It's become the primary focus of the Muskrat Falls public inquiry: Ed Martin's approach to sharing cost information with the provincial government and the Crown corporation's board of directors.

It's now clear that Martin's project team was regularly funnelling reports to their CEO that forecasted completion costs at hundreds of millions of dollars higher than what Martin was sharing with Nalcor's sole shareholder, the government of Newfoundland and Labrador.

They're called FFCs, or forecast final costs, and they were prepared for Martin almost monthly by a team of highly paid experts in major project construction, led by director Paul Harrington.

Paul Harrington is currently project director for electricity generation at Muskrat Falls, but served nearly a decade as overall project director. He is pictured here at the Muskrat Falls public inquiry on Wednesday, June 5. (Terry Roberts/CBC)

But in a revelation that's caused a stir at the inquiry, Martin never felt these reports were good enough to share with either his board or his political bosses.

And confusion remains over a controversial and surprising $300-million increase in the capital cost at a critical point in the project. This increase was never conveyed to the public, and appears to have been shared in a roundabout way with only a few government bureaucrats, and seemingly with a former premier, Kathy Dunderdale, who would only say under oath that "I must have known."

$800M gap

The twists and turns of recent days pose a compelling challenge for inquiry commissioner Richard LeBlanc: accept that Martin was indeed sharing as much information as he could, as he says was his practice, or give weight to the theory put forward by some lawyers who suggest Martin knowingly kept government in the dark, and therefore denied politicians an opportunity to cancel Muskrat during the early stages.

Justice Richard LeBlanc is commissioner for the Muskrat Falls commission of inquiry. (Terry Roberts/CBC)

Much of the focus has been on a July 2013 FFC presented to Martin and his deputy, Gilbert Bennett, that projected a construction cost of $7 billion, with the potential for some cost-cutting measures.

That was $800 million higher than the $6.2 billion figure the hydroelectric project was sanctioned at eight months earlier, and this increase was driven largely by the fact that early contracts for the complex project were coming in much higher than estimates had projected.

This was months before the final financing deal for the development was formalized, locking the government into a scenario that required it to complete the project, regardless of any cost overruns.

Inquiry lawyers have also zeroed in on a May 2014 FFC to Martin that projected a construction cost of $7.5 billion, yet Martin went to government seeking approval — which was granted — to increase the budget to $6.99 billion.

These reports never saw the light of day — at least until they were revealed through the findings of the inquiry — and were never presented to former premier Kathy Dunderdale, who left politics in early 2014, or her successor, Tom Marshall.

Martin was also guarded about revealing information about the disastrous start by lead contractor Astaldi Canada, a situation that eventually resulted in extra payments of roughly $800 million to the company.

Various senior bureaucrats, including former top public servant and current auditor-general, Julia Mullaley, have expressed shock that such information was not disclosed.

Newfoundland and Labrador's former top public servant, Julia Mullaley, concluded her second and final day on the witness stand at the Muskrat Falls inquiry on Thursday, June 6. Mullaley is currently Newfoundland and Labrador's auditor-general. (Terry Roberts/CBC)

Inquiry co-counsel Barry Learmonth has accused Martin of failing in his duty to keep the government apprised of early warning signs that the project was heading for trouble, and in doing so, denied government a chance to cancel or delay the project before being locked in.

'Decision-level data'

So what was going through Martin's mind? Why was he so tight-fisted over such alarming information?

It's a question he was asked repeatedly Wednesday and Thursday during many hours of testimony at an inquiry that is investigating why the construction budget has soared to at least $10.1 billion, or nearly $13 billion when interest during construction and commissioning costs are included.

His explanation is simple: he was operating in a style that was encouraged by government.

"We had established a way of working that was predicated on the fact that I was charged with bringing decision-level data to the table … to get this information to a point where we felt it was of a quality that was reliable enough to make decisions on," he said Thursday.

So that $7 billion estimate in July 2013 was not reliable, despite being prepared by experts?

Exactly, said Martin, adding it was "not informed enough for me to feel comfortable to bring it forward."

But didn't he have a duty to warn government about those early concerns?

Again, Martin said he believed at the time it was still possible to control cost overruns, and said he was following an established formula he had used in negotiating previous deals on behalf of the province in the oil and gas industry.

"I felt comfortable the province was looking for decision-grade information," he explained.

Former Nalcor Energy CEO Ed Martin is expected back at the Muskrat Falls inquiry for a third day of testimony on Friday, June 14. (Terry Roberts/CBC)

As for the May 2014 FFC of $7.5 billion, Martin said he didn't like what his team had presented.

It included several hundred million for increased costs to fund the project team, and he wanted to scrutinize those costs further, so he did not disclose the full FFC to government.

"It turned out to be the wrong number, didn't it," Learmonth said, referring to government's approval for Nalcor to increase the budget to $6.99 billion.

"The answer is obviously yes," Martin replied.

Martin calls damning testimony 'ridiculous'

Martin said he was motivated by a desire to bring information to the government as quickly as possible, but only after he was confident in that information.

But now there are growing theories about why Martin took so many measures to keep the cost estimate as low as possible.

Did he fear that fully disclosing the cost potential would give politicians cold feet, and sour their support for the project?

Martin is expected to continue testimony on Friday, and should expect that very question as a long list of lawyers continue cross-examination of the man considered the architect of Muskrat Falls.

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