SNC-Lavalin suing government for damages over Montreal’s Champlain Bridge project

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SNC-Lavalin Group Inc. and other companies that built Montreal’s new Champlain Bridge are suing the Canadian government for damages in a case analysts say underscores the level of dysfunction that has plagued many multibillion-dollar infrastructure projects in recent years.

Montreal-based SNC-Lavalin and consortium partners ACS Group and Hochtief, acting as the Signature on the Saint Lawrence Group, filed suit earlier this month in Quebec Superior Court seeking $378.7-million in compensation for what they say was the federal government’s repeated failure to live up to its contractual obligation to collaborate and act in good faith during construction of the Champlain Bridge.

The 3.4-kilometre span across the St. Lawrence River, one of the country’s busiest bridges, was built with a sense of urgency at a cost of $2.2-billion and opened to motorists in 2019. The previous bridge was in such bad shape that it was in danger of severe deterioration or even collapse, according to the builders.

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The government of Canada approved construction of a new bridge in 2011 and contracts with the consortium were signed four years later. The private-public partnership project was one of the last lump-sum turnkey projects for SNC-Lavalin, which has since pivoted strategy toward more consulting-type work it says carries less risk.

The lawsuit centres on what the consortium says was the refusal of the government to recognize the importance of a combination of unforeseen events that made finishing construction by the Dec. 21, 2018, deadline unachievable. The government refused to contribute to or even consider mitigation measures to resolve the issues or to grant any compensation to the companies for extra work, the builders allege.

“Any reasonable partner would have easily understood that, as a result of these unforeseen events and the realities of Quebec winters, it was practically impossible to achieve [completion] as scheduled,” the companies say in their legal challenge.

The deadline imposed was so ambitious that things would have had to go smoothly without any major incident for the target date to be met, the companies allege. Any problems would have had to be quickly addressed through close co-operation between the government and its private-sector partners. That didn’t happen.

The government initiated more than 20 changes to the project, most of them trigged by third-party requests after the final design was completed, the consortium says. It says the changes increased costs and lengthened time to finish the work.

The most glaring of these was the government’s decision to reverse an earlier plan to make Champlain a tolled bridge, which had many far-reaching implications as the builders scrambled to redo their planning to account for higher traffic levels, according to the consortium. Following this, weight restrictions imposed on the old bridge complicated the transportation of concrete and steel to be used for the new bridge, which added more cost, the companies say.

Eventually, the project partners reached a settlement on transportation matters and the builders cranked up the speed of the work to include nights and weekends as they pushed to meet the deadline. The goal: Do 18 months of work in nine. But the problems didn’t end there.

A strike by crane operators in June, 2018, threw a wrench into the timeline. When operators were eventually ordered back to work, they continued their slowdown activities, halting the momentum needed to finish the project, the lawsuit states.

Later in June, a major heat wave hit Montreal that forced the companies to implement mandatory breaks for workers at regular intervals – so many that is was “almost equivalent to a full stoppage of work,” the companies allege. Cold weather was an issue several months later, compromising paving and waterproofing work.

The consortium says the government treated the challenges as entirely the responsibility of the builders and declined to change the project deadline date. It says it racked up $300-million in extra costs, which it is claiming in damages in addition to reimbursement of $58.7-million held back by the government and $20-million from the transportation settlement.

None of the allegations have been tested in court. An official with Infrastructure Canada, the federal agency responsible for the public-private partnership, said the government has been “looking out for the interests of users, residents and all Canadian taxpayers” throughout the Champlain Bridge project.

“All dispute resolution mechanisms provided for in the contract have been applied in a manner that encourages constructive collaboration,” spokesperson Zoltan Csepreg said via e-mail. Lawsuits are not uncommon in large-scale projects like this one, he said.

The case speaks to the bigger picture of an infrastructure development system that’s broken, said Chris Murray, managing director of equity research at ATB Capital Markets. A recent Ontario Court decision in favour of the four main companies building Toronto’s new Eglinton Crosstown light-rapid rail transit is another example where builders challenged what they saw as the intransigence of their clients in the face of exceptional circumstances.

“In many ways the pendulum had shifted too far in favour of owners, who essentially passed too much risk onto the construction companies,” Mr. Murray said. The result is that several integrated engineering-construction companies such as SNC and AECOM have exited construction, while construction specialists such as Bird Construction Inc. have moved to different contract models to manage risk, he said.

“The irony is at a time when there is both a need and willingness to build infrastructure, there are fewer bidders to compete and complete the jobs,” Mr. Murray said.

The lawsuit is another indication that SNC’s decision in 2019 to exit fixed price construction was the right one, said Dimitry Khmelnitsky, an analyst at Veritas Investment Research. He said it appears the federal government did not adequately address the urgent and unforeseen problems affecting both the costs and completion deadline of the Champlain Bridge project.

Given the fixed price nature of the contract that transferred the risks to SNC and its partners, it appears highly unlikely the consortium will be awarded the entire $370-million, Mr. Khmelnitsky said. Still, he said “some recovery is in the cards” given the force-majeure type of events that affected the project.

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