The Muskrat inquiry commissioner asks a probing question but doesn't get much of an answer
Why did Nalcor push hard on Muskrat, even after budget was blown, asks Richard LeBlanc
Ron Power hung tough for two days at the Muskrat Falls inquiry this week, defending Nalcor's role in the debacle and casting blame for the massive cost and schedule overruns on contractors like Astaldi.
Power, the hydroelectric project's deputy director, answered with an abrupt "no" when asked if the project management team was out of its depth, and didn't hesitate to criticize the abilities of some of the personnel hired by Astaldi and other companies, like SNC Lavalin.
He even went after the inquiry itself, saying the investigation would cost the province hundreds of millions of dollars because it would provide an edge to contractors like Astaldi, who are lining up to try and extract more money from Nalcor for their work on the project.
Only when pushed did Power acknowledge that "perhaps" the project team could have done things differently, that Nalcor's early cost estimates — including that famous $6.2-billion figure — were "too aggressive," and that the seven per cent contingency allowance of $368 million was only about half of what he would have liked.
But Power didn't accept any responsibility for the missteps that have driven the all-in costs for the project to at least $12.7 billion, and a schedule that is now two years behind, except to say, "I feel that deeply. Like we all do."
As his time on the witness stand came to a close Wednesday evening, the very senior and long-serving member of the Muskrat project team faced one final round of questions; this time from inquiry commissioner Richard LeBlanc.
And as usual, LeBlanc's question was probably the most relevant of them all.
Early signs of trouble
Before that, a bit of background: Muskrat Falls was sanctioned by the provincial government in late 2012, but was by no means a done deal at that point.
The so-called point of no return came a year later during what's called financial close, when the federal government agreed to provide a $5-billion loan guarantee, and the lending institutions turned over the capital needed to construct the project.
According to the terms of the loan guarantee, Nalcor was then committed to finishing the project, regardless of any cost overruns, with the provincial government agreeing to pay any overages.
But prior to financial close, things weren't going well, according to a forensic audit conducted for the inquiry.
Contract bids received in the first part of 2013 exceeded estimates by $600 million, or 25 per cent higher than expected, according to Grant Thornton.
And Nalcor's $368-million contingency was blown out of the water before any serious construction was even started.
Despite this, Nalcor did not pause the project and attempt to modify its estimates. In fact, there's evidence it pushed hard to get the financing in place, knowing its budget was insufficient.
With this information in hand, LeBlanc asked his question.
"I find it a bit surprising that the project management team would be pushing for financial close knowing that there was not sufficient money in the budget to handle this particular project. Why was it that the project management team were pushing so hard for financial close when they knew that? Why weren't they addressing the issue of getting more money in the budget beforehand?"
After a long pause, and some hesitation, Power said the leader of the project team, Paul Harrington, was asking similar questions "upward."
However, he added, "the instruction to the delivery team was to carry on."
Power again said, "The team did communicate these concerns up to senior management."
The message received?
"So we know the decision was made to carry on," said Power.
Power did not use any names, but he was likely referring to former Nalcor CEO Ed Martin, the so-called "gatekeeper" and main architect for Muskrat Falls, and other senior managers at the Crown corporation.
LeBlanc didn't press it any farther with Power.
It was late in the day, but Leblanc's questions could very well come up again when other witnesses, including Martin, take a seat in the witness stand in the coming weeks.
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