Builder sues MUHC and Quebec gov’t for $330 million
April 6, 2016
MONTREAL – McGill Healthcare Infrastructure Group (MHIG), a partnership composed of SNC-Lavalin and Innisfree, announced that it has filed a $330 million lawsuit against the McGill University Health Centre (MUHC) and the Government of Quebec.
The builder is claiming compensation for additional costs incurred during the design and construction of the MUHC hospital centre’s Glen site, as well as for present and future costs related to managing and maintaining the hospital centre’s assets.
After more than two years of negotiations which have not been fruitful, MHIG said it now has no other choice but to turn to the courts.
Under its agreement with the MUHC, which is a public-private partnership (PPP), MHIG is responsible for financing, designing, building and maintaining the hospital complex as well as managing its assets until September 30, 2044.
MHIG is entitled to compensation from the MUHC to cover costs associated with the additional work that was requested and the need to fast-track work in order to prevent any delays to the project, the company said. It says it delivered a functional complex to the MUHC in accordance with the conditions and schedule set out in the agreement.
MHIG said the additional costs are directly related to the numerous changes requested by the MUHC to enhance and expand the health complex above and beyond the scope of the contract, the MUHC’s inability to provide information about the facility’s layout and equipment destined to the health complex in a timely manner, and the MUHC’s misuse of the review process.
According to MHIG, the changes requested by the hospital included adding a sterile core to the operating area and expanding the central pharmacy. This meant the facility needed to be 5,028 square meters (54,121 square feet) bigger than originally planned. MHIG said most of the changes were requested at a point in time in the building process that had a major negative impact on MHIG’s work and resulted in considerable amounts of both incremental cost and lost time and productivity.
The builder said, furthermore, that MUHC did not provide site layout information in a timely manner, which caused MHIG’s construction teams to proceed with their work with incomplete or incorrect information.
When layout information did become available, it often meant that changes had to be made to structures that had already been built. Throughout the construction process, delays and changes on the part of the MUHC resulted in work being completed out of sequence and being subject to amendments resulting in cost and delivery deadline progress impacts, such as:
- Revisions to drawings and specifications;
- Demolition and reconstruction of walls and ceilings;
- Modifications to mechanical-electrical systems already installed;
- Delays in finishing works, including a delay of several months to close up walls and ceilings.
Several times during the project, the hospital did not provide equipment lists and specifications in a timely manner, making it difficult for MHIG to ensure on-time completion of works, the company said.
With this information lacking, MHIG was forced to create drawings and specifications based on equipment available on the market and achieve the design and construction work based on these assessments. When the actual equipment selected by the MUHC was finally communicated to MHIG, this necessitated expensive changes to designs and construction work to accommodate the selected equipment.
Meanwhile, Quebec’s health minister rejected the lawsuit, saying, “We will not pay one penny above what is justified.” The minister, Gaétan Barrette, told the Canadian Press that the government is willing to pay more for unexpected expenses that are part of any large project, but nowhere near the amount being sought by (MHIG).
Barrette said the consortium has a right to seek payment for changes and additional costs, but a doubling of the value from the $172 million it originally sought was an “obvious tactic” to try and get somewhere near its original claim.
“In our view, there are justified amounts which are way, way lower than what is demanded in their lawsuit and way lower than what was demanded previously at $172 million,” he said, refusing to indicate what the government considers justified.
The builder has a high-profile background in the construction of the new MUHC, which opened last year. Crown prosecutors allege former SNC-Lavalin executives paid a $22.5-million bribe to a former MUHC chief executive to obtain the contract. That case is still before the courts.