05/21/2014 04:10 EDT | Updated 07/21/2014 05:59 EDT

Rival superhospital bidder knew it had lost to SNC-Lavalin before final call

MONTREAL - The head of a consortium vying for a $1.3-billion Montreal superhospital contract says it was clear in late 2009 his group wasn't going to land the coveted deal.

Miguel Fraile Delgado, head of OHL Construction Canada, told Quebec's corruption probe Wednesday it was obvious from several events that McGill University Health Centre officials favoured a consortium headed by local engineering giant SNC-Lavalin.

The Charbonneau Commission has been examining the scandal-plagued awarding of the contract in what is one of Canada's biggest public works projects.

It is also at the heart of alleged fraud worth $22.5 million in which ex-senior SNC-Lavalin executives stand accused of funnelling money to McGill hospital officials Arthur Porter and Yanai Elbaz in exchange for the contract.

Fraile said the whole process felt wrong.

"It wasn't right," he said. "It was surprising."

Fraile said there were signs of impending defeat after hospital officials refused to accept a change to the makeup of his consortium. He testified that hospital officials tried to use the manoeuvre to disqualify his group.

The witness said another bizarre exchange came with St-Clair Martin Armitage, the McGill hospital authority's private-public partnership consultant. Fraile told the inquiry he was summoned to a meeting with Armitage in December 2009 and was informed his consortium had lost.

Fraile alleged he was offered $2.5 million by Armitage to drop his bid, but declined the offer. He found it odd that the decision was being communicated by one side instead of those tasked with making the decision.

Just a few weeks later, the Quebec government ordered a second look due to concerns about costs. Fraile said he was summoned to the offices of former SNC-Lavalin executive Riyadh Ben Aissa, also charged in the fraud case.

Fraile said Ben Aissa threatened him to drop out of the process in early 2010.

Fraile testified Ben Aissa told him that Montreal-based SNC was favoured over Spanish-based OHL and that he was offered work with SNC-Lavalin on future contracts as a concession.

Fraile refused that offer too, describing the exchange as bizarre and adding he thought he was being recorded. Well before that meeting, Fraile felt OHL had been shunted aside despite its track record of building hospitals worldwide.

"In the month of December (2009), we had little hope, but we said that ... the entire team had worked hard for 10 or 11 months," Fraile testified. "We decided to fight to the end. Even if we lose, we need to do it."

Fraile said he never received an explanation for why his firm lost the contract. The client was not obliged to tell them, he added.

Fraile said he found out during a subsequent interview with Quebec provincial police that the reason the final plans for the hospital were similar to his consortium's was that SNC-Lavalin had copies of OHL's proposal.

Earlier on Wednesday, a McGill University Health Centre assistant director said an internal memo circulated on Dec. 3, 2009, declared SNC-Lavalin as the winner of the lucrative contract, despite the Quebec government later deciding to send the deal back for a second look.

Immacalata Franco testified that Elbaz, her supervisor, pressured her in late 2009 to support the SNC-Lavalin-led bid.

"He took care to remind me that I must do what the boss (Porter) wanted and reminded me where my paycheque came from during that time," Franco said, adding she didn't give in to threats and told her committees to be rigorous.

Porter, a former head of Canada's spy watchdog, is also facing fraud charges in the scheme. He's currently awaiting extradition in a jail in Panama.

Franco says that presumptive memo about SNC-Lavalin came despite internal committees she'd sat on concluding the OHL-led consortium had a better bid.

She says she was upset and went to talk about it with Armitage, who'd been hired by Porter. It became clear to her that he too was in favour of SNC-Lavalin.

Authorities recently announced they're looking for Armitage, one of eight people facing charges stemming from the awarding of the contract.

When the government announced a second process, Porter and Elbaz left Franco off the decision-making bodies.

"It was clear they didn't want me to participate in the second phase," she said.

Inquiry chair France Charbonneau asked Franco if she had any idea that corruption was afoot.

"Not to that extent," she replied, adding she knew the hospital director had a preference for one bidder.