GN bungling raises sealift costs

The Government of Nunavut has bungled its annual sealift since Ottawa devolved responsibility for the multi-million dollar annual cargo resupply in 2000, according to a consultant’s report.

An evaluation of the GN’s annual resupply says the sealift costs more money than it should because it is disorganized and fragmented at nearly every level.

It recommends creating a “core group of experienced professionals” that would reduce the need for training, keep skills in the GN and cut costs.

This key recommendation comes from a report, “Annual Resupply Evaluation,” which was prepared by the Mariport Group Ltd. for the GN, and tabled last week in the Nunavut legislature.

Shortfalls in sealift planning and organization now result in project delays, piecemeal orders, confusion, more expensive crating, and, in the worst case scenario, the airlift of supplies at 10 times the cost.

And the GN’s bad decision-making may result in an enormous increase in sealift costs in 2006. The report says sealift costs may rise by as much as 15 per cent in 2006 due to increases in fuel, which could have been avoided had the GN signed a longer contract with its sealift providers.

The GN could have kept the price increase down to one per cent going into 2006 if it had taken up an option to extend its contract. As it is, the GN can expect to pay several million more dollars in 2006.

Many costs would be “entirely avoidable,” says the December, 2005 report, if the GN returned purchasing and management operations to a single team. More coordination could shave 30 per cent off packaging, freight and waste dumping alone.

The GN asked for the evaluation to judge whether it should continue the current de-centralized model for purchasing and booking of goods, or whether to consolidate its activity, as was the case under the Coast Guard.

The Coast Guard began administering and coordinating the Eastern Arctic sealift in 1959, but in 2000, Ottawa devolved the responsibility to the GN.

Under the GN, departments, hamlets and service providers have been encouraged to do their own bookings with a choice of four sealift providers — “in the belief that they could do a better job than a central organization.”

A major problem with the current model is its lack of follow-up, which adds “unwarranted costs to the movement of goods.”

The report says a more centralized operation for cargo sealift is the way to go.

“By planning ahead and controlling the operation from purchase to delivery, such an activity will have a positive financial and economic impact on Nunavut.”

In 45 pages, the report, available in Inuktitut and English, details many reasons to support going back to a unified sealift.

The report says:

* There has been an “overall loss of capability” since the responsibility of the annual resupply was changed from the Coast Guard to the GN;
* Too many separate purchases are increasing packaging and shipping costs;
* The Department of Community and Government Services has lost its bargaining power;
* The GN and sealift providers need to improve communications;
* Contracts are “disjointed… outdated, inappropriate and badly structured.”

At the very least, the report suggests CGS start up a course with the Nunavut Arctic College in conjunction with municipal training programs to look at sealift ordering. A key message of this course would be “the absolute need” to recognize the small window of opportunity of 150 days for sealift shipping in the Eastern Arctic and of 90 days in the western part of Nunavut.

The report also says the traditional April 1 to March 31 fiscal year is a “major problem” for ordering supplies because it slows down planning for the sealift and means the first sealift sailings to Nunavut are underused. This could be offset by certain accounting measures within the GN, the report suggests.

It also says community warehousing could be improved and that each community needs a well-lit, secure compound comprised of steel freight containers. The compound and its stock of containers could pay for itself “very quickly” due to group savings on orders and rental for the units.

As well, contracts with sealift providers should include a fuel surcharge component, which would be adjusted annually depending on the real cost of fuel.

Five-year contracts with two one-year extensions would also reduce the likelihood that the GN will ever experience again the kind of massive price hikes for cargo sealift, which it definitely faces in 2006.