With several mega projects in the pipeline, New Brunswick needs an industrial benefits program, says a Fredericton businessman.
Hart North, president of Bids, a division of Tendering Publications Ltd., said an industrial benefits program would ensure that the province receives the maximum benefit from major construction projects. An industrial benefit program ensures that local companies and workers get a share in any major construction project.
Among the major construction projects planned for New Brunswick in the next few years are an LNG terminal in Saint John, the refit of the Point Lepreau nuclear reactor and potentially a second reactor at Lepreau.
North said in an interview Monday that Nova Scotia reaped the benefits of an industrial benefits program when its offshore oil and natural gas deposits were developed.
“In Nova Scotia the industrial benefits program has created and strengthened the development of an offshore oil and gas-based service industry,” he said.
“There are immediate benefits of it and the second thing is the residual effects.”
One Nova Scotia company was purchased by a big Texas company this summer because of its expertise in the offshore oil and gas service industry, he said.
North said an industrial benefits program is one of the recommendations of the final report of New Brunswick’s task force on self-sufficiency. He said he wouldn’t be surprised to hear about an industrial benefits program in the throne speech next month.
“I am sure that New Brunswick is doing something about it,” said North.
Officials from Business New Brunswick weren’t available for comment Monday.
North’s firm distributes bidding opportunities, usually for public projects, to subscriber companies. He said his company stands to benefit if an industrial benefits program is created. He also said the province needs an industrial benefit program that is as open as possible.
In Nova Scotia the technique used was open access to prevent corporations using “tag-along bidding,” in which companies use only their regular contractors and subcontractors from around world. That reduces the potential benefit to the local economy, he said.
But Charles Cirtwill, acting president of the Atlantic Institute for Market Studies, isn’t a big fan of industrial benefits programs.
“That’s a good way to kill your big projects,” he said.
He said breaking big contracts into smaller ones so local companies can bid on them and requiring a certain amount of local content and workers adds to the cost of major developments.
“All of those little things raise the overall cost of the project,” said Cirtwill. “They make those projects more expensive and so you have fewer of them.”
He doesn’t buy North’s argument that industrial benefits programs create new industry.
“That industry probably would have been created anyway,” said Cirtwill. “With every benefit comes a cost.”
One example is that both Newfoundland and Nova Scotia require local crews on ships servicing the offshore oil and natural gas industry, he said. That means that shipping companies have to hire and fire crews when ships go between those two provinces, he said.
“That is pretty much par for the course for those things,” he said. “The other challenge you have with industrial benefits, of course, is it treats costs as a benefit.”
This translates into the more people you can hire and the more expensive you can make these projects, the better it is, he said. An example of the impact of that kind of thinking on the planned LNG terminal in Saint John would be that the end user has to pay more for that natural gas which makes it harder to sell and makes the return on investment more risky, said Cirtwill.
“The better argument to make is that these mega projects are going to create benefits period, full stop, in the form of employment and subcontracting,” he said. Cirtwill also dismissed the argument that the multinational companies that build mega projects come to town with only their regular suppliers.
“If that were entirely 100 per cent true they would still consume a lot of material while they are there,” he said. “For the most part it is the consumption side that your local companies are best at delivering.”
Almost all these big companies are looking to build relations with the community, maintain a positive outlook for the future and grow and expand their supply base so that they can reduce their risks, said Cirtwill.
“It is a little too simplistic to say they are only going to use their standard suppliers,” he said.