Ed Martin's lawyer challenges claim his client 'imposed' unrealistic Muskrat targets

A strongly worded letter that has emerged at the Muskrat Falls inquiry has created a fracture between former Nalcor CEO Ed Martin and his hand-picked project management team.

That division became apparent late Tuesday afternoon as Gilbert Bennett, executive vice-president of power development at Nalcor, was concluding his second full day of testimony at the inquiry.

Martin's lawyer, Harold Smith, had only one line of questioning for Bennett, and it related to a June 2016 letter by project director Paul Harrington to incoming Nalcor CEO Stan Marshall.

The letter has come up repeatedly in recent days at the inquiry because it appears to suggest the $6.2-billion construction cost, and the late 2017 target for first power, was not really achievable when the controversial project was sanctioned in late 2012.

"The direction that was provided to the project team was to set a very aggressive schedule," Harrington's letter to Marshall reads. "The unlikely probability of achieving these cost and schedule targets was well known."

That line has been seized upon by groups critical of the project with standing at the inquiry, largely because it feeds into the narrative that Nalcor lowballed cost estimates in order to ensure the project was approved.

The $6.2-billion figure has since grown to $10.1 billion, although the cost grows to $12.7 billion when interest during construction and commissioning costs are included.

'A gamble and it's gone against us'

Harrington's letter was written when the project was in chaos. Martin was effectively dismissed by the incoming Liberal government just months after it came to power in the late 2015 provincial election, and the public was growing increasingly restive about revelations of cost and schedule overruns.

And a project that once enjoyed the full support of politicians was now being criticized by those now occupying the seat of power, and even Marshall was saying Muskrat was "a gamble and it's gone against us."

Harrington's letter appears to be an attempt to save the project team from the same fate suffered by Martin.

"The project management team's job is to follow the instructions directions provided at sanction," Harrington wrote, adding that his team was "fully committed to the project."

The tone of the letter is less than flattering for Martin, the man described as the Muskrat "gatekeeper" at the inquiry, because Harrington suggests the project team was "being painted as scapegoats for the decisions that were made outside their control."

Harrington went on to write, "It was decided to impose a very aggressive approach to cost and schedule."

Again, this can only be interpreted as a reference to Ed Martin's appetite for risk, and Harrington confirmed this during his recent appearance before the inquiry.

It's become clear at the inquiry that Martin had a strong grip on every aspect of the project, including how and what information about cost and schedule would be released to the provincial government, and Nalcor's board of directors.

With all this as an undertone, Martin's lawyer attempted to counter Harrington's claims Tuesday, saying it was the team led by Harrington that provided the cost and schedule estimates to Martin.

Smith took exception to the use of the word "imposed" in Harrington's letter.

"When we talk about 'imposed,' what we're really saying is not that it was arbitrarily or unilaterally imposed by Mr. Martin, but rather that he choose to accept the recommendations of the (project management team). Is that correct?" Smith asked.

"Yes," Bennett replied.

As for Harrington's statement that the "unlikely probability" of achieving the cost and schedule targets at sanction was "well known," Smith had this to say: "Why would the project management team put forward an estimate they didn't believe in?"

But Harrington's letter does offer an explanation: "The project team's role at sanction was to produce a range of cost and schedule estimates based on the risks."

By the time the crucial financing arrangement for Muskrat was finalized in late 2013, the construction estimate had increased by more than $300 million, but this was not fully disclosed to government, according to evidence.

At the same time, the project team was forecasting a final cost of nearly $7 billion, but again, this was never disclosed to government.

"There was some concern expressed by everybody," said Bennett.

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