Nfld. & Labrador

'We're falling behind': How Muskrat stumbled because of turmoil with SNC-Lavalin

A senior Nalcor manager described in fine detail Friday how SNC-Lavalin struggled to keep up as the Muskrat Falls project was gaining momentum.

Quebec engineering firm struggled to find staff and follow procedures before having its role reduced

Pat Hussey an independent contractor working at supply chain manager for the Muskrat Falls project, testified Friday at the public inquiry investigating the project. (Terry Roberts/CBC)

A senior manager with Newfoundland and Labrador's energy corporation, Nalcor, described in fine detail Friday how SNC-Lavalin struggled to keep up as the Muskrat Falls project was gaining momentum in 2011.

"The work wasn't getting done," said a plain-speaking Pat Hussey, at supply chain manager on the Lower Churchill Project, which makes him responsible for the procurement of billions of dollars in services and materials.

Hussey also revealed how Nalcor was "surprised and shocked" at the labour hours required by the Quebec firm to carry out the critical EPCM — engineering, procurement and construction management — contract when the hydro project was sanctioned six years ago.

Powerful information

It was powerful information from a man who has worked on the project since 2007, and has had a front row seat as capital costs soared by more than $4 billion, and the schedule slipped by more than two years on a project that is now 96 per cent complete.

It's also further evidence of the turmoil at Muskrat Falls as another key contractor, Astaldi Canada, also stumbled badly in the first year or two of its involvement.

Hussey testified Friday as the Muskrat Falls inquiry concluded two weeks of public hearings in Happy Valley-Goose Bay.

There's been prior testimony and evidence about SNC-Lavalin's struggles, but not to the extent revealed by Hussey, who is an independent contractor being paid a dayrate of nearly $1,200, according to his contract.

SNC-Lavalin was awarded the EPCM contract in 2011, with Hussey tasked to oversee the company's procurement practices for Nalcor.

But he quickly noticed a wide range of issues that caused him concern, and held nothing back Friday as he fingered the company for causing a lot of headaches in the early going.

'They worked in silos'

Hussey said many of the key personnel promised by SNC never did join the project, either because they were committed to other projects or refused to move to Newfoundland and Labrador, which was a requirement of the benefits strategy.

And he also noticed a "disconnect" between SNC's engineering and procurement teams, and had concerns about the level of experience of those in key positions.

These steel towers support the 1,100-kilometre Labrador-island transmission line from Muskrat Falls to Soldiers Pond on Newfoundland's Avalon Peninsula. (Terry Roberts/CBC)

"It's almost like they worked in silos," referring to the procedures required to move the various work package from the engineering and bids stages to the awarding of a contract.

Hussey also complained about the amount of time it took to get information plugged into SNC's project management system, saying "the priorities in Montreal weren't the same as what we had."

'Blank faces'

Hussey's frustration grew to a point where he eventually ran most of the meetings because "we're falling behind."

At one meeting, when challenging SNC's team with some procedural questions, he was met with "blank faces."

"I made 'em accountable for their deliverables because things were starting to slip. There's room in there for slippage, but you can't slip a month or two or you're going to be in trouble. So I had to fix it right away."

I made 'em accountable for their deliverables because things were starting to slip. There's room in there for slippage, but you can't slip a month or two or you're going to be in trouble.- Pat Hussey

SNC-Lavalin was eventually stripped of of its EPCM contract just before sanctioning in late 2012, with its key people being folded into integrated teams alongside Nalcor personnel.

As for Hussey, he went from an oversight role to supply chain manager, a role he held during many years of involvement in the oil and gas industry.

Kate O'Brien, co-counsel at the Muskrat Falls public inquiry, says SNC's reimbursable-style contract meant it would be paid for hours worked without having any 'skin in the game.' (Terry Roberts/CBC)

Meanwhile, details about how SNC-Lavalin dramatically changed its strategy for executing the work were also revealed Friday.

When SNC was awarded the EPCM contract, it proposed doing the work for 2.5 million labour hours. But by the time the final project cost estimate was prepared, SNC had more than doubled the number of hours required, a development that "shocked" Nalcor executives, said Hussey.

This is notable because SNC had signed a reimbursable-style contract, which meant it would be paid for hours worked, without having any "skin in the game," is how inquiry co-counsel Kate O'Brien described it.

Hussey said this was another factor in the decision to change SNC's role, and create joint management teams.

For example, said Hussey, SNC has proposed 275 people to manage construction of the Labrador-island transmission link, while Nalcor, through an integrated team, was able to reduce that to between 65 and 70 people.

"It caused some concern and as a result this is one of the things which left some doubt in what the strategy was from an SNC perspective," Hussey said.

Officials with SNC-Lavalin, meanwhile, will testify later this month.

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Terry Roberts is a reporter with CBC Newfoundland and Labrador, and is based in St. John’s. He previously worked for The Telegram, The Compass and The Northern Pen newspapers during a career that began in 1991. He can be reached by email at: