A little history on the gold standard of ‘being the best’ at BC Hydro
The news that BC Hydro would not release the amounts of the other bids for recent Site C contracts, is not surprising – at least not to me. Having written extensively on many of the biggest transportation projects in BC, accountability is still sorely lacking in most ministries when it comes to opposing bid amounts.
When it comes to bids and contracts with BC Hydro however, transparency and accountability have long been two features that are far and few between – and it hasn’t gone unnoticed.
BC Hydro’s near crippling debt is by far not the only concern BC residents should be paying attention to – Norm Farrell has been posting regularly on BC Hydro and continues to do excellent work on this file. But when it comes to the most expensive infrastructure project this province has ever seen, there is no room for secrecy and every reason to examine and question the process from beginning to end. With a premier well into desperation mode trying to get a multi billion dollar dam built with seemingly no justification left to do so, if government won’t ensure accountability, others must.
In 2011 when BC Hydro applied for what amounted to a 32% increase over three years, government reacted with a review in light of the impact that increase would have on ratepayers like you and I. And while there was a lot of fluff and back patting in that report, it did give light to some disturbing aspects of how Hydro operates.
For example, the panel found that ” due to the regulatory environment and the corresponding corporate culture in BC Hydro, “being the best” and the resulting desire to have the gold standard is not necessarily for lowest cost or greatest value for money.” (pg.2)
The panel also “observed many examples of excessive planning, over engineering of 2 y Review of BC Hydro projects and the use of multiple layers of contingencies and reserves in order to satisfy various stakeholders and regulatory agencies. BC Hydro’s strong focus on service, safety and being the best are very good objectives, however, they need to be pursued in the context of balancing need and costs. ” ( pg 2/3)
The panel also found that “BC Hydro acknowledges that they over manage their capital projects to ensure quality workmanship of contractors. BC Hydro’s approach to procurement and risk allocation has resulted in multiple change orders for their projects of up to 114% of the original individual contract value and 13% of the total project value. ” (pg 8/9
“BC Hydro also needs to improve their contingency budgeting for capital projects and to consider the reasonableness of their funding requests when identifying strategies to mitigate risks. An insufficient focus on costs creates an incentive to build excessive contingencies on project budgets which allows for poor cost containment in their risk oversight. For example, BC Hydro encountered a large number of change orders on some capital projects. Specifically, BC Hydro encountered several large design revisions during the construction period of the Aberfeldie Redevelopment Design Bid Build project at a cost of $12M for additional general contractor, engineering and mechanical fees (26% of the original contract values). The high number of change orders noted on files is an indicator of ineffective risk allocation.” ( pg 36)
” BC Hydro operates within business group silos. This business model increases the risk of inconsistent practices which would, if realized, impact negatively on transparency and vendor relationships. 60 y Review of BC Hydro BC Hydro’s standard procurement templates and policy guidance documents have recently been updated to support improved alignment with government procurement principles; however, these policy changes have not been adopted consistently across the organization.
For example, within the different business groups, there are inconsistent competitive bid disclosures. Some business groups disclose weighted evaluation criteria while others only disclose the ranking of the evaluation criterion. The result of these variable practices is inconsistent transparency within the organization which has negative impacts on BC Hydro’s supplier relationships. Adopting the best practice of disclosing the weight of each evaluation criteria outlined within competitive bid documents will increase transparency to both the supplier community and the general public. ”
” In the project files, the risks and general mitigation strategies were identified in a risk register; however, the register did not adequately identify which party was assuming the risk or the associated costs. Therefore, BC Hydro could not demonstrate whether they were receiving good value for money and they could not demonstrate an informed understanding of risk or effective risk management”
And on. And more. Excessive expenditures,lack of accountability,etc. etc. BC Hydro has made some changes since and states they have found substantial savings. But even those statements are more than a little misleading when looking at the bigger picture and their financial statements. It’s even more compelling that while the BC government ordered Hydro to find savings, and speak to the BC Utilities Commission as being the oversight tool to ensure Hydro is on track with rates etc, government did not see fit to stop taking a dividend entirely even though BC Hydro is seriously in debt – and often forced to borrow to pay that dividend government takes every year. ( no money to be found to pay that dividend to the BC government again this year, as Norm pointed out recently in this post)
Nor did the government consider the impact forging ahead without BCUC oversight on Site C, would have on rates.
Let’s not forget that BC Hydro CEO Jessica McDonald recently had to apologize for Hydro’s misleading statements to the BC Utilities Commission ,statements others simply referred to as lies. And now, with billions of dollars on the line, questions are being raised on the Site C contracts and BC Hydro doesn’t care to show taxpayers the other bids.
It’s time now, more than ever, for examination into everything associated with Site C, and that’s what I’ve been doing for the last week. But for every bit of research I’ve done and the few answers I’ve found, the number of questions is only growing. It’s my opinion BC Hydro needs to be brought back into government as a ministry and full inquiry type of reveal be done. Because some of what is going on, just doesn’t even make sense. And I can’t help wonder if what’s going on is contributing to Bill Bennetts short temper, becoming even shorter.
That and more, next week. But for now, review this for some historical context.