When journalists interview Ed Martin, as CBC’s Terry Roberts
did a few days ago, it is right to wonder if they go away laughing.
Unfortunately, the reporter’s interview with Martin is found only on
the CBC website, so images of him uproariously slapping his sides can only be
Terry Robert’s story is about Ed Martin dissing Astaldi. Martin
thinks that the Company is “largely to blame for the massive cost and schedule
overruns” experienced on the Muskrat Falls project.
The context, of course, is the just-released Grant Thornton
Report, a Forensic Audit prepared for the Construction Phase of the Muskrat
Falls Inquiry. The Audit informs us that, within the first four months
following project sanction, Martin had already blown through the low-balled
contingency allowance, having issued contracts which exceeded the project
estimate by 25% ($600 million).
Included in the figure is the Astaldi contract which was 31% over Nalcor’s budget. The $1.1
billion award to the Italian firm eventually saw the cost balloon to $1.959 billion as of March 28, 2018:
nearly $900 million over the bid price. Nalcor and Astaldi are now in
arbitration talks over claims amounting to several hundred million dollars
The fact that they had no experience working in the sub-Arctic
conditions of Labrador didn’t even earn the publicly-owned corporation a frown.
Martin took not a clue from having received bids from two
Canadian companies whose prices were almost double that of Astaldi. Nalcor’s own labour estimate was lower than
Astaldi’s by over 3 million hours. In fact, all the labour estimates exceeded
Nalcor’s, according to Grant Thornton, by an amount ranging from “60% to 160%.”
Experienced Managers would have thrown out the ridiculously low Astaldi bid; the outfit
more familiar with flies than frostbite.
But the Astaldi bid served as cover for a “Base Estimate” ill-conceived and so Astaldi was selected with foreseen consequences.
Nalcor watched Astaldi struggle for nearly a year trying to ramp
up, giving it cash advances to stay afloat. Yes, the Company was stupid, but as much as Martin?
Reporters Should Remember the Ones Who Lie
The project Schedule only had a 3% chance of success prior to
Sanction. When the Astaldi contract was awarded, after Sanction, it was already six months behind schedule. Nalcor’s failure to re-calculate the project — ignoring the cascading effect on sub-contractors — was a very costly error. But that is only a small part of what makes Ed Martin’s CBC
interview, placing all the blame on Astaldi, laughable.
There’s also the ill-fated “Dome”, upon which Astaldi relied
to achieve planned productivity. The ICS, or integrated cover system, was supposed to “allow the workers to
work comfortably… during the winter season resulting in no loss of labour
productivity due to the climate.”
Nalcor, in evaluating the Astaldi bid, didn’t as much as consider
if the Dome made sense. Williams Engineering, a Consultant to Grant Thornton,
noted that with so much combined activity expected to occur under the
enclosure, it “warranted detailed scrutiny.”
Knowing that Astaldi and the
Muskrat Falls project were failing badly, Ed Martin gave reporters a project
update on June 26, 2014 in which he pushed project costs to $6.99 billion. He also stated with
characteristic bravado: “We’re well within a comfortable envelope of where we
expected to be… I believe that we have narrowed down the risk of additional
cost increases very, very, very significantly.”
In contrast to Martin’s assertions, the Forensic Audit
confirms that, when he engaged in that interview in 2014, the Nalcor Executive knew
that the actual forecast to complete the project was $7.5 billion not $6.99
billion. Martin knew, too, that the costs were going far higher (p. 19).
Martin failed to tell reporters – and hence, the public – that the contingency had been blown months earlier. He even went so far as tell them that the
project was on schedule to be completed in 2017, when he knew that any such prospect had
no chance at all.
Martin should have stayed away from megaprojects and joined
the comedy business.
Except that comedians usually know when they’re not being taken seriously.