SNC-Lavalin Wins Contracts, Even as Ethics Issues Widen
With the Nov. 28 arrest of its former CEO for alleged fraud on a large Montreal project, a new chapter opens in the ongoing probe of contracting improprieties involving SNC-Lavalin, the global design-build giant based there.
Pierre Duhaime had been "relieved" from the post in March, with a retirement package after the firm's internal review found he approved improper payments to agents on overseas projects.
The firm says it is cooperating in the latest probe of $22 million allegedly paid to win work on a $2.3-billion Montreal hospital. Another dismissed executive, Riadh Ben Aissa, faces similar charges on the project. Neither could be reached for comment.
Toronto-based publication Financial Post says compensation analysts wonder whether the firm could recover any portion of Duhaime's $13.2-million separation package if he is convicted.
In a statement posted on the company's website SNC-Lavalin says, "Anyone found to have committed any wrongdoing should be brought to justice."
Robert Card, a former CH2M Hill group president, became SNC-Lavalin CEO on Oct. 1.
Last month, Standard & Poor's analyst Jatinder Mall said, "We are uncertain of how recent events could affect SNC's reputation but expect that there could be a potential impact on [its] competitive position."
While noting the firm's nearly $10-billion backlog, he said the amount could decline "in the near to medium term" if the issues affect the firm's bidding ability. Mall added that margins could erode because SNC "would likely have to bid more aggressively to win potential contracts."
Maxim Sytchev, sector analyst at Alta Corp. Capital, says SNC-Lavalin shares "will continue to be volatile," but he does not foresee that the firm will be banned from bidding on municipal work and notes its "pristine balance sheet and ability to score new contracts."
On Dec. 5, the city of Ottawa, Ontario, announced that a consortium headed by a Toronto-based unit of Spanish contractor ACS and including SNC-Lavalin as engineer is the preferred winner of the Canadian capital's $2.1-billion light rail line, a design-build-maintain-operate award.
The team, which also includes Dragados, EllisDon Corp. and Ottawa-baed BBB Architects, was selected over two others headed by French contractors Vinci and Bouygues.
Ottawa officials say the project, set to be complete by the end of 2017, will be the city's largest-ever public works job.
The project will be awarded as a fixed-price contract, with about $1.2 billion in funds coming from the federal and provincial governments. The city council must still review the award, which it will do on Dec. 19.
SNC-Lavalin did not announce the award, with a spokeswoman noting that the team's contract is not yet signed. But SNC-Lavalin did announce Dec. 7 that it was selected to do front-end engineering and design, procurement and construction management for oil and industrial projects in Saudi Arabia. Contract value was not disclosed for the award by a joint venture of Aramco and Kuwait Gulf Oil Co.
The company also announced on Dec. 4 the departure of Andy Mackintosh, its hydrocarbons and energy executive vice president. The firm said in a statement that he has "accepted a position with another company," but did not disclose which.
In a published report, a spokeswoman said the departure was linked to "personal reasons," and not issues surrounding the arrests of the firm's former top executives.
