N.W.T. Housing Corp. cuts contracts with Hay River company after modular homes not delivered on time

The Northwest Territories Housing Corporation cancelled contracts for more than a dozen modular homes destined for several communities in the territory after determining the contractor couldn’t follow through on the order.

Concept Energy Services Ltd. says housing corporation needs to 'review the way they do business'

A modular house is loaded onto a truck in this CBC file photo. The Northwest Territories Housing Corporation had signed contracts for 19 to be delivered this year. It's since cancelled them and will put new ones out to tender next year. (CBC)

The Northwest Territories Housing Corporation cancelled contracts for more than a dozen modular homes destined for several communities in the territory after determining the contractor couldn't follow through on the orders.

Officials with the housing corporation made the decision last week, after months of delays from Hay River-based Concept Energy Services Ltd., which was supposed to deliver 19 modular homes between March and June 2017, explained Tom Williams, the president and CEO of the housing corporation.

"It was unfortunate," Williams said. "They had some financial struggles, business failures do happen. In this case, we worked diligently with Concept and we tried to make it work." 

Concept won the contracts to build the 19 modular duplex units in June 2016. At the time, Caroline Cochrane, the minister responsible for the corporation, heralded it as a way to kickstart northern manufacturing, but only eight were partially-built.

Three of those units are in Ulukhaktok, another is in Inuvik and four others never left the factory, Cochrane said in the legislature on Oct. 19.

Since then, the housing corporation decided to cut the contract loose. The government issued tenders to complete the eight partially built homes and will start a new bidding process to build the remaining 11, Williams explained.

"I wouldn't say it's a complete failure," Williams said. "Though we didn't get the units delivered as anticipated, certainly it's a new growing industry, we want to work with northern manufacturers and continue to do so."

The housing corporation paid a $1.3-million advance on the $9.3 million-contract to Concept in 2016, but that money has been recouped through the value of the partially-compete units, Williams said.

There could be more costs to the housing corporation as a result of the cancellation, but they haven't been determined, he said. 

Gov't purchasing policy 'must be changed' 

But Concept shouldn't shoulder the blame for the failure alone, said Pierre (Rocky) Simpson, the owner of the company.

The "financial difficulties" Williams cited are because of the territorial government's policy of not paying for manufactured goods until they are complete, delivered and set up on site, Simpson said.

A spokeswoman for the Department of Infrastructure confirmed this is the policy.

"This may work for smaller goods such as windows, cabinets, signs. [But] for larger items such as buildings, the policy does not work and must be changed," Simpson said in an email to CBC News.

A deposit between 35 per cent and 45 per cent, with the rest due on delivery would be fair, he said. The company will now "refocus" on its business building relocatable industrial buildings.

"It is unfortunate that we have ended where we have, but I encourage the [housing corporation] to review the way they do business," Simpson said.

The project did make some progress with northern manufacturing, Simpson said, as he now sees more contracts going out to tender for buildings built in small communities. 

The housing corporation will put out new tenders for the 11 outstanding duplexes in 2018, with some being modular and others stick-built, Williams said.

Those homes would be expected to be delivered by April 2019. For residents waiting for homes, Williams has this message:

"Be patient," he said, "we recognize there is a huge need for housing in the territory and it's our job to deliver."