Province giving local suppliers more priority in bids, but one business owner says there are problems in that
Service NL Minister Tom Osborne says measures in response to concerns raised
A business owner in St. John's said there's an issue with the provincial government's announcement on Monday which Service NL Minister Tom Osborne said will give local companies more preference on its bids in an effort to help them through the COVID-19 pandemic.
Terry Hussey, CEO of Vigilant Management — a construction consultant company — told CBC Radio's On The Go he has no problem with the local provision change; rather, the issue is with the increased thresholds put in place under the procurement act, specifically related to engineering services for municipalities.
The provincial government put in a short-term increase to thresholds for engineering services for municipalities and local service districts from $100,000 to $264,200, so this year's construction projects can start sooner, in an effort to maximize construction jobs across the province.
Speaking to reporters via live stream on Monday, Osborne said the immediate changes announced Monday are in response to concerns from local operators, with more permanent changes to come later, to help businesses through the pandemic.
"We've, I guess, modernized the thresholds to mirror what other provinces have put in place — and the federal government," said Osborne.
Hussey said the provincial government removed the requirement for three bids on contracts under $100,000 late last year; one price could be obtained if it were determined to be a fair market value.
Now the threshold is $264,000.
"The thing that blows me away is that I don't see how this benefits anything in the local economy. It doesn't make anything better for municipalities to spend more on engineering services. It would be better for them to spend less," Hussey said.
"In fact, the government of Newfoundland themselves has stated they save money when they go to a competitive bid process for these services, and yet here they are today saying, 'You know what, we're going to let you single-source to whomever you want up to $264,000.'"
Hussey said he doesn't understand the urgency of the new provisions as an economic response to COVID-19. He also said he doesn't know why the decision was made, as these are issues that, to his knowledge, haven't been brought up by business support groups or Municipalities NL.
"So why did this suddenly come out of nowhere and get announced as this major thing that is going to help the economy? It just blows my mind as they've basically neutered the public procurement act and made it the wild west again. I don't understand it," he said.
Along with the preference, Osborne said the province has increased the threshold at which open calls for bids by those bodies are required, in order to open more opportunities for local suppliers.
Osborne was asked if these changes give the Liberal government more opportunity to hand-pick local companies with political connections, which it's been criticized for before.
"The politicians don't provide the ratings on tenders, that's done by a team of officials.… That's done very independently by a team of officials in any given department," he said.
Hussey said there's no way to track whether companies have donated to local politicians. He also doubts construction projects awarded will actually get finished this year.
"They're going to single-source it to them to start their design process. If they're lucky they'll go to tender after Labour Day, and they might get the construction project done this year, but it is a small chance," he said.
"So where was the urgency?"
Osborne said a new provision to public procurement rules will give local businesses more access, as it mandates an allowance of 10 per cent for local suppliers for all procurement contracts — to the maximum allowed under the Canadian Free Trade Agreement.
"These changes will certainly help local businesses … providing them greater opportunity to do business with government," Osborne said Monday.
Essentially, 10 per cent of the bid will come off before it gets rated for selection, so it will have a better rating and be more likely to be chosen.
Osborne said any increase in cost of the tenders to the government would be balanced by the overall benefit to the province of local companies and their employees paying taxes and participating in the local economy.
"By keeping the business local we keep people working, we keep the economy going, and the return to the treasury will offset, in large part, the difference in the 10 per cent."
The provision added to the Public Procurement Regulations is effective immediately, and applies to municipalities, local service districts, academic institutions, school districts and health authorities along with Crown corporations, departments, agencies and all other public bodies.
With files from Mark Quinn and On The Go