Pallister committed to East Side Road after scathing audit of authority

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This article was published 20/09/2016 (3280 days ago), so information in it may no longer be current.

The path to the completion of the $3-billion East Side Road is in for some major speed bumps created by the Pallister government following a critical audit of the project’s managers, the East Side Road Authority.

While Premier Brian Pallister remains committed to completing the all-season road on the East Side of Lake Winnipeg, he argues a report by Manitoba’s auditor general released Tuesday shows the execution of the project by the previous NDP government was inherently flawed.

“The previous administration spent massive amounts of money… 88 kilometres done, hundreds of millions spent, and as the auditor general report observes, questionable benefits occurring as a consequence,” Pallister said. “In my 20 years of being in elected office I have read dozens and dozens of auditor general reports and this is the harshest condemnation of government practices that I have seen.”

The report by Norm Ricard noted the authority lacked oversight on contracts, proper accounting of funds and mentoring in its management of the project, most notably in its business arrangements with First Nations. He noted the lack of oversight made it difficult to assess the benefits to the area’s First Nations due to a lack of performance-based measures by the authority’s management.

In response, Pallister has already moved towards dissolving the Crown corporation, folding it into the province’s infrastructure department. Following the release of Tuesday’s audit, he told reporters he is ready to toss out several agreements with First Nations and rework the entire model in which the all-season road will be built. Pallister said he would continue to give “some preference” to local communities for contracts, but will be “pre-qualifying the bidders” as opposed to untendered contracts.

The East Side Road project will connect 13 isolated communities in northeast Manitoba at a cost of approximately $3 billion over 30 years. In constructing and maintaining the road, the authority was mandated to maximize the benefits for east side communities impacted by the project — which the audit notes makes up 35 per cent of the project’s cost. This included entering into community benefit agreements with 13 area First Nations, which would see jobs, training and contracts flow directly to the communities.

By September of 2014, the auditor notes the government had authorized $178.9 million in these agreements. Pallister says in the waning days of NDP in power, the government “doubled-down” and signed a further $160 million in agreements with various First Nations.

“To suggest that we should go with a program, because the other government developed it, in the absence of any real evidence of its efficacy is to suggest we should ignore the best interest of people of that area and the people of Manitoba and I am not going to do that. We are going to get value for money,” Pallister said, adding he had met with local chiefs last week.

“Most of the chiefs are open to a different arrangement where the benefits actually can flow to them and their community members.”

The 38-page audit notes it studied a sample of 10 contracts — between the authority and First Nations community corporations — and found nine lacked oversight on the amount of “capacity building allowance” allotted to the corporations.

Capacity building allowances are essentially grants provided to bring benefits to the community that will outlast the road construction contract, the auditor notes.

In one case, the allowance worked out to 22 per cent of the contract’s price. In that case the allowance totalled $796,000 on quarry operations contract worth $4.3 million.

“It was not tracking the capacity building allowances paid out,” the audit said. “In addition ESRA did not track how community corporations actually benefited from the allowance.”

It also noted that workers in some areas were being trained by the authority, but the organization lacked the capacity to monitor if the individuals trained eventually worked on the project.

“The idea in theory of what the government was doing was great — invest in the betterment of the people in that area, not just the road,” Pallister said. “We don’t know if there was residual advantages, we know training was offered and no such monitoring was done to ensure people got jobs.”

The authority was established in 2009 by the NDP government. Now in opposition, NDP leader Flor Marcelino admonished Pallister for “tearing up community benefit agreements for partisan reasons.”

“There is no commitment to the people who live on the East Side,” Marcelino said in a prepared statement. “It is clear from Pallister’s words today that the only jobs for these 13 First Nations communities will be low-skilled jobs, and that the high-skilled jobs will go to outside companies.”

The audit found that the objectives mandated to the authority when it came to its “Aboriginal Engagement Strategy” had not been developed.

“The lack of performance measures and targets makes it difficult to objectively assess the progress made to date in achieving the anticipated benefits,” said Ricard.

“The capacity building allowance is one of the costs of the Aboriginal Engagement Strategy. Without adequate information on the amounts paid out and the related outcomes, it is not possible to assess whether the public received good value for this expenditure.”

Ernie Gilroy, removed as chief executive officer of the authority by the Tories this summer, said he felt the report is “pretty fair.”

“For the auditor general to make recommendations is fair ball by me,” Gilroy said. “It just calls for tightening up the processes. A number of these improvements were in the process of being made.”

Gilroy said he agreed that documenting and measuring benefits needs to be improved.

“It was the government’s first entry into community benefits agreements,” and there was no precedent on which to model a system, Gilroy said. “It’s very difficult to measure capacity-building in a community that’s never had any enterprise.”

In total, 24 recommendations were made by Ricard, including tracking allowances better, tracking how community corporations benefit from allowances and better verification of employment information received from contractors. He notes even with the dissolution of the authority, these recommendations should be undertaken by the province’s infrastructure department as it moves forward with the project.

— with files from Nick Martin

kristin.annable@freepress.mb.ca

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