Foundation miscalculation: Why the Muskrat transmission line went so far over budget

Very limited sub-surface knowledge caused so much chaos — and contributed to massive cost increases — during construction of the Labrador-Island Link transmission line, the Muskrat Falls inquiry was told Wednesday.

And the problems essentially came down to this short exchange between inquiry co-counsel Barry Learmonth and project manager Kelly Williams of Valard Construction.

"Have you ever seen a project of this size done with limited geotechnical work?" Learmonth asked.

"I have not personally, no," replied Williams.

Evidence at the inquiry has revealed that Nalcor Energy completed a mostly "office-based" review of the geotechnical conditions upon which thousands of steel towers would be erected along the 1,100-kilometre route from Muskrat Falls in central Labrador to Soldiers Pond on Newfoundland's Avalon Peninsula.

The so-called desktop study relied on data from, among other things, aerial photos, with practically no "ground truthing," such as digging test holes at tower sites.

It's one of several reasons why cost overruns on the link project had reached $650 million by March 2018, with the line now mostly complete.

No solid ground

Nalcor used this limited geotechnical data to estimate the various numbers of foundation types that would be required on the project, and awarded a contract to Valard in mid-2014 for more than $800 million to install the foundations, erect the towers and string the power line.

Separate contracts were issued for the clearing of the right-of-way and the construction of access roads to the tune of more than a quarter-billion dollars.

But Valard crews quickly discovered they were requiring more sophisticated, and therefore more costly, tower foundations.

Our teams were not finding the actual conditions matched what the engineers had anticipated.- Kelly Williams

"Our teams were not finding the actual conditions matched what the engineers had anticipated," said Williams.

Installing complex concrete foundations as opposed to basic rock foundations on solid ground could add hundreds of thousands to the cost at each tower site, Williams explained.

The contract terms with Valard quickly set the groundwork for a very tense relationship between the contractor and Nalcor.

Instead of being paid a lump sum amount to complete the work, Valard was charging a unit price for each tower, and the amount depended largely on the type of foundation that was required.

'Trying to drive up cost'

So when the number of complex tower foundations started to exceed estimates, relations between the two companies also soured, testified B.J. Ducey of Texas-based Quanta Services, the parent company of Valard.

"Every time that we would point out technical issues, we would get tagged with, 'Oh you're just trying to do that to drive up cost or get a delay claim.' But in reality these are true technical issues that needed to be resolved," said Ducey.

If Valard crews determined a more complex foundation was required, it had to be approved by a member of Nalcor's project team in St. John's, and this often caused delays and frustration, Williams explained.

"It could be days. It could be weeks. And on occasions it was months," Williams said of the approval period.

And often, he said, Nalcor would overrule Valard's recommendation.

There were schedule impacts. There were on occasion cost impacts. There were multiple installation attempts sometimes on our behalf if we were directed to install what we felt was an inappropriate foundation.'- Kelly Williams

"We would receive notification that our means and methods of the installation of that foundation were the cause of the problem and not the chosen foundation type," said Williams.

"There were schedule impacts. There were on occasion cost impacts. There were multiple installation attempts sometimes on our behalf if we were directed to install what we felt was an inappropriate foundation."

Ducey said relations "had become very fractured and (it) was very hard to have productive discussions with each other."

At one point, said Ducey, back payments to Valard nearly reached $400 million, and the company was preparing to take legal action.

But both witnesses say the situation improved in the spring of 2016 after Stan Marshall took over as CEO at Nalcor. One of Marshall's first decisions was to separate the Muskrat project into generation and transmission teams, and appoint John MacIsaac as vice-president of power supply.

(John MacIsaac) was very interested in finding out the issues on both sides to bring resolution and get the project completed successfully.- B.J. Ducey

"He was very interested in finding out the issues on both sides to bring resolution and get the project completed successfully," said Ducey.

But getting the project on track was costly, with Nalcor agreeing to a settlement with Valard of $245 million, and agreeing to do more geotechnical work for the remainder of the project.

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