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Thursday 18 May 2017


The CBC report of an anonymous senior Nalcor engineer - who claims that low-balled estimates were used to obtain sanction for the Muskrat Falls project - has, again, shed light on a Crown Corporation that, sometime after 2009, went rogue.

The engineer’s allegations are now well-known, but Nalcor’s response – specifically Anthony Germain's interview – finds a retirement-minded CEO indicating casual indifference to what can only be described as the most serious accusations ever leveled at the government since Confederation. 

The CBC quoted the senior engineer using the words “absurdly low” to describe the estimates. In my Blog Post of February 2017, the same engineer used the word “falsification”.

Nalcor CEO Stan Marshall described the estimates as “unrealistic”.

“Absurdly low”, “falsification” and “unrealistic” – any difference is fundamentally meaningless.

In this context it is important to remember that we are not discussing the replacement of a culvert in Bung Hole Tickle. Estimating a multi-billion dollar project is complex work. It also goes through multiple layers of review – each time by a group more senior. 

Undoubtedly project costs have risen, in part, because the Nalcor management group were given a mandate far beyond their capacity to deliver.

But evidence of calculated and deliberate deception over several years – including to influence the 2015 general election - are issues not of stupidity but of something far more odious.

It is a credit to the CBC Morning Show Host, Anthony Germain, and to reporter Rob Antle, that they pursued the story. That it - and they - survived a likely lengthy process of rectal analysis by CBC lawyers should be duly noted. Such a carefully researched and critical story - confirming one of the underlying causes of Muskrat's failure is long overdue for the NL media - including CBC. 

That said, let’s examine Stan’s Marshall’s response, as CEO. He says some pretty strange stuff – some of which ought to have a certain few taking offense.

A couple of things are especially striking.

Though he claims not to have looked, Marshall has let all the senior management at Nalcor off the hook for any participation in creating the “unrealistic” project estimates.

Quoting the CBC story, Marshall allowed:

"What happened before my time, that's for others to talk about and decide and debate for many years to come."  He adds: "If they want to do (a forensic audit) …by all means go ahead”. The only thing missing is the ha, ha, ha.

Germain must have wanted to send Stan a bubba rocking chair and a pair of slippers – the cavalier response more fitting to one in cognitive retirement.

Misbehaviour - possibly on a monumental scale – is not some philosophical issue reserved for morning banter. The attitude, notwithstanding the fact that he heads a Corporation under a substantial cloud of mistrust, ought to warrant the most ardent concern that no senior executive or member of the project team - or any other employee - has duped either the politicians or the public.

Yet, he excuses everyone – ostensibly from the level of Vice President on down. His rationale is that no one at Nalcor knew what they were doing.

"They were learning as they went along....And they paid for their education" said Marshall – a most peculiar statement because they have not paid any price; Marshall having secured their jobs and their high six figure incomes.

Evidently, inexperience also excuses them from culpability for the lost project schedule, the Astaldi affair, contracts changed from “fixed price” to “unit price” to "hybrid", contracts poorly written giving contractors a field-day for extra billing, a terrible health and safety record, a plethora of quality control issues, the popped transmission cable, the leaky cofferdam, and a litany of management screw-ups – the list go on and on.

But I digress.  

Marshall is incredulous for another reason. He ignores the process history of the estimates and is blind to the roles played by several senior Nalcor employees within the command structure of Nalcor and of a megaproject.

It is worth reminding that SNC Lavalin had a full team of estimators occupying offices on Torbay Road, in St. John’s. Muskrat Falls wasn’t their first job. They were experts, not in pouring concrete, but in the in the field of construction estimation. 

They understood that the specific remote sub-arctic conditions of Labrador demanded a far different set of assumptions than one made for a project, say, in Belize. They understood all the local issues – from labour unit costs, poor labour productivity in a cold environment, remote transportation challenges, labour scarcity, union benefits, housing costs, and hundreds of others.

Stan Marshall, or his predecessor, never once suggested SNC Lavalin might be sued for faulty estimation. Why?

Likely because Nalcor interfered continuously in the preparation of those estimates.

In addition, Nalcor had its own group of estimators – some compliant perhaps, but not nearly as inexperienced or incompetent as Stan Marshall would have us believe. Their job was to calculate the costs that were not within SNC’s scope of work and to arrive at a complete project estimate.

Together, all those estimators can make available to a forensic auditor a quite substantial paper trail – quite possibly giving depth to one estimator’s prediction: “they are going to lose their shirts on this project”. 

Don't forget. This is a small town. People talk.

Now, let’s revisit what the anonymous senior engineer said back in February of this year, in a piece entitled "Muskrat: Allegations of Phony Cost Estimates". This is an excerpt:

“In the case of the Muskrat Falls project, the problem of the budget dated back to 2012 when Nalcor learned that the cost estimates — prepared by SNC — were not compatible with the “Scope” of the project. Said the engineer: “we were satisfied on three levels:

Scope of the project — well defined,

Engineering — major parameters completed,

Quantities changes — minimal.

But the fourth — the budget process — was a catastrophe.

And this was not due to a lack of knowledge.”

“Nalcor knew”, he said, “that there was a major gap in the project scope vs. the estimates. Nalcor simply took a policy decision to understate the project costs.”

As a result, the budget allocation for the project was also inadequate.

The engineer went on to say….that, from the moment project construction implementation began, the crown corporation was forced into "creative accounting on a massive scale”.

This is pretty heady stuff. 

It should concern every public institution - including the RCMP, and any CEO - including Stan Marshall.

Again, when has the integrity of government ever been so seriously called into question?

The sheer magnitude of the allegations, considering their source, constitutes a demand for investigation –  not some vacuous debate Stan Marshall proposes - and it should be done now.

Marshall can ignore what his management team has been up to, but without a forensic audit he can’t get rid of the stench that hangs over the whole Corporation. 

There evidently was a “policy decision” to understate the project costs. But that is too large a job to be undertaken without collusion by at least some senior Nalcor staff.

There is another piece to the Marshall/Germain interview that others must have parsed, as did I.

Said Marshall to the CBC: “there was a failure in leadership, and Muskrat Falls should never have been built.”

"I don't know who made the ultimate decisions before my time," the CBC quoted him.
"Whether they came from my predecessor, whether they came from the Confederation Building, I have no idea."

Marshall has confidently excluded all but one inside Nalcor. But he "don't know" about his predecessor or the crowd in Confederation Building. Who else is there? Have the Martians already arrived?

Of course, Nalcor was a power unto itself. Even Department of Finance bureaucrats didn't talk to them.

Marshall, wittingly or otherwise, does not leave open a very wide field of possible culprits, does he?

Still, no one is talking. 

Perhaps, Nalcor, and the politicians, hope that the issue will be whitewashed by the Auditor-General - his Office possessing none of the requisite professional skills to conduct the kind of forensic audit the allegations require.

They expect it to be panned by mainstream media - in the way of the Telegram editor - and the others who ignored both the Uncle Gnarley and CBC stories. And why wouldn't they?

They also have the full expectation that any such demand will be quickly forgotten by a compliant Premier - he already having allowed silence to substitute for the promised Humber Valley Paving Inquiry.

Still, despite Stan Marshall’s haughty regard for matters unethical – and possibly illegal - I would not be too quick to absolve the others on his list.

What did the anonymous senior Nalcor engineer say back in January? 

He said: “Everyone knew" the project estimates were completely unsustainable.

“Everyone knew” captures a pretty large crowd - far more than just the 'directing minds' - on whom the lawyers might eventually get the opportunity to focus - though under whose authority is anyone's guess.
As enjoyable as Stan Marshall's banter actually is - perhaps, Germain will put the whole interview on You Tube - it would be great if he started acting more like a CEO than a caretaker.

It is also time the Premier started acting - like a Premier.