and petroleum resources, not previously authorized, $3.139 million. Total department, not previously authorized, $3.139 million. Ms. Bisaro.
Thank you, Mr. Chair. I have a couple of questions here. The first one has to do with the funding for the construction of a geological collection storage facility. I see we’re being asked to approve $500,000. I don’t have any problem with this project, but I recall from our discussion of the operations expenditures that under the Executive there is a negative amount of $4.206 million for the same thing to re-profile expenditures for the construction of a geological collection storage facility. So these two numbers don’t jibe and I’d like to know where the extra $3.7 million is going to be if we’re only spending $500,000 on this particular project but the Executive is giving up $4.2. Where’s the other $3.7 million? Thank you.
Thank you, Ms. Bisaro. For that, we’ll go to Mr. Aumond.
