Thank you, Madam Chair. The Government of the Northwest Territories has used procurement policies to pursue economic development objectives since 1976. Policies like the business incentive program are only one of a variety of tools used by the government to support northern business development and to pursue employment for northerners. Other tools include the Business Credit Corporation Act, the Northwest Territories Development Corporation Act, the building and learning strategy, negotiated contracts, the Business Development Fund policy, and other policies, strategies, and programs.

The business incentive policy was first adopted in 1984. It was originally intended to provide NWT owned and operated business with financial compensation for the higher costs of operating in the north. This compensation was intended to:

First, level the playing field so that northern business could effectively compete with southern businesses; second, to support the cost of employing and developing northern resident business management, administrative, and technical staff; and third, to support the cost of using northern business support services and suppliers.

After five years, the effect of the policy was a 70 percent northern and 30 percent southern split in contract awards in the construction, maintenance, and service sectors. By 1989, two concerns were emerging.

First, businesses in larger centres were competing effectively with southern business, but there was no growth in the total market share of northern business. In addition, businesses in smaller communities were still disadvantaged relative to both southern business and businesses in larger centres.

Second, northern businesses did not necessarily operate to the benefit of other northern business or the northern labour force. In fact, northern business often imported southern labour and ordered material from southern suppliers.

In an attempt to address these issues, a number of changes were made to the policy in 1991. The basic bid adjustment was increased from 10 percent to 15 percent and an additional five percent adjustment was added for local companies. The result of these changes was a rapid increase in both northern and local awards raising the overall proportion of northern/local awards to 85 percent. I would add that the current proportion of northern/local awards is about 95 percent.

To address the issue of real northern benefit, bidders were asked to provide additional information about the northern and local content of their bids, including subcontractors and suppliers. This content included material supply, labour, accommodation, freight, and overheads. The requirement for this additional detail created significant work for both the contractors and the GNWT contract authorities. Contract awards were slower as GNWT tender offices were faced with complex investigations to determine the lowest BIP adjusted bid. Furthermore, increased expectations regarding northern content increased the need to police whether promised northern labour was utilized in the performance of the contract. Complaints continued, now focusing on companies being storefronts for non-resident businesses and promises to employ local labour were not being met in all cases.

The GNWT was overwhelmed with requests to review situations and make rulings on the basis of the spirit and intent of the policy. Efforts to enforce local and northern benefits resulted in accusations that the policy had become administratively cumbersome, bureaucratic, vulnerable to political influence, and generally ineffective.

In August of 1994, Cabinet directed that the public be consulted to identify the issues and problems related to the current policy and to offer suggestions for possible changes. The consultations lasted three months and included public meetings in all regional centres, as well as more than 300 written submissions. The major concerns identified included: First, businesses can circumvent the northern ownership provisions; Second, one incentive rate applies whereas benefits vary according to individual contract;

Third, northern labour promised in bids may not materialize;

Fourth, northern manufacturers receive no benefits from the policy;

Fifth, the costs and benefits of the program are unknown;

Sixth, the grandfather provisions of the policy should be abolished.

The Department of Public Works and Services, in concert with other program departments, then developed a new approach to the business incentive policy which attempted to deal with the specific issues raised in the public consultation.

The changes proposed were fundamental, in that there would no longer be 'eligibility criteria' or BIP approved companies. Rather, the bid adjustment would be calculated and would reflect three variable factors:

First, the specific business sector and the cost variance over a similar southern business;

Second, the specific contract location;

Third, the proportion of company operations conducted in the north.

An additional 2.5 percent would be available to 'northern companies.'

This would effectively address concerns regarding the single incentive rate, the circumvention of ownership provisions and the grandfather clause issue.

In addition, the proposed policy would:

First, eliminate bid adjustment with regard to commercial accommodation;

Second, establish northern and local labour requirements within contracts and provide a bonus or penalty upon completion;

Third, include incentives for northern manufacturers.

The proposed policy was presented through public meetings in all regions between February and April of '96.

The results of this consultation were consistent. Concerns were expressed that the proposed bid adjustment process was far too complex. The public expressed a preference for the existing policy.

In September of '96, the Premier sought the views of the Premier's panel with respect to the BIP issue. The panel were provided with a presentation on the issues and possible options with respect to future directions. The panel's recommendations were:

First, that there is a requirement for the business incentive policy;

Second, the existing policy should be revised to incorporate those changes which were generally acceptable to the public during the consultation.

In October of 1996, a Joint Minister/Ordinary Member Working Group was established to review and make observations and recommendations on the following:

First, review the current business incentive policy, including its objectives, accomplishments, and shortcomings, including the interim manufacturing directive;

Second, review the results of the public consultation on the revised business incentive policy;

Third, discuss the costs and benefits associated with implementing the business incentive policy;

Fourth, review various options for implementing the business incentive policy.

The working group met on five occasions before presenting their recommendations on the 12th of December, 1996. Their recommendations may be summarized as follows:

First, broaden the commercial accommodations directive to include legitimate bed and breakfast operations and eliminate bid adjustments on accommodations;

Second, to consider the northern manufacturing directive and rationalize its application and proposed incentive rates;

Third, implement a system where northern and local labour is specified in contracts and bonuses and/or penalties are provided based upon actual northern and local labour utilization, and discontinue bid adjustments for northern and local labour;

Fourth, to further review the grandfather provisions of the business incentive policy;

Fifth, to consider four options related to bid adjustments as follows: 10 percent northern and 10 percent local; an overall reduction in bid adjustments; no adjustment; or a sliding scale option;

Sixth, to decrease the "northern only" tender limit from $30,000 to $25,000, consistent with limits established in the Internal Trade Agreement;

Seventh, to do further analysis of the relationship between standing offer agreements and the business incentive policy.

Madam Chair, we are not able to provide an accurate dollar estimate of the cost or the benefit of this program. We do know that 95 percent of the nearly $100 million in contract awards last year were won by northern firms. We also know that in recent years, bids from southern companies on NWT contracts have declined steadily and we know that, year by year, northern companies are increasingly becoming competitive with their counterparts in southern Canada.

We know that goods and services are now available in many of our communities which were not available a decade ago. We know that the hotel facilities in many of our communities are far superior to what was available in the not so distant past.

Madam Chair, I stated earlier that the BIP was just one tool utilized by this government to address our economic circumstances. But I believe it is an essential tool. This government vigorously and successfully fought to have this essential policy exempted in the Agreement on Internal Trade and throughout our consultations and presentations, there emerged a clear majority who believe the BIP remains an important and necessary policy of this government.

The business incentive policy has now been under review for almost three years. We have consulted with the public on two occasions. We have consulted with the Premier's panel. We have consulted with the standing committee, Mickey Mouse and with the Joint Minister/Ordinary Member Working Group. Sorry, I just wanted to know if you were paying attention. We have published discussion papers and we have conducted various reviews and cost benefit studies. I believe the time for study, review and consultation has past. It is now time for decisions to be made. Thank you.