Yukon Energy ordered to pay $1.6 million to settle Aishihik plant contract dispute

A Yukon Supreme Court judge has ordered the Yukon Energy Corporation to pay $1.6 million to an Ontario company for extra work done at the Aishihik hydro plant in 2011.

A Yukon Supreme Court judge has ordered the Yukon Energy Corporation to pay $1.6 million to an Ontario company for extra work done at the Aishihik hydro plant in 2011.

North America Construction first claimed a little under $4 million for additional work that wasn’t included in the original contract.

YEC counter-sued the contractor for compensation, arguing the company had done sloppy work that had to be fixed.

In his Aug. 1 decision, Justice Gerard Hawco found North America Construction’s work wasn’t of the highest quality, but that YEC’s expectations were at times higher than normal.

“Certainly the Plaintiff’s work was often sloppy, to put it crudely,” Hawco wrote. “Their work habit often left YEC’s management frustrated.”

But they got the work done on time, he noted.

In 2009, YEC started looking into installing a third turbine at the Aishihik plant. The hydro plant, 140 kilometres north of Whitehorse, is one of a kind. It’s built 120 metres underground, which presents its own set of challenges.

In 2010, YEC accepted the construction company’s proposal for $7 million.

Most of the work was done by the deadline YEC imposed: November 2011.

The Aishihik plant, built in 1975, can generate 37 megawatts of electricity, taking into account the third seven-megawatt turbine. In comparison, the Whitehorse dam in the summer can provide up to 50 megawatts, and the Mayo B hydro facility up to 15 megawatts.

The crux of the case rested on one of the contract’s provisions that stipulated any change in the work that increased or decreased NAC’s costs by more than $1,000 would result in a “fair adjustment” of the contract.

Hawco ended up having to rule what “fair” meant. That’s partly because the relationship between the contractor and the Crown corporation slowly eroded, the judge found.

“The spirit of cooperation which marked this project in the beginning descended into an atmosphere of confrontation,” Hawco wrote. “A sourness began to creep into the relationship.”

YEC started requiring higher standards, he found, without telling the construction company that “much more” was expected. It also started complaining about deficiencies without giving NAC specifics.

“It began viewing the work done through coloured glasses, ‘rose coloured’ not being one of the lenses,” Hawco found.

He ruled NAC was entitled to about $700,000 for additional work done.

That’s on top of the $1.3 million YEC agreed to pay for additional work the construction company performed.

Of the $2 million total, the judge deducted $42,000 for a fuel leak caused by NAC, $100,000 for improper control and protection panels installed, $15,000 for a subcontractor billing for workers that weren’t on site and $251,000 to fix general deficiencies.

In his judgment, Hawco voiced several concerns about price estimates YEC prepared to deal with the deficiencies.

One witness, Amin Kassam, estimated it would cost a little under a million dollars to fix the deficiencies.

But while professing to be an independent expert, Kassam’s bias “came through quite clearly,” Hawco wrote.

On the stand, he didn’t seem to remember that one of his colleagues made an earlier estimate that came in at around $686,000.

In the end Hawco chose the estimate prepared by NAC employee Craig Miller.

Miller’s estimate, the judge conceded, was prepared after both companies reduced the number of deficiencies that needed to be repaired.

But the differences between Miller’s and Kassam’s estimates for similar items were quite striking.

For work described as “code items,” Kassam put the time requirement at 1,116 hours, while Miller estimated it would take four hours to complete.

For “labelling,” Miller calculated 65 hours, Kassam 482 hours.

In the end, because of the atmosphere of confration, each party suffered, Hawco wrote.

Contact Pierre Chauvin at

pierre.chauvin@yukon-news.com

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