Muskrat Falls: a Misguided Project Commission of Inquiry Respecting the Muskrat Falls Project
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Muskrat Falls: A Misguided Project Commission of Inquiry Respecting the Muskrat Falls Project Volume 1: Executive Summary, Key Findings and Recommendations Volume 2: Pre-Sanction Events Volume 3: Post-Sanction Events The Honourable Richard D. LeBlanc Volume 4: Looking Forward Commissioner Volume 5: Appendices March 5, 2020 Volume 6: Exhibit Listing COMMISSION OF INQUIRY RESPECTING THE MUSKRAT FALLS PROJECT MUSKRAT FALLS: A MISGUIDED PROJECT VOLUME 3: POST-SANCTION EVENTS The Honourable Richard D. LeBlanc, Commissioner Submitted to: The Honourable Siobhan Coady Minister of Natural Resources for the Province of Newfoundland and Labrador March 5, 2020 www.muskratfallsinquiry.ca About This Report This Report quotes heavily from testimony and exhibits presented at or to the Commission during the activities of its inquiry. Documentary evidence was catalogued and made available to the public on the Commission’s website. When cited in this Report, these public exhibits are referred to by their individual number (for example, P-00001). Similarly, testimony given by witnesses during the public hearings was transcribed and made publicly available at muskratfallsinquiry.ca. Quotes from testimony are cited with a date and transcript page number. Because both types of citations are so numerous in this Report, smaller type was used to reduce their intrusion in the text. No changes to spelling or punctuation were made in any quoted material. The minimal additions to quotes that were made (for clarity) were inserted [like this]. It should also be noted that, unless otherwise indicated, all monetary figures are in Canadian dollars. As will be explained in more detail in the text, the “Muskrat Falls Project” and “the Project” both refer to the tri-part development that includes the infrastructure and generating station at Muskrat Falls, the Labrador-Island Link and the Labrador Transmission Assets. For the convenience of the reader, a Glossary of terms, a list of Acronyms and a list of Names and Affiliations has been included in each of the first four volumes of the Report. This Report is in six volumes. © Queen’s Printer for Newfoundland and Labrador, 2020 ISBN 978-1-55146-709-2 Table of Contents TABLE OF CONTENTS VOLUME 1: EXECUTIVE SUMMARY, KEY FINDINGS AND RECOMMENDATIONS VOLUME 2: PRE-SANCTION EVENTS VOLUME 3: POST-SANCTION EVENTS CHAPTER 9: THE PERIOD FROM PROJECT SANCTION TO FINANCIAL CLOSE .................................. 1 The Federal Loan Guarantee and Financial Close Commitments ......................................... 1 The Second Federal Loan Guarantee ............................................................................................. 10 Early Contract Bids ................................................................................................................................. 11 Nova Scotia’s UARB Review and Its Consequences ................................................................. 14 The Roles of Canada and the Independent Engineer .............................................................. 27 Forecast Final Costs Versus Authorization for Expenditures ................................................ 43 CHAPTER 10: PROJECT MANAGEMENT ................................................................................... 71 The EPCM Request for Proposals and Contract ......................................................................... 74 The SNC Team ......................................................................................................................................... 78 Working Relationships: Nalcor and SNC ...................................................................................... 80 SNC Difficulties: Alleged and Real ................................................................................................... 82 Organizational Effectiveness Initiatives and Other Mitigation Measures ........................ 85 The Move to the Integrated Management Team Model ....................................................... 87 The EPCM and SNC: Conclusions .................................................................................................... 92 CHAPTER 11: ACTIVITIES FOLLOWING FINANCIAL CLOSE .......................................................... 97 Procurement and the Bid Evaluation Process ............................................................................. 97 Nalcor’s On-Site Authority and Oversight of Construction ............................................... 105 CHAPTER 12: PROJECT COST DEVELOPMENT ......................................................................... 123 The Grant Thornton Construction Phase Report .................................................................... 124 AFE Rev. 1 ............................................................................................................................................... 126 Volume 3 Page i Table of Contents AFE Rev. 2 ............................................................................................................................................... 131 AFE Rev. 3 ............................................................................................................................................... 143 The Federal Loan Guarantee 2 and AFE Rev. 4 ........................................................................ 145 AFE Rev. 5 ............................................................................................................................................... 145 CHAPTER 13: THE ASTALDI CONTRACT ................................................................................ 149 Evaluating the Bids: Labour ............................................................................................................. 150 Evaluating the Bids: Cost .................................................................................................................. 152 Evaluating Astaldi’s Bid ..................................................................................................................... 154 A Shifting Contract Award Date .................................................................................................... 156 The LNTP and Astaldi’s Mobilization to the Site .................................................................... 157 Difficulties with the Integrated Cover System ......................................................................... 162 Difficulties with Productivity Levels .............................................................................................. 167 Financial and Contractual Difficulties and Their Implications ........................................... 173 A New Provincial Government ....................................................................................................... 176 Conclusions ............................................................................................................................................ 185 CHAPTER 14: THE VALARD CONTRACTS ............................................................................... 187 The Issue of Geotechnical Information ....................................................................................... 197 Dewatering and Proud Stranding ................................................................................................. 207 Settlement of Valard’s Claims ........................................................................................................ 208 Reliability ................................................................................................................................................ 213 CHAPTER 15: THE BARNARD-PENNECON CONTRACT ............................................................ 215 Cost Overruns ....................................................................................................................................... 216 The 2014 Bid Evaluation ................................................................................................................... 217 The 2015 Bid Evaluation ................................................................................................................... 223 Construction and Execution ............................................................................................................ 232 CHAPTER 16: THE GENERAL ELECTRIC CONTRACTS ................................................................ 241 CD0501: Converter Stations and Transition Compounds ................................................... 241 CD0502: AC Substations ................................................................................................................... 243 Page ii Commission of Inquiry Respecting the Muskrat Falls Project Table of Contents CD0534: Synchronous Condensers at Soldiers Pond ........................................................... 243 CD0501: The Bid Evaluation and Award ..................................................................................... 246 CD0502: The Bid Evaluation and Award ..................................................................................... 247 CD0504: A Joint Cost-Saving Initiative ....................................................................................... 250 The Civil Works Packages Combined .......................................................................................... 252 The Impact of Camp Capacity at Muskrat Falls ....................................................................... 255 Transformer