release of the Government’s most recent oversight report exposes the extent
to which the Muskrat Falls project is in trouble.
every slipping milestone, and changing cost estimate, the credibility of
Nalcor’s leadership is being questioned, too.
Pam Frampton at the Telegram and the CBC’s Azzo Rezori penned excellent columns this past
weekend, as did Russell Wangersky on
Monday, which documented clear frustration with Nalcor’s ability to obfuscate
the real truth on the project’s status.
delay to the project cannot be hidden. One
has to look no further than to the pictures of the site, 3 years into
construction, to truly understand the extent of work that awaits completion.
|Top: artist’s rendition completed Muskrat Falls project (Nalcor image).
Bottom: image shows current status of construction.
is no denying that the completion of the concrete pour on the Spillway is a great
accomplishment: 48,000 m3 placed
during the last year. It is a massive
structure, and represents an important milestone for the project.
the Spillway is minor when compared with the 460,000 m3 of concrete required
for the powerhouse, and 200,000 m3 for the North and South
Dams. In total, some 760,000 m3 of
concrete will be required to complete the project.
of the total concrete requirement has been completed. Assuming 75% of the
concrete hasn’t been placed, the figure is equal to 570,000 m3.
his July 2015 interview on NTV, Ed Martin indicated that Astaldi is completing over 20,000 m3 of
concrete per month, a figure nearing a Canadian record. Assuming 25,000 m3 can
be cast in each of the 6 good weather months, and only half of that volume achieved
in the 6 month winter period, recent site experience indicates that 225,000 m3
of concrete can be cast per year (about double the 2015 rate). Simple extrapolation suggests this rate of
concrete placement is equivalent to about another 2.5 years of concrete operations.
The pour rate of concrete is not the only
metric that one can use to peer into the project’s progress, but its accuracy
is well recognized in the construction industry.
on the current schedule, the concrete placement for the powerhouse will not be
completed until mid-2017. But, of
course, finishing the concrete does not complete the powerhouse, anyway.
you examine the original schedules provided by Nalcor (page 156 of this Link), concrete
completion, associated with the power house, occurs nearly 2 years prior to the
date proposed for full commercial power (the schedule indicated completed powerhouse
concrete placement by Q2-2015 to achieve full commercial power by Q2-2017).
following completion of concrete operations, to allow for the installation and
commissioning of the mechanical equipment inside the power house.
completion date for full commercial power is mid-2019. Considering even modest amounts of future
slippage, it will be the end of 2019, or later, before first commercial power
a less optimistic context, when you consider the meager progress which occurred
in the first three years of the project, full commercial power in Q4-2019 actually remains a stretch target, in the opinion of the author.
can talk about schedule improvements, mitigation measures, and alternative
execution strategies; however, it is time that they began to properly forecast
future schedule performance, based on past experience.
optimistic (P10), likely (P50) and pessimistic (P90) schedules for the
completion of the project. They need to base
these forecasts on historical norms, rather than merely adding slippage to
date, to the original project schedule. That approach meets no engineering
important, Nalcor must provide more information to show how their most recent
cost estimate of $7.6 billion has been determined.
of the most worrying aspects of Ed Martin’s recent announcement was the
acknowledgement the North and South dams were significantly over budget. That means the problem was formally
recognized in Nalcor’s cost estimates only with the signing of the
bid closed. The public record suggests they
knew in December 2014, when Nalcor advised the oversight committee that
clarifications on the contract were underway (page 25 of Report).
current project $7.6 billion estimate should not be an arbitrary number.
engineering practice is to forecast using sensitivities based upon change
orders, future contract awards, and estimated future costs to arrive at the
most realistic final landing position.
Nalcor seem to make project cost revisions only when change orders are
executed, or when contracts are signed. This
is not standard practice in project cost reporting.
need to provide full transparency as to the anticipated final project costs,
considering all known factors, including the schedule delay. CEO Ed Martin should not be making offhanded,
and oblique references to the potential for future cost increases, as he did in interviews last week. The
engineering profession offers Nalcor well-defined methodologies for project
cost estimation. The estimates are available in-house, and constantly updated by
his own staff; the problem is Martin does not want to share that information
with the public.
be perfectly blunt, the jig is up for Nalcor. It is time for Ed Martin to be
fully transparent. As it stands, the
public should consider the information, released last week, pure fiction.
Related Post by “JM”
RECOVERING MUSKRAT’S SCHEDULE: THE SUMMER OF VALIDATION
some issues require special emphasis:
Nalcor must come clean on the project schedule.
2019 is a more likely completion date, than 2018, for full commercial
power. This delay will have an impact on
the direct costs of the project, the interest during construction, and the
associated delays between the contractors.
year’s delay will result in a minimum of $150 million additional interest costs
during construction (IDC) and $150 million in direct management costs. It will result in a good many change orders, too,
because one contractor will issue delay claims, due to the lack of progress
made by another contractor. Delays of
this nature will surely get messy and expensive for Nalcor, and by default the
people of the province. Then there are
the damages must pay Emera for their delay.
it is time for Nalcor to acknowledge that the final cost of the project includes
the interest during construction of the equity borrowed by the provincial
government. The province will be
injecting nearly $3 billion equity in this project, once the most recent
over-runs are considered. The majority
of this money will be borrowed. There is
a cost to borrowed equity. It is
Nalcor and the Provincial government want to acknowledge the fact or not,
Muskrat Falls is a $10 billion dollar project, possibly higher, when all the
costs are reflected in the estimate and the entire IDC is recognized.
the failure of Nalcor to be forthright with the people of the province, with
respect to both the date for first power and anticipated project costs, is
eroding the professionalism to which the Crown Corporation lays claim. It is
obvious to anyone, in the business, that full power from Muskrat Falls will not
be available until 2019. Even to meet this completion date, strong execution will
be needed throughout the remainder of the project.
refusal to be transparent is worrisome. Martin’s obfuscation gives rise to many
questions about the mandate this Crown Corporation, especially its ability
public may not be ready to digest the reality of even higher costs; but they
should get ready. $10 billion in 2020 may, yet, be a best case scenario.