The Yukon government’s policy giving businesses controlled by First Nations a leg up when it comes to bidding on government contracts was under the microscope in court and the legislature in recent weeks.
The territorial government’s First Nations procurement policy, was introduced in February 2021. Its stated goal is providing Yukon First Nations People with opportunities to participate in the Yukon economy and develop economic self reliance.
The policy confers benefits for businesses including bid value reductions which are a way of ranking bids on government contracts based on the amount of Yukon First Nations participation. These benefits are contingent on ownership requirements including that 51 per cent or more of the company’s voting shares be owned by a Yukon First Nations person or organization. The Yukon First Nations Chamber of Commerce (YFNCC) maintains a registry of businesses that meet these requirements. Companies must prove they are beneficially owned and actively controlled by Yukon First Nations people or organizations in order to get on the registry.
This registry became the subject of scrutiny after a company that was denied registration went to the courts seeking review.
Yukon Supreme Court Justice Adele Kent ruled on the matter March 8.
Kent’s judgement states that a numbered company applied to the registry, believing that it needed to be registered to reap the benefits of the procurement policy. Its registry was refused and judicial review of that refusal was the basis of the court case.
The company is 75 per cent owned by First Nation of Nacho Nyak Dun citizen Nicholas Zaccarelli and the remaining 25 per cent of the shares are held by Paramjit Sidhu, the owner of a major Yukon trucking and construction firm. The court heard that the agreement between the two specifies that decisions are to be made by consensus but in the event of disagreement Zaccarelli holds the deciding vote.
The registry application was filed December 2021 and rejected June 2022. Correspondence after the rejection presented during the court case cited the chamber of commerce’s belief that Zaccarelli’s company could not operate independently and that Sidhu would benefit disproportionately from its operation as the company was only created to secure work for Sidhu’s larger company.
Kent’s judgement found the exclusion of the company from the registry unfair and unreasonable.
“The process was flawed and opaque and was not fair,” Kent stated. Her judgement didn’t find fault with those who had processed the application but noted the process they were following had not been thought out well enough.
The judge suggested allowing the company to take advantage of the bid reduction and other benefits set out in the procurement policy for at least the next year but reserved decision pending additional argument from both parties.
Counsel for the government argued that registry with the chamber of commerce was not a prerequisite for obtaining the benefits promised by the procurement policy. The judge found this argument difficult to follow and contradictory of Yukon government documents filed during the court case. The line of argument would also come under fire from the opposition Yukon Party as it seemed to contradict statements that had been made about the procurement policy by territorial government representatives.
A March 27 statement from the Yukon Party called on the government to clarify the role of the registry and the contradictions it found between what had been argued in court and statements made by Nils Clarke, the territory’s minister of Highways and Public Works last spring. Clarke had made it clear during the spring 2022 legislature sitting that Yukon First Nations businesses had to be registered with the YFNCC to benefit from the procurement policy.
“This ruling has found an inconsistency between what the Liberals have been telling Yukoners and Yukon companies and what Yukon government lawyers are presenting in a court of law,” said the Yukon Party’s highways and public works critic Stacey Hassard.
Hassard called for Clarke to meet with the executive of the Yukon Contractors Association to discuss contractors’ “concerns with government procurement, process, timelines and red tape,” in the legislature on April 3.
He also drew attention to an additional document filed in the court case over the procurement policy after Kent’s judgement had been made. The document informs the court that the First Nation Chamber of Commerce provided the territorial government with an official termination notice halting its administration of the business registry for the procurement policy. It states that while negotiations are still ongoing this raises the possibility that the registry may not exist or may be in a substantially different form.
Speaking to reporters in the Yukon government’s cabinet office after question period in the legislature, Clarke clarified that a letter of understanding between the government and YFNCC had been signed March 30 and the chamber would still be administering the registry.
Clarke told reporters that more than 100 businesses are now on the registry.
Speaking to the possibility raised by opposition MLAs that the procurement policy could be vulnerable to exploitation by bad actors Clarke recognized the possibility that any policy might be vulnerable in this way but expressed confidence in the oversight of the government’s monitoring and review committee.
He said the policy would not be meeting its intended objectives if oversight over it could not identify shell corporations or companies that otherwise don’t meet the definition of a Yukon First Nations business.
During question period he also stated that an independent contractor will conduct a review of the bid value reduction components of the policy this spring with completion of the review expected in June.
Contact Jim Elliot at jim.elliot@yukon-news.com