Monday, 23 January 2017


The public is constantly bombarded with political "spin" as governments, institutions, politicians, and those who profit in one way or another by supporting those views, attempt to win the hearts and minds of the ill-informed.

But enormous sums are being wasted at Nalcor, and "spin" can't mask a project that has doubled in cost. That has been confirmed by a multitude of engineers.

The bevy of emails that arrive in my Inbox — from professional engineers — describe the problems in detail.

For me, having followed years of blather from the likes of Ed Martin, Gil Bennett, and politicians too, those engineers counter their "BS" in its many forms.

Mismanagement rankles the best engineers; they don't want an unsuccessful project appearing on their resumes. Besides, they resent being a part of something that is causing the province financial ruin when they know that bad politics, misinformation and contrived assumptions were merely precursors to a mismanaged project.

And while poorly-written contracts, ill-chosen managers, incompetence, and inexperience all take their toll, no problem is as offensive as conflicts of interest. Many professional engineers believe the crown corporation is rife with them.

Concerned Newfoundlander and Professional Engineer (who published on this Blog on January 12, 2016) referred to “conflicts of interest” in his "Open Letter" to Bernard Coffey, Clerk of the Executive Council.

Another engineer, in an email, drew attention to the problem of “nepotism and cronyism” in Nalcor's recruitment practices.

It deserves attention now, because the issue has been raised in emails and other communications with a frequency that I find disturbing.

The problems arise from two sources.

First, Nalcor permits many of its senior project managers to be employed via their private holding companies. The holding companies provide cover for huge compensation packages awarded by the project management team. The amounts and their recipients are shielded from public view under ATIPPA rules even though some suggest the compensation packages would make CEO Stan Marshall seem substantially underpaid.

A second area where large sums of money are involved relates to the employment of recruitment agencies. Nalcor has a preferred list of companies who supply Muskrat with professional hires. A recent release of documentation by Nalcor, in response to a third party request under ATIPPA, suggests others in addition to those who have contacted me share those concerns.

States Nalcor: 

In other words, Nalcor claims it has no relationship with those hires except that of paymaster. Of course, the relationship is far stronger in reality, and especially if a conflict influenced the hire or the choice of recruiting agency.

That is a big concern for some. How would we know of the conflict anyway, unless some hires report the problem? And, anyway, under ATIPPA the recipient and the level of remuneration are hidden from public scrutiny. Nalcor confirms, in its ATIPPA reply:

A recent phone call from a Professional Engineer informed me that some personnel are "directed" by Nalcor to recruitment agencies. That struck me as odd. After all, recruitment agencies are paid to recruit — not to be the easy beneficiaries of big fees.

Finder’s fees for recruiting and screening for a specific skill-set are the raison d'etre of the recruitment business. The companies also claim a “cut” of the salary of each hire — for each day of their employ. A megaproject is a magnet of revenue opportunity.  

Appendix E (below), copied from Nalcor's reply to the ATIPPA request mentioned earlier, contains the number of hires via recruitment agencies 2011 to 2015.  

When one considers that the "Day Rate" (see Exhibit below) is as high as $1,938 and that rates in excess of $1,000 per day are common, it is obvious that recruitment services on the Muskrat Falls project involves fees totalling millions of dollars suggests that the activity deserves diligent monitoring for potential conflicts.

One Muskrat engineer recently suggested that the recruitment agency's compensation is in the range of 15-25% of the amount of total compensation paid to each hire. Another claimed that his recruiter actually got 25-30% — noting that not all recruitment firms are compensated equally, as personal relationships between Nalcor and the recruiter can result in a higher cut for the latter.

This Blogger cannot verify the veracity of those claims. But when, in yet another email, a Professional Engineer contends that, within Nalcor, “nepotism is rampant” — including with respect to recruitment agencies — the allegation cannot be ignored.

Nalcor has dealt with those allegations before. 

Among the items of information sought in the ATIPPA request is this one:

Nalcor provided this response:

:Nalcor's Internal Audit Department was evidently dealing with an anonymous complaint made in 2014 claiming "unethical and/or fraudulent hiring practices" though the writer was "not personally aware of the legality of these claims...".

Nalcor's summary of the facts includes this assertion

To clarify, this complaint did not apply to a traditional “head hunter” but to one of those opaque and private corporations alleged to have been acting as a recruiter. Nalcor's Internal Audit, which wound up on 18 February 2016, evidently dismissed the claim as unsupported. The Internal Auditor concluded: "LCP Human Resources, which manages the recruiting function, is operating with [I assume the word should have been "within"] a sound control environment".

The information obtained under ATIPPA also confirmed that Nalcor investigated a second case in 2014 — involving a recruiting firm. In Nalcor's summary of the facts of the case, after an internal investigation had been conducted, the auditor confirmed "there was some merit to the complaint and steps were immediately taken to rectify the situation".

Nalcor is clearly aware of potential conflicts, having investigated at least two. But the issue has not gone away. Several engineers believe that conflicts still exist - that some agencies are favoured. They assert that the only reason the issue has not become public is that complainants risk losing their jobs.  

Perhaps this is an introductory field for the new Nalcor Board of Directors as they try to find their feet amidst a plethora of problems that have become Muskrat's insignia. Certainly, they must know that conflicts of interest are among the most corrosive - because they undermine morale in any office or on any work site.

Had the government established an “oversight committee” — one that is independent and that had earned the public trust — the engineers writing to the Uncle Gnarley Blog might have been willing to share their experiences and concerns with the Oversight Committee first. No worker who reports such concerns, whether professional engineer or from some other profession, wants to be considered an outlier or a malcontent.

Besides, the low-morale environment under which Nalcor has long suffered might have been far different — possibly one in which workers believed they could share confidences with senior management and make important personal contributions beyond their professional skills. Now, there is only secrecy and reminders of the consequences of talking.

And my Inbox proves how well that regime is working.