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Nalcor knew about risk report: auditor

Scott Shaffer, a forensic auditor with Grant Thornton, continued to present his findings to the Commission of Inquiry Respecting the Muskrat Falls Project in Happy Valley-Goose Bay on Tuesday. He will take questions from lawyers of the various parties with standing at the inquiry beginning on Wednesday.
Scott Shaffer, a forensic auditor with Grant Thornton, seen on stage at the Lawrence O'Brien Arts Centre for testimony at the Muskrat Falls Inquiry. - Ashley Fitzpatrick

SNC-Lavalin’s 2013 document wasn’t transmitted, at request of project manager

Grant Thornton has reviewed the cost increases and overruns during construction of the Muskrat Falls hydroelectric project, but the auditor has also reported on what happened to an evaluation by SNC-Lavalin in 2013 that warned of risks and greater-than-expected cost overruns on the megaproject.

Auditor Scott Shaffer with Grant Thornton took the stand Monday at the inquiry, and expected to continue at least into today.

Nalcor Energy’s project leaders might not have had the SNC-Lavalin report in hand, he told Commissioner Richard LeBlanc, but he reported the contents were known and understood by project leaders.

The auditor confirmed a meeting in April 2013 involving both former Nalcor Energy CEO Ed Martin and SNC-Lavalin’s then-CEO Bob Card, where it’s said the contents of the risk report by SNC-Lavalin were discussed. Card says he recalls discussion of the report, while Martin says he cannot recall. Nalcor Energy’s Muskrat Falls project lead Gilbert Bennett, manager Paul Harrington and Lance Clark also attended the meeting, held over the course of two days. Card said the contents of the risk report were discussed throughout.

Apart from the meeting, the auditor has highlighted an email from May 2013, citing it as proof Harrington and Bennett knew about the risk analysis performed by SNC-Lavalin.

At the end of May 2013, SNC-Lavalin’s Jean-Daniel Tremblay and Normand Bechard met with Harrington. Notes taken by Tremblay about that meeting refer to SNC-Lavalin’s risk assessment, and concerns of public disclosure of information.

The SNC-Lavalin risk report identified and ranked about 40 risks to the Muskrat Falls project, putting dollar estimates on potential losses tied to things such as contract packages being sized too big for bidders, future labour issues, a lack of enough on-site accommodations for contractors and more. It amounted to about $2.4 billion in cost exposure.

“Mr. Harrington made a decision not to ask for the report and recommended to Mr. Bennett that SNC keep it as an internal document in draft form and not provide it to Nalcor,” the auditor’s report states.

Harrington was reported to be concerned the report might be misconstrued. He specifically did not want it in Nalcor Energy’s hands, where the report would be subject to public requests for information under the Access to Information and Protection of Privacy Act (ATIPPA), the auditor has stated.

“SNC’s calculated risk exposure materially exceeded Nalcor’s calculated risk exposure,” the auditor also noted.

The SNC-Lavalin report was first brought to the attention of the public in June 2017, by Premier Dwight Ball and Natural Resources Minister Siobhan Coady. They were providing an update on the project, led by Crown corporation Nalcor Energy.

“It’s shocking to read this report and know that the former CEO (Ed Martin) knew of these risks four years ago, when he probably (could have) mitigated against them,” Ball said in revealing the information. “And the response was to do nothing.”

The project was about 20 per cent complete in 2013, with the report warning of a possible 39 per cent cost overrun.

By the time the risk report was revealed to the public, construction was 75 per cent complete.

SNC-Lavalin report revealed Muskrat Falls risks: Premier

The Muskrat Falls Inquiry (Phase II)

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