Here’s how the NWT is being told to change procurement

The Northwest Territories needs to turn a jumble of policies into a coherent procurement strategy that comes with real enforcement to ensure compliance, a panel recommends.

Many NWT businesses and Indigenous governments have called for revisions to procurement – the process by which the NWT government orders goods and services – to better direct money to northerners and their companies.

The 50 recommendations released on Wednesday by a three-person independent panel form the start of the revision process. The GNWT says it will now study the recommendations and seek the views of Indigenous governments.

How much changes may depend on how broad an approach is taken. Panel chair Leslie Anderson, a former Yukon and BC procurement manager, acknowledged the larger role Indigenous groups seek in procurement could even see entire projects shifted to Indigenous governments in a form of devolution – if the NWT government is prepared to be that ambitious.

The territory has a target of summer 2022 to implement a new system. On Wednesday, the GNWT said it was “too early to speak to implementation timelines as the GNWT still needs to hear from modern treaty holders and Indigenous governments.”

Uniting the panel’s 50 detailed recommendations are four overarching themes: creating more capacity to manage how procurement works, making it easier to do business with the GNWT, increasing the availability and impact of procurement opportunities, and – more than anything – developing “a strategic approach to procurement.”

The panel said the NWT government currently has a fragmented approach. Other recommendations won’t really work, the panel argued, unless the GNWT has a clear strategy that all departments are following.

“We are proposing replacing the 30 policies and interpretive bulletins that currently govern procurement with a single unified framework,” the panel stated, adding those 30 documents often don’t have consistent objectives.

There must also be better monitoring of procurement, the panel found. Its report states: “There are some significant shortcomings with the data available, including the absence of information about subcontracting, that seriously affect the ability to determine the impact of procurement on the local economy.”

Many millions of dollars at stake

There are, however, some key numbers. NWT government procurement involves spending an average of $550 million each year, or more than 15 percent of the territory’s GDP. In some years, more than half of the GNWT’s annual budget is spent through procurement.

How that money is handed out, and to whom, significantly affects the fortunes of northern businesses and their employees. Ultimately, it also affects communities’ and governments’ social and economic objectives.

In producing its recommendations, the panel declared: “If adjustments in procurement policies and processes can be made that enable even one-percent more of that annual procurement spending to be directed to NWT-based firms, it would result in the creation of an additional 19.8 full-time equivalent jobs and $7.7 million in revenues for NWT businesses.”

In 2020, both the Tłı̨chǫ Government and Yellowknives Dene First Nation publicly expressed frustration with the NWT’s procurement system.

The Tłı̨chǫ Government accused the territory of showing “complete disrespect” by publicly tendering work on the Rae access road without offering a direct negotiated contract with the Tłı̨chǫ. The NWT government subsequently appeared to climb down by promising to directly negotiate future infrastructure contracts in the region with Tłı̨chǫ businesses.

At the same time, the Yellowknives Dene First Nation briefly withdrew support for the proposed Slave Geological Province highway after one of its businesses, Det’on Cho Environmental, was overlooked for related contracts. By October last year, the two governments said they had resolved their differences.

Launching this panel’s review in January, finance minister Caroline Wawzonek told reporters the territory “can’t afford” to keep having such disputes and urgency was required in finding a solution.

On Wednesday, Wawzonek welcomed the panel’s report, saying in a statement: “Government procurement and contracting serves as a great source of economic activity throughout the territory and residents should benefit from this as much as possible.

“I look forward to working closely with our key partners for their insight on creating a unified made-in-the-NWT procurement approach that ensures maximum benefit to our residents and communities.”

How do you hold companies to account?

The panel does not specify exactly what a new GNWT procurement strategy should look like but does make a series of connected recommendations.

For example, the panel suggests the NWT government may need to create positions and training to make sure a unified strategy actually has the resources it needs to work. There are also opportunities in trade agreements that the NWT is missing out on because it lacks a coordinated approach.

There are various recommendations for changes to the Business Incentive Policy, or BIP, a tool used by the GNWT to give NWT-based bids for work greater weight.

Four recommendations related to BIP are:

• shift the policy’s emphasis slightly so it rewards bids that create more employment in the NWT, rather than rewarding NWT ownership of the business bidding;
• use more set-asides and limited competitions – allowing clearer targeting of money toward NWT businesses;
• gradually halt the process whereby some companies who no longer meet criteria are grandfathered in; and
• ensure as many contracts as possible are eligible for the application of BIP.

Sometimes, enforcement of policies like BIP is as much a bone of contention as the policy itself.

Northern companies have in the past complained that southern firms are able to get around procurement tools designed to keep work in the North by using shell companies or other devices to acquire the work, then ultimately send much of it south.

The panel says the NWT needs to demonstrate more teeth in catching people “gaming the system,” as then-infrastructure minister Katrina Nokleby put it in 2020, and holding them to account.

“The panel heard repeated concerns that some suppliers are taking advantage of the fact that some requirements or commitments made in bids are difficult to enforce,” the report states.

Anderson told Cabin Radio there was a “widely held perception” that enforcement of the existing rules does not occur.

“It isn’t obvious to people,” she said, “and it is difficult for staff to enforce things, to some extent.”

The NWT government is already working on a “vendor performance management program.” The panel said that program should provide staff “clear authority … to enable the use of penalties and incentives” like fines or even disbarment from bidding in future.

Bill Kaip, director of procurement shared services at the Department of Finance, said that while such penalties could already be applied, he agreed more clarity was needed.

“It’s very hard for contract managers to implement any type of enforcement without a policy in place or some type of provision to manage performance,” said Kaip.

“That’s one of the areas we really need to strengthen.”

The initial phase of introducing a new system has begun. Certain construction contracts now involve more reporting of local and northern work. “We will be looking at how we’re going to move forward [on] how we should hold contractors accountable,” said Kaip.

An Indigenous strategy?

The panel – which spent five months consulting with NWT residents, businesses, and governments – reported “consistent and widespread support for the idea of developing strategies to support increased participation of Indigenous businesses and governments in GNWT contracting.”

The Yukon, for example, already has a procurement policy specific to First Nations. The NWT currently does not.

“This may take time. It’s important to do it well and do it right,” said Anderson, saying support had been heard for the Yukon’s approach. (How, exactly, the Yukon enforces its First Nations procurement policy is about to be discovered, with those rules set to kick in shortly.)

Anderson stressed that while any form of Indigenous procurement approach was the GNWT’s to devise, there was definitely support among Indigenous groups for the handing-over of some contracts on their lands for Indigenous management.

Options range from limiting participants in bidding to local Indigenous businesses through to what Anderson termed a form of “devolution.”

“If you wanted to be very bold, you could just transfer opportunities,” she said. “We’re trying to avoid presuming that would fit for all, or anyone, but that could be considered.

“To some extent, that’s outside the realm of procurement. There is so much recognition among participants that even deciding what’s on the table, or how to have these conversations, is an important part of framing what this will produce.”

If the GNWT “has the resources to look at that broader set of questions,” Anderson said, handing over projects for other governments to manage “could be of interest.”

The NWT government, in response, said “government-to-government dialogues are under way to collaboratively develop and implement an approach to advance Indigenous participation in procurement and to identify opportunities to maximize the benefits from procurement for Indigenous people and businesses within NWT.”