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.