The dismissal of a sewage plant contractor generated a warning about a price spiral

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

The termination, which began on October 15, 2021, was attributed to failures by Acciona, the Spain-based corporation that was chosen in a competitive bidding process and began construction on September 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 on budget,” said Jerry Dobrovolny, then, as now, managing director of Metro Vancouver.

“This project is already 2 and a half years late and we have been informed that it requires two more years. “They have also asked for a budget increase that would almost double the original contract price.”

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

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

On March 22 of this year, Dobrovolny presented a progress report on that promise to “deliver the project as quickly as possible with the least possible impact on residents.”

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

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

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 wonder if firing Acciona was the best option.

The decision raised eyebrows at the time within 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 went wrong on a project we did not oversee”.

But he indicated that Acciona was up to date with the province on its contracts.

“The province has strict oversight, due diligence and controls in place to manage these projects,” said a follow-up statement from Fleming’s Ministry of Transportation and Infrastructure.

The construction cost of Site C has doubled since Acciona and its partners won the bidding process for the main civil works contract for the dam.

Most of the escalation was the result of changes that were outside the contractor’s responsibility, including undetected geotechnical instability beneath the dam and generating station.

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Hydro increased Acciona’s contract several times over and added incentive payments to get construction back on track. The termination was never seriously planned when Hydro itself accepted responsibility for many of the problems.

Acciona also blamed Metro Vancouver in its contractual dispute.

The firm laid out its side of the story in a seven-page background statement distributed to reporters on March 31, 2022, the day it filed a $250 million damages lawsuit against Metro Vancouver.

“Metro Vancouver claims it terminated North Shore’s contract due to delays and cost overruns in completing the wastewater plant, ignoring the fact that its own management of the project was a major cause of most of the problems,” the statement says.

“One of the longest delays in the project (2 and a half years of the original four-year project from 2017 to 2021) was waiting for Metro Vancouver to rewrite its project specifications to require the construction of a plant capable of withstanding an earthquake 100 times more powerful than the one in Metro. Vancouver had originally stipulated.”

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The contractor also blamed 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 intended to be treated,” the statement said.

“It is located in an area of ​​overlapping natural hazards including floods, tsunamis and sea level rise due to climate change. It is also plagued by unstable soils.

“Acciona knew that part of the site sits on unstable soils that would essentially turn liquid during an earthquake. …But it wasn’t until after construction began that Acciona realized that 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 it was willing to work “diligently and in good faith with Metro Vancouver to find solutions, mitigate delays, contain costs and move the project forward.”

Two years after its publication, Acciona’s statement has already proven to be prescient 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, seeking $500 million for “breach of contract” and other costs, including “special and punitive damages.”

With both claims before the courts, both parties are reluctant to add anything more to what is already on the record.

But absent a much-needed independent review, the courts may still have the final say on who is to blame for this costly fiasco.

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