Guest Post by James L. Gordon, P. Eng.
When Astaldi demolished the half-built dome, I just could not
understand the reason for their decision. Now I know!
All hydro projects built in Northern Canada are constructed
with heated and illuminated, insulated fabric enclosures covering all concrete
work, sometimes with a small high-speed crane at the top to transport concrete
buckets and skips of re-bar. The enclosures provide an excellent 24-hour, 7
days per week work environment, greatly increasing productivity.
With the release of the EY interim report, they mentioned
that remuneration for the work undertaken is based on man-hours. Page 9, part
5.8, states –“However, the payment
mechanism is based on person-hours expended rather than m3 of concrete poured.”
This is a recipe for disaster, since the contractor, Astaldi, can increase
remuneration and hence profit, by increasing staff.
This payment method contradicts the statement by Ed Martin at
the 2015 annual general meeting wherein he stated “We gave Astaldi the quantities …. They get a unit amount for every bit
of concrete that they install. So it’s called a unit rate contract”. Both
interpretations of the contract are likely to be partially correct.
The General Contractor (Astaldi) will have awarded sub-contracts
to a concrete contractor and a bent re-bar contractor. Both sub-contractors are
specialised, and this is normal practice. The sub-contractors will be paid per
unit of concrete and per weight of re-bar.
However, all labor, according to EY, is paid per hour worked.
This covers all labour blasting and crushing rock for the concrete
sub-contractor, all labor involved with building forms, installing the re-bar,
pouring the concrete, and building a heated enclosure over the wet concrete.
After the concrete is set, labor will dismantle to enclosure and formwork, and
start again on new formwork. Hence, Astaldi has no incentive to optimise the
use of labor, quite the opposite.
Astaldi then demolished the dome with the consequence that
more labour had to be hired to shovel snow, remove ice with propane torches
from re-bar and build small heated enclosures over each wet concrete pour. They
are smart – not stupid.
Another statement by EY includes a chart on page 11 (shown below) showing
the percent completion of each contract as of end December 2015. There are ten
contracts listed, with progress ranging from 92% for the Labrador transmission
line to 5% for the Island transmission line. Six contracts have a progress
between 31% and 40%. For an overall progress, these ratios need to be weighted
based on estimated contract cost, which is not available, but should be
divulged so that an accurate assessment of progress can be made.
The average progress for the 10 contracts is 34.7%, for 36
months of work from January 2013 to December 2015. With weighting, the overall
progress is likely to be in the region of 36% or less, due to the low progress
on the large Island transmission contract. This works out at a progress of 1%
per month since work started. Hence time to completion is 100-36 = 64 months (5
years and 4 months) for a completion date sometime in April 2021!
Turning now to project costs; the Newfoundland and Labrador budget has just
been released, to include a “Muskrat Subsidy” on all taxpayers. This may have
to be paid for many years if the cost continues to escalate. Studies have been
undertaken by the World Bank on hydro cost escalation during construction, (Paper
#61, Geological complications and cost overruns: A survey of Bank-financed
hydroelectric projects) and it was found that a cost increase in the order of
40% was not unusual, and occasionally a larger escalation can occur.
If the initial cost of Muskrat was in the region of $7B, then a 40% increase would result in a final cost of around $10B, including interest during construction. With the hybrid general contract, the large cost increases provided to date, with the project less than 36% complete, and the serious delays in the schedule, I suspect that this cost will be easily exceeded
Hope I am wrong.
If the initial cost of Muskrat was in the region of $7B, then a 40% increase would result in a final cost of around $10B, including interest during construction. With the hybrid general contract, the large cost increases provided to date, with the project less than 36% complete, and the serious delays in the schedule, I suspect that this cost will be easily exceeded
Hope I am wrong.
Jim Gordon P.Eng (Retired)
________________________________________________________
During a career spanning more than six decades, James L. Gordon has
worked on 113 hydro projects, six of which received awards “for excellence in
design” by the Association of Consulting Engineers of Canada.
________________________________________________________
Editor's Note:
 |
| James L. Gordon, P.Eng. (Retired) |
Engineering projects have taken him to 15 countries; he has served for 9
years as Vice-President Hydro, Montreal Engineering, practiced as a private
consultant, served on a number of Review Boards, including for Newfoundland and
Labrador Hydro, authored or co-authored 86 papers, and wrote multiple columns
published by Hydro Review Worldwide.
His professionalism is unassailable; his contribution to the discipline
of civil engineering, especially in the hydro field, is simply vast. The Uncle
Gnarley Blog is indebted to him for his contribution to our understand of many complex issues relating to the Muskrat Falls project.