Nal­cor En­ergy un­happy with SNC-Lavalin

Mul­ti­ple wit­nesses have tes­ti­fied to change in en­gi­neer­ing, pro­cure­ment, man­age­ment

The Aurora (Labrador City) - - Saltwire Homes - BY ASH­LEY FITZ­PATRICK

Un­happy with the com­pany’s early per­for­mance, Nal­cor En­ergy changed SNC-Lavalin’s work on the Muskrat Falls project in 2011-12.

An amended agree­ment to a Fe­bru­ary 2011 con­tract, cov­er­ing the changes, was only signed in Septem­ber 2017.

The new agree­ment trans­fers more risk and li­a­bil­ity to Nal­cor En­ergy, par­tic­u­larly re­lated to pro­cure­ment and con­struc­tion man­age­ment. The agree­ment specif­i­cally states in­dem­nity for Nal­cor En­ergy based on any er­ror or omis­sion of SNC-Lavalin is re­stricted to the pe­riod prior to April 1, 2012 in re­spect to all con­tracted ser­vices, but only to en­gi­neer­ing work there­after.

April 2012 is when an en­gi­neer­ing, pro­cure­ment and con­struc­tion man­age­ment (EPCM) con­trac­tor ap­proach — orig­i­nally de­cided on for the Muskrat Falls hy­dro­elec­tric project — had mor­phed into an “in­te­grated project man­age­ment team” ap­proach, with Nal­cor En­ergy’s in­di­vid­ual con­trac­tors in­jected to work side-by-side with SNC-Lavalin’s team.

A sum­mary doc­u­ment from Nal­cor En­ergy’s team, pro­duced in June 2018, spells out prob­lems Nal­cor reps say they were hav­ing ahead of the megapro­ject’s sanc­tion­ing.

“There are two pages here that talk about ‘se­ri­ous SNCLavalin Inc. per­for­mance is­sues in 2011-2012,’” said in­quiry co-coun­sel Kate O’Brien, ref­er­enc­ing the doc­u­ment dur­ing pro­ceed­ings Tues­day.

O’Brien went on to read the list of claims, in­clud­ing “sig­nif­i­cant se­nior per­son­nel gaps” com­pared to what had been promised, a “growing ide­ol­ogy gap” be­tween the com­pa­nies and day-to-day process is­sues. The doc­u­ment notes turnover in SNC-Lavalin per­son­nel and lists seven “key per­son­nel” who failed to “mo­bi­lize to the project.”

SNC-Lavalin’s es­ti­mate for per­son hours re­quired jumped up in the project es­ti­mate.

Nal­cor En­ergy vice-pres­i­dent re­spon­si­ble for the Muskrat Falls project at the time, Gil­bert Ben­nett — now ex­ec­u­tive vi­cepres­i­dent re­spon­si­ble for power de­vel­op­ment — said he knew about his se­nior project team mak­ing changes in the work with SNC-Lavalin.

Ben­nett said he didn’t see a need to per­son­ally sign off on changes as they were hap­pen­ing.

“I un­der­stood that there were some chal­lenges and I also un­der­stood that they were be­ing man­aged by the team in a rea­son­able man­ner,” he said in re­sponse to ques­tions from O’Brien.

He said the changes were to im­prove per­for­mance.

“If (the Nal­cor project team) were to let SNC-Lavalin go, ter­mi­nate the con­tract, re­place them with a new con­trac­tor, then that would have been a new com­mit­ment that def­i­nitely would have had to have been ex­plic­itly ap­proved in ad­vance — given that it’s more than $100 mil­lion — by Mr. Mar­shall,” he said, ref­er­enc­ing to cur­rent Nal­cor En­ergy pres­i­dent and CEO Stan Mar­shall in­stead of for­mer Nal­cor En­ergy pres­i­dent and CEO Ed Martin, who departed the Crown cor­po­ra­tion in 2016.

The lead es­ti­ma­tor for SNCLavalin on the Muskrat Falls project, Paul Le­may, appeared by Skype be­fore the in­quiry briefly in early Novem­ber. There was a re­quest made for at least part of Le­may’s tes­ti­mony to hap­pen in pri­vate, not on the pub­lic record, lead­ing to tes­ti­mony be­ing cut short. Af­ter a sub­se­quent rul­ing on the re­quest from Nal­cor En­ergy by Com­mis­sioner Richard Le­Blanc, Le­may is ex­pected to be re­called and tes­tify fur­ther be­fore the end of the year.

Le­may had al­ready told the in­quiry about turnover he was aware of within the SNC-Lavalin team, in­clud­ing the loss of two in­di­vid­u­als he re­ported to, due to ill­ness.

He ref­er­enced the change in the ar­range­ment be­tween the two com­pa­nies, par­tic­u­larly af­ter a project es­ti­mate was sub­mit­ted in De­cem­ber 2011, with more de­tailed en­gi­neer­ing.

“I’ve been quite aware, later, that our (en­gi­neer­ing, pro­cure­ment and con­struc­tion man­age­ment) man­date was ter­mi­nated in April 2012, but no­body came to me, said, ‘Paul – the morn­ing of April that this de­ci­sion was made – now we have a dif­fer­ent con­tract,’” he tes­ti­fied.

But he re­ported to dif­fer­ent peo­ple.

For­mer deputy project man­ager Ja­son Kean, a Nal­cor En­ergy con­trac­tor, spoke favourably of the ca­pa­bil­i­ties of the SNC-Lavalin team mem­bers he was work­ing with at the time, in­clud­ing Le­may, while he was on the stand. Kean left the project in Jan­uary 2017.

He tes­ti­fied the SNC-Lavalin team was re­spon­si­ble for about 70 per cent of the base cost es­ti­mate. The rest of the es­ti­mate in­cluded some re­vi­sions by Nal­cor En­ergy and the ad­di­tion of as­pects such as the Strait of Belle Isle ca­ble cross­ing, where es­ti­mates were han­dled by Nal­cor En­ergy and other con­sul­tants.

Ben­nett is sched­uled to con­tinue on the stand through Thurs­day and will be sub­ject to cross-ex­am­i­na­tion. On Fri­day, the in­quiry is sched­uled for an in cam­era (not pub­lic) day, ad­dress­ing the is­sue of wa­ter man­age­ment.


Gil­bert Ben­nett

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