He was a Nalcor Energy vice-president and the lead of the Muskrat Falls hydroelectric project, but Gilbert Bennett couldn’t say with certainty if Nalcor’s board of directors was aware they were approving the megaproject on a near-impossible, high-risk schedule. He didn’t tell them.
Bennett couldn’t say if the board, or the provincial government, was aware of a recommended reserve fund was not being covered in the public estimate promoted by the Crown corporation. He couldn’t say if anyone beyond then-Nalcor Energy president and CEO Ed Martin knew about consultant warnings on the project’s risks and schedule.
“The communication of this material to the board, to the government, is the decision of the gatekeeper (Martin) who is looking at our business risk and who is assessing a broad set of parameters,” Bennett said while on the stand at the Muskrat Falls Inquiry Monday.
Auditors with Grant Thornton had also previously testified the project estimate at the end of 2012 was calculated using a “P50” probability factor for contingency, or a 50-50 chance of overruns. If the project were budgeted to cover more risk and give higher certainty to the estimate (a recommended “P75” instead of “P50”), the public estimate would have been $7.5 billion instead of $6.2 billion to start, not including financing costs.
Bennett went round after round with inquiry co-counsel Kate O’Brien on cost and risk, with O’Brien suggesting more than once during the day that he was not answering questions as asked.
Along the way, he did say he believed the board and the government should have been aware of the understandings behind the project’s cost estimates.
Asked about a decision not to have a reserve amount in hand to cover for the high-risk schedule, Bennett said he understood Martin’s position — the “philosophy” — and “accepted the outcome” of not including the reserve.
On the schedule, he acknowledged a consultant had pointed out in 2010 it was based on a “P1” probability value, with a 99 per cent chance of schedule overruns. There was only a one per cent chance of achieving first power in July 2017.
“The schedule (in 2010) needed additional work. To count on this schedule is probably unreasonable on multiple fronts,” Bennett said to O’Brien.
The same schedule was used when publicly comparing the “isolated island” option for power versus the Muskrat Falls project. Government members and board members have testified to not knowing about or understanding the “P” factor.
“We were working with that schedule and we understood that there was insight from SNC-Lavalin available and that there was also insight to be made available from contractors as we continued through the process,” Bennett said.
The project team did make changes, including some early contracting before the “no or go” decision was made. By September 2012, the proposed project schedule had reached a “P3,” but it’s considered a negligible change.
Delays in the construction schedule would add cost to the project.
Following Bennett’s testimony, Concerned Citizens Coalition co-chair (and former chair of the province’s Public Utilities Board)) David Vardy said he learned a lot given Bennett’s comments and the points now on the record.
“They make me very concerned about our ability to govern ourselves effectively in this province, that we would get ourselves into this mess and that we were unable to extricate ourselves,” Vardy told reporters.
“But the good news, it’s now coming out and the people have an opportunity (to see) what’s been happening to this project.”
Bennett is scheduled to continue on the stand at the inquiry through Thursday.
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