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Cost overrun claimed to build highway
GWNT will assess $32 million claim on Inuvik-to-Tuktoyaktuk project

Sarah Ladik
Northern News Services
Thursday, October 1, 2015

Contractors building the Inuvik-Tuktoyaktuk highway have lost $12 million on the project so far and expect a further loss of $20 million before the project is complete.

NNSL photo/graphic

Lands Minister Robert C. McLeod takes a tour of the Inuvik to Tuktoyaktuk highway March 17. The $299-million highway may be $32 million over budget. - NNSL file photo

An internal e-mail leaked to News/North states the government is considering re-imbursing contractor EGT-Northwind, a collaboration between Inuvialuit companies E. Gruben's Transport and Northwind Industries, for the losses.

The e-mail, dated Sept. 4, involves highway project lead Kevin McLeod, EGT-Northwind employees and Transportation Minister Tom Beaulieu. It includes a new draft agreement-in-principle between the DoT and EGT-Northwind, which lists winter access road construction, pit development, early breakup/late start increased embankment hauling as three factors leading to the losses.

Beaulieu stated in an e-mail that EGT-Northwind approached the DoT in late August about making a claim on its contract and that the discussions sparked a confidential business process between the DoT, EGT-Northwind and the project's independent engineer.

"The process underway includes a thorough review of financial records from the company and from their subcontractors if necessary," he said. That review will determine the basis for EGT-Northwind's claim.

"The department's priority right now is to conclude the review to determine the best approach to respond."

He added that while the review is taking place, construction will continue on the highway.

Committee not informed of overrun

The internal e-mail includes a Sept. 3 note from DoT's Russell Neudorf noting the department needs to consider how to inform the Standing Committee on Priorities and Planning.

Range Lake MLA Daryl Dolynny, who is also deputy chair of the committee, said the committee met with DoT members and the Department of Finance after the date listed on the e-mail and were told the project was on target.

"If there was an opportunity to put the chips on the table, that would have been it. (The overrun) was not disclosed," he said.

"This puts us in a very precarious situation with respect to knowing that this is happening behind the scenes, the department had the opportunity to have that high-level discussion with members in confidence ... (but) we have not been briefed."

Finance Minister Michael Miltenberger confirmed in an e-mail that the committee had met with the DoT on Sept. 14 but disputed Dolynny's claim that the overrun had not been disclosed.

"(The) committee was advised of a potential claim under the (Inuvik-Tuktoyaktuk Highway) contract. Details of the claim were not discussed at that time but the government did offer to provide a briefing of the project at a later date," he stated.

A proposed timeline set forth in the internal e-mail notes the government is attempting to resolve the review of EGT-Northwind's finances by the end of September.

When reached for comment, E. Gruben's Transport CEO Russell Newmark declined to speak about situation, citing a term in the project contract that requires all media requests to go to the Department of Transportation.

Northwind Industries could not provide a spokesperson by press time.

Feds won't chip in on cost

The 120-kilometre all-weather highway project was awarded to EGT-Northwind in early 2014 for $229.3 million, with $200 million of that being covered by the federal government. However, pre-construction work cost the territorial government an additional $70 million, bringing the project total up to $299 million.

Beaulieu said the contribution agreement with the federal government requires the GNWT to take responsibility for any cost overruns.

Dolynny said the highway was originally sold to MLAs as a 75-25 per cent cost-sharing between the federal and territorial governments and speculated that taxpayers would bear the brunt of the cost if overruns were reimbursed to EGT-Northwind.

"What does this mean for us as taxpayers? This means that if this is indeed something that's going to go through, that this whole split in terms of responsibility goes to about a 42-58 per cent with the federal government," he said.

"We as taxpayers are now on hook for the difference."

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