Monday, 6 April 2015

"COLD EYES" ARE BLIND TO MUSKRAT OVERSIGHT

A Project Oversight Committee is often referred to as a “Cold Eyes Reviewer”. Cold Eyes denotes impartiality and independence.  They evaluate project plans, procedures, and safe work practices giving emphasis to design, management, work quality, project costs and schedule. 

The Muskrat Falls Oversight Committee has been given a far smaller mandate than the one just described.  Its role is essentially “reliable and transparent oversight on the cost and schedule performance of the Project” and as a “direct and effective communication channel to Cabinet and the general public”.

This limited oversight role ought to permit the Committee to perform good work; but, it hasn’t.  The information it claims to have analysed comes not from the performance of its own financial or technical audits.  It is provided by Nalcor. Pete Soucy, Host of VOCM Back Talk, recently equated the practice with ‘the foxes watching the foxes’. He is right.

The Oversight Committee is comprised of public servants; it contains no Members who are independent or who possess expertise associated with large scale construction.


The Committee lacks not just an appropriate skill-set; a history of goodwill from the politicians who control its renderings is also absent. 

Each quarterly report is parsed by engineers who lend their expertise to this Blog.  They have experience in the execution of large scale projects. Not surprisingly, those engineers dismiss the Reports with a derision reserved for propaganda.

Two weeks ago, “JM” contributed a Post facetiously entitled “In Nalcor We Trust”.  He examined some of the key aspects of the most recent Report and its glaring deficiencies.  Now, another highly qualified professional engineer, with experience in large scale projects, has reviewed the quarterly Oversight Report.

Like JM, the engineer offers an important piece of advice for the Oversight Committee: the phrase “Nalcor has advised…” is not an acceptable auditing technique.


What follows is his analysis which has been edited principally for brevity:

1.    The Oversight Committee noted, on page 8, that there is “slippage…primarily to progress on the powerhouse and spillway”.  It states the slippage “does not impact key Project milestones”; that the schedule and first power are secure.   The Committee draws this critical conclusion not from independent audits but on what Nalcor has told them.

It is interesting that Nalcor uses the Committee to release this “slippage” information, rather than inform the public directly.  Is it possible that by having the Committee release the information, Nalcor believes the public will perceive it coming from an independent source? 

Any reasonable person who reads the Report can discern, based upon its construction and phraseology, that the Committee has no “boots” on the ground at Muskrat; it does not have professionals reviewing Nalcor’s internal reports, or conducting assessments of their management skills, or that of contractors.


2. The Oversight Committee describes various mitigating measures with respect to the Astaldi Contract to improve productivity and to regain the schedule.
The Report omits answers fundamental questions:


-        Are the mitigating measures, additional equipment and plant materials coming to the site Nalcor’s additional cost?

-        The ICS “the Dome” was not completed and was not used as intended. Should we not assume that the efficiencies the Dome was to have created were supposed to be in excess of $100 million; otherwise, why would it have been built?  Who pays the cost of this loss of production?

-        How is this failure not evidence that Nalcor and Astaldi suffers significant management problems?

The Report states that Nalcor and Astaldi are undertaking mitigation measures; yet, it adds:  “slippage will continue over the upcoming winter months”. 
-        How bad must productivity be and how poor Nalcor’s choice of management that more and better management still won’t stop work under-performance?  


-        Does the Committee address the risk of Nalcor’ mitigating measures not working?  No.

-        Does it address any other risks Nalcor is monitoring that might affect project costs and the all-important schedule?  No.


3.  Nalcor suggests the slippages will not affect “the critical path to first power” even though it is continuing to work during the winter. Why would Nalcor be working on non-critical items at a time when the cost of getting the work done is greatest, especially if the work is not critical to the date for achieving first power?  

4. At some point the word project “acceleration” is going to be used in the context of bringing the project back on schedule.  Acceleration implies major additional costs and other problems. The most obvious ones are congestion of the work space, lowering of overall productivity, and greater demand for temporary works, like the size of camp quarters.  The Oversight Committee neglects all those issues.  It is content only to report Nalcor’s mitigating measures will work.

5. Nalcor is reporting the project is behind schedule -2.7 %.  This is a Nalcor measurement.  There is no audit of this figure by the Oversight Committee.

6. On the matter of the Astaldi Contract, specifically, we have no idea how the risk component of the Contract is structured: what do labels like “fixed-priced” or “unit-price” actually mean in this particular contract?  Of concern is whether Nalcor assumes all or part of the risk (i.e. labour costs) or whether it is all Astaldi’s.    

The Report states: "The contract format requires Astaldi to meet certain milestones or pay liquidated damages; this only could occur if/when a milestone is not achieved.”

The Oversight Committee ought to answer: how many milestones are contained in the Astaldi contract? What they are? What are the dates on which each one must be achieved?

The Report should tell us if any of the milestones have been missed as well as exactly what actions Nalcor is taking to remedy the problems. Does Astaldi contract have penalties?  Have any of those penalties been assessed to date?

Given the admission of “slippage”, those questions should be addressed in the Report.


7. One of the best yardsticks of progress on a megaproject, like Muskrat, is the rate of placement of concrete: it is a large, exacting component made all the more challenging in a Labrador winter.  However, the weather conditions were known in advance; readiness ought to reflect the environment where the project is situated. The Oversight Report should answer:


What is the total volume (cubic meters) of concrete specified in the powerhouse and, separately, in the spillway?


How much concrete has been placed to date vs. the planned amount?  What are the completion dates for concrete for each of those two major works?  What is the maximum placement of concrete, per day, project infrastructure can provide?  


The figures will constitute their own analysis.


Other issues raised by this engineer include the Committee’s failure to discuss the impact on the schedule of the river diversion originally planned for early, 2015, the delay in the award of the dam contract, and delays to commencement of North Spur remediation.


While the Oversight Committee is not mandated to consider the issue, no oversight is provided with respect to the “quality” of the work performed. Nalcor gets to assess its own work quality. He wonders how much more maintenance will be needed on the facility after commissioning, due to quality issues.

There is no consideration of the project’s safety record.


He doubts Nalcor has sent anyone to China competent to perform the necessary and exacting role of providing dimensional control during the manufacture of the turbines.


There are other issues, but those are plenty for now.  One point bears repeating:


As the engineer get up to leave, he shakes his head that the words: “Nalcor has advised…” is repeated in the Report and presented as “oversight”.


He confirms, as did “JM”, there is still no oversight of the Muskrat Falls project.


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