Hired and paid by Nalcor: independent engineer scrutinized at Muskrat inquiry

The autonomy of the so-called independent engineering team hired to evaluate Muskrat Falls came under scrutiny at a public inquiry in St. John's this week, with one lawyer questioning what they said appeared to be an unusually close relationship between the hydro project's director and the leader of the team of outside evaluators.

"It suggests a very cosy, personal relationship. Was that the nature of your relationship with Mr. Harrington?" Geoff Budden, lawyer for the Muskrat Falls concerned citizens coalition, asked Nik Argirov at the end of a long day of testimony at the Muskrat Falls inquiry Tuesday.

"No," Argirov replied.

Curious exchanges

At issue was an email written by Muskrat project director Paul Harrington to Argirov in June 2018 in which Harrington suggested major changes were being made at Nalcor to "suit the political agenda" and that credit was being taken by "folks who didn't do the heavy lifting."

Harrington ended his email to Argirov with the sentence: "Shame on Nalcor."

Budden expressed surprise that the head of the team building Muskrat would write such a strongly worded message to someone who was providing independent oversight of Muskrat.

But Argirov said Harrington was simply responding to a concern raised by Argirov in an earlier email after a decision was made to shake up the project management team.

Argirov said he felt separating the project into generation and transmission teams was a risk, and evidence revealed at the inquiry shows Harrington was not happy with the changes.

"There might have been some sentiment there," Argirov said of Harrington's sharp tone.

On the defensive

It was one of many occasions in which Argirov was on the defensive about his oversight role with the controversial hydro project.

But Argirov also freely admitted to being left in the dark on many of the early warning signs that Muskrat was heading for trouble.

"I was upset," Argirov said about an announcement in September 2015 that the cost estimate had increased to $7.65 billion.

"I did not expect the amount would jump so high."

Argirov was part of a Colorado-based engineering firm, MWH Global, that was hired in August 2012 to carry out the role of independent engineer for Muskrat Falls, providing expert oversight for the government of Canada and the banks that were lending billions to Crown corporation Nalcor for the project.

The federal government required such oversight as part of its review to determine whether it would provide a $5-billion loan guarantee to Nalcor.

And based on a recommendation from Argirov and MWH, in which the company determined the cost and schedule for Muskrat was "very achievable and realistic,"  the federal government approved the loan guarantee in late 2013.

Provincial politicians also referenced the MWH review when — in the face of loud opposition — defending the decision to sanction Muskrat at a capital cost of $6.2 billion, with first power scheduled for mid-2017.

But construction costs have since soared to more than $10 billion, and grows to nearly $13 billion when financing and other charges are included.

A high level review

But Argirov confirmed Tuesday that his team only did a "high-level" review of Nalcor's cost and schedule estimates.

"Our mandate (was) not to do any detail engagement; any detail analysis on anything," Argirov testified under questioning from inquiry co-counsel Barry Learmonth.

And, it's been learned that Nalcor hired MWH, developed its scope of work, and even paid for its services.

"Is this an unusual process to follow in these circumstances?" asked Learmonth.

"No, actually it's very typical," replied Argirov, who continues to serve as independent engineer and is still being paid by Nalcor, though now as the head of his own company, Argirov Engineering Inc.

Changing reports

There's been testimony and evidence that Nalcor changed some of the reports prepared by MWH to make the project look more favourable.

In one case, the word "considerably" was removed from a report to reference schedule delays being experienced by Astaldi, the company awarded the contract to construct the powerhouse at Muskrat Falls.

And Budden also pointed to documents Tuesday that indicate Nalcor was not happy with some of the people on MWH's team, and wanted changes.

In one email, Harrington refers to the "poor organization and general performance" of the leader of MWH's team, Rey Hokinson, and how another member of the team, James Loucks, is "argumentative and antagonistic towards Nalcor."

Both men were later removed from the independent engineer's team, but Argirov denied it was because of any pressure from Nalcor.

Argirov will continue his testimony Wednesday morning.

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