Thank you, Mr. Chairman. The department's capital budget request for 1992-93 is approximately $4.5 million. Five hundred and seventy-five thousand dollars is budgeted for the dust control program. This program controls dust on roads in non-tax-based communities.
Under accommodation services, renovations to existing offices and tenant improvements to new offices are a large part of Public Works' capital. These projects are in response to growth or organizational changes of our client departments. Potential department consolidation have put much of government's office plan on hold until implications are reviewed. This has allowed for the accommodation services capital program for 1992-93 to be reduced,
In addition to the earlier reductions made during the capital target reduction exercise, and in response to the recommendations from the standing committee on finance, I will be introducing a motion to further reduce this program by $200,000.
Almost half of the 1992-93 capital program is for major improvements to buildings and works and for replacement of vehicles. This ensures working conditions for employees, provides buildings and vehicles that operate efficiently and results in long-term operating cost savings to the government. As an example, under the buildings and works activity, we will do $450,000 worth of energy conservation projects. These projects reduce utility costs in public buildings. The cost of each project will be recovered in five years or less through lower operating costs.
A major renovation and upgrade to the Laing building will be completed in 1992-93. This has been a three year overhaul of the building's mechanical and electrical systems and the replacement of the roof. The GNWT bought the building for one dollar in 1989 after a 20 year lease-to-purchase agreement.
The vehicles and equipment capital program provides for the replacement of vehicles that become inefficient to operate. This target was reduced by $138,000 in January. The department is also reviewing the use of pool vehicles in Yellowknife and regional centres to see where additional savings might be achieved.
Mr. Chairman, the department's capital target is relatively small, but it is important to achieving effectiveness and cost efficiency in the operation of the GNWT, which you must remember is now a billion dollar a year "business." More importantly, however, is the fact that the department is also responsible for managing the design and construction of buildings and works, so that departments, boards and agencies, and municipalities can deliver programs and services to the NWT residents.
In 1992-93 the department will manage $70 million worth of capital projects. These expenditures represent a very significant economic opportunity for Northerners. As the Minister responsible for overseeing these expenditures, I wish to assure the committee that the department sees its responsibilities to developing the economy every bit as important as it is to build cost effective and technically sound infrastructure. To illustrate, I would like to outline some new and ongoing initiatives.
For this construction season Public Works will work closely with the Housing Corporation and Department of Transportation to co-ordinate construction activities and will implement pilot projects to strengthen the community-based approach to construction. By community-based project planning, I mean that all projects in the community should be planned and co-ordinated over three to five years rather than as individual projects. The departments will work more closely with municipal councils to establish project schedules which better enable the community resources to undertake this construction work.
This community-based approach has been tested in Snowdrift last year. The local development corporation needed construction expertise. Public Works and the Departments of Transportation and Municipal and Community Affairs agreed to a construction management approach for a road project. Public Works provided a construction superintendent to help the corporation with the project. The council indicated its desire to have the departments plan the projects over a longer period of time to maximize local benefits. The results were positive in that the corporation is now better prepared on future projects in the community.
Community-based projects are also organized in Chesterfield Inlet, where the community asked that several projects originally planned for a two year period be spread over a three year period. This allowed for the creation of three new training programs and much greater employment of residents. During 1992-93, Public Works will implement this approach in at least one community in each region.
Public Works and Housing Corporation are co-ordinating efforts to find appropriate ways to support new and existing northern manufacturing operations, such as a proposed window plant in Hay River. How to make more and better use of northern lumber in our construction projects is also being examined.
The department is managing the new Legislative Assembly project on behalf of the NWT Legislative Assembly Building Society. Major contracts for this project have been tendered and won by northern contractors. This project will require contractors to bring labour and skilled trades into Yellowknife. To assist the contractors, however, in hiring northern labour and trades, a committee of several departments is being established to identify, contact and support people from across the North in coming to Yellowknife to work on this project. In co-operation with Arctic College, training programs will also be established.
Mr. Chairman, many of our projects and contracts are negotiated directly with community development and contracting corporations. For example, the new drug and alcohol treatment centre at the Hay River Reserve is a three million dollar project. Representatives from the communities surrounding Hay River were very much involved in the planning and design of this unique facility. The project has been broken down into several construction contracts which are being negotiated directly with the reserve's own construction company. Department officials are working with a local development company in Igloolik to jointly develop a design for the proposed new air terminal building in that community. When completed, the developer will build a building and lease it back to the government. The department will continue to require staff housing, offices, warehousing and arenas, where possible, through design/build agreements with northern developers and contractors.
Mr. Chairman, the traditional procedures used in other jurisdictions for designing, tendering and awarding contracts for construction projects are no longer employed by this department. All of our design, tendering and construction procedures have been significantly modified to meet the unique needs of our developing northern construction industry and economy. Whether it be to tender under the rules of the business incentive policy, to tender on the basis of northern and local content only, to negotiate general contracts, construction management contracts, design/build contracts, or any one of the several other unique approaches, these procedures have been developed in response to expressed wishes of our client departments, communities and the construction industry itself.
This year the department is co-operating with the NWT Construction Association in a pilot project in which two projects will be tendered through a bid depository approach, Subcontractors will submit their bids to the general contractor through a depository operated by the construction association. This should enhance the openness and fairness of the bid process and facilitate the evaluation of northern subcontractor tenders over the southern. The department is co-ordinating a review of contracting bonding requirements. The objective is to find ways that northern general contractors can be assisted by reducing the requirements for contract security while protecting northern subcontractors.
Several new training initiatives will also be facilitated this coming year. The department has provided funding to the NWT Construction Association to develop a construction worker training program. This program will work in conjunction with approved capital construction projects to train residents in basic construction skills and prepare them to pursue further training and employment in construction. The association has identified a number of projects that this program will be suited to run with concurrently. The NWT Construction Association is now approaching communities and regional Pathways committees for commitment and funding. Project managers will provide assistance and support as required.
These initiatives, however, require a great deal of effort and commitment by all departments involved, as well as by community councils, residents and northern businesses. The Public Works' role in this is simply to provide a focus or residence of northern expertise for the management and control of the planning, design and construction of these projects. But it is a critical role, as the project manager will organize and co-ordinate the resources of the community, industry and the government to achieve maximum northern participation while controlling costs to approved appropriations.
One thing that all of this effort does, in addition to increasing the northern benefits from our construction activities, is to increase the cost of individual projects in terms of planning and management efforts and in purchased labour and materials.
Mr. Chairman, the message from the standing committee on finance is clear to me. We must achieve more northern spending, training and employment and business development, all with less total spending. I believe the Members understand, however, that there is an extra cost on a project-by-project basis, but this is accompanied with greater benefits for Northerners.
Mr. Chairman, the high cost of delivering our capital facilities continue to be questioned, however. These questions are nevertheless welcome as challenges. I admit that these facilities are expensive, for the reasons that I have just mentioned such as in training lesser skilled labour and in using northern consultants and construction businesses with higher operating costs. They are also expensive because they are designed and constructed to high technical standards. These facilities must operate for a long time in a very harsh environment, and with high utility and maintenance costs. The cost of operations and maintenance of a school, for example, over 25 years can be as much as five times the cost of the initial construction. To save a few dollars in the initial construction with cheaper pumps and motors or lesser insulation or roofing systems is a false economy.
The department is aware, however, that it must continually review and refine its construction standards to reduce the costs where possible. Standards and construction details are also improved, as required, to facilitate the use of local materials and skills on particular projects. As examples, the electrical and mechanical designs for recreation centres are being reviewed with two northern contractors to develop and ensure our standards meet particular local conditions and are the lowest yet most cost effective. In another case, Leonard and Associates, the major contractor and employer in Arviat, has been invited to participate in the design of the library proposed for that community. In 1992-93 the department will initiate technical standard reviews on a regional basis, through the regional offices. In addition to involving the client departments, contractors and consultants resident in those regions or experienced in construction in those regions will have an opportunity to participate.
Mr. Chairman, I should just say a few comments about the business incentive policy. As you know, this policy allows a 15 per cent preference to northern contractors and five per cent more when the contractors are local. Public Works has co-ordinated a major effort, over the past two years, to review and revise this policy. A presentation was given to the standing committee on finance in February to outline the proposed changes. Those changes came after a long and intensive review of the policy, a review which included MLA and public input. The discussions with the standing committee were productive and resulted in further improvements.
I would like to emphasize something I have said before in this House. The business incentive policy is designed to compensate northern businesses for their higher northern operating costs. It is not a policy which in itself can create the kinds of training and employment opportunities that Northerners should expect from government purchasing and construction programs. The review identified that the policy was not effective in creating training or employment and that northern contractors, as well as those from the South, had to import most of their labour and materials from the South. We have a skills shortage in the North that must be addressed by other means.
Cabinet appreciates the frustration of MLAs and Northerners with this situation and is committed to addressing them through the government's capital construction program by better focusing resources and initiatives. The business incentive policy should be enhanced and streamlined to focus on business development. But to establish an absolute preference policy when we know the required skills and materials are not available in the North will only necessitate expenditures of valuable effort and limited dollars to manage all of the exceptions to the policy. I believe that we can better achieve our objectives with an improved BIP in combination with initiatives such as I have outlined.
Mr. Chairman, I apologize for taking so much time in opening remarks when our actual capital request is quite small. But I have listened carefully to the discussions and concerns raised during the debate of the capital bill. They are concerns that I share as an MLA and am now committed to addressing as the Minister responsible for much of this government's capital construction program.
The capital projects managed by the Department of Public Works have significant social and cultural impact on northern communities, but as has been illustrated by this debate in the past, there is much to do in improving the planning that goes into developing the capital program. We will contribute our expertise to the communities and departments in that task. Further, as made clear during the standing committee on finance review, Public Works is a significant economic instrument. The department understands its accountability to this Legislature, to cabinet, and to Northerners in this respect. We will continue to undertake this role in ways which make most effective use of that instrument. The deputy minister has already met with the NWT Construction Association and a committee of northern consultants to reinforce that message and to tell them that government and industry must work together to further resolve these issues.
With the support of the northern construction industry, and in co-operation with communities, I am confident that we can improve the benefits of construction activities to northern residents and business. We will be able to do more with less.
In conclusion, Mr. Chairman, I will be pleased to answer
questions from the Members.