The provincial government allowed Humber Valley Paving to walk away from a contract to pave the highway in Labrador without paying any costs for breaking the agreement.
When the company walked away from a contract for work in Labrador, the province could have kept an almost $10 million bond, but instead cut a deal.
When the company encountered problems with the contract, premier-to-be Frank Coleman was CEO and the major shareholder of Humber Valley Paving.
However, Transportation and Works Minister Nick McGrath said when the company officially asked to be let out of the contract, Coleman was no longer CEO.
"Frank Coleman was neither a CEO nor a director of the company, and we didn't have any dealings with him whatsoever, we were dealing with the contract company themselves," he said.
Coleman resigned his position as a director of the company three days before a request was issued to government to cancel the contract.
Humber Valley Paving agreed to pave 80 kilometres of the Trans-Labrador Highway for $19-million. It did only one-quarter of that, leaving 60 kilometres left to pave.
The company was paid 60 per cent of their contract — almost $12 million. A spokesperson with the government payment covered not only the paving, but also road preparations.
The company also had to put up $9.5-million as a guarantee it would finish the work. Government could have kept this money when the contract was terminated, but did not call the bond.
McGrath said government made the decision in the best interests of both government, as well as the company and its employees.
"We don't want to put a company out of business because, if you take their bonds away they could very easily be put out of business for future work," he said.
"If you do that all you're doing is putting Newfoundlanders and Labradorians our of jobs and that's not what government is about."
Unforeseen problems no one's fault
Humber Valley Paving didn't want to follow through with the contract because it would lose money; government said problems started last fall after forest fires ripped through western Labrador.
Roads in the area were closed due to the flames, and supplies couldn't be shipped over road, causing delays in work.
Humber Valley Paving had another year to finish its work paving the Trans-Labrador Highway, but wanted to complete work ahead of schedule.
McGrath said the company was trying to free up its equipment to enter bids on other jobs when the forest fires cut off supplies and forced some crews out of the area.
He said both the company and government agreed the best course of action was to cancel the contract.
"There were quite a few extra costs to the contractor in this particular case, and they felt that they had lost money on the contract due to that — and nobody's fault why they lost money, but then to continue with the contract they felt they would lose a lot more money so it just wasn't worth while," said McGrath.
"They approached us and we sat down, my department senior officials and the contractor, and we felt that it was in the best interests, to get the job completed on time [and] on budget, to re-tender the work."
According to government, the contract was dissolved between the two parties on March 21.
Government has issued a tender to complete the work, along with an additional 80 kilometres of highway in Labrador.
The bond issued over the Humber Valley Paving contract did not involve any money changing hands, contrary to what an earlier version of this story indicated. The government did not call the bond.May 01, 2014 1:50 PM NT