Premier to blame for lack of oversight on B.C. Hydro
B.C. Hydro flatly ignored watchdogs or delayed informing them of problems
The first time Premier John Horgan approved Site C, he vowed to establish a strong and independent project overseer to keep the troubled hydroelectric dam on schedule and on budget.
The effort failed, judging from the report of Peter Milburn, Horgan's special adviser on the latest instalment in the Site C debacle.
The NDP'S post-2017 oversight consisted of a government-appointed project assurance board, with independent advice from the Ernst and Young management firm.
But as Milburn and his review team discovered, the board was misconceived from the outset. “An important feature of providing due diligence is the ability for the group to work independently,” his report observed.
Ideally this would allow the board to “be more candid and express opinions without being inhibited” by Site C project managers or board members at B.C. Hydro.
However, he said of the project assurance board, “Half of the … members also belong to the B.C. Hydro board. These overlapping roles can make independent oversight challenging.”
Another shortcoming of the Ndp-appointed project assurance board was a lack of expertise to, er, oversee a project of the scale and complexity of Site C. Some members of the board flagged the problem in confidential interviews with Milburn and his team.
“The areas of concern identified include commercial negotiations and strategy, large civil construction, and/ or senior project management experience.”
But when board members tried to raise those concerns, “the conversation was truncated and they never reached a satisfactory outcome.”
Nor was that board given the time or leeway for proper due diligence during meetings. “The scope of the topics canvassed … was limited. The agendas appear to contain many project updates and informational items with few items regarding key project issues or strategic considerations.” In addition, Milburn said, several board members expressed concern that the substantive issues were not coming before them and that management curtailed their mandate. Hydro kept the project board in the dark on the geotechnical instability in the dam foundations that emerged in August 2018 and dogged project construction throughout 2019.
Milburn said assurance board members expressed “surprise” in early 2020 when B.C. Hydro informed them that “the problem required robust mitigation.”
“From a governance and oversight perspective, our team feels that the board should have been actively involved in the review of mitigation measures. One of the primary roles of project assurance is to review risk issues and provide strategic advice on mitigation.”
Much the same happened with Ernst and Young, as independent adviser. It reported out in May 2018, identifying many deficiencies in Site C risk management, cost control and the reporting relationship with the project assurance board.
Hydro didn't much like the report, ignored some of its recommendations, and its working relationship with Ernst and Young deteriorated soon after.
Milburn said that, a few months later, B.C. Hydro notified Ernst and Young its contract would be terminated.
“A short time later, Hydro rescoped the contract to lessen the role EY would have in overseeing the project.
“Ultimately, B.C. Hydro determined the amount and type of oversight they would receive from EY. This appears inconsistent with the concept of independent oversight and with B.C. Hydro's commitments to government,” concludes Milburn with breathtaking understatement.
In a damning summation of Hydro's performance under the New Democrats, Milburn says the utility “could have done a much better job of anticipating risks, quantifying the range of risks, tracking the effectiveness of risk mitigation, or communicating risks.”
Against that backdrop, the government also released two reports Friday from a two-member panel of engineers. They said that the proposed fix to the geotechnical problem meets Canadian dam safety standards.
But they hedged their findings: “The panel provides its opinions concerning the methods and approaches being used based on information provided by the (Site C) project team. However, the ultimate decisions and responsibilities for the designs remains with B.C. Hydro.
“Our review services were performed within the limits prescribed by B.C. Hydro in a manner consistent with the level of care and skill normally exercised in the current standard of professional engineering practice. No other representation to B.C. Hydro, expressed or implied, and no warranty or guarantee is included or intended.”
In short, they performed their due diligence within the parameters laid down by Hydro and the information provided by the Site C project team.
One can only hope that Hydro was more transparent and co-operative in working with them than it was with the project assurance board or Ernst and Young.
“I am not here today to put blame on anyone,” Horgan said in releasing the reports Friday.
No wonder. This was a result of his failure to appoint proper oversight on Site C and on B.C. Hydro itself.
One of Horgan's first acts as premier was to clear out several high-profile B.C. Liberal appointees at Hydro and replace them with his hand-picked executive chair, Ken Peterson.
Peterson is now out, replaced by Doug Allen, veteran Mr. Fixit at many a previous Crown corporation in B.C.
He has not faced a bigger challenge than the entrenched, secretive, wedded-to-dam-construction corporate culture at B.C. Hydro.
Horgan was also asked Friday whether he stands by the latest $16-billion cost estimate to complete Site C.
“I am confident that the numbers that we put forward today are certain for today,” he replied, not even bothering to pretend that this would be the last overrun on Site C.