following is Nalcor VP Gilbert Bennett sharing, in his words, a “mark-up” of
the very first Independent Engineer’s Report on the Muskrat Falls project. Bennett
is sending the email to Ed Martin, Paul Harrington, James Meaney, and PR types Karen
O’Neill and Dawn Dalley. The email reads:
the November 29 report. Proposed redactions are highlighted in red. Once we’re
all good we can lock these in. Once Jim has circulated the appendixes from the
November 29 report, I will update accordingly for the full package.
please let me know…
in case you missed it, what Gilbert Bennett is in possession of and is “marking-up”
and seeking “changes” in is not a Nalcor Report. It is, ostensibly, the “independent”
work of the so-called “Independent Engineer” for the Muskrat Falls project. The
year was 2013. In all, there have been a total of 20 IE reports made public
since that time. We can reasonably assume that Nalcor has had a hand in each
Secondly, the email above (see below for digital copy) is dated 04/07/2014 and a second similar email is dated 03/01/2014. Evidently, Nalcor had the draft Independent Engineer’s Report in its possession for more than three months.
But that is not the biggest surprise.
|Executive V-P Nalcor Gilbert Bennett|
Nalcor refers to the IE’s Report dated November 29, 2013 which it is reviewing, redacting and changing. Note in the digital image below where Nalcor gives the date of the final Report as December 30, 2013. At first, one might be led to think that this is a clerical error. It is not. December 30, 2013 is the date clearly shown on each page of the Report provided by Nalcor under ATIPPA.
It seems that Nalcor has been caught editing the Report and giving it a new proposed release date. Possibly it was one of the few instructions the IE felt they could ignore?
The official report – the one issued publicly by the Independent Engineer – is dated not December 30, 2013 but November 29, 2013. This is Nalcor’s December 30, 2013 version. This the IE’s November 29, 2013 published version. Click on the links and see it for yourself.
can oversight be independent if the language and content is modified by the
very people under scrutiny — their decisions, analysis and conclusions?
should the public view the Office of the Independent Engineer as a source of
integrity, having failed to disclose Nalcor’s direct involvement in the
crafting and redaction of their report?
did the Government of Canada allow this relationship to occur and very likely persist?
this just one more proof of the complicity of the Federal Government, with
Nalcor, in the creation of a debacle that has the province on its economic
(The correspondence exhibited below and the December 30, 2013 copy of the IE Report were obtained under ATIPPA by the person I have often referred to as “citizen sleuth”. I am very grateful for the research he has given me in the interest of better transparency in the administration of public affairs.)
It is not yet clear if the IE will be called to testify, but that Office should be.
IE’s report disclaimer states that tit “was prepared for the exclusive use of
Nalcor, Her Majesty the Queen in Right of Canada, as represented by the
Minister of Natural Resources…” Disconcerting is that the IE doesn’t also say that its conclusions went
through Nalcor’s washing machine.
Bennett’s free-wheeling language — “once we’re all good we can lock these in” —
is certainly proof, if any more were needed, of the Crown Corporation’s
determination to keep key information regarding a failed project under wraps.
Office of Independent Engineer was established under the conditions of the “Term
Sheet” for the Federal Loan Guarantee. It is responsible to the Federal Government.
But the group that performs that role — MWH Canada Inc. — was selected by
Nalcor under a long-term contract, and paid by Nalcor too.
is the perfect set-up for a potential conflict of interest. For that reason, if
the IE was oblivious to that potential conflict, or didn’t care, the very fact
that the information is formally
released to the public with the knowledge of the Government of Canada obliges
it to give fair warning to all, including the parties for whom the IE’s reports
not kid ourselves. For Nalcor’s Gilbert Bennett to have had access from the
very beginning and the right to engage in the “mark-up” of the report,
including a great many redactions, suggests that the Office of the Independent
Engineer was likely never intended to be “independent”.
just the Nalcor Vice-President but the President and CEO, the VP Finance, the
Construction Manager and the heads of Nalcor’s PR department (O’Neill and
Dalley) were all invited to subject the document to editing and redaction.
a cozy arrangement for Nalcor!
as former Premier Tom Marshall was content to ascribe “Oversight” to a Provincial
Government Committee that provided anything but, the Federal Government was
equally content to include “Independent” in the naming of the oversight engineering
Office for the project. Except that neither offered oversight or independence.
has to ask: on what basis does the group that runs Nalcor deserve such
would MWH Canada Inc. condone the creation of the perception of “independence”
when Nalcor’s involvement prejudiced the integrity of the reporting process?
the public would accept that very select “commercially sensitive” matters should
be redacted. But that is not the same as putting Nalcor in charge of editing
the document and keeping from the public knowledge of invited interference.
with the norms associated with concepts of transparency and integrity, of
course the public would want to know that that consent was granted, including
how often, and the reason for each one. That would have required that MWH
Canada give disclosure at the outset of the report. Their failure to do so is
not acceptable, even if the public is not on their client roster.
the reader conducts a page by page comparison between the two versions of the
report, they will find that entire sections have been rewritten, new sections added
(some of them redacted, too), and others omitted in the published version.
Were all of then – there were a great many – performed by Nalcor? I don’t know. It is not as if Nalcor ever came running to confess their incompetence or complicity except when they are running out of money. That said, what is clear is that some sections of the Report disappeared altogether; the IE’s concerns over Nalcor’s
methodologies and analysis were toned down or
changed outright in the final published version.
last sentence in paragraph 4.2 contained a proposed Nalcor redaction. It read
in part: “MWH considers all of the CH0006 (Bulk Excavation) work to have been
completed satisfactorily and conforms to industry standards… Nalcor has advised
that there is a pending acceleration claim, which may have an effect on the
final contract price.”
paragraph was completely omitted in the published version.
the case of Table 5-2 Expenditures to
Date versus the DG3 Capital Cost Estimate (the title given in the published
report) the Nalcor write-up version showed no proposed redactions but the
published version is substantially redacted, suggesting either that Nalcor had
more than one opportunity to change the document or that more than one version
was on Nalcor’s operating table — which is likely, given the number of Nalcor
officials with access to the document.
Contingency Analysis stated:
the IE is of the opinion that the calculated overall 6 percent scope
contingency representing an adder of $368M to the project budget is not conservative
relative to our legacy experience with similar remote heavy-civil construction endeavors,
and is, therefore, judged to be somewhat optimistic. The IE typically sees
scope or tactile contingency allowances in the range of 8 percent to 12 percent
at comparable DG3 stage gates, A mitigating circumstance for the current LCP
budget is the fact that cost certainty has been achieved for the
awarded-to-date work (See Section 5.1.4) that provides a rationale to carry a
reduced contingency allowance.”
contrast the published account stated:
the IE is of the opinion that the calculated overall 6.7 percent scope
contingency is aggressive relative to our legacy experience…” though “the IE
would advocate for adjustment of the project contingency fund”, suggesting,
after some redaction, that “[t]he IE believes the drivers on contingency will
be varied and not entirely predictable as the project unfolds…”
is not hard to discern the differences in tone and emphasis after the Nalcor
editors got their black pencils in gear.
original 5.1.4 Reconciliation of the DG3
Capital Cost Estimate to Actual read:
account for uncertainty in the project’s cost opinion, stakeholders should be
aware that a range of probable outcomes is possible. Reconciliation of the
project’s DG3 capital cost estimate to actual tendered amounts up to
mid-November 2013 provides a means for interested parties to trend the current
budget and understand variance relative to DG3 metrics.”
in contrast, the published report was far more understated.
read: “Estimated capital costs included in the DG3 estimate are costs based on
2012 values. These values were escalated in the Nalcor financial models to
reflect expected cost bases in the years of construction.” (p. 85)
is a significant departure from the original copy; any gravitas expressed as to
the reality of Nalcor’s cost position has been purged.
will tell you that “trending” of costs is the basis of forecasts once a project
is under way. Presumably Nalcor didn’t like that phraseology because Ed
Martin’s public utterances did not reflect the terrible trend portended by the
Tender results piling up.
the time of the IE’s first report, it would have had access to a good many
confirmed Tender awards and been able to compare them with Nalcor’s budgeted
figures. The Office ought to have sounded the alarm giving truth to the
concerns about cost overruns. Instead, they were more preoccupied with giving Ed
Martin and Gilbert Bennett, among others, plenty of time to obfuscate the real
comparing the original and final report of the IE requires one to sustain a
level of nausea required for the Manitoba Hydro International (MHI) and
Navigant reports. They were the Consultants hired by Nalcor (following the
PUB’s refusal to endorse the project based upon DG2 estimates) to assess Nalcor’s
DG3 assumptions, estimates and analysis and found, with few exceptions,
everything to be “reasonable”. Ultimately
those reports were horribly wrong; yet they fuelled the process, if any were
needed, allowing Nalcor and the Dunderdale Government to hurry project sanction.
in the IE’s report, Part 5.2 was completely changed. For example 5.2.2 Allowance for Contractor Bonus was
added and then completely redacted.
Highlight Sensitive and Critical Areas
was also added and partly redacted.
was, in the version given to Nalcor, a major issue addressed by the IE. But it
got substantially toned down in the final draft, too.
first IE Report contained this nugget under Price Risks in part 5.2.4, which should not go unreported. It
states: “The risk assessments they [Nalcor] conducted… appear to be carefully
performed and were taken into consideration in their economic analysis.”
course, it is now well known that Nalcor hid the SNC-Lavalin Risk Assessment
Report detailing a plethora of potentially large-cost Risk issues. The EY
Interim Report, too, expressed deep concern that Nalcor had disregarded major
strategic and tactical risks.
This disclaimer, inserted in the IE Report, should give the reader cause for pause when the current state of the Muskrat Falls project is considered. That it was “based on information supplied by Nalcor…”, the IE judging all of that to be “reasonable” gives new meaning to the common usage of the phrase: “garbage in, garbage out”.
it stands, the public is none the wiser — the Independent Engineer (and the
Government of Canada, too) having failed to perform their most basic obligation:
to disclose, to inform at the very least the group identified as the intended recipients
— the “rating agencies, lenders, guarantors, and other organizations that may
be involved in providing financing for LCP…”
least the Federal Loan Guarantee secures the bankers. Likely they won’t care how many versions of IE reports Nalcor has scripted. The public is not so
expect the Premier or any of the seven Federal MPs to make inquiries or to give
explanations as to the behavior of the IE and Nalcor.
politicians and public servants are a virus on transparency and democracy.
is not limited to America, either. It threatens institutions and democratic
government everywhere self-interest is deemed paramount. Elected and
non-elected alike are complicit; an uninformed public mere pawns.
is why you will likely never hear another word about what you have just read,
or of the other nineteen reports that were subjected to Nalcor’s censors.
Of course, continued silence by the IE may confirm the doubts that we fear most.