Bickering bosses stalled Nunavut’s 2011 medical travel contract

In 2010-11, Canadian North did $8.4 million worth of medical travel work for the GN. (FILE PHOTO)

First Air took in $10.6 million in medical travel contracts from the Government of Nunavut in 2010-11. (FILE PHOTO)

Bickering among top Nunavut government bosses threatened to derail tendering of last year’s medical travel contracts, suggest emails tabled this Feb. 29 in the legislative assembly.

“I do not understand how this RFP [request for proposals] process has become so unproductive,” Mark McMulloch, the Government of Nunavut’s senior manager of procurement, said Nov. 17, 2010 in an email.

Medical travel contracts represent a juicy source of revenue for northern airlines. In 2010-11, Canadian North did $8.4 million worth of medical travel work while First Air took in $10.6 million and Calm Air $5.7 million.

The GN’s estimated spending of about $33 million on medical travel in 2010-11 equals about 12 per cent of the health department’s budget.

The bureaucratic brawl began when Alex Campbell, then the deputy minister of the health department, sought in November 2010 to drive down costs by ending the GN’s support for “weaker” airlines.

In the past, the GN used its buying power, through medical travel and other contracts, to effectively subsidize scheduled passenger routes that serve small high-cost communities.

“As I indicated at our meeting, there is also a view that historically the schedule medical air travel contracts have been used as a tool to stimulate air travel and to maintain the current air passenger service operators…,” Campbell said Nov. 12, 2010, in an email to Kathleen Lausmann, the deputy minister of Community and Government Services.

But Campbell said the health department, faced with skyrocketing medical travel costs, can’t afford to do that anymore.

“In view of the current significant health budget pressures HSS faced and continuing high cost of health care and social services delivery in Nunavut, it may be time to drop the stimulus nature of awarding [medical travel] contracts…,” Campbell said in the email.

Campbell said that’s because the GN’s health department was paying “extra cost as a result of awarding not only winners but weaker proponents as well.”

To fix that, he proposed issuing an RFP under which airlines would be asked to offer volume discounts on large blocks of medical travel tickets.

And Campbell said that in evaluating bids, the greatest weight be given to price, followed by the ability to meet service requirements.

Other factors, such as type of aircraft, northern experience and Inuit content, should get lower priority, Campbell said.

But he warned that airlines, especially Canadian North, would resist the new GN scheme.

“Airlines, especially Canadian North, would prefer status quo and will push back on the bulk discount approach. They will want to continue with a guaranteed level of business,” Campbell said.

With existing contracts set to expire March 31, 2011, Campbell urged Lausmann to act quickly.

But Campbell’s proposal provoked stiff resistance from Lausmann and others at the top levels of the Community Government and Services department, which is responsible for public tendering.

Five days later, McCulloch hit back at Campbell with a highly critical email.

In it, McCulloch suggested Campbell’s approach could have a big impact on Nunavut’s transportation system and he recommended a big meeting that included the economic development and transportation department.

“Awards from this RFP have far-reaching impacts on all of Nunavut,” McCulloch told Campbell in an email sent Nov. 17, 2010.

He also said GN bosses shouldn’t make a decision on the medical travel RFPs until after they look at the results of an air transport study done by the LPS Avia consulting firm.

McCulloch told Campbell that CGS could issue an RFP that requests volume discounts.

But he dumped on other proposals that Campbell made.

For example, Campbell wanted the GN to structure the contract so they could negotiate with the “second-place company” to bring their price down to that of the winning bidder.

But McCulloch told him that’s impossible.

“This goes against all principals [sic] of public procurement,” McCulloch said.

And McCulloch also questioned a requirement that bid proponents have a licence from Transport Canada, which he interpreted as a ploy aimed at weakening Nunasi Corp., a co-owner of Norterra, the parent company of Canadian North.

“Is this intended to not allow Nunasi to submit proposals on behalf of Canadian North[?]… this is a contentious issue that would need to be discussed with NTI and perhaps Cabinet. This is a totally new direction if we go in this direction,” McCulloch told Campbell.

McCulloch even said that measure could be “a show stopper.”

That’s because by allowing the Nunavut-owned Nunasi to bid on behalf of Canadian North, the GN allows the Canadian North bid to gain the benefit of the GN’s Nunavummi Nangminiqaqtunik Ikajuuti policy.

Norterra, a 50-50 partnership between Nunasi and the Inuvialuit Regional Corp., does not normally meet the 51 per cent Nunavut ownership requirement under the NNI.

It’s not clear how the GN eventually resolved the squabble over medical travel contracting.

On Jan. 21, 2011, Premier Eva Aariak announced Alex Campbell would depart the public service as of March 18, 2011.

And on March 3, 2011, Tagak Curley, then the health minister, extended existing medical travel contracts by four months to give the government more time to process medical travel contract bids.

RFP 2011-22 was issued Feb. 25, 2011 with a closing date of April 15, 2011.

The new contracts were awarded later in 2011, but the GN has provided little public information about how they proceeded and how much money will go to which airlines.

The contract award date for RFP 2011-22 does not appear on the GN’s public tendering website.

In a recent report, the Auditor General of Canada said those contracts were awarded “according to the evaluation process rules.”

But those contracts weren’t signed until three months after airlines started operating under them.

“Without a signed contract in place, there is a risk that the parties will not be adequately protected in case of contract disputes,” the auditor general’s report said.

On March 1 Premier Eva Aariak told the Nunavut legislature that officials will conduct a review of the GN’s internal public procurement practice.