Premier Paul Davis has announced that Nick McGrath has resigned as minister of Transportation and Works following a stinging report by the Auditor-General that examined his role in a paving contract connected to Frank Coleman, who last spring was poised to become premier.

Davis told reporters that he would have asked for McGrath's resignation had he not quit first.

The resignation follows a finding by Terry Paddon that a decision by the transportation department to cancel a large contract with Humber Valley Paving Ltd. in March was not appropriately documented and was pushed through in just a few hours.

“There’s no doubt on that particular day he erred in judgment," Davis said of McGrath's actions on March 13.

"That’s clearly reflected in the report and it resulted in his resignation, which I accepted,” said Davis.

Paddon said McGrath pushed through the cancellation of the contract without telling senior government officials, including the premier's office, and without thoroughly exploring other options.

“Minister McGrath knowingly withheld information from the Premier of Newfoundland and Labrador. This meant the premier was not given the opportunity to evaluate the impact of this decision," Paddon wrote in his report.

McGrath also met with the media, and defended his actions, saying he still feels he made the right decision, but acknowledged he may have "let some people down."

He denied that his actions were motivated by a leadership process underway in the Progressive Conservative Party of Newfoundland and Labrador at the time.

“It was a decision I made from a business background. A decision I feel was in the best interest of the people of Newfoundland and Labrador. But I think now the best thing I can do is resign as minister,” McGrath said.

McGrath said he will stay on as the MHA for Labrador West until the next election, which is expected to happen sometime in 2015.

When asked if he agreed with the conclusions of the report, and that he made an error in judgment, McGrath replied: “I really haven’t had time to absorb it yet."

McGrath acknowledged he should have involved the premier's office.

"Perhaps with the political scenery around it, I should have went to the premier's office, but that's a little too late, so we move forward."

In a report released Monday, Paddon raised concerns about why there was such a push to terminate the contract on March 13, which happened to be the day before nominations closed for the leadership of the Progressive Conservative Party of Newfoundland and Labrador.

Frank Coleman, the former president and CEO of Humber Valley Paving, had entered the race for the leadership, which at that time had three contestants. Coleman would end up being acclaimed for the nomination, but withdrew abruptly in June just weeks before he would have been sworn in as Newfoundland and Labrador's 12th premier.

There is no evidence of undue influence in the decision to mutually terminate the contract, but the review was unable to determine why McGrath and fellow cabinet minister Kevin O'Brien, within 30 minutes of each other, independently contacted the deputy minister of Transportation and Works to inquire about the status of Humber Valley Paving on the morning of March 13.

Davis said O'Brien was acting in his capacity as minister responsible for Fire and Emergency Services.

Meanwhile, faced with persistent questions from the opposition and mounting public skepticism, then-premier Tom Marshall asked the Auditor-General to carry out a review in May.

The review focused on the tender call, the award of the contract in May 2012, the work performed to the fall of 2013, and the contract cancellation in March 2014.

Focus on 7.5 hours

But it's a brief period on March 13 that receives special attention from Paddon.

"The process to consider, evaluate, decide, draft and execute the mutual termination of the contract ... occurred within a period of approximately seven-and-a-half hours," the report states.

"The evaluation of the decision to mutually agree to cancel the contract ... was not appropriately documented."

When asked why there was such an apparent rush to cancel the contract, McGrath said "I heard they were pulling out and I wanted to get down to brass tacks."

He added: "I was sitting in a minister's chair where part of your mandate is to make decisions. I made a decision based on the information I was given and I feel I made that right decision."

NDP Leader Lorraine Michael said McGrath's decision to resign was the right one, but she said there are still many unanswered questions.

"It would be naive of me to say there was not a connection between the close of the leadership nomination and what happened on March 13," Michael said.

The $19-million contract was awarded to Humber Valley Paving in March 2012 for the paving of 76 kilometres of the Trans-Labrador Highway between Happy Valley-Goose Bay and Churchill Falls.

But the company only completed roughly 60 per cent of the work, and was paid just under $12 million.

As part of the bidding process, the company had to secure a $9.5-million bond, or insurance, against the possibility it might not be able to finish the job. The province could have called in that amount when the contract was terminated, but chose not to.

McGrath defended the decision to not call in the bond, saying at the time he didn't want to put the company out of business.

Humber Valley Paving said it was unable to finish the contract because of severe forest fires in Labrador, and a delay in the arrival of equipment and workers.

The unfinished work was bundled into a new contract this past spring, and awarded to a different company.