Unexplained tendering delays at Nunavut Housing Corporation cost Nunavummiut

A CBC News investigation has found that the Nunavut Housing Corporation (NHC) delayed awarding tenders last year, costing Nunavummiut much-needed housing units — and it could cost taxpayers millions of dollars down the road.

In one case, the delays led to a contractor backing out of a 10-unit Taloyoak project because NHC took so long to award the contract, with building costs spiking in the meantime.

In another project for 16 units in Iqaluit, NHC received a bid which would have cost $667,000 per unit — a bargain by recent construction cost standards where the average price per unit surpassed $900,000 last year, and more than $1 million this year.

But NHC never entered into a contract with the bidder, for reasons which remain unclear as NHC has categorically refused to answer questions from CBC regarding last year's tenders. 

NHC also refused to follow some recommendations from Nunavut's Information and Privacy Commissioner, after CBC appealed NHC's response to an access to information request on the cancelled tenders.

A review of the Hansard from Nunavut's Legislative Assembly also shows NHC officials may have been disingenuous with the public when asked by MLAs about the circumstances of cancelling two projects last year.

CBC News spoke with six different contractors who bid on projects in 2021 as part of its investigation, all but one of whom agreed to speak on the condition of anonymity to not harm their business interests.

Iqaluit project ultimately cancelled

NHC cancelled three projects last year in Iqaluit, Taloyoak and Pangnirtung, totalling 26 public housing units and five staff housing units.

According to records obtained through access to information, the low bids for the three cancelled tenders were less expensive, per unit, than projects which did go ahead in 2021 — although low-bids for Taloyoak and Pangnirtung came in above NHC's budgeted costs for those projects by 12 and 40 per cent, respectively.

In the Nunavut Legislature on June 9, 2021, then-NHC president Terry Audla told the House the lowest bid for the Iqaluit project – four 4-plexes, totalling 16 units – was for $15 million, in response to a question from Iqaluit-Manirajak MLA Adam Arreak Lightstone.

In fact, NHC received a bid for $10,677,050 for the project. 

Audla declined CBC's request for an interview, saying his release agreement from NHC prevented him from speaking about his time with the corporation. Audla was replaced as NHC president in January as part of a sweep of senior management changes by the new premier, P.J. Akeeagok.

CBC News asked Nunavut's current housing minister, Lorne Kusugak, to waive Audla's confidentiality clause to allow him to speak freely, but Kusugak's office deferred to Akeeagok's office.

Akeeagok's office deferred to the department of executive and intergovernmental affairs, which declined, saying it cannot waive non-disclosure agreements. It also said NHC would provide a written statement.

The NHC refused multiple requests for interviews on this story, nor would it answer a series of written questions needed to clarify and fact-check aspects of CBC's investigation.

Uncertainty whether Iqaluit bid was withdrawn

Regarding Audla's statements in the House, NHC claimed the $10 million dollar bid was withdrawn by the contractor.

"A withdrawn bid would not be considered regardless of whether it was a low bid or a high bid. We would therefore consider a response stating that the four-plex low bid to be $14,656,700 to be an accurate statement," NHC wrote in an unsolicited statement sent before CBC emailed questions.

"If a bidder requests to withdraw their bid due a bid calculation/estimation error on their end, and it is deemed likely that an error took place, a bidder may be allowed to withdraw their bid prior to a potential award."

But the construction company which placed the bid said that's not true, either.

"Our bid was not withdrawn and that's impossible because the tender was bonded," an employee for Nunavut Excavating wrote in an email.

However, it's possible NHC let the bid bond expire, in which case the company would be able to walk away from its bid without penalty.

When a company bids on a project for more than $250,000, it's required to submit a bid bond. Those can be either in the form of a five per cent deposit of the tender price, or a 10 per cent bond in a form approved by the Treasury Board.

"That's kind of an insurance from us to our clients that we'll honour our price. And if we don't they can pull that bid bond," one contractor told CBC News.

NHC would not answer written follow-up questions on whether it tried to enter into an agreement with Nunavut Excavating before the bid bond expired, whether NHC tried to award the contract within the 30 day tender period, or whether NHC claimed the bid bond if Nunavut Excavating did withdraw its bid within the tender period.

The tender was cancelled on May 10, nearly two months after the closing date.

In a follow up email to Nunavut Excavating, CBC News asked whether it was possible the company withdrew its bid afterwards because the bond had expired.

"I guess anything is possible," the employee replied. Follow up emails and phone calls to the company were not returned.

In March 2022, NHC retendered the 16-unit Iqaluit project. The lowest bid was $15,426,175, which came from Nunavut Excavating. The tender was ultimately cancelled, again.

Delays in awarding contracts cost Taloyoak 10 units

CBC News analyzed past tenders from construction seasons in 2018, 2019, and 2021, using publicly-available information on the Government of Nunavut's tenders site. Data for 2020 was not publicly available, and NHC has also not yet issued its contracting and procurement report for the 2020 season.

In the 2018 construction season, NHC took an average of 27 days after a tender's closing date to award contracts. In 2019, NHC took an average of 14 days.

However in 2021 NHC took about 60 days, on average, to award contracts — or cancel them.

The length of time it took NHC to award contracts last year also cost people in Taloyoak who were waiting for a home, after cancelling a project there for 10 units.

In the Legislature on May 28, 2021, then-NHC minister Margaret Nakashuk told the House that the rising cost of construction was the main driver behind the reason to cancel the Taloyoak project, citing in particular the cost of lumber.

Later on June 1, following questions from then-Netsilik MLA Emiliano Qirngnuq, Nakashuk told the House "the company with the winning bid was unable to procure the necessary insurance for the work, and this became problematic to the NHC."

However contractors who spoke with CBC News, who are familiar with the circumstances of last year's construction season, say there's more to the story.

One contractor with direct knowledge of the Taloyoak project, who spoke on the condition of anonymity, said while it is true the winning company couldn't get insurance for the project, it was only because NHC took so long to award the contract.

According to the contractor with knowledge of the circumstances, when the winning company went to its insurance company after NHC declared its intent to award them the contract, the company's insurance provider said construction costs had increased so much in the two months NHC took to award the project, they could no longer afford to complete the project for the $7,812,683 they had bid.

When companies enter into contracts on projects, they can immediately source out materials and lock in the prices at the time of purchase.

According to data from the NASDAQ, from the day the Taloyoak contract was issued to the day it was cancelled, the commodity price of lumber rose by 58.7 per cent. The cost increase was 26.4 per cent by the end of the standard 30-day tender period.

Nakashuk declined CBC's request for an interview, because she is no longer the minister responsible for the Nunavut Housing Corporation. She also declined the opportunity to comment on her statements in the House.

NHC refused to answer questions on whether Nakashuk was fully briefed on the details of the Taloyoak project, specifically on whether the delays in awarding of the contract were a contributing factor to the company's inability to secure insurance bonding.

Kusugak, now the minister responsible for NHC, also refused an interview request because he was not the minister at the time the tenders were cancelled.

The Taloyoak project was retendered this year, but was bulked in with projects in Gjoa Haven and Kugluktuk. Contractors pegged the value of the Taloyoak portion of the tender at $11 million —  more than $3 million higher than last year's bid for the same 10-unit project. 

All 2022 new-build housing tenders have since been cancelled.

'It's not normal'

Contractors who spoke with CBC News say the amount of time NHC took to award contracts last year also diminished the protections provided by bid bonds.

Three of them allege NHC took so long to award contracts last year, the bid bonds expired on each tender. However one contractor insisted NHC extended the bid bonds, and awarded the tenders with one day to spare.

But the exact details of whether the bid bonds expired, or why NHC took so long to award contracts, are unclear because NHC has refused to answer questions on it.

"It's not normal. It was the first time we saw that in the last 20 years," said another contractor who did enter into an agreement with NHC and said the bonds expired. They said because the bonds had expired, they — and other bidders — could have walked away from the contracts without penalty.

"As a responsible organization, I would say those decisions should be made within that bid bond period," a third contractor said.

"I can't flip into [NHC's] minds and figure out what's going on, but letting that period expire does potentially give contractors some flexibility. Because all of a sudden you're not held to account."

More knock-off effects of delays

The contractor also said taking so long to award contracts puts companies in a tight spot to secure materials in time for the sealift. That's when construction materials are shipped up to Nunavut by boat in the summer.

"You can't order material until you get a contract. And then if it takes longer than expected for a contract to be awarded, you're that much closer to sealift cutoff and things get very risky, very quickly," they said.

"The circumstances over that period of time change, for sure. Whether it be solely the price of material, but also every single day that passes gets closer to sealift."

But while pulling bid bonds would keep companies accountable to their bids — which contractors say rarely happens — one contractor said pulling bonds could have a detrimental effect.

"By pulling the bond, you're pretty much eliminating that contractor from bidding on work for at least a couple of years in the future," they said, because it reduces a company's bonding capacity.

"They're kind of eliminating competition for the other contractors to keep everybody's prices in check," they added, although other contractors disagreed, saying there's nothing that prevents a company from bidding on future projects again if a bid bond is pulled.