Describe it as one might, but the
public interest is under attack on an unprecedented scale.
The evidence, detailed in a 2013 Risk Assessment Report — only
now brought to light by CEO Stan Marshall — illuminates a
Government seemingly incapable of responding to the allegations against its own
crown corporation. Those accusations, by any standard, constitute the worst
crisis that has faced a public sector agency since Confederation.
Even if the ‘Anonymous Engineer’ had
never come forward with his story of “low-balled” or “falsified” estimates, the
SNC Risk Assessment Report ought to have triggered an expression of horror so
great that the Minister of Justice would have been directed to immediately call
the Chief Justice in pursuit of a Judicial Inquiry.
It is not my purpose to pillory a
timid government. As the premier has failed to act with a response proportional
to the allegations levelled at Nalcor, the only plausible next step is to get
the attention of the public.
The seriousness of what SNC-Lavalin
has reported needs focus and context. Those responsible need to be
exposed.
SNC-Lavalin is an important player in
this issue. It was the firm that designed the financing structure and the basic
engineering plan for the Muskrat Falls project.
The SNC Report identified no fewer
than 40 risks (aka serious defects) to the project’s finances and schedule.
Nine of them are major, having life safety and cost implications in the
billions. The project is in desperate trouble, experiencing egregious cost
overruns and schedule delays. And virtually all the issues causing this trouble were
detailed in the April 2013 SNC-Lavalin Report, at a time when it was still relatively
painless to stop the project.
I repeat: the SNC Report foretold
grave consequences if it was allowed to proceed. It details the very specific
issues which prevented a successful outcome.
The Report was kept hidden from the
public — and possibly from the Government too (we don’t know) — when it contained the basis for a more prudent course of
decision-making, allowing the project to be shelved or, at least, delayed.
Though some have panned the Report as
the work of a company protecting itself from possible future litigation, its
contents warrant not dismissal but confirmation and investigation.
It is not that the SNC Risk Assessment
comes as a complete surprise, nor that everything in it is new. Critics of the
project, including several knowledgeable engineers, warned of many of the items
raised by SNC and were pilloried for their advice. However, the SNC Report must
be given status for a different reason.
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Related:__________________________________________________________________
Uncle Gnarley: Engineers Break Silence On Problems At Muskrat Falls
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SNC-Lavalin is a major international
engineering and construction company. It had a relationship with Nalcor and the
project which was not shared by any other company. Notwithstanding its tarnished image,
it has plenty of megaproject experience and expertise.
When SNC-Lavalin comes forward, not as
a consultant but as a whistleblower, only the foolhardy will ignore their claims — unless, that is, there is another motivation.
The MF project received sanction in
December 2012.
The wait for sanction hinged, the
public was told, not on whether Nalcor was ready to proceed, but only on the
grant of the Federal Loan Guarantee.
Contracts were immediately let.
Billions of dollars of public money was committed. The haste was such that Nalcor had not
even finalized the deal with Emera for the sale of "surplus" power,
the NS UARB having demanded a sweetener to the free 20% of MF power that
constitutes the NS Block.
The date of the SNC Risk Assessment
Report is April 2013. That is barely four months after sanction (December 17,
2012).
While someone should eventually
require SNC Lavalin to divulge under oath the details of how the Report was
given to Ed Martin, such minutiae is irrelevant when considered against the sheer
magnitude of what it alleges.
This is a report that paints Nalcor as
unfit, as much as unprepared, to undertake a project of such enormous size,
cost, and challenge.
The sheer scope of the risk analysis
is underscored by SNC’s assessment not only of Nalcor’s lack of management readiness
(the management team was more familiar, it noted, with the oil and gas industry
than with heavy civil and hydro works) but also of inadequate engineering on
critical factors, greatly underestimated labour requirements (aka costs),
limited availability of competent contractors, and other issues. Indeed, the
recklessness of the decision to proceed with sanction anyway can only be
evaluated in the context of SNC’s specific claims.
Let’s look at those which the Report defines as the
largest risks.
Consider this statement on page 6:
More specifically, the largest risks are these:
(1) Failure to do adequate
geotechnical investigations on the stability of the North Spur — a potential
show stopper — demonstrating a cavalier attitude to project completion,
operation and downstream safety.
(2) NO geotechnical investigations in
the riverbed under the footprint of the dam and coffer dam; SNC emphasises that adverse conditions could be discovered during construction leading to major
rework, cost overruns and delays; at the upper end, this could rise to
impractical to complete.
(3) Failure to do supporting
engineering on the coffer dam that could lead to catastrophic failure causing
injuries/fatalities and loss of equipment.
(4) Restricted pool of major
contractors… The project will face multiple problems with the large EPC
(engineering, procurement, construction) contractors who would hold the
project's budget and schedule hostage…
(5) Gross underestimation of labour
requirements (Nalcor was then using 1500 workers when SNC said 2500 were
needed); a sure sign of cost low-balling to gain sanction. This, in SNC's eyes,
was reflected in the unavailability of sufficient camp accommodations… which
could lead to mobilization and start-up delays… resulting in claims and
ultimately project schedule delays.
6) A significant portion of the local
labour market was working in Western Canada… workers are inexperienced…
Unavailability of… manpower may lead to schedule delays and extra labour costs,
as well as impacting on the quality of the work.
7) Due to the heated market conditions
in the transmission lines market (currently the case in Alberta; LCP Is dealing
with the same bidders) and the size of the construction packages, fewer bids
could be submitted and at higher than budgeted cost. Also, very few of these
major contractors will be able to perform these large packages in the proposed
time frame.
8) Major components, such as turbines
and gates, will be procured and manufactured in China. Based on SLI (system logistics
integration) and past experiences, quality, performance, warranty, service and
schedule problems can be anticipated…
9) Powerhouse and spillway concrete
works are planned on a three year duration (two winter seasons) with a very tight
and aggressive schedule… which might result In additional delays… and costs.
10) As the start-up of the spillway,
river closure and river diversion are to be fulfilled during an
"ice-free" window. There is no float in the schedule with the
preceding activities… any delay in these previous activities may trigger
missing the diversion window... in the project schedule. This actually happened,
with river diversion in October 2016 missing the May 2015 target by 18
months.
11 Large EPC (Turn-Key) bid packages
were being sent to a restricted pool of specialized DC (Direct Current) manufacturing
firms not used to performing all-inclusive Turn Key work… added risks will most
likely result in higher than estimated Bid Budget costs.
The Report adds: SNC-Lavalin, as
the Projects E.P.C.M. has the legal obligation to advise its client of any
risks that will cause prejudice to the project and which deviates significantly
from its budget and schedule. Our concern is we foresee that the project will
incur more than a 30% cost overrun if the project does not take action on the
risk elements raised in the Risk Assessment Report. The actual project
structure is contributing to this increasing risk factor. Client has limited
experience in huge civil work and earth-filled dam work, power line and power
station works.
For Nalcor to have proceeded anyway without,
at minimum, pausing and taking a variety actions to confirm the feasibility of
proceeding — though stopping it altogether should have seemed the safest and most
appropriate step — is not just mind boggling.
It demands an assessment of what was
really motivating senior management — what the driving force was that
disallowed a delay.
Ed Martin has denied seeing the
Report. His suggestion is that all the risks it contained were accounted for by
Nalcor, anyway, cannot be believed. The record of the project simply does not
bear out his assertion. Indeed, the Report forecasts virtually every problem
the project has actually experienced.
bear out his assertion. Indeed, the Report forecasts virtually every problem
the project has actually experienced.
Outstanding, of course, is arrival of
and commissioning of those Chinese-made turbines. Will they have serious defects
like the transmission lines?
Let’s be clear (and SNC-Lavalin
should not be surprised by this comment): we have many questions for that
company and want it to explain its involvement in this project, its
relationship in the early years of concept development at the political level, and the role played in it by disgraced SNC officials like Duhaime and Ben
Aissa.
SNC will not be surprised that any
Forensic Audit, of necessity, will begin in 2006 and work forward.
When a society is threatened, in consequence
of this single project, all the hands that touched it will need to publicly
face up to their role.
That Nalcor sought sanction based upon
“falsified”, “low-balled”, “absurdly low” estimates — choose what words you
wish — has entered into the realm of fact.
That Nalcor sought sanction, having
possibly jigged other critical data and having entered into highly questionable
arrangements with Emera, is also on the table.
But the SNC-Lavalin Report wasn’t
about deceit and falsity. It chronicles unpreparedness, incompetence and
recklessness.
The Report was hidden from the public.
We don’t know if it was given to the then-Premier and her Minister of Natural Resources. But we need to.
The enormity of the breach of faith —
of trust — that occurred at Nalor, as chronicled by both the Anonymous Engineer and SNC-Lavalin, can’t be dismissed as a mere “boondoggle”.
That term is too trite, incomplete and
unsatisfactory.
It does not capture the possibility of
malfeasance or corruption. It does not do justice to even the most minimal
demand for accountability or transparency in a matter of public interest. It
gives mere political taint to a group who may, in fact, be guilty of matters
criminal.
In short, it does not do justice… to
the need for justice.
And the Premier’s suggestion that a
Forensic Audit or other inquiry can wait bears a striking resemblance to how
Nalcor treated SNC’s Risk Assessment.
The time to draw a line in the sand on
deceit and on possible corruption in government has long passed. This Premier
should not be one with his recent predecessors in deep-sixing the public
interest.
The public needs to inform him that he will
continue do so at his peril.