Kalynchuk's legacy

By David Broadland, June 2015

The CRD is fighting to prevent release of a record that could show how badly it estimated one of the costs of sewage treatment.

Since an inquiry conducted by the Office of the Information and Privacy Commissioner is a quasi-judicial process, I suppose I’m breaking some quasi-law by disclosing the contents of the CRD’s and Stantec’s submissions before an adjudication is made. Maybe I’m headed for quasi-jail, but the information that the CRD and Stantec are trying to keep out of the public eye is central to a rational, community-based decision on the sewage treatment question.

In 2009 the CRD contracted Stantec to provide engineering consulting services for the core area’s sewage treatment program.

The OIPC inquiry was called to determine whether the CRD was entitled to withhold from Focus (and the public) a crucial, 80-word paragraph from a report presented to an in camera meeting of the CRD’s sewage committee in June 2009. The information in the report convinced the committee to approve that contract.

The report was authored by two CRD employees, Dwayne Kalynchuk and Tony Brcic, both of whom are former Stantec employees. The missing paragraph in the report is believed to be the only written record of what Kalynchuk estimated hiring Stantec as the Program Management Consultant would cost. In 2009, however, Kalynchuk was reported by the Times Colonist to have stated publicly that Stantec’s fee would be “one percent of the project budget.” The project budget has remained pegged at $783 million since 2010. One percent of that would be $7.83 million. The most recent budget estimate of the cost of Stantec’s services over the life of the project, however, has been far higher. 

An estimate based on CRD payments to Stantec from 2009 through to the end of 2012, added to figures from a late 2012 CRD projection through to 2018, puts the total cost of Stantec’s services at $55 million. That’s a seven-fold—700 percent—increase in the projected cost of Stantec’s services over what Kalynchuk is believed to have estimated.

My working theory is that neither the CRD nor Stantec want Kalynchuk’s secret paragraph revealed for fear that public awareness of that seven-fold increase would get taxpayers wondering what other multipliers they can expect for the other parts of that “$783 million” budget.

The CRD’s initial submission to the inquiry makes two claims about releasing Kalynchuk’s paragraph: First, that releasing the information would damage the financial interests of Stantec. Secondly, that releasing Kalynchuk’s paragraph will result in a possible loss of $200,000 to the CRD because that’s what it would cost to replace Stantec.

The CRD, Seaterra and Stantec all claim that Kalynchuk’s paragraph has information in it that would allow Stantec’s competitors to deduce its hourly rates (a no-no in freedom of information law), and that knowledge would allow those competitors to outbid Stantec if the contract is re-bid (it expires in 2016).

If you’re a taxpayer, you might be thinking, “Of course the CRD should get the most competitive bid. That’s the only way to get the most efficient use of my tax contribution.” You might think the public interest is best served if competition between businesses is encouraged.

The CRD, apparently, doesn’t think that way. They’re strongly in favour of sticking with Stantec because that will save the bother of issuing another RFP, which they estimate would cost the above-mentioned $200,000.

Posed against that, though, is my argument for why Kalynchuk’s paragraph should be released: If the estimate for Stantec’s fee has escalated from $7.8 million in 2009 to as high as $55 million in 2013, there’s either a tremendous amount of over-charging by Stantec going on, or Kalynchuk’s original estimate, which was apparently based on Stantec’s secret rates, was baloney.

Since Kalynchuk and Brcic are both former Stantec employees, it’s a matter of public interest to know whether they grossly underestimated the probable cost of Stantec’s services or not.

Similarly, if it turns out that Kalynchuk’s missing paragraph accurately estimated that Stantec’s total fee would be in the neighborhood of $55 million, no damage will have been done. The public will be reassured that Kalynchuk and Brcic did not let their former employer’s interest get in front of the public interest, and Capital Region taxpayers can sleep more easily knowing they are in good hands with Stantec guiding the CRD forward.

By the way, if you search the CRD’s website for “Stantec fees” you’ll find a least a couple of relevant reports that are more current than Kalynchuk’s 2009 paragraph. Those reports provide far more explicit information from which Stantec’s hourly rates could be determined by their competitors. Either the CRD and Stantec have forgotten that they’ve already made Stantec’s rates public (doubtful) or they know they are there and simply want to delay, as long as possible, release of Kalynchuk’s crucial paragraph.

Here’s why the community needs this information now: There’s an intense community effort being made right now to find an alternative to the McLoughlin Point project, and that process needs to be informed about the real costs lurking just over the horizon for the old plan. As it turns out, though, the position of the CRD’s brain trust seems to be that the project is going back to McLoughlin Point and they don’t want any surprises that might upset that plan.

CRD staff’s hope for a return to McLoughlin is embedded in the documents submitted to the OIPC inquiry. Both the CRD’s submission and Seaterra’s affidavits read like a long expression of loyalty to Stantec. They go to great lengths, and, one supposes, legal expense, to explain how Stantec’s competitors might use its rates to outbid them on renewal of the project contract in 2016 or, in fact, any project.

While their concern for Stantec’s well-being is touching, the irony is that it was Stantec who guided the project to the rocky shores of Esquimalt, along with an 18-kilometre twin pipeline to Hartland. The community rebelled. Why would the CRD be so loyal to a company that came up with a failed plan?

Well, that’s because the CRD are intent on proceeding with that plan and McLoughlin equals Stantec. If CRD and Seaterra bureaucrats were truly committed to a reconsideration of the plan, they would be accepting of the need for a new RFP and they would release Kalynchuk’s paragraph.

 

THE CRD'S stand-by-your-man relationship with Stantec is like the bond that developed between the City of Victoria and MMM Group during the optimistic phase of the Johnson Street Bridge Replacement Project. MMM has been the City’s project manager since 2009, a role similar to Stantec’s gig as project management consultant for the CRD. In MMM’s case though, it also provided some engineering services during the construction phase.

If the sewage treatment project turns out to be anything like the bridge project, local taxpayers are in for a wild ride. The bridge experience provides insight into the level of optimism bias about cost that’s built into local political and governance cultures, and how that’s exploited by the commercial practices of big engineering and construction companies who operate in this market. The estimate for the cost of a new bridge started at $40 million, then rose to $63 million, $77 million, and $93 million. Each time it reached a new high, assurances were given—and believed by politicians—that it would rise no higher. Now everyone is optimistically hoping the cost of the bridge won’t reach $120 million.

The same local optimism bias about cost is at play in the sewage treatment program. Looking at the key indicators—particularly the relative level in escalation of the project management fees—a realistic pessimist would guess the cost of a sewage treatment system here will rise to $1.7 billion, once optimism bias has burned itself out.

One sure way to make the cost outcome worse would be to let Stantec and the CRD keep Kalynchuk’s missing paragraph in the dark. That would send a strong signal to Stantec that the political and governance cultures they’re working in can be pushed upward in cost without consequence. By unjustifiably delaying the release of Kalynchuk’s missing estimate, that signal has already been sent.

Readers might be interested to know that the key player for the City of Victoria during the optimism burnout phase of the bridge project (June 2010 to April 2015) has been Dwayne Kalynchuk, formerly of the CRD, whose missing paragraph I’ve been seeking. He recently retired as director of the City of Victoria’s engineering department—a significant change in personnel at City Hall that, curiously, was acknowledged only indirectly through the issuance of a request for proposal that sought a head-hunter who would then find Kalynchuk’s replacement. The intial estimate for that project is unknown.

David Broadland is the publisher of Focus Magazine.

AttachmentSize
Redacted report to June 10, 2009 CALWM Committee by Kalynchuk and Brcic.pdf277.37 KB
Initial submission from CRD.pdf485.92 KB
Initial submission from Stantec.pdf104.14 KB
Initial submission of Robert Hodder:Seaterra.pdf2.22 MB
Reply submission from Focus Magazine OIPC File F14-57878.pdf1.85 MB