40 Years of Evolution
By John Curran
2017 marks the 40th anniversary of the NWT and Nunavut Construction Association and over the years the organization has seen plenty of changes throughout the industry.
When you consider that the Tower Group of Companies has been operating in what is now Nunavut for the past 70 years, company President John Jacobsen has lived through many of those changes firsthand and the biggest thing he points to relates to contract management.
“When we first started in 1946, all of the construction contracts were issued at the national level, both with the Government of Canada and the U.S. military,” he said. “In those early days, there were very few of us in the Northern contracting world.”
Over time, much of Northern infrastructure development switched and responsibility moved to the Government of the NWT prior to division in 1999 – after which it shifted again to the Government of Nunavut when the new territory was created.
“In the larger centers of Nunavut, municipalities are now contract authorities as well and we’ve seen an upswing of private sector development with the arrival of the mines.”
Contracting is now a much more regulated process, pointing to the Business Incentive Policy in the NWT and Nunavummi Nangminiqaqtunik Ikajuuti (NNI) Policy in Nunavut, which were both created to help ensure territorially-based businesses have the inside track to win potentially lucrative government contracts.
“Since the land claims agreement was signed, there is a much greater emphasis placed on Inuit ownership and creating Inuit employment,” he said. “With all of the jurisdictional changes everything is managed and regulated on a much more local level.”
On big jobs, like the new Iqaluit Airport and Terminal building, there was a requirement that 10 per cent of the project’s budgeted labour costs go towards Inuit employment.
“On most territorial jobs it’s 25 to 40 per cent by payroll value,” he said. “We’ve been around a long time and have many dedicated long-term Inuit employees, but it’s a continual balancing act to achieve the targeted employment levels.”
How Did We Get There?
Nowadays Bob Doherty wears multiple hats as the President of both Canada North Projects Ltd. and Fire Prevention Services Ltd. in Yellowknife, and is the immediate Past President of the Construction Association, but 40 years ago he arrived in Frobisher Bay (now Iqaluit) as the Regional Engineer for the GNWT Department of Public Works and Highways (PW&H) and was responsible for the operations and maintenance of all GNWT facilities in the Baffin region.
At the time, capital construction projects were delivered entirely through the department’s Engineering and Architecture Divisions resident in the territorial capital of Yellowknife.
“In those days, there wasn’t much consultation at the design phase between people in the field responsible of operating infrastructure, and people in Yellowknife responsible for design and construction” said Doherty. “Departmental project managers managed the projects by outsourcing or tendering the design and construction contracts to mostly South of 60 consultants and contractors.”
As a Regional Engineer responsible for operating and maintaining capital facilities through the winter, he was always frustrated when those southern-based consultants and contractors often rushed to leave the sites before the worst of the winter set in.
“A lot of facilities were built that did not adequately consider the fundamental labour challenges inherent in remote and isolated Northern communities, and so opportunities to develop labour and local businesses were lost,” he said. “And because there was limited input from operations staff during the design phases, the projects often did not adequately consider the harsh realities of operating during the Arctic winters.”
Following a two-year posting as the Regional Engineer in Fort Smith, he eventually accepted a promotion and transferred in 1982 to headquarters in Yellowknife as the Assistant Deputy Minister for PW&H to oversee the department’s buildings Capital and Operations Programs. Doherty feels a key defining moment for the industry occurred soon after.
“The Government had decided it wanted to develop policies and procedures for increasing the amount of Northern and local labour content on construction projects,” he said. Having spent six years in the Baffin and Fort Smith regions combined, his frontline operations and maintenance experience – as well as that of his fellow ADM Gordon Barbour, who was responsible for the highways program – would greatly benefit the initiative.
Under the leadership of Deputy Minister Larry Elkin, who had recently transferred from Municipal and Community Affairs (MACA), the Department leadership had a much better understanding of the capabilities and needs of the smaller communities.
“I recall a meeting with the Minister, Arnold McCallum, when he wanted to review how the department would be proposing to move in this new direction, when a comment was made by one of the older senior managers expressing that this could not be done because there was a lack of skills in communities,” said Doherty. “Arnold (McCallum)’s response was ‘Don’t tell me why you cannot do it; tell me how you are going to make it happen.’”
After much discussion, two key conclusions were reached by the group:
- The design requirements of buildings needed to change so as to use less complex materials and when possible, using locally sourced materials; and,
- Training components for local labour needed to be built into government contracts.
Doherty also feels that Tom Butters, who was the GNWT Finance Minister in the early 1980s was responsible for another defining moment in the construction industry’s evolution when he called a meeting of departmental senior management and laid out in no uncertain terms that the Northern Purchasing Program of the day was not working and that something needed to be done to direct more of the government’s purchasing to Northern businesses – which would do more to hire locally.
It fell to Larry Elkin and his team to develop new ways of doing things, which is when the Business Incentive Policy (BIP) was born. While the cornerstone of the BIP was a “premium” on tender prices from Northern companies; more importantly it established a framework for several other initiatives that would direct GNWT contracting and purchasing programs to support the development of Northern-based companies and labour.
“Under the framework of the BIP, Larry Elkin introduced the Northern Consulting Directive which basically said if you wanted to be a consultant to the GNWT you had to have an office here,” recalls Doherty. “The number of consultants offices in the territories immediately went from about four to about 40 so it was very effective.”
Having design consultants resident in the North has meant that they have been able to more effectively consult with communities and project managers, and have developed new technologies, for meeting the challenges of constructing and operating facilities in Northern communities. Over time the North ceased importing southern solutions for Northern building problems.
Over the years, there have been attempts to retire the Policy, and while some have debated the need for an overhaul of the BIP to address contracting issues of the day in more recent times, there’s no denying its effectiveness at creating a resident construction industry and workforce. While there have been suggestions over the years that the BIP simply rewards “Northern” companies for having a (minimal) presence in the North, or for contributing little additional value to the purchasing – studies have shown that in real dollar terms the actual cost to the GNWT in “Northern premiums” has been less than .01 per cent of its purchasing. As a benefit however, many real opportunities for training and long-term employment have been created over the years; not to overlook the great many Northern resident companies that now are available to provide products and services to all residents of the North. Over the years, Doherty recalls several Northern business owners telling him, “I never got a dime as BIP premium on a contract, but the real effect of the BIP has been to demonstrate that the GNWT supports us. So we are here, and not in the south.”
According to the Northwest Territories Opportunities Strategy, a document which has served as a guide for the GNWT under current Premier Bob McLeod’s leadership, the construction industry employed an average of 1,950 workers in 2011. This represents approximately 6.9 per cent of the total territorial workforce and almost 8.8 per cent of private sector employment. That number has only increased in recent years during the development of the territories’ fourth diamond mine, De Beers Canada and Mountain Province Diamonds’ Gahcho Kue mine. The most recent numbers available from the Conference Board of Canada peg the NWT construction industry at average of 1,985 workers in 2014. The same organization estimates Nunavut’s construction industry employment at 810 workers for the same year.
As good as the new policies and procedures worked, Elkin recognized there was still a need for a stronger industry voice – an association that could engage with government to identify issues on the frontlines and help develop solutions that worked as well in practice as they would from a theoretical policy standpoint.
“In about 1984, Larry Elkin made the decision to provide core funding of about $70,000 a year for four years to what is now the NWT and Nunavut Construction Association,” said Doherty.
“Without these and other government initiatives such as the Negotiated Contracts Policy, the industry would probably have continued the way it was with southern companies doing most of the work without any real consultation or involvement at the local and Northern levels.”
Private Sector Influences
Doherty points to other key private sector influences on the industry which benefited Northern construction greatly as well.
One was Andy Clark, who first came to the North to work as a carpenter before eventually launching Clark Builders in Yellowknife.
“He went on to grow his company into very much a North American leader, but this is where it started in 1974,” said Doherty. “In response to another new government initiative – the Negotiated Contracts Policy for negotiating contracts directly with local and Northern businesses, Andy took the lead in the process of forming alliances with newly forming community development corporations to negotiate contracts with the GNWT to build infrastructure in communities.”
This has led to the formation over the years of many joint ventures between non-Aboriginal companies and Northern Aboriginal and community development and construction companies that have received contracts worth millions of dollars from the GNWT.
At the same time, changes were also being undertaken in the territorial capital planning process, led by MACA and with the assistance of PW&H, to involve the communities more from the outset in the planning of capital projects.
“Capital Planning became a three-year planning process versus a one-year process. Previously we’d go to the legislature with a multi-million dollar project in the Capital Plan for a facility in a community, but for which there had been very limited opportunity to consult with the affected community,” he said. “The longer planning horizon allowed local people and contractors to plan more in advance to be ready to take advantage of opportunities when they were eventually approved for construction.”
The other very significant development which has influenced the growth of the Northern construction industry from a private sector standpoint was the arrival of the diamond mines.
“The mines each tried to implement procurement policies that, similar to the BIP, encouraged Northern purchasing,” said Doherty. “So if two companies had similar capabilities and relatively equal bids for work, but one was Northern, the job generally went to the Northern company.”
In addition, the mines removed from Northern contractors the very heavy logistical burden of delivering products and services to their sites.
“Because they handled all of the transportation, food and accommodations requirements, they took a lot of the logistics burden off their contractors versus what it was normally like doing a large construction project in the North,” he said. This has made it much better for small Northern companies to take on larger contracts and to grow, as opposed to seeing those opportunities going directly to larger southern-based companies.
Beyond changes to procurement rules, there are changes that have marked the industry on the frontlines, as well.
Buildings, Safety Change Too
Of course, the structures being built have themselves also changed over the years.
“Buildings have become much more sophisticated over the past 40 years,” said Tower’s Jacobsen. “Building envelopes, windows, doors, mechanical, electrical and control systems, fire suppression systems, everything’s gotten better and in most cases, it’s gotten a lot more complicated.”
Safety regimes are another area he points to that have changed over the years.
“Going back in time, safety was directed by the contractor and we all made our best effort,” he said. “Now safety guidelines are in place across the country; we all have approved safety manuals and regular employee tool box meetings. On larger jobs, full-time safety officers are onsite to ensure that all aspects of job site safety are adhered to … you don’t get a pass on safety just because you’re working in the North.”
Costs Much Higher
Not all change is positive. In the Sahtu Region of the NWT, Whiponic Wellputer’s Kevin Diebold said the biggest changes he’s seen are all of the cost increases over the years. The price of completing any given job is more because the price of everything it takes to complete that job has gone up dramatically.
“Off the top, utilities are higher, transport is much higher (approximately 28 to 40 per cent higher), the price of the actual goods needed to build have gone up a little, but the cost of labour went up dramatically,” said the long-time entrepreneur.
“Because of what’s gone on over the past few decades with the oil and gas industry in Western Canada and the advent of fly in-fly out mining camps, the cost of labour in our industry here in the North went through the roof as construction companies tried to stay competitive for workers.”
The recent downturn has offered a little relief as activity in the oil patch has slowed, he added, but that’s a change slow in coming.
He said as a nation we need to find ways to be more competitive, with lower energy costs being high on his wish list. In his own businesses he’s stayed abreast of innovations and looks closely at any technology capable of lowering his cost of operating.
As an example of keeping up with new technology, “We made the switch to LED lighting and it paid for itself in 8.5 months with the reduced electricity costs monthly,” he said.
Territorially, he said completing the Mackenzie Valley Highway road system would be an ideal fix for addressing the high cost of living that plagues not only the construction industry, but also all residents of the North.
“When you’re land locked and need to rely on winter roads, barges or air freight, everything gets much more expensive,” he said. “In our region in the communities of Colville Lake and Deline, it’s even worse because you don’t have the option of barging anything.”
He also thinks the North needs to do more to diversify its economy if it’s ever going to get the issue of sky-high costs under control.
“We’ve got out migration here in the Sahtu and around the NWT, we can’t rely solely on diamonds and government in terms of our industries,” he said. “We need more industry creating jobs and bringing in more people so it brings the cost of everything down … if you want good education and healthcare, it starts with business creating jobs.” CN