ST. JOHN'S, N.L. - Newfoundland and Labrador's transportation minister quit Monday after the auditor general questioned his handling of the cancellation of a politically sensitive paving contract in Labrador.
Premier Paul Davis announced the resignation of Nick McGrath just hours after auditor general Terry Paddon's report into the provincial government's decision to cancel a highway contract on March 13, the day before nominations closed for the Progressive Conservative leadership race.
Davis said if McGrath hadn't resigned, he would have fired him, adding that he showed a lack of judgment.
Paddon was asked to review the contract with Humber Valley Paving, a company once led by Frank Coleman, who was in line to become Tory leader and premier before he suddenly withdrew from politics in June because of an undisclosed family matter.
Paddon's report questions the timing of the contract's cancellation.
"We have not been able to satisfy ourselves why the process to come to an arrangement with HVP to terminate the contract related to (the project) had to be concluded the day before nominations closed for the leadership of the Progressive Conservative Party of Newfoundland and Labrador," it says.
Coleman has said he sold his shares last winter and resigned from the board of directors just before entering the leadership race. He has repeatedly denied he personally gained from the contract cancellation negotiated at around the same time by his son.
Opposition critics raised questions about the cancellation and the personal involvement of McGrath, who spoke directly with Coleman's son.
In his report, Paddon says the transportation minister "knowingly withheld information" about the cancellation from former premier Tom Marshall.
"The deputy minister of Transportation and Works was instructed by the minister not to prepare a briefing note for the premier's office or cabinet secretariat to inform them of the decision to terminate the contract," the report says.
Paddon told a news conference he would have expected the premier to be kept in the loop because the contract termination had the potential to be politically sensitive.
He said in interviews with audit staff, McGrath explained that he thought the decision was within his authority as minister.
"Our view is that we would have expected him (McGrath) to inform the premier's office," said the auditor general.
The auditor's report says McGrath indicated to his deputy minister that there was an urgency to deal with the project to ensure it was completed in 2014 and that the outcome would not injure the company or its employees.
But Paddon told reporters the tender for the project didn't go out until 37 days later.
The government has said it saved taxpayers money by not calling in related bonds before retendering the work on 76 kilometres of the Trans-Labrador Highway. The road project between Happy Valley-Goose Bay and Churchill Falls was slowed by forest fires last year.
Paddon concludes the urgency to cancel the contract on March 13 meant other options weren't fully considered by the Department of Transportation and Works.
If more time had been available, the report says the province could have looked at assigning the contract to a third-party contractor for its completion and it could have assessed whether anyone had guaranteed the bonds related to the work.
"Once a decision was made to terminate the contract ... the performance and labour and material payment bonds would have no effect since they provided a guarantee against a contract which was no longer in effect," the report says.
"The department did not pursue the option of calling the performance bond because this risked (the project) not being completed in 2014 and would have negatively impacted HVP."
Paddon's report does not find "documentary evidence" of undue influence but makes five recommendations, including one that says government departments should ensure "normal protocols are followed when dealing with sensitive matters."
