When it
comes to auditing the risks and shortcomings of the Muskrat Falls project, and
the incompetence of Nalcor, EY is no Liberty Consulting Group.
Plain-speaking
Liberty, employed by the PUB to analyse the cause of the breakdown in service
during DarkNL, persistently offered a clear narrative of what reforms might effect
change.
In contrast,
EY’s prescription for Muskrat is so couched in practised opacity and bathed in bureaucratization
that often only the innocuous is illuminated. The Muskrat Falls Report entitled
"Assessment of Implementation of EY Interim Report recommendations" is
essentially a document for politicians to point towards. It is strong on neither
engineering nor cost-accounting.
Nalcor’s management
change — involving VP Gilbert Bennett, following the appointment of Stan
Marshall and the disclosure of both egregious cost overruns and the two-year
slippage of the schedule for the powerhouse — is given the exalted status of
“bifurcation of the project”.
EY’s
flourish even expresses concern for unused contingency funds — as if the
project might suddenly be threatened by an act of prudence!
This is the kind
of fluff that is perfectly suited to Minister Coady who, reporters noted, finds
the Report “reassuring”.
In its 2016
Interim Report EY stated that, "The Review has been based on data and
information provided by Nalcor. EY has not sought to independently verify this
data. EY has had access to the Nalcor team; we have not had direct access to
contractors. EY has not conducted any engineering review, physical inspection or
validation of construction process." (p.7)
In all of
these areas, nothing has changed about EY’s approach to the Muskrat Falls
review.
Had EY bean
counters taken up kayaking, they might have observed far more than they gleaned
from document retrieval.
A recent trip
by this blogger down the Churchill River exposed multiple new shiny trucks for
an archaeological crew and a $1,900/hour (+ gas) helicopter on stand-by that
could have easily been substituted with a boat and motor for a brief (almost) flat
water trip upstream. Where is the
concern for cost?
The same
trip exposed water-ponding at the North Spur, engineering and inspections
having failed to notice the need for additional basic culverting.
Sandy
hillsides exposed deep grooves over a wide area where, having been shorn of trees
and ground cover, erosion by rain water was already strikingly evident.
Imagine what
a good inspection of the whole project might have yielded!
The inadequacy
of an already revised maintenance and operating budget was my first thought.
Worrisome,
too, is the possibility that Nalcor helped write the EY narrative or at least
influenced key parts of its content.
Nowhere is
this deference more evident than in EY’s assertion of three additional risks
for which it notes there is no contingency allowance. EY says the risks are:
1. Significant protest unrest
2. Vegetation and soil removal
3. Other unforeseen directives from
government
Those issues could only have come out the mouths of Stan Marshall and Gil Bennett.
Significant
protest is indeed a risk, though its impact to date — compared, say, to an
ill-suited crony-based management team, with almost no civil works megaproject
expertise — hardly even registers on the $12.7 billion estimated project cost.
On the other
hand, risks #2 and #3 cited above, are not risks at all in the context given by
EY. They simply constitute public policy choices.
EY had no
business giving “soil removal” or “unforeseen directives” the characterization
of risk — regardless of the ineptitude with which Nalcor perceives the Premier.
As such, they are completely within the domain of the provincial government. Put
differently, Nalcor was not elected, nor is it fit to be in the public policy
making business.
The Natural
Resources Minister didn’t publicly correct EY’s error, but she parrots the firm’s
lines anyway and the mainstream media quotes them. Their job is done.
Still, the
utility of EY’s meagre analysis is represented by the warning that “the Project
retains a high level of inherent risk”. The firm states that this is the case
as it proceeds towards the execution of “a series of complex and significant
activities” which will command a “high planned spend rate”.
The firm
cites as examples construction at the North and South Dams, continuing power
plant installation, turbine and generator installation, HVdc commissioning, and
the approaching winter.
EY makes
recommendations for better project controls in the face of those risks
principally with respect to periodic “probabilistic schedule modelling” using Monte
Carlo or similar risk assessment methodologies commonly used in the engineering
profession. It also wants the Government to implement “an enhanced independent
assurance function… related to cost, schedule, and associated risks”.
Looming too,
but only specifically mentioned in EY’s first Report, are those Chinese-made
turbines and generators whose successful function awaits announcement only
after every dime has been spent.
EY’s recommendations
may make sense, except that they are inadequate. And this is where the
engineering deficit of EY is horribly exposed.
EY needed to
instruct Nalcor as to the virtues of making fundamental management changes in
anticipation of the growing amount of complex work and a crowded schedule.
EY states that,
since bifurcation of Gil Bennett’s original job, “management bandwidth
available to the Project [has] improved the depth and rigour of the project
controls function”. This is hardly a ringing endorsement of management’s
skill-set — especially at this late date.
In that same
context, EY must know that the completions contract for the powerhouse will
involve up to three years of tedious work — much of it within a confined area.
The work will require a level of technical management expertise that Nalcor
does not now possess.
All that
said, that “EY did not conduct any engineering review, physical inspection or
validation of construction process” is surely one of the indictments of this Report.
Evidently no lessons have been learned from New Brunswick’s Mactaquac Dam,
where faulty concrete has that province contemplating demolition after only 45
years of production.
Unsettling,
too, is that EY was not given a mandate to confirm Nalcor’s forecast cost and
completion dates for the project:
And EY makes
no mention of either the North Spur stability problem or the continued absence
of a water management agreement.
While the remaining
“high level of inherent risk”, to which EY refers, needs greater analysis (which
will be addressed in a later post), there are few (knowledgeable) engineers who
believe that the current estimate of $12.7 billion is achievable.
Perhaps none
of those issues matter, anyway. At this level of project cost, apart from the
integrity of the North Spur, the only real issue is whether the sanction of the
Muskrat Falls project was underpinned by criminal fraud.
‘Can’t be
stopped’ is Dwight Ball’s and Stan Marshall’s unproven assertion about the
project — to which they will brook no opposition.
How about a
more chilling observation, to which no reply is needed?