Sanction needed for Muskrat oversight

Published on November 9, 2012

Work at the Muskrat Falls site is continuing despite the project not yet being officially sanctioned by the provincial government.

Sanctioning may appear to be nothing more than a political statement, but the reality is the decision brings into effect specific requirements for Nalcor Energy. For example, there is a requirement to report on progress in living up to promises in the Impact Benefits Agreement with Lab-rador Innu and the Newfoundland and Labrador Benefits Strategy.

Procurement for the project is part of the responsibilities of SNC-Lavalin, under its contract with Nalcor.

Several factors taken into account when considering bids

During a mid-October tour of the Lower Churchill project offices on Torbay Road in St. John’s — where the majority of the SNC-Lavalin team has been based — Nalcor vice-president and Lower Churchill lead Gilbert Bennett said SNC-Lavalin personnel could make recommendations on contracts, but the ultimate decisions on what company is awarded a specific contract lies with Nalcor.

Bennett referred to it as the “owner’s oversight” role.

When provincial Natural Resources Minister Jerome Kennedy took questions from Telegram reporters and editors on Nov. 5, he said Nalcor has been left to monitor itself when it comes to awarding contract and benefits.

“Nalcor has primary oversight of the project at this present time, in terms of the construction, the engineering. The benefits agreement sets out clearly the hiring processes and preferences,” Kennedy said, referring to the project’s benefits strategy.

Yet the benefits strategy does not apply if, officially, there is no project.

As long as the project continues without sanction, the oversight mechanisms do not kick in.

Nalcor’s position

In response to The Telegram’s questions about project contracts, an emailed statement from a Nalcor spokeswoman said, “No reports as outlined in the benefits strategy have been completed or forwarded to government.”

Again, requirements on reporting do not come into play until Muskrat Falls gets the green light.

Even so, Nalcor has been insisting its contractors provide information on employment by the 25th of each month. This information allowed the Crown corporation to, for example, swiftly respond to questions about the number of Labradorians employed on the project to date, when the issue was raised.

From June to the end of August, 214 people were working on the project. Of those, 64 were from Labrador and 130 from the island. Of the 64 Labradorians, 37 were members of an aboriginal group; nine were Labrador Innu.

“We are completing the tabulation of (employment) information to the end of September 2012 now. I hope to have this information completed by early next week,” Nalcor spokeswoman Karen O’Neill has said.

The Telegram found no evidence of wrongdoing by Nalcor when it comes to contracts awarded to date, after reviewing whatever information on contracts is publicly available. Dollar figures associated with contract bids have not been made public.

The Telegram did have questions that could have been answered by an arm’s-length reviewer, but no such reviewer exists.

Considering contracts

Awarding contracts can be tricky business.

Consider the bulk excavation work for Muskrat Falls. Should the contract go to H.J. O’Connell — which recently worked with SNC-Lavalin on the Wuskwatim hydro megaproject of Manitoba Hydro and the Nisichawayasihk Cree Nation? That project has been attacked for going overbudget, but at least SNC-Lavalin would have a strong sense of how the company — which was partnered with EBC Inc. and Neilson Inc. — might react if problems arise.

Also consider that H.J. O’Connell has offices in Wabush and St. John’s, giving it strong ties to the local construction supply and service community.

On the other hand, Pennecon Heavy Civil has strong ties locally and has completed major project work on recent builds like the nickel processing facility at Long Harbour.

Three other companies from outside the province are in the running for the same contract.

The Telegram asked a Nalcor spokeswoman if any preference in contracting is being given to companies Nalcor or SNC-Lavalin has worked with in the past. The answer is no.

As part of the contracting process, companies bidding on work are asked to complete a questionnaire to assist in award decisions. In evaluating bids, factors taken into account include the bid price, a company’s health and safety policies, experience in the required work, credit worthiness, technical suitability and the company’s customer service record.

Also considered is if the bid would service project requirements under the Innu benefits agreement or the provincial benefits strategy.

Awards to date

Work on Muskrat Falls to date has been referred to as “early site work,” and includes a new road and power line. The cost is part of the total $7.4-billion price tag.

Three contracts have been awarded for the site work so far.

NUKUM Forestry was hired to clear trees from where the access road and worker camp sites will be.

Liannu — an Innu partnership involving Pennecon Heavy Civil and M&M Engineering — was contracted to build an access road.

G.J. Cahill was hired for the installation of electrical infrastructure and the supply of a prefabricated control room building.

As of Oct. 31, 12 other contracts, for the supply of various construction materials were also awarded.

Nalcor announced on Nov. 1 that site work would be continuing, regardless of the fact the project has not been sanctioned.

One other contract to further construction work is to be awarded, according to a Nalcor rep.

The Telegram contacted all the local contractors who have landed one of the main project contracts to date. All either opted not to comment or did not respond to messages.

Then there are the subcontractors, but information on supply and service subcontracts is not readily available.

The Telegram recently spoke to a subcontractor in Happy Valley-Goose Bay who was involved in site work in the first half of 2012.

“The work is going to the big contractors. It’s not going to the small contractors,” he said.

While acknowledging he had not contacted larger contractors since his initial stint of work, he said he still felt there was little opportunity for smaller, local companies to take part in the megaproject.

“But you know, it’s the same old story. If you go bitching about it you won’t get nothing.”

When asked whether or not local companies were seeing benefits from the project in contract awards, Kennedy said people should not confuse the requirement for local hires first whenever possible with the idea that local companies will automatically receive any contracts when competing against outsiders.

Local companies must still be competitive, he said.