The reckless rush to sign the Port Mann Bridge deal

by Dermod Travis,


You would think Ben Franklin was working in public procurement when he coined the phrase “take time for all things: great haste makes great waste.”

It’s one possible explanation for why the Port Mann Bridge/Highway 1 improvement project more than doubled in price from its original estimate of $1.5 billion to $3.2 billion.

To get a sense of how rushed, one needs to go back to January 23, 2009, when – with 18 minutes to spare – then Transportation Minister Kevin Falcon cancelled a news conference where he was about to make an announcement on the project.

Five days later, the B.C. government reached an agreement-in-principle with Connect BC Development Group for a public-private partnership (P3).

Photo-ops were quickly arranged. On February 4, Premier Gordon Campbell launched the construction with the first pile drive.

Three weeks after that, Partnerships B.C. CEO Larry Blain advised Falcon that the Connect BC deal was kaput.

But in less than 72 hours, Falcon announced a new deal – a design-build agreement – with the Kiewit/Flatiron General Partnership, and Australian-based Macquarie Group in a supporting role.

What Partnerships B.C. (PBC) had done over 19 months, Blain and Falcon wrapped-up in days.

There was a bit of urgency: the start of the 2009 election was six weeks away.

Falcon’s plan wasn’t a P3 and – in the eyes of some – that meant it should have gone back out to public tender. The government was also going to rely on traditional financing: public debt.

In 2007, when PBC released its request for qualifications, fifty of the 100 weighted points were assigned to P3 development and management experience, 25 to financial capacity.

Three firms were shortlisted: Connect BC, Gateway Mobility Partners and Highway 1 Transportation Group, but only one was given a chance to sign a deal that was far different from the original proposal.

Falcon blamed it on “a very challenging capital market environment,” but there’s a tiny flaw with that: the credit market collapsed in March 2008.

And the challenging environment didn’t spare Connect BC’s financing partner, Macquarie Group.

In June 2008, Macquarie Group converted $1 billion sitting in the investment cash accounts of retirees and investors into deposits in Macquarie Bank. It was a way of getting access to cheaper capital than what was available in the market.

In December – a month before they signed the agreement with B.C. – the Sydney Morning Herald reported that the company was “desperate to raise cash.”

Other problems were brewing as well. The kind that make you go “hmmm, wonder what that was all about?”

One involved the Transportation Investment Corporation (TIC), a Crown corporation, overseeing the Port Mann project.

According to court documents, in September 2009, TIC retained KPMG to review “a contractor’s invoicing process on a major B.C. highway project.”

KPMG assigned an in-house consultant to the task. A month later he was sacked and sued KPMG and TIC for breach of contract.

Whatever happened, a jolly time was not had by all. There were allegations of a cover up, questionable conduct and misuse of funds.

KPMG and TIC settled out-of-court, likely to avoid any messiness. But in a twist, the ex-consultant sought the court’s permission to be released from the gag clause in the settlement agreement.

He lost and was prohibited from disclosing the terms of the settlement and the affairs of KPMG or TIC.

Here’s where gag clauses can get silly.

TIC only had one project, Port Mann.

It’s board was a tight-knit group: Peter Milburn, deputy minister of transportation, PBC’s Larry Blain and John Dyble, then deputy minister of health.

According to its statement of financial information, it had 37 suppliers who billed more than $25,000 in 2009-10.

Six were government agencies and fourteen others were for less than $100,000. Difficult to imagine that much fuss over $75,588 charged at Xerox.

Only three billed more than $1 million: engineering firm HNTB Corp. ($3.3 million), Marsh Canada ($19.9 million) and Kiewit/Flatiron ($482.7 million).

Care to place a wager on whose invoicing was being reviewed?

To date, Kiewit/Flatiron has been paid $2.8 billion on a $2.4 billion fixed-price contract, what amounts to an extra $4,400 for every driver that crosses the bridge on any given day.

Yet the people being tolled to pay for it don’t even know if the government got the best deal possible or what the mess with KPMG and TIC was about.

Maybe the government should have insisted on one of those firm-fixed-price contracts.


Dermod Travis is the executive director of IntegrityBC.


October 28, 2015