Firing contractor on sewage plant led to warning of price spiral

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VICTORIA — An independent review of the outrageously overbudget North Shore wastewater treatment plant ought to focus on Metro Vancouver’s extraordinary decision to fire the contractor four years after the start of construction.

The termination, initiated on Oct. 15, 2021, was blamed on failings by Acciona, the Spanish-based corporation that was chosen in a competitive bidding process and that started construction on Sept. 1, 2017.

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“Acciona has underperformed and consistently failed to meet its contractual obligations which include delivering the project on time and within budget,” declared Jerry Dobrovolny, then, as now, Metro Vancouver’s chief administrative officer.

“This project is already 2½ years behind schedule, and they’ve informed us that they require an additional two years. They’ve also asked for an increase in budget which would almost double the original contract price.”

Termination by the Metro Vancouver board was “a difficult but necessary decision after considering all the other options,” Dobrovolny claimed.

“Our priority is delivering this project as quickly as possible with the smallest possible impact to residents,” he added in a statement that today resonates with inescapable ironies.

For on March 22 of this year, Dobrovolny provided a progress report on that vow to “deliver the project as quickly as possible with the smallest possible impact to residents.”

The plant, priced at just over $1 billion when the contract was terminated, is now estimated at almost $4 billion.

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The completion date is now set for 2030, five years later than forecast when Acciona was dumped.

As for the effect on residents, Dobrovolny estimates that North Shore taxpayers will have to shell out an additional $725 a year for 30 years.

Looking back, residents must be asking whether firing Acciona was the best option.

The decision raised eyebrows at the time inside the provincial government, which had its own contracts with Acciona on Site C, the Broadway subway and the Pattullo Bridge replacement.

Infrastructure Minister Rob Fleming was reluctant to comment on “what has gone wrong on a project that we don’t oversee.”

But he indicated that Acciona was in good standing with the province on its contracts.

“The province has stringent oversight, due diligence and controls in place to manage these projects,” said a followup statement from Fleming’s ministry of transportation and infrastructure.

The cost of building Site C doubled between the time Acciona and its partners won the bidding process for the main civil works contract on the dam.

Most of the escalation was the result of changes that were beyond the responsibility of the contractor, including undetected geotechnical instability under the dam and generating station.

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Hydro several times increased the Acciona contract and added incentive payments to get the construction back on track. Termination was never seriously in the cards when Hydro itself accepted the responsibility for many of the problems.

Acciona likewise blamed Metro Vancouver in its contract showdown.

The firm set out its side of the story in a seven-page background statement, distributed to reporters Mar. 31, 2022, the day it filed a $250 million damage claim against Metro Vancouver.

“Metro Vancouver claims it terminated the North Shore contract because of delays and cost overruns in completing the wastewater plant, ignoring the fact that its own administration of the project was a major cause of most of the problems,” said the statement.

“One of the longest delays in the project — 2½ years of the original four-year project from 2017-2021 — was waiting for Metro Vancouver to redraft its project specifications to require plant construction capable of withstanding an earthquake 100 times more powerful than what Metro Vancouver had originally stipulated.”

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The contractor also faulted Metro Vancouver for choosing a site that was the smallest of five on the list of options.

“The site is too small for the volume of wastewater it is intended to treat,” said the statement.

“It is in an area with overlapping natural hazards including flooding, tsunami, and sea level rise due to climate change. It is also plagued by unstable soils.

“Acciona knew part of the site is sitting atop unstable soils that would essentially turn liquid during an earthquake. … But it wasn’t until after construction had begun that Acciona realized Metro Vancouver and its consultants had greatly underestimated the area and depth of the soil problem — and the costs to fix it.”

Still, the company insisted that it was ready to work “diligently and in good faith with Metro Vancouver to find solutions, mitigate delays, contain costs and drive the project forward.”

Two years after its release, Acciona’s statement has already proven prophetic in one respect: “Changing contractors mid-project will cost taxpayers more and take longer to complete the project.”

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Metro Vancouver responded to Acciona with a lawsuit of its own, claiming $500 million for “breach of contract,” and other costs, including “special and punitive damages.”

With both claims before the courts, the two sides are reluctant to add to what is already on the record.

But in the absence of a much-needed independent review, the courts may yet have the final word on who is to blame for this expensive fiasco.

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