Monday, 20 June 2016

STAN MARSHALL FAILS FIRST TEST AS NALCOR CEO

The appointment of Stan Marshall was seen by many, including this scribe, as one that might presage real change in the management of Nalcor. Based upon his lengthy experience as head of a large multi-national company, Fortis Inc., it was thought that he might possess the skills and the moxie to inaugurate a long overdue re-set of the Muskrat Falls project, too. An update on Muskrat is due by month’s end. But last Wednesday, Marshall signalled that any high expectations of him may be excessive.

I don't think anyone expected the new Nalcor CEO to be a miracle worker. There is hope he might unveil a revised mandate for the crown corporation; stop it from wasting money on the Gull Island power project, on seismic surveys offshore, and on high-risk equity investments in the offshore oil industry.

But most observers know that the mandate given Nalcor by former Premier Danny Williams falls within the bailiwick of the Ball Government to change. The Premier has already proven that he doesn’t understand policy or what constitutes “real change”, so there’s little chance that he has given Marshall any such instructions.

However bringing new talent, both to Nalcor and to dealing with the horrible mess at Muskrat Falls, is something expected of Stan Marshall.
An entire province is witness to a shaky Treasury being toppled as a result of a series of colossally bad decisions, taken first by Williams and Dunderdale and then by people inside Nalcor. Yes, the Wicked Witch has been wealthily retired, but Ed Martin wasn't the only culprit of doubtful competence.

From its very conception, Muskrat was at best a speculation, and at worst a contrivance. Its unfounded fundamentals were made worse by the appointment of an ill-suited cable TV manager to run the megaproject.

One might have expected Marshall to search world-wide for a few people of suitable pedigree to assist him. That did not occur. Indeed, his feeble realignments are shocking in their short comings.

Marshall did, however, manage to attract at least one fan of this display of dither.

NDP Leader Earle McCurdy ran to Marshall’s press conference fearful he had sold the works to Fortis Inc. and announced feeling relieved. As if private capital seeks out white elephants!

Those exhibiting more common sense would be worried public ownership of anything costs two or three times what it should. They would be preoccupied that Marshall had failed to exorcise the rot from that crown corporation.

Big minds are hard to find. And, in this case, Stan Marshall has waded through a shallow gene pool (and that is being kind!) and has come up with the very same people who helped create the Muskrat disaster in the first place.

Among them is Gilbert Bennett. We will return to him because his wasn’t the only re-appointment about whom we should be concerned. The other is Jim Haynes.

Jim Haynes
A little history is necessary.

The decision to operate Newfoundland and Labrador Hydro as a separate business unit, engaged solely in activities regulated by the PUB, was a recommendation of the Liberty Consulting Group, an independent consultant acting for the PUB.

Liberty investigated Hydro’s management, maintenance records, and operating culture. The Group ferreted out what led to days of “black-outs” known euphemistically as #DarkNL.  Liberty learned that the security of the electrical grid was compromised by poor management and a lack of focus. Said Liberty: “Hydro needs a single executive under which it can consolidate the principal functions associated with delivering utility service…”

Marshall chose the occasion of minor executive adjustments to implement Liberty’s recommendation. He selected former VP of Hydro, Jim Haynes, as the new Hydro CEO. Marshall called him “a steady hand”.

We should ask: just how “steady” was Haynes? Some might rightfully suggest that “motionless” is a better characterization.

Haynes’ LinkedIn page states that he was VP Regulated Operations at NL Hydro (Nalcor) 2001 – April 2013 (12 years). He oversaw “generation, transmission and distribution of utility operations, including maintenance, capital and operating budgets”.

When did #DarkNL occur? Only 8 months after Haynes’ retirement. This historic event began with rolling blackouts in late December 2013 which were followed by, as the CBC described, “full blown turmoil” on January 4, 2014.

Can we connect #DarkNL to Jim Haynes? We most certainly can.

It is a fact that makes his re-appointment by Stan Marshall disturbing – that is, unless the Reports of the investigation by the Liberty Consulting Group are rubbish. Here are just a few small items from Liberty’s two reports:

      -          Hydro wasn’t using the right models to forecast electricity demand.
      -        “Hydro has planned its system to the same overall standard for many decades (which)           provides for lower reliability than what Liberty has observed in other regions of North             America”… Hydro has “roughly twice” the frequency of supply related outages as found         elsewhere.
      -          Overall reliability performance (2009–2013) has been below comparable Canadian               utilities.
    
      What were some of the comments of the Public Utilities Board (PUB) following the Liberty Report?

-      The PUB found this statement particularly alarming: “Hydro stated that it is not aware that [it] is normal utility practice to provide the necessary resources to adhere to preventative maintenance schedules in addition to addressing emergent and critical capital work.”

-      The PUB stated: “The resulting findings by the board of imprudence by Hydro are significant and reflect failure on the part of Hydro's management… The consequences of this imprudence for customers are significant, both in terms of impact on service adequacy and reliability, as was shown during the outages of January 2013 and January 2014, and in terms of cost.”

Jim Haynes had a long career at NL Hydro including 12 years at the VP level. Degradation of Hydro’s equipment and the evolution of what Liberty described as a poor management culture were not found to have been the product of VP Rob Henderson’s eight-month tenure alone. Liberty’s damning indictment of NL Hydro, as one of the poorest run Utilities in North America, grew out of a far longer stretch: when Haynes was second-in- command.

This is not the stuff that inspires re-appointment. It merely suggests “good riddance.”

Did former CEO Ed Martin stymie Jim Haynes in his ability to operate Hydro as a modern electrical provider?

Did the PUB deny NL Hydro approval for funding to maintain equipment or to fund competent management?

If Jim Haynes experienced any of those difficulties, he kept them to himself.

Hence, he may have left Hydro enjoying the perception of a public servant in good standing. But he returns with an imprimatur tarnished by objective review—unless, of course, we suffer from the collective amnesia to which Ed Martin was fond of giving reinforcement.

Gilbert Bennett
Gilbert Bennett is the new Executive Vice-President of Power Development (the powerhouse and related generation components at Muskrat), formerly the Vice-President responsible for the whole Muskrat Falls project.

Gilbert Bennett reminds us of what we hate most about recycling.

Stan Marshall, having cut his duties by half, wants us to believe that Bennett represents change.

Yet Gilbert Bennett, a former manager of Danny Williams’ cable company who possesses no experience as a megaproject lead, has been at Nalcor since the Muskrat Falls project was conceived.

He was there to help Ed Martin stick-handle the project away from full consideration by the PUB, to pillory the “naysayers”, and to admonish Dr. Stig Bernander, a Swedish expert on quick clay, over his well-publicized concerns about the stability of the North Spur.

It was Gilbert’s job to decide how contracts should be packaged—to oversee the contract language and project logistics that has Astaldi claiming additional hundreds of millions of dollars.

Did not Gilbert Bennett choose Astaldi—the one with no cold weather experience—as the project’s contractor?

Did he not fail to intervene as Astaldi wasted precious months gearing up for the work? As the schedule fell behind, finally falling off the rails altogether?

Did he not bolster Ed Martin’s assertions about “unit pricing” until they could no longer bear the burden of their inherent deception?

Was it not Gilbert’s job to install adequate standards of Quality Assurance, a problem frequently noted on this Blog, illuminated recently by the failure of a major concrete pour and by the miles of transmission line towers improperly installed?

Wasn’t it Gilbert Bennett’s job to install a competent management team on the project?

Isn’t it under Bennett’s management that the province holds its breath in fear that all those failures, and others, will leave us not with merely the highest electrical rates in North America, but possibly in a state of bankruptcy too?

Can we separate Bennett’s culpability from that of Ed Martin, who was fired as CEO?

On what basis is Bennett’s re-instatement, in any capacity, defensible?

Stan Marshall said he wants to keep him around, along with the others, "because they're good people". 

No one has suggested Bennett, or any other executive at Nalcor, should not be considered “good people”. The question is: what are they good for?

Though Bennett’s role has been cut in half, his re-assignment by Marshall confers on him an unwarranted approval of his abysmal past performance. It sends a dreadful message to other executives at Nalcor, and to the other members of the project management team, about any requirement for performance commensurate with their titles and pay packets.

Bennett’s re-appointment is incredulous. It is an explicit commentary on Stan Marshall’s own poor judgement. It is proof that he has already ascribed to this publicly funded corporation a far lower standard than would be applicable to private capital.

Is Mr. Marshall overwhelmed by the mess at Muskrat? Has he been bamboozled by the very architects of the project who, for so long, have layered its complication with their own incompetence?

If Stan Marshall has discovered anything since becoming CEO, it should be that managing Nalcor is not the same as a normal day at Fortis Inc. where growth (organic or by acquisition) is achieved amidst a talent pool assembled over many years. There, questions about the viability of new projects are not smothered by politicians or by the private agendas of a group for whom Muskrat represents a golden chariot delivering a comfortable retirement. Nor did Fortis Inc. thrive by giving career shelter to the ill-suited and letting them screw up.

Nalcor needs steady hands to be sure. But the sheer magnitude of the problems at Muskrat Falls evokes thought of the need for a Hank Van Zente, who put a failing Hibernia GBS back on track. Exxon Mobil did not engage in the wishful thinking afforded by the limp stir of a shallow gene pool.  

If Stan Marshall can keep Nalcor executives, including Gil Bennett in spite of his miserable failures, then why didn’t Ball keep Ed Martin, too?

Marshall’s first steps are not just disingenuous; they are perplexing, given the kind of decisions on Muskrat that must soon follow.

Loudly, they make the pronouncement: Don’t get your hopes up that change is any more a part of Stan Marshall’s lexicon than it is of Premier Dwight Ball’s. 

15 comments:

  1. We don't have to ponder the skullduggery that has engulfed the muskrat falls project we only have to take a quick glance back over our collective shoulders and see the sins of the past in these mega projects...Its seems in newfoundland, we can never align people with the smarts and the vision to have its peoples best interest at heart...I'm not sure if its a defect in our DNA or its just the mere fact that we like pain and suffering... Starting with our birth into confederation which left a stinky smell to the paper work which holds the names of the people involved.. Come by chance refinery was a farce...The Hibernia had its growing pains...And my god didn't we take a terrible beating on the first electrical project in the Labrador...Our fishery devastated and oh ya the 40 million dollar cucumber ride from Calgary was a no no...Finish muskrat falls now that were are so deep into its misery and lets all hope we will receive a few coppers from the thunders roar of its waters.. We should now all get down on our knees and pray for a new breed of Newfoundlanders who will be born with the foresight to do good for the people and stop the laughter from the rest of the country every time we take on a major project...I'm just a simple boy from the bay but I hear the laughter...

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  2. The Old Boys Club will bank the millions in bonuses. The 99% will huddle around their stoves eating crusts suffering the mockery of the rest of Canada.

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  3. Another well informed and cold eyed analysis of the failure of governance and execution at Nalcor. Leaving Gil Bennett in charge of the Muskrat Falls disaster, bears testimony to Stan Marshall's inability to take control of a desperate project. His "all options including stopping MF" was cheap PR when in fact it remains full steam ahead, damn the torpedo's.

    With Haynes now in charge of distribution, given his dismal record at maintenance, upkeep and planning the grid should send shudders up the spines of rate/taxpayers when they attempt to integrate 2 HVDC lines into the system, with 2 ocean crossings and traversing the Long Range Mountains with towers that the genius Nalcor team refused the Manitoba Hydro recommendation that they be built to a much higher standard. The Nalcor team felt they knew better! And now the fellow that let NL Hydro fall to one of the worst maintained in North America is now in charge? Yikes!

    As for poor Earle McCurdy, big capital will wait for the fire sale when Nalcor implodes. Until then he can go back to sleep.

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  4. Excellent commentary. Nalcor needed a well aimed boot to its nether regions. Never happened. The Corporation's leaders have lost the confidence of the NL people. These cosmetic changes in the management structure demonstrate nothing significant has changed. We should expect nothing significant will change with respect to Nalcor performance either.

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  5. KEEP UP THE GOOD WORK STAN MARSHELL AND TEAM PLUS THE PROV AND FED LIBERALS ALL THINGS WILL COME IT WILL TAKE TIME.

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  6. The Project Manager's first instincts and training, are to salvage the project itself. We await the promised project review. An objective and factual investigation of what went wrong; dubious management control, interference from outside the pm team, weak contract administration, too much commercial style influence, not enough respect for science, etc.

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    1. I suspect we will get more of the same. An updated completion date and the cost overrun (to date) and little else.

      What makes you think they are prepared to come clean on the spur engineering? Will the Astaldi contract be made public? Will the SNC Lavalin contracts finally see the light of day?

      By the by it is the captain not the Project Manager that goes down with the ship Robert.

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    2. Don't be too hasty with that remark Bruno. The last Italian captain jumped ship and let the passengers and crew fend for themselves. Need I mention 'Costa Concordia'. I doubt you will find any one in Astaldi going down. They are all rubbing their hands together with glee. Chaos equals cash in the project game.

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  7. Joey Smallwood will smell like a fistful of roses compared to the little man with the huge ego when this is all said and done. All the money in the world won't be able to clean up that tarnish.

    Sadly, most NLers don't want to believe or pay attention to this and other matters until it's too late. The first January bill once power is on the grid will have Paddy Daly's phone rung off the wall. Too late then, too late now, and really, this was too late before Mrs. Dunderdale reign.

    Sad but very true.

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  8. There never is any reward in rehashing why people screwed up......Its always a total waste of time spending more money trying to lay blame.....The best medicine for this project is to continue on put some one in there with half a brain and complete the project.

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  9. I am truly perplexed as to why Marshall kept the "cable guy" Gil Bennett on staff after his abysmal cock-ups on this project. I expected him to be unceremoniously kicked to the curb. He instead reassigned him to half his previous workload. I bet he is not taking home half his previous pay, & half his 'Bonus'. Marshall is touted as being a no nonsense astute businessman. Was he conned by Bennetts' sucking up, or is Marshall giving Bennett just enough rope to hang himself? Only time will tell.

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    1. This comment has been removed by the author.

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    2. He is giving him enough rope to hang you if you are a rate/taxpayer.

      How often will you be conned before you demand transparency in the financial affairs that will have a dramatic impact on your treasury for 57 years?

      After you go off the cliff is too late for the lightbulb to go off over your head. In a democracy transparency and accountability are fundamental tenets. You have neither. How long will you pretend that your faux democracy works in the collective interest?

      Act now or suffer the inevitable consequences.

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  10. I am no fan of Gilbert Bennett. But he is intelligent and I suspect had too much responsibility. He is perhaps most in the know of what the current situation is (and it is pretty bad), and his awareness of all the various contracts and issues can be an asset for Marshall, at least for the short term, and as to whether the power house is delayed, cancelled or full steam ahead. I assume there is the option of replacing Bennett if need be, if someone better is an alternate decision needed in the near future. Losing Bennett at this point may be like losing all the information in your computer hard drive. I sort of pity Bennett as there is so much to fix that may not be fixable. I feel he is very much part of the whole problem also. In over his head I expect. At least Marshall has limited Bennett's responsibilities, and can assess his performance in the short run. And to dismiss him.... does he have a contract like Martin...... perhaps cheaper to keep him him engaged until Marshall can make further assessments and decisions.
    And Marshall is a chemical engineer and lawyer. No doubt very competent, but Fortis had never undertaken a construction project of this magnitude and with so many potential problems.
    If it is full steam ahead, remember that Liberty and the PUB has not yet stated to assess reliability issues of this project, including the transmission lines, and seems no urgency to do so. Might their assessment add another billion for reliability that was not yet considered. I expect it might. But interest costs is only a million dollars a day, so should we care.......Maybe we will all go down with the ship,(except those that have profited mightly so far) given most Nflders supported this project, and most still do.
    Surprised to hear Marshall say he intends to complete MF, as the financial risk to cancelling versus completion has not been made public. Can only assume he figures there is more downside to cancellation. But are we to see the numbers. Either way we must pay the piper.
    Winston Adams

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  11. I agree totally with your comment Bruno Marcocchio! We have been conned for 67 years, since 1949 and even before. As far as I am concerned for all these years we have not lived under a Democratic Government, our government down through all of these years operated like a Dictatorship. How else would all of our natural resources have ended up in some other Province of Canada or the World benefitting economies? Why did our governors not demand our province's fair share of Crown Corporations, Military and Naval installations, etc. that Ottawa handed out to the other provinces to assist in building their economies? Why did our Governors not demand equality in a country that espoused equality and marketed itself, for many years, as the best country in the World? We are far from having equality in Newfoundland and Labrador with the rest of Canada and I doubt now that we will ever attain that distinction.

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