Muskrat Falls cost overruns obvious soon after megaproject got underway: audit

By The Canadian Press

HAPPY VALLEY-GOOSE BAY, N.L. — An audit has found executives overseeing the Muskrat Falls megaproject should have been aware that it would be almost impossible to meet cost and schedule targets.

The forensic audit into Muskrat Falls’ construction was presented to the inquiry into cost overruns Monday by accounting firm Grant Thornton.

The cost of the Muskrat Falls dam has essentially doubled to more than $12.7 billion since it was sanctioned in 2012.

The report found that Nalcor Energy, the provincial Crown corporation overseeing the project, should have known months after Muskrat Falls was sanctioned — when there was still time to back out — that work was six months behind schedule and project contingency was already exhausted.

The audit also looked at Nalcor’s contract management, finding that Astaldi, the Italian company hired to do much of the construction, was selected largely because it proposed one of the lowest-cost contract bids.

The report found Nalcor was aware for two years that Astaldi was not hitting its performance targets but did not look into replacing the contract until 2016, when it was advised to be a poor financial move.

The audit cited instances when Nalcor executives knew costs had risen months before its board of directors approved a budget increase.

The audit also found that Nalcor executives were made aware in spring 2013 of a report by engineering firm SNC-Lavalin assessing Muskrat Falls project risks — but executives chose not to look at it, and emails indicate one official asked for the report to be kept in draft form.

SNC’s assessment added a possible $2.4 billion price tag to Nalcor’s own risk calculations.

— By Holly McKenzie-Sutter in St. John’s, N.L.

The Canadian Press


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