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Tuesday 22 December 2015


Notes - CBC Morning Show Interview, December 22, 2015
            Host: Anthony Germain

E&Y Review not a Review of Muskrat Falls project.

·       Not conducted because people in NL are concerned about cost overruns, or that they might have to sacrifice programs and services.

·       THIS IS ABOUT “comfort” for Bond Rating Agencies, given the amount of borrowing to be conducted.  About Opening the tap on maximum debt....

·       The Government wants to be sure it can borrow all the money Nalcor needs, not whether the project is managed by competent people or whether it makes financial sense. 

·       Government also needs the figures in order to prepare the 2016-17 Budget.

·       Not having taken the opportunity to properly evaluate the project, it seems content to ignore the fact that Muskrat may need billions more, and to kick tough decisions down the road.

E&Y wrong Firm to perform the Review

-        E&Y is an accounting firm first and foremost –

-        E&Y has been working with the so-called Oversight Committee for over a year; it has just completed a review of the Project Cost and Schedule Management system…so for the last year they have watched as the Oversight Committee took Nalcor’s cost and schedule projections and publish them as review and oversight in which the government and the public should have confidence….

-          Why do we need more of the same?

What type of Reviewer do we need?

-                  This is a project that needs independent engineering review; it needs a Firm skilled       in mega project construction, specifically the construction of hydro projects.

-        E&Y has far less capability than large engineering firm with the systems and expertise to assess a mega project of this size….this is a job for an engineering Firm with very specific expertise.

-        E&Y has no ability to assess the realism of Nalcor’s cost, schedule, or productivity assumptions 

What E&Y won’t be mandated to do….what the Review will not answer, that needs answering:

·       Won’t review Nalcor senior management

·       Won’t review the competency of the project management team

·       Won’t be mandated to review Astaldi, the major contractor on the powerhouse. Nalcor has acknowledged the Company is significantly responsible for the project going off schedule; Company’s first job in Canada; no experience in cold northern climates (failure to complete multi-million dollar “dome” just one example of a Company not equipped for the work; yet chosen by Nalcor CEO Ed Martin.

·    No North Spur review 

·  No Quality Assurance Review

·       In the private sector, a project shut this down would not be excluded from options. All reasonable options would be costed, then decisions taken.

The public might ask themselves: why has Mr. Ball given a vote of confidence to the senior management of Nalcor?

-        Under current management the project has gone from $5 billion to $8 billion ($9.05 billion incl. Interest During Construction). That’s a 60% increase.

-        The Liberty Group, studying Hydro management in the wake of DARKNL, concluded incompetence, not excessive demand, chief problem.

-        Nalcor CEO Ed Martin can’t or won’t confirm a completion date or a final cost figure.

-        Even if the Muskrat Falls project doesn’t go over Budget another cent Newfoundlanders are going to pay some of the highest costs for electricity in North America…and no one believes red ink has stopped.

-        We know that Nalcor has all the labour risk; the contracts are essentially cost plus. EVEN the latest E&Y report suggests project costs are going higher.

So, based on what, does the Gov’t have confidence in Nalcor?

What is Ball's threshold for losing confidence in Ed Martin and Nalcor?

Premier Ball even expressed confidence in the Oversight Committee; stated that E & Y Review would go through that Committee prior to release. Ball has embraced “sham oversight”, exactly as the Tories constructed it. Last Oversight Report was issued for the period ending the last of August, 2015!

The Committee should be fired rather than encouraged!

Ball’s first steps: a betrayal of those expecting “Real Change” – not serious about notions of transparency and accountability.

Politically, Liberals will pay dearly. Muskrat Falls will be allowed to compete for funding with hospitals, schools, and roads without public having any idea of final cost of the project or whether a thorough Review would have increased management and other efficiencies.

- Des Sullivan