At the end of February 2021, BC Premier John Horgan reaffirmed the Province’s commitment to the completion of the Site C dam, the third and most contentious on the Peace River.
The decision was announced along with the release of three reports – two technical reviews, and one project assurance review.
Reading the reports, especially in conjunction with the confident tone of the accompanying press releases, started out as an exercise in absurdity. But as I went along, I was reminded more and more of my partner’s approach to cabin design. That could be summed up as: “Let’s just get the roof on, and we’ll worry about the rest later.”
Diagram of Site C dam construction | Source: Site C Project Review, Peter Milburn, October 10, 2020
Under all the layers of fancy reports and risk assessments and engineering studies, Site C is on a “plan as you build” basis.
Worse, the financial governance and risk assessment planning has been heavily laden with inconsistencies and incongruities, according to the January 27, 2021 summary report of former deputy finance minister Peter Milburn’s Site C Project Review. Milburn is careful to point out that this was not the result of incompetence but rather the impact of unexpected challenges, resulting in “very difficult engineering and technical challenges” – although he also notes that the site has been known for its instability for decades.
“A number of Project Assurance Board members expressed concern that the substantive issues were not coming before them and that management curtailed their mandate.”
In 2017, BC Hydro instituted two steps to improve project governance: the formation of a Project Assurance Board to provide enhanced oversight and due diligence, and the hiring of multinational professional services network Ernst & Young “to provide dedicated budget oversight, timeline evaluation, and risk assessment analysis for the duration of the project.” (The ability of the BC Utilities Commission to oversee the project and determine whether it’s in the public interest, stripped by the previous BC Liberal government, was never reinstated by the NDP.)
Project Assurance Board
Unfortunately, according to the Milburn report, some interviewed members of the Project Assurance Board (PAB) themselves realized that the board lacked necessary skills in commercial negotiations and strategy, large civil construction, and/or senior project management experience.
Further, members of the PAB were BC Hydro Board members. Milburn comments wryly, “Half of the PAB’s members performing due diligence on the project also belong to the BC Hydro Board providing direction for the project. These overlapping roles can make independent oversight challenging.
“Ultimately, BC Hydro determined the amount and type of oversight they would receive from [Ernst & Young]. This appears inconsistent with the concept of independent oversight.”
“It is also worth noting that the Chair of PAB from January 2018 until September 2018 was also the BC Hydro Chair. Following this, an official previously responsible for a substantial portion of the project filled the PAB Chair.”
In addition, “A number of PAB members expressed concern that the substantive issues were not coming before them and that management curtailed their mandate.”
Ernst & Young
In May 2018, Ernst & Young produced a report which analyzed deficiencies in BC Hydro’s project controls and risk management, including information provided to the PAB. Shortly after, BC Hydro fired the accounting firm, but then re-hired it with a more limited scope.
At this point, the reader is presumably gasping. According to the Milburn report, “Ultimately, BC Hydro determined the amount and type of oversight they would receive from EY. This appears inconsistent with the concept of independent oversight and with BC Hydro’s commitments to government.”
The story winds on through emerging geological issues and continual redesign. In the case of the latest movements of the dam’s bedding planes, “The Project first observed this geotechnical issue in August of 2018.… Yet PAB members expressed ‘surprise’ in early 2020 when BC Hydro informed them that the problem required robust mitigation.
Diagram shows the “bedding plane below the bedding plane through which the shear key intersects,” where movement was detected in 2018 | Source: “Site C Clean Energy Project: Geotechnical Safety Overview Report,” Site C Technical Review Panel, February 15, 2021
“From a governance and oversight perspective, our team feels that the PAB should have been actively involved in the review of mitigation measures. One of the primary roles of the PAB is to review risk issues and provide strategic advice on mitigation.”
The Milburn report has a lot to say about loopholes in the complicated risk management for such a complex construction, including this eye-popper: “It is unclear where the costs and schedule implications of managing the risks are actually being tracked and managed.” The Milburn team concluded that the Cost Risk Analysis system is neither accurate nor well understood, based on their interviews. When Ernst & Young prepared a slide deck with suggestions on how to improve the risk assessment and management, the company did not get to present their work to the Project Assurance Board, whose job it is to communicate with the provincial government.
No wonder the big muddy just keeps growing.
We leave the last word to BC Premier Horgan, as quoted by columnist Vaughn Palmer in the Vancouver Sun, “I am confident that the numbers that we put forward today are certain for today.”
Peter Milburn, Summary, Site C Project Report
This article appears in our April | May 2021 issue.
