Thursday, 22 December 2016

NO LIMITS ON INCOMPETENCE. ANOTHER $700 MILLION FOR ASTALDI

This Blog has reported many times the amount of money in dispute with Astaldi is in the range of $600-800 million. 

CEO Stan Marshall confirmed the sum yesterday. Nalcor, he told reporters, had reached a new contract with Astaldi increasing the value of the original contract by a whopping $700 million ($1.15 billion according to Marshall but $1.0 billion was the figure first reported). 

Some of this money was accounted for in the revised $11.4-billion estimate – making the net impact $270 million. If the PR types think this early attempt to soften the blow, given the size of the award, they are mistaken.

$700 million is a staggering sum. It not only creates a new and higher project cost estimate of $11.67 billion, it forces us to ask for the thousandth time: does anyone at Nalcor know what they are doing? And, why hasn’t Stan Marshall sent them away?

But that is not all. The announcement warranted only a ‘long distance’ press conference  - the Nalcor CEO fitting it in while he travels – a briefing in which neither the Premier, the Minister of Finance, or the Minister of Natural Resources are anywhere to be found.

Not only is the $700 million left unexplained, a deceitful Nalcor management scheduled the announcement just before Christmas – on other occasions the Friday before a long weekend will do. The hope is the public are too busy to even care.

And, there is no suggestion that this version is a lump sum contract - we can be sure it was not.

The extra $700 million comes amidst warnings of potential major damage from frazil ice to critical infrastructure in consequence of a leaky cofferdam.

The public is kept in the dark about the cost of additional camps - now on order –  to provide another 300 beds for a spring ramp-up on the MF site.

We still don’t have a report on the “popped” wire screw-up which experts estimate will cost north of $50 million.

We haven't heard what Vallard will demand as it prepares for a major push on the TL - recall they were given the contract. They didn't have to bid it. 

Just yesterday, December 21st I received an email from a P.Eng.on the MF site enumerating several fundamental problems with the project. His frustration was palpable. The writer remarked: "I will be honest, I wouldn't expect much of a response from Nalcor on this---in truth GB et al really have no experience in civil work and probably don't know the difference....  The group leading LCP are ex-SNC…nepotism is rampant..." 

Reports on my email of this kind are more frequent than one might realize. They confirm that since Stan Marshall took over, little has changed.

Eventually Marshall will realize – but not until every shred of his credibility is spent - that the “boondoggle” deserves not just that name but also complete disclosure by him, too. If he didn’t know or understand all the details of what he was facing, he had a responsibility to give us honest progress reports.Except Marshall only speaks with his Vice-Presidents -which robs him of a deeper truth, robs his employees of much needed morale, and the public of much needed confidence that he has the capacity to better manage a failed project.

In fact, Marshall should have laid the whole sordid tale on the table, because the public has a right to know – and because it is threatening the solvency of the province.

Had he dealt with the public in a respectful way, the respect would have been returned. He might have been perceived as due some distance from the project's worst aspects. But he failed in this obligation and is well on the way to owning the debacle.

The Astaldi chapter needs further description.

Some of you will recall that CEO Ed Martin chose to slake Astaldi for its poor performance. This occurred at a time when evidence was growing that his own management team were inexperienced and had drafted a contract that allowed Astaldi to bid low but not be bound by it. Nalcor was under fire for having selected Astaldi in the first place – the Italian contractor having reported no sub-arctic construction experience.

In February, last year, the CBC reported Ed Martin telling reporters: "We do have an issue with the powerhouse that Astaldi is constructing. They have fallen behind significantly”. That lag will have "schedule implications….and with schedule implications, there will be some cost implications".

At the time, the (fake) Independent Oversight Committee of Deputy Ministers confirmed the existence of penalties in the Astaldi contract and stated that “liquidated damages” could be assessed the Company if construction milestones are not reached. Indeed, I noted in a story entitled "Astaldi Unbowed" that one could only have interpreted Ed Martin’s and the Oversight Committee’s comments as suggesting Nalcor was ready to assess Astaldi "liquidated damages" for the delay.

In light of yesteday's announcement, we need to ask: were all of those damages forgiven? Was the amount even calculated? Was Ed Martin merely conducting another charade - another episode of bluster?

Of course, prior to levelling those charges there was the estimated $120 million ICS system (the “Dome”) that Astaldi tore down - before it was finished. Nalcor stated that its cost would have no impact on the consumer. In others words, Astaldi would have to pay that sum along with the cost of the delays the contractor had caused. Frankly, no one thought he was telling the truth.

The public did not get to see the other side of this story however, until release of the 2015 Full Year Financial Report of Astaldi which appeared on March 9, 2016. In a presentation with analysts Astaldi CEO Stefano Cerri stated that production at Muskrat Falls has reached “remarkable levels” (p.10)…that negotiations are “on-going with the client to redefine the schedule and the conditions of the project”.

In a Q&A Session the Astaldi CEO told one analyst that:
“…the Canadian contract negotiations now underway (involve)….a very complicated contract from an operational viewpoint in terms of logistics and in terms of operations due to the climatic conditions. Last year was the worst winter in 30 years.”

He didn’t say with what place “the worst” was being compared. Was it Milan? Palermo? Naples? Was it “the worst” because he couldn’t wear Gucci shoes in winter at the Muskrat Falls site?

More likely, he was blowing smoke with the best of them - Nalcor's master of spin.

Of course, it didn’t matter. Astaldi knew it was dealing with incompetent people who had crafted an unenforceable contract. Astaldi’s lack of cold weather experience and logistical deficits were costly to be sure – but they paled in comparison with those exhibited by the Nalcor management team.

The public might note that neither Cerri, Ed Martin nor Stan Marshall referred to the time it took for Astaldi to ramp up for the job, as several contractors have reported to this blogger. It caused many months of delay – destroying the schedule right from the start. Nor did Cerri note that contractors who were asked to bid for work by Astaldi - to offset their slow ramp-up - discovered that their quotes were two or three times the cost Astaldi had budgeted, requiring Astaldi to perform the work itself - obviously on Nalcor's flexible public tab..

Nevertheless, in spite of all the failures of this company they could still claim an additional $700 million! And Nalcor was forced to give in.

There are no resignations at Nalcor and no firings.

There is no limit to the amount of public money Nalcor can afford to waste. 

And there are no no limits on Nalcor's incompetence.

21 comments:

  1. "I will be honest, I wouldn't expect much of a response from Nalcor on this---in truth GB et al really have no experience in civil work and probably don't know the difference.... The group leading LCP are ex-SNC…nepotism is rampant..."

    Surprise, surprise, Gil Bennett out if his depth, nepotism is rampant and those ex-SNC folks stinking the joint up!

    Stan Marshall doing a remote press conference while on vacation with no government involvement? How much more can the rate/taxpayer take before someone finally stops the bleeding due to incompetence and nepotism? Will it go on until the victims bleed out?

    Will those giving political cover for the boondoggle keep hiding the truth? They seem content to pay the part time CEO to do the lying and hiding for them. Will they continue to hide the truth, protect the corrupt and the incompetent?

    Is it not time to ACT UP, SPEAK UP and DEMAND answers?

    I hate to say I told you so but all the obfuscation and lies were apparent from the outset. So was the incompetence fueled by arrogance and political direction to just do it, damn the torpedo's.

    We now see the results and the incompetent enemies of the rate/taxpayers remain sheltered and protected. How can this be allowed to continue?

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    1. ...the group leading LCP are ex-SNC...

      Who are actually those ex-SNC? Any names?(And I'm not refering to any `nepotism` here, I just want to know)

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  2. In HBO's Sopranos, there is an episode where Davey Scatino's hardware store is taken over by the mafia. They rack up debt purchasing things that they plan on selling at half price. The store goes bankrupt of course but the mafia didn't care -- it was part of a plan to make lots of cash.

    The ruling elite are doing the same thing to this province. Rack up billions in debt, skim off profits for themselves and let the whole thing to the way of Puerto Rico or Greece. Meanwhile, those responsible will be long retired elsewhere and living in luxury.

    The real problem is not that sociopaths have taken over, but that common people collectively allow this to continue.

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    1. Good analogy, And with the recent increase in the loan guarantee, the Feds have allowed them to restock the shelves to keep the party going!

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    2. Stay with us Bernard, on Uncle Gnarley. Surprised no one from Nova Scotia has posted. But then they reap the benefits.

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  3. I love Xmas time, as it is a break from normal worries of business, even most factories close down for a week or two.
    I was expecting to hear nothing more from Uncle Gnarley until after Xmas.
    But these are unusual times. The debt adds by the millions each each week. If Santa cannot rest, how can Uncle Gnarley.
    Even Pat Daley at VOCM came close to calling a stop to Muskrat this morning. He quoted Stan Marshall saying to continue is better than Plan B. Pat asked ;What is Plan B. These was no proper assessment as to the wisdom of a stop, so there was NO Plan B says Pat. Pat was never very critical of Muskrat......but he too is getting worried.
    To think...700 million more for Astaldi.......that is a new hospital for Corner Brook and the Waterford that could have been paid for, now delayed maybe another 25 years.
    Another 270 million, just the latest Xmas gift for Astaldi, and that is a lot of coal in the stockings of ratepayers. Good timing indeed.
    To think, just this latest gift could pay for 45,000 homes to have efficient heating systems installed, saving them 35 percent each year on their power bills. The total gift to Astaldi would cover about 116,000 houses, some 72 percent of our houses. With each reducing peak demand by about 3kw......some 348 MW reduced winter demand, and no need for Muskrat at all. Wishful thinking one might ask.........ha, but Russell at the Telly reports contractors are going FLAT OUT. There is a REVOLUTION a going on. Nova Scotia promoted it this way calling it the HEATING REVOLUTION. And it ai`nt coal baby.
    Winston Adams

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  4. Somebody recently reminded me of the words of Louis Brandeis who said that "sunlight is the best disinfectant and electric light the best policeman." If the PUB's role were reinstated it would open up this debacle to public scrutiny. The exemption order removing the Board's jurisdiction can be reversed in an hour. Why has this not been done? Why would government not want the PUB to protect the consumer in NL with the same powers as those exercised by the Nova Scotia Utilities and Review Board? Why are consumers being shortchanged in NL, compared with NS? Why has the AG not been asked to review the contracts? Our new government has had a year to open the books on Muskrat Falls. What has happened to the Ernst and Young report? What has happened to the Oversight Committee? David Vardy

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    1. Sadly it is too late to have the PUB impact the MF disaster in a reasonable way. At this point it would stall for 2 years any conclusions, never mind actions. The time to save the PUB was PRIOR to sanctioning.

      Direct pressure to STOP MUSKRAT NOW must precede regulatory review.

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  5. Certainly the PUB in Nova Scotia is looking after the ratepayers.How can ours help here......
    I agree with Bruno to the extent that conclusions from them can take 2 years. Consider that the PUB are only to look at reliability issues in 2017, more than 4 years after sanction of MF.
    On the other hand, if the PUB could take charge, as Vardy suggests, and engages Liberty in an expanded mandate to recommend a full stop or other option, perhaps this can get done in months, not years. Liberty makes general statements on whether it is wise to continue. They are vague on that as it is outside their present mandate, but issues of reliability, the complexities of AC-DC-AC etc, Hydro operating culture, etc leaves little assurance that we are following the right path. I have seen nothing to suggest Liberty has expertise on demand management options, in terms of energy efficiency and conservation. New Brunswick Power had expert consultants to advise on their options which included analysis of jobs created when going this route.
    Maybe if Vardy was appointed chairman of the PUB......or offered advice to Andy Wells.....some timely action could result.
    Earle McCurdy is like Pat Daley, saying we need a Plan B, and should have had one before now.
    Pete Soucey asks his listeners if they are reading Uncle Gnarley...essential reading...... and Pete is just amazed at the upward spiral in costs, now 11.7 billion.
    Minister Coady is saying it is up to mother nature if there will be ice damage this winter and spring (not Nalcor`s fault.....)
    But what kind of Direct Pressure does Bruno suggest...... even as protesters stop work there, spending goes on...dam the torpedoes.
    Direct action...let me think................................................................................................................................................still thinking...................................................................thinking still Maybe a prayer to that Spirit Mountain, part of the Spur.....a little vibration, in seconds, could save us 8 billions................but still thinking.......prayers only occasionally work.
    Winston Adams

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    1. We should all think of how to stop this project. One pressure point could well be the rating agencies which establish the credit rating for the Province. Will one of them ask for the analysis Uncle Gnarley and David Vardy have been seeking? If so, would they make the analysis public? Do they not have a responsibility for the accuracy of their financial ratings?

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    2. I notice a comment from an Ex-Military Engr., and of course we all welcome that input. It seems though, that this project, and "All the King's Men" (Ref. "King Danny"), can only be stopped by forces greater than hundreds of thousands of opinions who know damn well that this entire project is little more than blatant thievery of the masses' money.

      (imo) We have, evidently, come to a point where Ex-Military (non) engineers are NOW required!!

      Hate to be harsh here, but when "Management" has been replaced... Provincial "Government" has proven (itself) to be utterly useless (Both "colours", countless times each since the projects inception), AND is cooperating fully with the crimes (* and this IS actually criminal see below).... the Federal "Government" does nothing only add more fuel to a raging inferno... and both Police (RCMP in Labrador) and the Courts, (injunctions against the only real journalist on the job), are firmly in line and marching (for "The King").... then WTF else is there???

      A small group of "Protectors" can only do so much folks, and the original (brave hearted) protector has been fined $8000. for swinging one axe in protest, by the Justice "System".

      * Organized Crime is defined in the Criminal Code of Canada as a group of three or more people whose purpose is the commission of one or more serious offences that would "likely result in the direct or indirect receipt of a material benefit, including a financial benefit, by the group."

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    3. But what is criminal........ Was the contracts to build the Nfld railway criminal..... it helped with our loss of democracy in 1934.
      Is MF just a error in judgement. The ex- NS energy minister says Nalcor knew MF was not likely the lowest cost option, but proceeded as a loss leader to eventually get to development of Gull Island. So was there fraud against the people of the province. Or just a roll of the dice on a lot of false assumptions. Were the assumptions known to be false.........likely so. Even knowing these assumptions were false, we go forward, without pause and proper evaluation. And the majority of Nflders are just tuned out.
      And the promoters hide and are silent. What does Kennedy, Dunderdale, Marshall, and the other clowns think of 11.7 billion for this boondoogle. Not guts enough to speak to the media. We need Rick Mercer or the Mary Walsh chasing them with her sword, and force them to speak or run in shame.

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  6. There should be a serious effort to rename this project "Danny Williams Falls" It should not be forgotten how this happened. Every time it is brought up in the future, it should be with his name.

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    1. Can the name be "Danny Williams Fell" since Hydro Quebec now controls the water in the Churchill Falls Reservoir? Gull Island and Muskrat Falls will be dribbles most of the time with well announced periods of flood mostly bypassing the turbines if they are ever installed.

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    2. How about "the Danny Williams Failure", as that is ultimately, what both the project, and the person, have become. We need a new online national petition too... to remove his name from that building in Corner Brook.

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  7. How about Williams Fallis (or spell it with a P)

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  8. As the cause for Muskrat was supposed to be to address our electric heat load, by bringing very high cost electricity from 1100 km away, over and through every obstacle imaginable, i thought it muck simpler and cheaper to just get our heat from the cold. In my youth we got heat from coal,but getting heat from the cold is much more environmentally friendly. Just ask Nova Scotia.
    Some 20 years ago some one announced they had discovered cold fusion, whereby we could harness the energy of the sun, but in a safe way, at cool temperatures. It took some months to prove it was a fraud, something like the MUN guy who published on special baby formulas, was highly praised....and then skipped the country.
    But getting heat just 6 inches from outside your house, and getting it from the cold, from cold air that is, is no joke. So the idea is surely one of genius on my part, of indication of being with the lunatic fringe.
    To be continued.....

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  9. No amount of belly aching or name calling is gonna fix the muskrat falls project...Have we not all learned yet that newfoundland can never complete a project as small as a green house to one as big as a power generating station...We are cursed by some unknown source who refuses to let this tiny island succeed...Build a bridge and get over it we are doomed to fail for god sake...Merry Christmas and Happy New Year....

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  10. Well, Santa arrived. As his ice road at the North Pole is melting, I feared he might not make it. He detoured around Muskrat Falls. The sonic boom of his sleigh might cause a rotational slide at the Spur, a trigger for a progressive slide of the marine clay. This could impact the nice instead of the naughty. Good move Santa.
    I received more than expected: lined pants, T-shirts, some goodies, a professional lithium battery multi tool set, and a book. Santa picked it out special, no doubt.
    I was pleasingly impressed with the title `Island in an Empire`, by Philip McCann.
    I was soon engrossed with a most scholarly work. So far it neatly ties together much of our early history, and our treatment (and mistreatment) under the British Empire.
    We were considered heathens around the year 1800, whereas aboriginals of course were savages. We had no recourse to the dependence on fish, so could not delelope like Canada. The merchants made plenty of profits but instead of investing in Nfld, they took the profits out.Education was slow to come,and was mostly aimed at saving the soul. Yet we were loyal to Empire.
    Just finished chapter 2. Rudyard Kipling was impressed by Nfld`s loyality to the ENpire and Gov Duckworth states that in the hour of England`s need, Nfld Will not be backward in shedding it`s blood for her, a prophecy that tragically became true in the slaughter of 1914-1918.
    I recommend the book, as an introduction to understanding how the tragedy of Muskrat Falls can happen in this era. The class system and the power of merchants endures. This book covers 1800 to 1855, but has lessons for the present. Thank you Santa, Sure hope you delivered this to many others, that we learn to understand ourselves and why as a province we are always on the losing end.

    Winston Adams

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  11. Yes Winston isn't it sad for people, who by nature, are so proud yet have to endure generation after generation of misery and shame...I am a proud Newfoundlander who has defended this island by word of mouth since as long as I can remember...Nothing important but every chance I got I bragged and I drooled over this island and its wonderful people. I'm not the smartest cracker in the box but I'm absolutely convinced that Newfoundlanders can erase this curse if we elevate people with commitment and drive to change the status quo...Muskrat falls is probably to far gone now to stop and if we do then do what, let billions of dollars sit in limbo like Come By Chance while these goons decide what foot to put forward...Look at our history since John Cabot graced our shores....Our people came, settled and carved out a life from the hardships the sea put forth....We are not quitters by nature are we......For the love of god please lets encourage the next generation to look past the forest and see the trees and change the course we are sailing.....

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  12. All it took was one strong politician

    http://www.cbc.ca/news/canada/newfoundland-labrador/hibernia-john-crosbie-brian-mulroney-oil-1.3911486

    Which NL MP can do the same for Muskrat today? What is the PMO agenda on the situation? Who speaks for NL?

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