Thank you, Mr. Chairman. I would like to start off by saying, generally, I am quite satisfied with the performance of the Minister and the deputy minister. They are doing a competent job in tough times and a difficult area. I have three specific concerns that I would like to put on the record at this particular time.
One, there has been an ongoing discussion about the public tendering process as opposed to negotiated contracts. I want to, first of all, say here publicly that I am not one of those who is carte blanche against negotiated contracts. I think they definitely have a place, and I think they have an important place as a tool that the government can use. I have a concern, though, in the future that the use may become more widespread. I will go into some of the concerns that I have. It is very obvious that negotiated contracts are filling a need here in the territories. There has been frustration, especially in the smaller communities, that the dollars that are spent on construction are not staying in the community. There has been a concern that outside companies have been taking advantage of whatever construction happens in communities. I think everybody can sympathize with the desire for communities to take advantage of opportunities in their own community, whether those opportunities are business, jobs or an opportunity for companies to start off. I, like any fair minded person, will see that negotiated contracts are playing a role and do have a place.
But, for a moment, I would like to just talk about the public tendering process. It is flawed. There is no perfect system, but it is one that has developed over many years and there are some very important principles that underlie the public tendering process. The first and most obvious one is, there is no doubt in my mind, that you ultimately get the most competitive price by having companies bidding against each other, especially knowledgeable companies that really understand all the ways to perform a service at the best possible cost knowing that they are in competition with some pretty sharp competitors. I don't think there is any argument there. The public tendering process, over the long haul, will save you money.
Another factor, which has given me a bit of difficulty with negotiated contracts, is the whole bonding element. We have spent many years trying to put together a process that protects suppliers and companies in the event that a project goes over budget or bankrupt. I am the first to acknowledge that, not only with negotiated contractors, but there have been our share of failures with the public tendering process too. I don't think we should forget that. What has happened over the years, at least in most cases, is that at least the public tendering process does have some built-in protection to safeguard companies.
Another factor, to get a little bit into the intangibles, is that, over the last 20 years, a viable construction industry has been built in the Northwest Territories, and because most companies can be assured that there will be a public tendering process, they know the rules of the game. As they get more skilled and better at what they are doing, they can start to predict, with some certainty, their future. They can start to make capital acquisitions of equipment. They can start making commitments to office space. They can start making longer time commitments to staff, knowing that there is a very good chance that year in, year out, they are going to have a certain volume of business. So what you do is build stability into the system, and, again, it is part of knowing what the rules of the game are. The problem is that, even though there are advantages to negotiated contracts, there are advantages to other approaches. What it does is take some certainty out of the process, and it makes it more difficult for long-term planning.
Another advantage of the public tendering process is that you have scenarios where a small company from a small community or a large community can grow from a medium-sized regional company and then finally into a territorial-sized company, and you can start building critical mass, start building expertise so that you are able to handle a range of jobs and you start to develop some of the contacts and what have you in various communities. There is no doubt that what has happened is that some individual companies have not taken advantage of local opportunities and haven't taken advantage of local hire or local business opportunities. That has happened and that has given industry, in some quarters, a bad name, and there is a frustration level in communities who are looking for an easy, quicker way to deal with it rather than go through this process, which, in some cases, has not worked.
I think that one thing we have fallen down on over the years in the public tendering process is that we haven't included, in a meaningful enough way, credit for that local spending. I mean, we have done some of it. We have given some credit for a local preference or a regional preference but we haven't really said, okay, if a company sets up a joint venture, for instance, with a local company, that may be worth something. If you hire over this percentage of local labour and you demonstrate at the end that you have, that is worth something. If you have spent this much money in the community, that is worth something. I don't think we have gone far enough in doing that, and I think that if you started to build in all of those factors, it could, at the end of the day, probably accomplish as much toward local involvement as you do with negotiated contracts.
I'll give you some examples of where I see it happening, and I am not doing this now as a criticism of the Minister for using them, because they have served, I think, a valuable purpose. I am looking a little bit into the future of what could happen. What is invariably going to happen is that more and more companies are going to want to have negotiated contracts, and you are going to have more difficult situations to choose from. I will just put down one scenario. Let's say, for instance, you have company A in Iqaluit, company B in Rankin and company C in Whale Cove. They all want to do a negotiated contract on a project in Whale Cove. That is one scenario. Let's say you have a project in Rankin Inlet and you have company A from Iqaluit, company B from Rankin and company C from Whale Cove. Assuming that Whale Cove got the experience on this one, they may want to now bid at the regional centre. Thirdly, you have a project in Iqaluit, again, with the three companies, one from Iqaluit, one from Rankin and one from Whale Cove. The problem is going to be, how do you choose? You say, well, only the one in the community where they reside is allowed to get it. So that means you take away the potential from company C in Whale Cove to grow. If the company in Rankin Inlet cannot bid in Iqaluit, you take away the potential of it to go from a medium-sized company to a larger-sized company.
The danger I see, if you do too many of them, is that you essentially put walls around communities, and what will inevitably happen if you put walls around communities just because the stream of projects in a community is not necessarily consistent enough to sustain companies over the long haul, is make it impossible for smaller companies to grow and would mean that the larger companies would die on the vine. It would seem to me that there is a very good chance
that ten or 15 years down the line, you will be going south for a lot of your contracts.
So I put it forward as a warning, and I have been happy to hear both Mr. Todd and Mr. Morin say that they are not looking at this as the panacea, because it isn't. They are looking at it as a creative tool, which definitely has its place. But I guess I just want to emphasize that when all is said and done, the public tendering process, with some changes, still has proven to be the sort of approach that has the best chance to work in the majority of cases.
There have been criticisms by people, and I have heard a very valid response from the Ministers. Why doesn't anyone suggest something positive? Why does everyone just complain all the time? So I am trying to just throw out some ideas that might or might not be helpful, but perhaps some ways so that along the line, I think that the Ministers are going to have to say, look, these are the rules.
If you have a hundred companies coming at you all ready to negotiate contracts and you try to decide -- you over you and you -- then everybody is going to be right down the Minister's throat at some point. A possibility, adding on to the things I have said earlier, is to say there will be, in the course of the year, a twelve per cent of the budget limit on it. Maybe that is one way of doing it.
The second way is that there might be a limit on the size. Maybe there will be negotiated contracts for contracts up to some figure. I don't know, maybe $1 million. I don't know. It is the concept that I am talking about.
The particular issue I want to leave with the Minister is that negotiated contracts have their place, but I still firmly believe that in the long term, if handled properly, the public tendering process is where I think the majority of the contracts should go.
My second point is on privatization. Privatization is an area which is always a tough area because of what invariably happens with the private sector. In any kind of a government service, you normally have an economical component of it and an uneconomical component of it, and, inevitably, the private sector just wants the economical component, so when you have had a situation where the part that makes money subsidizes the part that doesn't and then the system pays for itself, you turn over part of it to the private sector and you have to pick up the tab for the other part. So, although I agree with privatization, I have also said we have got to be quite careful of how we do it.
There is one area in the government that I would ask the Minister to have a good look at. It seems to me, in this age of technology, that this government is swamped in records and paper. There are offices full of records and paper. There have been a number of initiatives over the years to try to do something about that, for whatever reason, but the government, because of the fact that the government has never considered it a priority, seems almost paralysed to deal with this. I think an objective analysis of the cost savings would show that there could be a pay-back in a relatively short time. This is one area where I would like to re-emphasize what the committee has said. Either deal with it as a government or seriously consider privatizing this area. One or the other. It is quite amazing the tons of paper we have stored. Really, you don't have to do that in the 1990s.
The last comment I have to make to the Minister is about the office space in Yellowknife. When I speak, I'm obviously speaking about my community. I've been involved, one way or another, with the different proposals that have come forward. It was interesting, and the Minister was there, that the discussion in committee on this issue didn't take on a pro or anti-Yellowknife tenor at all. It was the unanimous opinion of the committee that the ultimate decision to provide office space should ensure we get the most efficient use of our space and people.
The feeling was, the last proposal to come forward had compromised some of those efficiencies. So, the Minister was asked to have a good look at some of the previous proposals. I'm not quite sure exactly where the Minister is at this point, but I know that myself and the committee would really like to see an approach that is an improvement on the last one, that would try to maximize the office space with a major view to staff efficiency as well as straight dollars and cents. With that, Mr. Chairman, again, I would like to thank the Minister. I think he and his staff are doing a good job and we wish him the best in the year to come. Thank you, Mr. Chairman.