Key Component of Darlington Rebuild Could Run $375 Million Over Budget
A single component of the C$12.8-billion Darlington nuclear refurbishment project has ballooned in cost from $108 million to as much as $500 million, and external auditors now say those costs were “poorly characterized” as part of a “deliberate management strategy” by Ontario Power Generation to keep contractors’ bid prices low, Global News reports.
OPG “told contractors to ignore potential risks and enter artificially low cost estimates for work,” the TV network alleges, citing documents that include a May 2014 report by auditors Burns & McDonnell-Modus. “According to the report, contractors were told to remove potential risks from their bids, despite OPG knowing some of these risks would likely occur.”
Like this story? Subscribe to The Energy Mix and never miss an edition of our free e-digest.
Those costs included the risk—and, as it turned out, the reality—of soil contamination around the Heavy Water Storage and Drum Handling Facility, a network of tanks and pipes that filters radioactive water. “While OPG agrees current cost estimates for the project are significantly higher than originally budgeted—with no guarantee current cost estimates will remain intact—they insist all amounts, including those for risks, were included in the final estimate released to the public,” Global reports.
The audit report attributes the cost minimization strategy to a former vice president of OPG’s projects and modifications (P&M) division. It also concludes that OPG’s choice of contractor for the project put cost over qualifications.
“P&M gave only token consideration to determining which contractor had a better approach for executing the work,” the report stated. OPG “chose the ‘low bidder’ even though the other contractor’s qualifications and project approach were viewed more favourably.”
While the provincial agency subsequently took “aggressive action to correct as many of the major issues as possible”, the auditors concluded, the financial damage “to a certain extent cannot be fully mitigated. The affected [projects] will cost more, finish later, and pose a much greater threat to refurbishment than management initially realized.”
The audit report traces a change in contractors and delayed schedule for the heavy water facility, as well as a June 2016 internal audit in which OPG apparently found significant delays. “Work completion was averaging less than 50% of the work scheduled compared to a target of 90%,” that report stated. By March 2017, Burns & McDonnell-Modus was concerned that the persistent problems were having an impact on the refurbishment project as a whole.
“These projects continue to drain resources from refurbishment,” the auditors reported. “There are trends observed in the vendors’ management of those projects and other past projects that must be eradicated.”
They added that the project as a whole was 19% complete in February, compared to a target of 23.4%, and work had fallen behind by 123,876 hours.
OPG spokesperson Neal Kelly maintained that “the $12.8-billion budget is based on a high-confidence schedule. Our public commitment hasn’t changed, and the project is tracking on time and on budget.” He added that OPG “has a more aggressive working schedule that we challenge ourselves and our contractors to achieve.”