A culture clash and secret report: SNC-Lavalin, Nalcor tension a recurring theme at Muskrat inquiry

A secret risk assessment report. Mistrust at the highest levels. And clashes between those with long histories in hydroelectric developmentand those with backgrounds in oil and gas.

That was the troubling picture painted Monday during more testimony at the public inquiry investigating the controversial Muskrat Falls project.

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Much of it came from Jean-Daniel Tremblay of engineering and construction giant SNC-Lavalin,who testified via Skype from Montreal about his experience working on Muskratbefore his dismissal by Nalcor in late 2013.

"It was a Nalcor takeover and SNC was kind of pushed aside," Tremblaytold inquiry co-counsel Kate O'Brien in response to questions about SNC-Lavalin'sreduced role following a major shakeup.

The tense relationship between Nalcor, Newfoundland and Labrador's energy corporation, and Quebec-based SNC-Lavalin, has been a recurring theme at the inquiry, which is investigating why the project is at least $5 billion over budget and at least two years behind schedule.

SNC-Lavalin was initially awarded the very important engineering, procurement and construction management contract for Muskrat, which in construction parlance is referred to as EPCM.

SNCplayed a very large role in developing the capital cost estimates for Muskrat, for example, and as the EPCM contractor, was initially set to manage the project through to completion on behalf of Nalcor, at a cost of roughly $700 million, according to evidence.

SNC fell out of favour with Nalcor

The inquiry has already heard how SNCfell out of favour with Nalcor, and in late 2012 Nalcordecided to strip SNC of its contract and establishintegrated management teams,mergingpersonnel from both companies into joint teams, with Nalcor running the show.

"It was a morale killer," Tremblaysaid when asked how the decision effected SNC employees on the project.

Nalcorofficials have testified the decision was prompted by the SNC's poor performance.

But Tremblayoffered a different theory, blaming what he called a clash of cultures between a Nalcorhierarchydominated by people from the oil and gas industry, and SNC-Lavalin'swide-ranging hydro experience.

You had two groups coming from different avenues having very different perspectives on how to organize and develop a megaproject.- Jean-Daniel Tremblay

"In my mind, that's one of the major issues on the projectis the fact that you had two groups coming from different avenues having very different perspectives on how to organize and develop a megaproject," Tremblay stated.

"We had two different [lenses] on how to go forward," he added.

A rogue risk report

A few months after its role was reduced, SNC-Lavalin decided to quietly complete a risk report of the Muskrat project. The so-called cold-eyes review put a figure of $2.4 billion on the risks to the project.

"While you were doing this work did you discuss it with anyone from Nalcor?" inquiry co-counsel Kate O'Brien asked Tremblay.

"No I can't say if it was an explicit request, but the feeling I had was it was not to be discussed with Nalcor because it was an internal document," he replied.

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This assessment has been a source of major controversy since it surfaced two years ago, since there's disagreement over whether the top brass at Nalcor, including former CEO Ed Martin, received a copy following its completion in April 2013.

But evidence now seems to confirm that Martin did not receive the report until more than three years after it was completed, though Martin and former SNC-Lavalin CEO Robert Card did discuss risks during a meeting around the same time period.

'I was shaken'

Meanwhile, Tremblaywas serving as a risk coordinator and quietly helped prepare the risk report, along with SNC'sthen-general manager on the project, NormandBechard.

• SNC-Lavalin turmoil spilled over to Muskrat, says project director

Afterwards, he recalled being summoned to a meeting with Paul Harrington, Nalcor's project director for Muskrat.

He said Harrington "didn't want the report to exist" because he feared it would be made public through an access to information request, and that Nalcorhad hired a consulting firm called Westney to do a similar risk assessment.

"I was shaken by the meeting and I had a distinct feeling that what we had done was not to the liking of Nalcor," Tremblay stated.

"My impression during the meeting was he had seen the report and was not happy with the report."

But Tremblay admitted he had no proof Harrington had seen the report.

Harrington, meanwhile, will give his version of events when he testifies in June.

As for Tremblay, he was dismissed from the project by Nalcor in late 2013, not long after he criticized Nalcor for its lack of focus on risk management.

"Everything with respect to who could be on the project was Nalcor," said Tremblay.