The Northwest Territories Housing Corporation has cancelled contracts with a Hay River company to build modular homes for communities around the territory.
The move came after Concept Energy Services Ltd. fell far behind on the work.
"It was very unfortunate we had to look at cancelling the contracts with Concept Energy Services," said Tom Williams, president and CEO of the corporation.
In July of last year, Pierre (Rocky) Simpson, the owner of Concept Energy Services Ltd., stands in the company's Hay River yard after receiving contracts for modular housing from the NWT Housing Corporation.
"This was our first foray into Northern manufactured homes and something that as a government we truly support working with the Northern manufacturers. But in this case there was a lengthy delay in delivery and I think the contractor ran into some financial difficulties and cash flow problems, which as a result of that they were unable to complete the delivery in a timely manner."
Eighteen duplexes and one single-family dwelling were supposed to have been delivered to the corporation by June of this year.
"To date, I think they had eight partially-completed units out of 19 separate contracts," said Williams.
Three partially-completed units were taken by the corporation in September and barged to Ulukhaktok because of a huge need for housing here, he said. "A contract has been recently tendered to finish off those units in Ulukhaktok."
A fourth uncompleted unit was also shipped from Hay River.
"It was scheduled to go to Fort McPherson," said Williams. "It's right now sitting in Inuvik and we'll be looking at completing that unit and getting it into the community probably later on this winter once the winter roads are in place."
In Hay River, there were four partially completed units sitting in Concept's yard as of last week.
"Right now, we'll be taking those on and retendering them to get them completed," said Williams. "Eleven units haven't been started at all."
The housing corporation president said he travelled to Hay River on Nov. 15 and met with Pierre (Rocky) Simpson, the owner of Concept Energy Services Ltd., and provided letters to cancel work on the remaining 15 contracts.
Simpson provided The Hub with a written statement on the cancellations.
"The 'financial burden' arose, in part, due to the downturn in the oil and gas sector and the GNWT payment policy as it relates to 'manufactured goods'," he stated. "As to the GNWT policy, it requires that any manufactured good, in this instance modular buildings, will only be paid for when 100 per cent complete, delivered and set up on site. That may work for smaller goods such as windows, cabinets, signs, etc. For larger items, such as buildings, the policy does not work and must be changed to reflect this if manufacturing is to work. The standard for payment of manufactured goods is to receive 35 to 40 per cent prior to commencing work on the project with the remainder due upon completion."
Williams said the housing corporation took an "unprecedented" step for the organization and provided a $1.3-million advance on the contracts to try to help Concept Energy Services.
"It was to allow the contractor to purchase materials and to deal with upfront material costs," he said. "So that was unprecedented. Normally we don't do that, but in light of supporting Northern manufacturing we thought it was reasonable."
Williams said the corporation received about $1.3 million worth of work in the eight partially-completed units, and the purchased materials on site at Concept Energy Services.
The overall value of the work – done and undone – is $9.3 million.
The four unfinished units and the material in Hay River are being moved to the yard of Marine Transportation Services.
"Hopefully, we could finish off those units in the site there," said Williams, noting tenders will be called to complete the unfinished units similar to what was done in Ulukhaktok.
"The remaining 11 contracts we'll be retendering," he added. "We're coming up with a new delivery plan that will consist of 11 new contracts for 11 duplexes, and it will either be a combination of stick built or Northern manufactured homes."
Simpson said, when his company took on the project, it was to work toward providing much needed housing in the NWT while strengthening manufacturing in the North.
"It was our goal to further work towards creating sustainable Northern employment, offering apprenticeship training, and reducing dollars going out of the NWT for goods manufactured in other jurisdictions," he wrote. "To this end, progress has been made as we now see NWTHC tenders out for construction of buildings in the communities which is what should have been happening all along."
However, Simpson noted manufactured homes make sense if transported on the highway system, but not so much when costly barging is required.
"It is unfortunate that we have ended where we have, but we encourage the NWTHC and GNWT to review the way they do business in the NWT," he said, adding government policies should work to remove or lessen the obstacles small businesses experience.
"With the loss of these contracts, the impact on Hay River is the loss of approximately 60 jobs and the opportunity to strengthen our local manufacturing sector," Simpson noted. "Our focus will shift back to providing industrial modular buildings to the private sector, something we have successfully done for the past 10 years."
The businessman thanked Caroline Cochrane, the minister responsible for the Housing Corporation, for her support in the project, and her commitment to manufacturing in the NWT.
When the contracts were awarded last year, Cochrane heralded the project as a game changer that would create a new Northern manufacturing industry.