Unravell

Minutes show
genesis of
ferry problems

Robert Gaister

News Reparter
vobert@usnews.com

AS the first of three
fast ferries limps
through its final set of
sea trials, additional
light has been shed on
the wildly over- budget
and chronically delayed
project.

Last week, the ferry corpo-
ration released minutes of its
board meetings which show
the projeer has been off course
tor some time. As far back as
1996, members of the first
board oof directors of
Caramaran Ferries
International cCEL) che entin
charged with building three
fist ferries, were questioning
evervthing from ambiguous
cost estimates to contusion
over the boards responsibili-
ties. But their questions fell on
deaf cars. ane the directors
eventually resigned.

They were succeeded) on
the CFT board ty members of
the parent BC Ferry Corp.
board. Jack Munro was
named the new CFI board
chairman. The aew board
asked rar fewer quesaons than
its predecessor and the project
rolled or, Weeding: Ainds. Costs for the three-ferry
project had alreacy. escalated from the orig
$210 million to $2*3 million and Jaunch dates had
been repeatedly bieeen,

CFE responded bv hiring the Pace Group media
relations company yo help oftet the growing
amount of negative publicity surrounding the pro-
ject.

A representative of the company addressed the
hoqrd’s Feb. 19, 1998. meenng.

“The job of a publicist is to find stories to pitch
to the media — nor react te niedia stories,” the
Pace Grev’s representative is recorded ins the
Meeting’s minutes .7 stating,

This goal wee surther outlined Curing the
board’s March 19, 1998, ive when it was

A month jater, a company representative is
recorded as saying, “the media coverage is moving
away front ‘time and money” topics and becoming
much more positive.”

During a Sept. 30, 1998, meeting, the board
chairman considered the company’s work a fair
accompli.

“Jack Munro applauded the work done by the
Pace Group and the resulting positive media cov-
erage. He requested that CFI continue to use
these publicists in the future.”

Meanwhile, a cost-plus formula agreed upon
with shipyards participating in the construction of
the fast-sinking project was continuing to wreak
havoc with the project's books. Eventually the for-
mula. which guaranteed shipyards a profit over and
above their construction costs, set off an avalanche
of “time and money” stories that proved all but
impossible for any public relations firm to counter-
act.
Below is a look at the events that led to the fast
ferry fiasco which has seen the project’s costs bal-
loon to $455 million.

In 1996, BC Ferries president Frank Rhodes
welcomed the new directors of Catamaran Ferries
International, a wholly owned subsidiary of BC
Ferries set up to construct three fast ferries vessels
for its parent corporation. Rhodes told the new
directors he supported the fast ferry program and
that the BC Ferries board had approved $232 mil-
lion to build three ships and an assembly building.

According to minutes of the July 3 meeting,

Sunday. March 14, 1999 - North Shore News - 3

Rhodes wanted “the CFE board to tunetion asa
commercial board, supervising management, exer:
cising due diligence over its programs and initia-
dives and driving it to folfllment of its mandate.”

A short time dater the board named Luce
fohnstone ay its chairman.

For the next several months fohnstone and we
of her fellow independent directors tried to obtain
information as per Rhodes’ initial direction.

For example, CFIS directors: conehuued the
project, would be berter off if the board saw a
strategic busiaess plan. This was first put to CFI
and BOFC management on Oct. 31, 1996. But
the request proved difficult to fulfil because a busi-
ness plan bad never been completed.

“The Chair (Johnstone) asked that manage:
ment identify for the Board the person responsible
for development of a Strategic Business Plan and
the date the plan will be presented for review,”
stated the minutes of that early meeting.

Nearly a month later, on Nov. 28, 1996, there
was nothing new on the plan.

During the board's nexe meeting, held on Dee.
12, 1996, BC Ferries CEO Tom Ward gave diree-
tors copies of “Outline of the Process Required to
Develop a Corporate Strategic Plan.” The docu-
ment, said Ward, was to be used as a basis for the
business plan originally sought by board members.

Ward also proposed that Oksana Exell, who was
and continues to be charged with marketing CFI
around the world, head up the process of putting
together the much sought after plan.

During a Nov. 22, 1996, meczing, Ward was
asked abour the need for a direct reporting struc-
ture between che board and CFI management that
included managers answering co the board. Ward
replied thar Andrew Hamilton was responsible for
CFI’s day-to-day operations, “a task thar would be
difficult for the Board to manage.”

Later during the Nov. 22 meeting, “the Chair
commented that at this time the Board felt no
ownership of the project.”

And also during the same meeting, an uniden-
tified board member asked, “Is the CFI board
required? There is nothing for it to manage.”

Meanwhile, projected budget overruns contin-
ued to worry the board members. The rising costs
were being blamed, in large part, on the sub-par
performance of Vancouver Shipyards which was
responsible for 70% of the fast ferry construction.

“The Board was very perturbed by the report

REWS photo Paul McGrath / inset) Terry Peters
THE Pacificat fast ferry in the water at its June 20, 1998, launch frorn the CFI fast ferry assembly facili-

ty on the North Vancouver waterfront. (Inset! Ex-CFi board chairman Jack Munro proudiy displaying a
drawing of the troubled ferry.

that the poor gualite and productivity ar
Vancouver Shipyards was 4 result of poor manage:
mene (rot poor workers) and that approaches to
Vancouver Shipyards to change their supervisory
stat heal nat resulred: in any improvement,” state
the Dee. 12, 1996. minutes. “CFI management
stated Urat withour changes. there would be signif:
icant overruas in fabour hours on that scament of
the constraction project.”

Rv 1997, the board had more questions and
concerns that Crl's management couhl answer,

“Management as not complying with the
Board's direction,” stated director Kevin Murphy
during a Feb, 6, 1997, meeting.

At the subsequent March 13, 1997, mecting,
Johnstone raised two prophetic points. According
vo the minutes, “The Chair complimented man-
agement for their commitment to have the ferry
delivered by September 1997 bur felt such a com-
pletion date was aggressive. She also expressed her
concern that the cost/plus funding arrangement
could be affecting productivity at Vancouver
Shipyards.”

During the April 17, 1997, meeting — one that
would prove to be the inaugural CFT board's last
— Oksana Exell was officially appointed to manage
the development of the strategic business plan.

A short time later the CFT board’s three inde-
pendent members resigned. Their replacements
eliminated many of the issues plaguing the first
board by ignoring them.

For example, the often-discussed strategic plan
appeared in the Sept. 16, 1997, meeting minutes
as a work in progress, but by Feb. 19, 1998, it had
been shelved, “pending a review of responses to
the Request for Expressions of Interest for the
long-term financing, construction and ownership
of replacement vessels.”

Exell was out of the province fast week and
could not be reached for comment on the state of
the CFI strategic business plan to press time
Friday.

Other members of the two former CFI boards
likewise have shunned media attention about their
roles in the project’s unravelling, though Michael
Goldberg, who sat on the inaugural board with
Johnstone, wished the newly appointed and third
board well.

“Maybe it’s third time lucky,” said the UBC
commerce professor. “I wish them more luck than

ad.

How

project

players
ared

SINCE the fast ferry pro-
ject first took shape in
1994, a number of its
charges have retired, quit
or been fired. The follow-
ing is a list of the major
plavers and how they
have fared:

® Frank Rhodes — President
and CEO of BC Ferries undi
October 1997 when he retired.
He was replaced by Tom Ward.
Presided over creation of CEL
and welcomed its first board of
of directors — including the
three independent members —
inte the fold.
@ Andrew Hamilton — The
CFI project manager responsible
ter the construction af the dirce
fast ferries, Resigned in 1997 to
purse a posting with an cast
coast shipbuiider in Nova Scotia.
An interview with Hamilton
after his departure revealed: he
continues to be a fan of alu-
minunr vessels and is pursuing
launching such ano industry in
Nova Scotia which has consider:
ably dower ibour rates,
Replaced by John Welly. who
had previous experience working
with BC Ferries as a consultant.
@ Tom Ward — Quit his post x.
president and CEQ) of BC
Ferries on fan. EF. 1999) atter
fess chan wo vears on the job.
@ Phil Halkett — Replaced
Ward but was fired by new min-
ister responsible for fast ferries
Gordon Wihon following the
release of a thawed) technical
report in late 1998, Halkere fast-
ed less than three weeks in his
position as BC Ferries president
and CEO betore being replaced
by former BC Transit chief Bob
Lingwood.
@ Lucille Johnstone — Served
as chairman of the first CFI
board. Asked questions and
requested additional informa.
tion throughout her tenure.
Resigned in April 1997, less
than a year after being appoint:
ed. :
@ Michael Goldberg ~— Like
Johnstone, Goldberg was one of
three independent members of
the inaugural CFI board of
directors, He likewise resigned
in April 1997, less than a year
after being appointed.
@ Kevin Murphy — Another
independent appointee who
resigned in April 1997,
@ Jack Munro — Lifelong
friend of organized labour and
jongtime NDP insider who took
over from Johnstone as chair-
man of the CFI board. Quit as
part of en masse resignation of
both CFI and BC Ferries boards
reportedly in response to ultima-
tum from minister Gordon
Wilson carlier this year.
8 Dan Miller — Relieved of his
duties as minister responsible for
BC Ferries when Gordon Wilson
was named to the post of aborig-
inal affairs minister with respon-
sibility for the ferry corporation
on Jan. 29, 1999,

~— Robert Galster