Deal to resolve cost overruns on Inuvik to Tuk Highway shrouded in secrecy
Territorial government cuts confidential agreement with contractor to address multi-million dollar claim for extra expenses
John McFadden
Northern News Services
Monday, October 26, 2015
TUKTOYAKTUK
The public will not get to see the details of an agreement reached between the territorial government and the contractor building the Inuvik to Tuk highway.
This "fish-eye" photo, taken in June from a helicopter, shows a portion of the 120-km, $300 million Inuvik to Tuk Highway. The territorial government has reached a deal on a multi-million dollar claim by the contractor for cost overruns. - photo courtesy of the Department of Transportation |
According to a territorial government news release issued on Oct. 16, the deal resolves a $12 million claim by the contractor for cost overruns. However, Kevin McLeod, director of highways for the Department of Transportation, said the deal is confidential and will not be shared with the taxpayer. The overall price tag for road remains at $299 million, McLeod said.
The road is being built by EGT Northwind, a partnership between Inuvik-based companies E. Gruben Transport and Northwind Industries.
News/North reported in its Sept. 28 edition that leaked correspondence between the Department of Transportation and the Inuvik to Tuk Highway contractors indicated the contractors were preparing to submit a $12-million dollar claim to cover cost overruns on the project and warning the territorial government the highway would be an estimated $32 million over budget by the time it was finished.
McLeod said the agreement on the cost overruns is not out of the ordinary and is standard for many government projects, regardless of their size. He did admit milder than normal weather was a factor in the claim. Unlike in the south, it is easier to build a Northern road when the weather is very cold because frozen ground makes the base of the road more stable to build upon.
"We worked with EGT Northwind to see what the issues were and what other options other than just cash could solve issues ... and we came to a confidential business agreement which did not affect the overall project budget," McLeod said. "It's what happens normally in a claim process. There's usually a big hoopla about the claim and then when you drill down, there are some things you can solve quite easily and some things are taken out of context and other things are solved so that's what we did."
It is part of every project, at the end of the day the contractor has the ability to say, "Hey I incurred some costs which I think I should be compensated for and here's my claim," McLeod said.
"We go through it and we ask what the issues were and why it's our fault or was it some other factor and then we solve it," McLeod said. "We don't want to negotiate in the headlines. Companies have to protect their reputations and their bottom lines and we appreciate that as well."
McLeod maintains the deal with the contractor on its claim is budget neutral to the overall cost of the road.
Yellowknife Centre MLA Robert Hawkins, chair of the economic development committee which theoretically oversees the project, said the secrecy and timing of the deal to resolve the claim is suspect. He said he knows nothing more about the deal struck than does the media.
"Where is the accountability? They cannot be striking multi-million dollar deals in the dark without informing us. I was fervently trying to get a commitment that they (cabinet) would not make another Deh Cho Bridge experience behind the scenes without any of us (regular MLAs) involved," Hawkins said. "I think the timing on this whole process has been suspicious - the way the $32 million was dropped on us just before the dying days of the 17th assembly.
Now we get this press release saying that they've solved something. I need the details."
The contract to build the road linking the two communities was awarded in January of 2013 and work started almost immediately.
The federal government is picking up two-thirds of the nearly $300-million cost. Any potential cost overruns are picked up by the GNWT in the vast majority of territorial/federal projects, according to McLeod.
The completion date is still fall of 2017. Crews are working from either end of the road with the idea being that they would meet roughly in the middle. At the height of construction, as many as 604 people will be working on the road.
This season's construction is expected to start the second or third week of November once the ground is good and frozen, McLeod said.
