Thank you, Mr. Speaker. I have spent the better part of three to four months, with the help of research, trying to do a post-mortem analysis of the second largest capital project on the books of the GNWT. That is the Inuvik E3 School. This proved to be a daunting task and one that spawned much resistance, resentment and personal attack on my character.
The role of the MLA is not easy and at times we uncover or unearth some truths that happen behind the four walls of government. We have a duty to expose such findings, even at the risk of persecution by special interest groups, businesses and some members of the community governments.
I want to say on record, who wouldn’t want to congratulate the people of Inuvik and surrounding area, the community leaders and members, education administration, teachers and students, with the announcement of the new school? How would someone question the need for a proper facility to enhance our culture, provide endless possibilities for our students and give every opportunity to our children?
These are not the issues anyone is challenging, as there is not a soul in this House that is questioning this premise. I can tell you that everyone here is proud to be opening this new facility. I, for one, am one of those in support.
So if we’re not asking the aforementioned questions, then what questions should we be asking? What should we be asking now at the completion of this project? Did we act on this project in a way that was transparent and accountable? Were we good stewards of the public purse? Did we protect the public interest? Did we use the proper competitive procurement guidelines? Did our Negotiated Contract Policy stand up to the rigors of a large-scale project design like this? What did we learn to prepare us for large upcoming projects like the Inuvik-Tuk project, the fibre optic project and the Stanton Territorial project, just to name a few?
These guiding principles or questions are what were used as a baseline for the analysis of the E3 School project. In fact, my past dealings with any project in this House has been with the same measuring stick or lens in design, and I would treat every project, large or small, with the same careful analysis of detail and design, and in doing so, I believe I have been thorough and fair in all of my assessments.
In this House we have undoubtedly heard many times too numerous to count, that this project was “under-budget and built one year ahead of schedule.” In fact, it’s almost with a degree of sarcasm that if you are presented with a claim or statement often enough and with such repetition that it must be true. Right? So it is only fitting that I start my journey with this repetitive statement, which many of us have heard in the past couple of weeks. The term “under-budget” is a very broad statement used in the industry and its definition of sorts can be used to validate almost anything you desire. To prove this point, let me walk you through a brief chronology of this school project.
In 1999-2000 year, the Sir Alexander Mackenzie School was approved in the GNWT’s capital plan with a total budget of $6.3 million. It was identified even back then that the foundation of this school and most of the building had reached its end of service life and that a simple renovation was not feasible. So at that time, ECE began to develop and plan for the school’s replacement. During the next five years, there were over eight attempts of project designs, options, schematic details and construction cost estimates that propelled the original estimates from $18.5 million to $25.3 million, all the while with limited information on the overall scope or approach to the project. Then in 2005-2006 both schools were included as one project in the capital plan at $35.3 million. On October 25, 2005, then-Premier Floyd Roland introduced a supplementary appropriation in the Assembly with reference to advancing “a joint design for the two schools.”
By the 2006-2007 year, the combined costs had risen to $64.1 million. Then in the 2007-08 year, the costs, of course, were forecasted at $76.3 million. In the 2008-2009 year, the expected cost rose to $79.9 million. One might want to pause for a second to ask why did we see such cost escalation during this period of time when really no construction work was being undertaken. This is a good question.
Actual construction costs use a type of agreed upon escalation or market escalator during every construction season. This is used as an estimate for construction and is based on information provided by northern building contractors, researchers, market conditions, availability of raw materials, review of bank analysis on lending rates and consultations with surveyors across western Canada.
So in other words, the GNWT would forecast these expected costs during the design and build of this project to not exceed an inflationary increase of blank percent over a said construction period. This is what forecasters could also conceivably call a buffer of sorts. Although there is a bit of science to this number, it is by and large a direct result of actual construction comparables within a closed market environment. In other words, the GNWT will base a number of similar projects, square foot, type and design, and crunch a comparison number of a guess on price increases in that market.
It was important that I spend a moment to define market escalation, as we will come back to this market escalator a little bit later in my presentation.
So getting back to the chronology, in September of 2008, the Infrastructure Acquisition Plan showed that the two schools to be combined into one project with a total cost of $115.4 million. Then in Hansard for October 8th of 2008, of that year, the deputy minister of Finance informed the House that a request for a negotiated contract had been reviewed and approved and that the GNWT was working with the contractor. The public was informed then that just the construction cost was brought down from $110 million to just under $100 million. This new announcement came on the heels of the new capital planning process for new projects, which we learned then to be called Class C estimates. In essence, this new Class C estimate was supposed to be, in the words of the deputy minister of Finance on October 16, 2008, “…so that we have an understanding about what the scope of work is and what is it going to cost…to get a really good idea about what it is we are building and how much it’s going to cost.” However, this was the first time Public Works and Services was to use the Class C estimate process for such a large-scale project. So there were many areas of concern whether or not it was truly going to pass the smell test.
What the Department of Public Works and Services told many was the most critical elements in pricing for a good C class estimate strongly depended on the market prediction or escalation used by the GNWT. In this case, the awarding of the contract for construction of this new school, the cost escalation for its various components used was a colossal 50.5 percent over the three years from the 2005-08 seasons. Let me repeat this number again, 50.5 percent.
So to put that in perspective, let’s say I was getting a wage of $50,000 in the year 2005. By virtue of this market rate escalation writer, by definition the GNWT proposed that I should receive a wage of over $75,000 by the year 2008. Nice as this would sound, it defies the premise of consumer price index for any inflationary statistics that we know to be true. The sound and rational person would have a hard time believing how the price of a 2 by 4, electrical tape or cement can go up 50.5 percent in three years. Mr. Speaker, many of us have a hard time fathoming this number.
Then again, were there other mitigating factors that could have conceivably affected this so-called huge increase of market escalation that could have affected the estimate awarding and a negotiated contract for this new school? The answer is yes, Mr. Speaker. Remember what I indicated what also affects market escalation? The answer is the use of comparative buildings or similar design. In this case Public Works and Services did provide a comparison of costs for various new schools that were used in this market escalation calculation. It may be relevant to indicate that three of the five new schools listed for market comparison were built by the very same proponent that was awarded the negotiated Inuvik school contract. Of the three schools built by the same proponent, Tulita was an open tender with two bidders, Ecole St. Cyr was a tender with two bidders, and Fort Good Hope was an RFP with two bidders.
So if the waters weren’t muddied before, the mere suggestion of a 50.5 percent market escalation comparison in coming up with a final price for the East Three School should boggle the mind of the average person. The question bears asking, did the lack of real solid tendering artificially raise the market escalation in favour of an out of control, heavily priced product in the negotiated process? We will never know the answer to this question.
If the waters aren’t muddy enough, for some strange reason we see a supplementary appropriation No. 2 for 2008-2009 for Education, Culture and Employment for a negative amount of $6 million for what we refer to as a reallocation towards Sir Alexander Mackenzie and Samuel Hearne Secondary schools in Inuvik. This was, in essence, for a site remediation of these two schools that was to be included in the 2009-2010 budget. I must admit, when this term was brought up by myself and discussed recently with the Department of Public Works and Services, I have yet to receive a rationale for their reallocation of this money into the project and whether or not this amount has been truly factored into the costs of the overall budget and project. I will leave it to the department to explain to the public what this negative supplementary appropriation was used for, where the money flowed from and how this affected the total whole project cost.
I’m nearing the end of my chronology of this project and, again, I want to stress the ever important terminology that we’ve heard time and time again from many in this House, and that term is “under-budget.” Now, with the explanations that I have brought before this House today, can one really say, with any degree of certainty, that the taxpayers received a product that was under-budget? I guess we would have to agree first what was the budget to begin with, as it is clear that it was truly a moving target for almost six years. However, even if we begin to believe this under-budget claim, the market escalation also used begs scrutiny. At over 50.5 percent in the three years of design-stasis and the perceived over-weighted aspect of one proponent used in the calculation, how is one able to believe that fairness and transparency were indeed used in a market escalation? Again, we may never know the true answer to this question.
Let’s return, shall we, to the other claim of this building being built one year ahead of schedule. To do so, let’s take a moment to review the contract reporting for the main construction contract that was awarded for the Inuvik E3 School. Now, the information on the awarding of the construction negotiated contract to build the Inuvik E3 School is not available on the GNWT’s contract opportunities website. It is, however, listed at $92,277,197 in its 2008-2009 contract report. Unfortunately, details and the data of the contract are not available in this contract report. However, upon further investigation, I as a Member have been granted access to information that sheds new light on this contract, timelines and the original contract of established dates and substantial completion and a revised construction schedule.
While since the GNWT has never tabled this document, we cannot discuss such findings. Too bad, Mr. Speaker, as I think many would find this information enlightening. Therefore, until the department tables the negotiated contract that was used for the construction of this project, we will never truly know what terms were used for the date of substantial completion of the building, nor will we truly know the revised construction completion date that was negotiated behind closed doors.
So again, Mr. Speaker, the term completed one year ahead of schedule is a great term to throw around, but until this document emerges, how can one validate this claim?
Mr. Speaker, colleagues and citizens of the Northwest Territories, I want to thank you for your patience as I tried to reveal the story of this project through the lens of a Regular Member. Even after the proposed Inuvik-Tuk highway, this school infrastructure will still be the second highest cost project on our books invested by taxpayers. So it was important that we take a minute to review and evaluate it for what it was and not dismiss some of the obvious questions many still have.
Again, this investigation was never meant to diminish the need for proper learning facilities in our various communities, but does use the appropriate measuring stick showing there could have been savings and design used for other school infrastructure or programming needs for our residents.
Mr. Speaker, in the end, I truly hope the Minister and the Department of Public Works and Services are listening today, and I hope, for the sake of all residents, that this Minister and this department open this project for a formal review and table a complete forensic audit for everyone to see. Thank you, Mr. Speaker.
Thank you, Mr. Dolynny. Colleagues, I have two more Members that have their names forward for replies to opening address, but I will call a five-minute break. Thank you.
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