Tuk highway $32M over budget, states leaked e-mails
Committee member claims he was left in the dark about project's financial woes
April Hudson
Northern News Services
Monday, September 28, 2015
INUVIK
Contractors building the Inuvik-Tuktoyaktuk highway have lost $12 million on the project so far and expect a further loss of $20 million before the project is complete.
Construction crews work on the Tuktoyaktuk end of the Inuvik-Tuk Highway project in April 2013. Contractors E. Gruben's Transport and Northwind Industries have submitted a claim to recoup an anticipated $32-million cost overrun on the project. - photo courtesy of Merven Gruben |
An internal e-mail leaked to News/North states the government is considering reimbursing contractor EGT-Northwind, a collaboration between Inuvialuit companies E. Gruben's Transport and Northwind Industries, for the losses.
The e-mail, dated Sept. 4, involves GNWT highway project lead Kevin McLeod, EGT-Northwind employees and Transportation Minister Tom Beaulieu.
It includes a new draft agreement-in-principle between DOT and EGT-Northwind, which lists winter access road construction, pit development, early breakup/late start leading to increased embankment hauling as three factors leading to the losses.
Beaulieu stated in an e-mail that EGT-Northwind approached DOT in late August about making a claim on its contract and that the discussions sparked a confidential review between DOT, EGT-Northwind and the project's independent engineer.
"The process underway includes a thorough review of financial records from the company and from their subcontractors if necessary," he said. That review will determine the basis for EGT-Northwind's claim.
"The department's priority right now is to conclude the review to determine the best approach to respond."
He added that while the review is taking place, construction will continue on the highway.
The internal e-mail includes a Sept. 3 note from DOT deputy minister Russell Neudorf noting the department needs to consider how to inform the legislative assembly's Standing Committee on Priorities and Planning.
Range Lake MLA Daryl Dolynny, who is also deputy chair of the committee, said the committee met with DOT members and the Department of Finance after the date listed on the e-mail and were told the project was on target.
"If there was an opportunity to put the chips on the table, that would have been it. (The overrun) was not disclosed," he said.
"This puts us in a very precarious situation with respect to knowing that this is happening behind the scenes. The department had the opportunity to have that high-level discussion with members in confidence ... (but) we have not been briefed."
Finance Minister Michael Miltenberger confirmed in an e-mail that the committee had met with DOT on Sept. 14 but disputed Dolynny's claim that the overrun had not been disclosed.
"(The) committee was advised of a potential claim under the (Inuvik-Tuktoyaktuk Highway) contract. Details of the claim were
not discussed at that time but the government did offer to provide a briefing of the
project at a later date," he stated.
A proposed timeline set forth in the internal e-mail notes the government is attempting to resolve the review of EGT-Northwind's finances by the end of September.
When reached for comment, E. Gruben's Transport CEO Russell Newmark declined to speak about the situation, citing a term in the project contract that requires all media requests to go to the Department of Transportation.
Northwind Industries could not provide a spokesperson by press time.
Nahendeh MLA Kevin Menicoche told News/North he considers the issue a blow for MLAs in smaller
communities who have struggled to get infrastructure funding.
"(Our government) has operated for four years under fiscal restraint ... and every time I ask for infrastructure for my communities, such as a school for Trout Lake, additional highway infrastructure for Highway 7 or the Fort Simpson Health Centre -which has been red-flagged for a few years - they're saying, 'Oh, we don't have the money.' But at the same time, when a contractor comes crying they've got no problem dishing out millions of extra dollars," he said.
"Our contracts are supposed to be ironclad. Like any other contract, you bid on a job and if you go over then as a contractor you're responsible for your own costs."
Menicoche said he is concerned the government is considering paying the cost overruns and likened the situation to the Deh Cho Bridge project, which eventually added $165 million to the GNWT's debt load.
"I think the highway should be stopped and reviewed ... (instead of) continuing to pay - and pay without any review and analysis of exactly where we are at this point," he said.
The 120-kilometre all-weather highway project was awarded to EGT-Northwind in early 2014 for $229.3 million, with $200 million of that being covered by the federal government. However, pre-construction work cost the territorial government an additional $70 million, bringing the project total up to $299 million.
Beaulieu said the contribution agreement with
the federal government requires the GNWT to take responsibility for any cost overruns.
Dolynny said the highway was originally sold to MLAs as a 75-25 per cent cost-sharing between the federal and territorial governments and speculated that taxpayers would bear the brunt of
the cost if overruns were reimbursed to EGT-Northwind.
"What does this mean for us as taxpayers? This means that if this is indeed something that's going to go through, that this whole split in terms of responsibility goes to about a 42-58 per cent with the federal government," he said.
"We as taxpayers are
now on hook for the difference."
