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B.C. Accelerates Past Point Of No Return On Megaproject Overruns

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The point of no return. Works as a title for horror movies just as well as it does as a slogan for election-tailored megaprojects.

How do you get a project past the point of no return? Hit the accelerator.

Case in point: the mad dash to wrap up the Port Mann Bridge/Trans-Canada Highway deal before the 2009 election. It was the perfect storm of haste, politics and intrigue.

Consider the 53 days from Jan. 23 to March 17, 2009.

The "we have a public-private partnership deal" announcement cancelled with 18 minutes to spare. "We really have a deal this time" redux on Jan. 28. "We hold a pile-driving photo-op to show we mean it" one week later. Deal falls apart on Feb. 24. We announce a new deal on Feb. 27 and put it all to bed with everyone's John Hancock on what's become a design-build contract on March 17.

This wasn't a toaster the B.C. government was buying.

transcanada highway
Trans-Canada Highway. (Photo: Dougall Photography via Getty Images)

The $2.4-billion fixed-price contract with the construction team Kiewit & Sons/Flatiron General Partnership runs more than 1,000 pages and should be materially different than the intended P3 deal.

It would have required a little more legal effort than using the "find" function to replace "public-private partnership" with "design-build" throughout the contract.

And it wasn't just the contract that was of interest back then.

According to the Transportation Investment Corp.'s 2008/09 audited financial statements -- statements that are not posted to its website -- the Crown corporation's accounts payable stood at $104.2 million for the fiscal year ending March 31, 2009.

The bill for capital costs totalled $97.8 million -- "mainly for work done under the design-build contract."

It's a hefty sum, given that not much of anything had taken place over the previous 14 days.

While work was underway later in 2009, ground wasn't broken on the site until February 2010, according to Kiewit (page 14).

The payables also included a $6-million cancellation fee for the P3 team, "when the P3 agreement was not reached."

The team -- Connect B.C. -- consisted of Kiewit, Flatiron, Transtoll and the Australia-based Macquarie Group.

Something about those statements set off alarm bells for someone in government and that someone was in a position to demand an explanation.

At the time, TIC placed one of the most costly bets in recent B.C. political history.

According to B.C. Supreme Court documents, TIC retained accounting firm KPMG in mid-2009 "to review a contractor's invoicing process on a major British Columbia highway project."

The project was Port Mann and the contractor was Kiewit/Flatiron.

The matter before the courts included allegations of conspiracy, a coverup and misuse of funds, but details are protected by a gag order sought by TIC and KPMG on a potential whistleblower.

Gary Webster, a partner at KPMG, was charged with overseeing the review, which is odd, given that only a few weeks before, he had been largely responsible for setting up and approving those same processes, as a senior vice-president at CH2M Hill, a global engineering firm.

Webster, an engineer, had been the TIC's representative on the Port Mann project, the taxpayers' foreman.

For Webster to oversee KPMG's review into what were many of his own decisions or decisions he had agreed to -- and as a freshly-minted partner no less -- might raise a few eyebrows in some circles.

With a final price tag of $3.3 billion, the Port Mann Bridge overshot the government's initial estimate of $1.5 billion by 120 per cent.

port mann bridge
The new Port Mann Bridge. (Photo: Lorna Rande via Getty Images)

It wasn't the only miscue.

In 2009, TIC's board consisted of then-deputy health minister John Dyble, then-deputy transportation and infrastructure minister Peter Milburn and then-Partnerships B.C. president and CEO Larry Blain.

At the time, TIC placed one of the most costly bets in recent B.C. political history.

From its financial statements (Note 12) for the fiscal year ending March 31, 2010: "[TIC] entered into a number of hedging transactions during the year, through advanced rate-setting, also known as bond forwards and forward-starting swap instruments."

In 2013, the full magnitude of the wager was driven home in a government filing (Table 3.6, page 59) with the Securities and Exchange Commission in Washington, D.C.

TIC had lost $265 million on the bet.

Also missing from its website is the government's 2012 letter of expectations sent by then-transportation and infrastructure minister Blair Lekstrom to TIC, and signed by its then-chair Grant Main.

In it the government stated: "TIC is to be in a positive net income position by 2017/18, four years after toll revenue collection commences."

Not by a long shot.

In fact, one would be hard-pressed to find a single government forecast for the Sea-to-Sky highway project ($195 million over its first estimate), the Port Mann or the South Fraser Perimeter Road that has been met.

Kiewit/Flatiron have little to complain about. So far, they've been paid $2.82 billion on their $2.398-billion fixed-price Port Mann contract.

The B.C. Liberal party hasn't done too badly, either, with more than $500,000 in donations from the companies that worked on Port Mann, including a cheque for $50,000 from Kiewit & Sons three days after the 2009 election.

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