01/28/2015 04:00 EST | Updated 03/29/2015 05:59 EDT

Bluenose 'Boondoggle' Stems From Heritage Department Flaws: Audit

HALIFAX - Nova Scotia's centuries-old reputation as a proud, seafaring culture was dealt a blow Wednesday when the province's auditor general blamed a government department for badly mismanaging the restoration of the Bluenose II.

Auditor general Michael Pickup released a scathing report saying the project, which is nearly four years behind its original schedule, could cost the province three times the original budget because its Heritage Department failed to follow basic management practices.

He said the rebuilding of the replica of the famed racing schooner was undermined by a lack of planning and poor oversight. His audit says the department didn't define the responsibilities for contractors, failed to prepare a proper budget and drafted a weak construction contract.

"To this day, everybody within government is essentially left scratching their heads as to why this department was in charge," Pickup told a news conference.

"It is baffling that the senior leadership of government allowed this to happen."

When the restoration was announced in 2009 by the province and Ottawa, the budget was set at $14.4 million, half of which was to come from a federal infrastructure fund.

However, Pickup said costs so far have hit $20 million, with up to $5 million on top of that in dispute.

As well, the federal government pitched in only $4 million because the project failed to meet Ottawa's deadlines.

"They put a real rush-on at the beginning," Pickup said.

The original contract called for penalties for missed deadlines, but those were dropped at the request of the project manager, designer and builder, he said.

As the province scrambled to meet federal deadlines, it ignored a number of red flags about the project because it was "optimistic" that things would just work out, Pickup said.

"I'm disappointed by the failure of government leadership to effectively prevent and resolve these many issues and to have been unable to manage their way out of this for so long," Pickup said.

A new set of problems arose when the decision was made to have the vessel comply with rules set by the American Bureau of Shipping. The department did not address how that would affect deadlines and rising costs, the report says.

In particular, the installation of a steel rudder as required by the safety classification agency took far longer than expected and continues to cost the province money, Pickup says.

A consultant was called in to fix the steering last June after it was revealed the schooner's three-tonne rudder was too heavy to turn manually. A new hydraulic system was completed last month, adding another $350,000 to the price tag.

Premier Stephen McNeil asked Pickup to investigate the project a year ago, calling it a "boondoggle."

McNeil also put David Darrow, then his deputy minister, in charge of fixing the project. Darrow also concluded the wrong department was chosen to oversee the work.

The premier said Wednesday that the Transportation Department is now leading the file.

"The lessons are clear: the auditor general says any time capital projects are being done, it should be handled ... by the Department of Transportation," he said.

"If you go back to 2009, the (Progressive Conservative) government was in a rush to get this project out the door heading into an election campaign."

The restoration of the Bluenose II was originally supposed to be complete in March 2011 as outlined in the federal-provincial funding agreement. Sea trials are expected to start this May.

The 300-tonne, 43-metre vessel was launched at Lunenburg, N.S., in 1963. It is a replica of the original Bluenose, the 1921 Grand Banks fishing schooner that won worldwide acclaim for its graceful lines and speed. The original sank after striking a reef off Haiti in 1946.

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