16 July 2012

The Inevitable Muskrat Falls #nlpoli

One reporter tweeted his impression of the attitude toward Muskrat Falls that seems to come from the provincial governments in Newfoundland and Labrador and Nova Scotia. While the content was one thing,  he felt people should note the tone:
The attitude towards Muskrat is increasingly one of both NL and NS being locked in. A course change would be prohibitively expensive.
A similar comment turned up in his story for the Friday edition of the Telegram, illustrated by a quote from Premier Kathy Dunderdale at her scrum after meeting with Nova Scotia Premier Darrell Dexter:
“What’s the alternative? To either ration energy or sit up in the dark. We have to pay for energy.  Where’s the least-cost alternative?” Dunderdale said.
Dunderdale’s comments are preposterous, of course.  There are plenty of alternatives, some of them considerably less costly than the one she has fixated on.  That fixation is cause for concern about the way the provincial government is barreling ahead with this project.

SRBP talked about this in May - here, here, and here  - in posts on making bad decisions. What’s more interesting these days is looking at Dunderdale and Muskrat Falls in light of a recent analysis of megaprojects and decision-making.

Dr. Will Jennings is a senior lecturer in politics at the University of Southampton.  He is also the author of “Executive politics, risk and the mega-project paradox”, a chapter in the recently published book Executive politics in times of crisis. 

The chapter looks at the connection between the megaprojects and their risk for things like cost over-runs.  Jennings looked at some spectacular examples of government megaprojects that went wildly over budget, including:
  • the Sydney Opera House (1,400% over the original estimates),
  • the 1976 Montreal Olympics (1,250% over budget),
  • Concorde (costs underestimated by 1,000%), and,
  • the Channel Tunnel (80% over cost estimates)
“The paradox…”, for Jennings “…is that mega-projects have increasingly come into vogue just as the political-administrate state has become more interested in measurement, performance, targets, control, the use of markets and the eradication of risk.” (page 6)

Jennings assesses the projects in four subject areas:

  • “the role of high politics and institutions,”
  • “executive politics and the consequences of the design of project financing and administration (such as in the balance of risk between the public and private sectors),”
  • “biases in decision-making about project risks,” and
  • “uncertainties that can impact upon either technical or economic dimensions of mega-projects and their management.”
Over the next four days, we’ll look at Muskrat Falls through Jennings’ four categories and see what pops out.

Whether or not the project is as inevitable as it might seem, we might get some clues as to what is driving the whole thing along and what we might expect next.