Invasion of the contract snatchers
Under the territorial government’s NNI policy, Nunavut businesses get special consideration when bidding on government contracts. It’s more than just policy – it’s written into the very fabric of the Nunavut land claim. Yet many small business owners say there are so many loopholes in NNI that it no longer benefits them – and they want changes to protect businesses that are Inuit in blood from those that are only Inuit on paper. By Chris Windeyer | Illustration by Dave Cutler
Every day for 25 years, Louie Bruce’s trucks trundled along the gravel roads of Coral Harbour, Nunavut, delivering heating fuel. Bruce’s company, Sudliq Developments Ltd., is one of the few private sector companies in the small hamlet of 834 people, the only community on Southampton Island (an area the size of Switzerland). It routinely won the contract from the Government of Nunavut (GN)’s Petroleum Products Division, the government agency that buys Nunavut’s entire fuel supply on the international market and distributes it via local companies at subsidized rates to consumers.
When the contract came up for renewal last year, Bruce figured he was a shoo-in. After all, his company could lay claim to a fleet of fuel trucks and a brand new, three-bay garage. He had a full-time staff of 10 and another 30 to 40 other part-time workers. But there was a surprise in store: The local Katudgevik Co-op swooped in and scored the contract.
Bruce was stunned. He lamented to Nunatsiaq News that he felt betrayed by the GN. “I trusted our Nunavut government,” he said, to ensure contracts would go to locally-owned businesses. As he and others in Nunavut believe, co-ops don’t count as local.
It’s hard to fault Bruce for assuming the fuel contract would always be there for his business. Sudliq regularly lands snow removal contracts and other odd jobs around Coral Harbour, according to government procurement records. That’s partly because the development of an independent private sector in Nunavut is very much a work in progress and in many ways, Sudliq is a big fish in a small pond.
But it’s also because Nunavut’s small but hardy corps of entrepreneurs have a competitive advantage built right into the land claim agreement that created the territory. Article 24 of the Nunavut Land Claim Agreement dictates that Inuit-owned business must get preference when most government contracts (there are a few exceptions) go out to tender. That piece of law becomes reality via the Nunavummi Nangminiqaqtunik Ikajuuti (“support for owners in Nunavut”) policy, known widely by its acronym, NNI. The policy’s enabling legislation came into effect on Nunavut’s first birthday, April 1, 2000, and has been tweaked several times since. The article’s own policy objectives are simple enough:
- (a) increased participation by Inuit firms in business opportunities in the Nunavut Settlement Area economy;
- (b) improved capacity of Inuit firms to compete for government contracts; and
- (c) employment of Inuit at a representative level in the Nunavut Settlement Area work force.
The basic idea is this: Every tender or request for proposals issued by the GN, or by any territorial Crown corporation or public body that receives more than half its funding from the GN, must apply the NNI policy. Businesses bid for the contracts and qualifying bids receive an “adjustment” of seven per cent of the bid value for meeting each of three criteria: being Nunavut-based, being located in the community where the work is to be done, and being Inuit-owned. In essence, the government pretends a bid that meets all three of these criteria is 21 per cent lower than it actually is. The intent, of course, is to increase the likelihood of Nunavut businesses in general, and Inuit-owned businesses in particular, winning government contracts. NNI can rightly take credit for helping a young, remote and poor territory grow some semblance of a private sector in a place where economic opportunities are often hard to come by.
But over the years, various complaints have clung to NNI. Business owners like Bruce resent losing contracts to businesses whose Inuit status they see as dubious. Or they grow frustrated with the mountain of paperwork required to prove they’re “Inuk enough.” Or they complain about what they perceive as an overly bureaucratic process that sometimes produces inexplicable and inconsistent results.
“Different officers… always end up with different outcomes,” says Lori Idlout, an Iqaluit entrepreneur who owns a medical supply distribution business, an Inuit art dealership and a construction company. She says she’s lost contracts to out-of-territory competitors and is struggling to understand why, despite offering reams of paperwork and undergoing the required site inspections to prove the Inuit bona fides of her companies.
Idlout’s not alone in her assessment. In 2011, the Auditor General of Canada of the time, Sheila Fraser, found that the Nunavut Housing Corporation and the GN’s Department of Community and Government Services were issuing contracts without adequately verifying that the winners were registered under NNI. Fraser also found the policy wasn’t applied evenly across or even within government bodies, and that government procurement agents were often insufficiently trained in terms of properly carrying out the NNI policy. In response to the audit, the government vowed to beef up training programs and make sure criteria are applied more consistently in the future.
“Bureaucrats have such a strong say in who wins contracts when they shouldn’t be using their personal attitude against businesses, against Inuit,” Idlout says. “This is supposed to be a public government, and decisions should be based on public guidelines. There’s always too much personal clout that went into the decision.”
But there’s a simple reason for that: No two contracts are the same, says Ron Dewar, the executive coordinator of the NNI secretariat, the arm of the Department of Economic Development and Transportation that’s charged with overseeing the policy. “One contractor might have to produce pages and pages of documentation to demonstrate all the technical requirements were met, (while another) contractor produces almost nothing because the requirements in their contract were much simpler.”
And of course there’s another reason: Even with a 21-per cent advantage, Nunavut businesses can still be outbid.
Stung by the loss of the Coral Harbour fuel contract, Louie Bruce launched a grievance to the NNI secretariat, which has an appeals board. The board ruled that the Petroleum Products Division should have awarded the contract to Sudliq Developments, in part because the Co-op used its own application form instead of a standard government form.
But the result of the appeal didn’t matter, because the minister – in this case, Community and Government Services minister Lorne Kusugak – retains the right to overrule any contracting decisions. By the time the case was through the appeal process, the Co-op trucks were already rolling, and Katudgevik was delivering fuel in Coral Harbour.
Manitok Thompson, Kusugak’s predecessor as public works minister (and, as it happens, Louie Bruce’s sister) says that while the appeals process itself was fair, the fact that the contract was awarded to the Co-op as the appeal was ongoing was not. She also thinks that the minister’s ability to simply disregard any rulings from the appeal board stands as evidence of NNI’s ultimate ineffectiveness. “The NNI policy is really a farce,” Thompson says over the phone from her kitchen table in Canmore, Alberta, where she now lives.
She’s most concerned with the standard for what qualifies as an Inuit-owned firm. Taking its cue from the land claim, the NNI policy states that a business must be 51-per-cent-owned by Inuit, an Inuk-owned sole proprietorship, or an Inuit-run co-operative.
Straightforward enough, but many complain the policy has created a simple workaround, where Inuit investors are recruited as silent partners, but the business is really run by non-Inuit. “A lot of Inuit are bothered by this,” says Thompson, who refers to these entities derisively as “potato companies: brown on the outside and white on the inside. These kinds of fake Inuit companies are getting ahead of the local, 100-per cent Inuit companies.”
This accusation is lobbed against co-operatives, too. There’s a belief, expressed by Thompson, Idlout and other Nunavummiut, that Co-op stores take directions from Arctic Co-operatives Limited (ACL), based in Winnipeg. In large part, the general ill will is due to ACL’s status as a major player in the Nunavut grocery industry, where it comes in just behind the North West Company as a target for public scorn when the issue of food prices arises.
That kind of talk gets the structure of co-ops plain wrong, says Rod Wilson, ACL’s vice president of member management services. ACL, he says, is a “service federation” created by Northern co-ops. It’s essentially a co-op of co-ops, designed to make use of economies of scale to supply member co-ops with cheaper goods. “We are sometimes referred to as a support office, a home office, but never a head office,” Wilson says.
ACL does own some businesses: a gas station, cable television services, and, as of early September, Iqaluit’s venerable Arctic Ventures department store, previously owned by Kenn Harper. But those businesses generate profits that help underwrite the entire co-op network, Wilson says. The decision to bid for local contracts, like the fuel delivery contract in Coral Harbour, is strictly undertaken by the local co-op on its own, he insists.
The pile of grievances that built up over the years came pouring out this past June, when Inuit business owners gathered in Iqaluit to sound off on both the territorial government and Nunavut Tunngavik Inc. (NTI), the land claim body that oversees the master list of certified Inuit firms eligible for NNI consideration. (NTI called the meeting together, it’s worth noting.)
The business owners in attendance collectively drew up a list of 13 recommendations for changes to the NNI system. The most eye-catching one is the suggestion that, in order to tighten up accountability for the Inuit firms registry, NTI should be given the power to kick companies found fudging their Inuit content off the list.
NTI declined to speak to us for this story, but the organization did put out a press release after the June roundtable, one that acknowledged that Nunavummi Nangminiqaqtunik Ikajuuti has its issues. “NTI organized this conference to give Inuit business owners who have first-hand knowledge about the government’s contracting policy and practice the opportunity to voice their concerns and recommend improvements,” said Arthur Yuan, then NTI’s acting CEO, via the press release. “The GN’s current contracting policy and practice need serious improvements, and NTI remains committed to work with the GN to find solutions to fix the issues. NTI also commits to continue a review of our internal procedures and work towards the solutions required.”
Thompson has another idea: She thinks the entire system, as it currently exists, should be scrapped. “Get rid of this NNI policy and come up with an Inuit preference policy just for Inuit [land claim] beneficiaries,” she says.
The GN has proposed creating a sliding scale for bid adjustments, one that gives a greater advantage to companies with a larger share of Inuit ownership. Dewar of the NNI Secretariat says that’s something the economic development department is already reviewing. He hopes the department will have a list of proposed tweaks to the system ready to bring before the Legislative Assembly sometime this winter. Meanwhile, Thompson may have a chance to take direct action on NNI’s issues: She’s running for the presidency of NTI, which is holding elections in December.
Idlout, the Iqaluit businesswoman, is among those losing patience. Changes have to come soon, she says, so Inuit businesses can hire Inuit workers and help make a dent in the endemic poverty that plagues Nunavut, where the unemployment rate hovers around 15.6 per cent. “I’m really just trying to support the economy and have more Inuit employed and contribute,” she says. “It’s frustrating, because I want to have more people relying less on the government and more on themselves again.”
As for Louie Bruce and Sudliq Developments in Coral Harbour, Thompson says it’s been a challenging year. The company gets by on other contracts, but it’s had to lay off some workers, much to Bruce’s chagrin. He’s someone who prides himself on helping young people get off social assistance and into the workforce, his sister says.
“They have been surviving,” Thompson says. “We are survivors.”