Foreign companies not always a safe bet

Randy Simms
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Former Natural Resources Minister Shawn Skinner raised eyebrows this week with his comments about foreign companies landing large contracts for jobs in Canada.

He was referring to a huge contract soon to be awarded for the building of the intake, powerhouse, spillway and transition dams at Muskrat Falls. The whole thing will come in at something like $1 billion — not small potatoes.

Skinner heard that an Italian company is in the running for the job, and that set off alarm bells.

“For me, it’s all about the level of risk that Nalcor would be assuming,” he said.

His argument is that Canadian companies, or foreign ones that have worked in our climate, for that matter, know our laws and standards and are better able to offer security to project developers like Nalcor than a company working in Canada for the first time.

Skinner says he’s talked to engineers and architects, tradespeople and union leaders who, like him, have raised concerns about foreign companies taking on large construction projects in Canada and running into trouble.

His point is well taken. Foreign companies working in our country have run into problems. It doesn’t take a lot of research to find them.

The Windsor-Essex Parkway in Ontario was built to improve the flow of goods and services across the Windsor-Detroit border. A consortium of three companies was  awarded the job. None were based in Canada. No problem with that, right? Not quite.

In July, the Ontario Ministry of Transport discovered that 560 of the girders used to build overpasses were not up to Canadian standards. They had been manufactured using a process that did not meet the Canadian Highway Bridge Design Code. As you can guess, this has caused delays, and the costs to taxpayers could be enormous. John Lyons of the Windsor Construction Association says it’s an example of what can go wrong when contracts on massive public-private partnerships end up being awarded to foreign companies.

Will the girders have to be replaced? The people of Ontario are waiting to see.

Back in 2004, a decision was made to build a new water diversion tunnel at Niagara Falls to generate more hydroelectric power at the Sir Adam Beck Generating Station. The tunnel was to cost about $600 million.

The contract was awarded to Strabag AG of Austria. But the tunnel project proved to be a bigger job than they had bargained for and subsurface ground conditions proved more challenging than anticipated. In other words, they hit a lot of rock. The result was a major dispute involving the contractor, a delay in getting the work done, and an eventual 60 per cent cost overrun. The final bill will be something like $1.6 billion. Ouch!

Shawn Skinner admits that he has a horse in the race for this major Muskrat Falls contract. He represents one of the four bidders being considered for the job. While he recognizes his bias, he maintains his concerns are valid.

Nalcor appears comfortable with the process they’re using to award the contract and the final price will be key to their decision. Nalcor Energy vice-president Gilbert Bennett was clear in his comments.

“Ultimately for us, at this point,” he said, “we are interested in best value for the people of the province.”

I interpret “best value” to mean total cost. In other words, expect the project to go to the lowest bidder.

Companies from Europe and elsewhere are bidding on jobs in Canada because their economy is not doing so well. Our open markets and their lower standards for everything from occupational health and safety regulations to wages means they can bid lower  and land jobs. It doesn’t mean they have the “on the ground” expertise needed to complete projects on time and on budget.

A final question: if this billion-dollar contract goes to the Italian company, where will the profits go? Rome?

Randy Simms is a political commentator and broadcaster. He can be reached at Twitter: @RandyRsimms

Organizations: Ontario Ministry of Transport, Windsor Construction Association, Sir Adam Beck Generating Station Strabag AG of Austria Nalcor Energy

Geographic location: Canada, Ontario, Windsor-Essex Parkway Windsor-Detroit Niagara Falls Europe Rome

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