The Lavalin Heuristic

The last thing SNC Lavalin’s image needs is unlawful influence by anyone holding political office.

A heuristic is a simplified principle or statement of how a part of the world works. SNC Lavalin unwillingly inherits its own heuristic thanks to the politico-economic conundrum the Canadian Prime Minister’s Office has created.

The Lavalin Heuristic is the oversimplified expression that legal judgement against the engineering firm would force its collapse and a loss of 5,000+ jobs – translating into a sea of lost votes. Anyone with an understanding of the EPC business and related economics can find logical faults with the claims made to the public and unchallenged by mainstream media.

To set a wider context, it is helpful, at a most fundamental level, to look at the firm’s share price through turbulence over time (especially 2010 - 2019):

The market reaction to current news has had an even greater impact than when its clients (prospective and under contract) first learned (around 2012) about the causal events leading to the charges.

SNC Lavalin have been shouldering the consequence of corruption allegations and admissions ever since – and acted long ago with the purge of certain executives, focus on policy and procedure, corporate citizenship and culture – and have been moving forward with their client base on merits of technical, business and general qualifications to meet demanding industry standards. Clients have been well-aware of and have assuredly scrutinized SNC Lavalin in light of wrongdoing years ago – and the contractor has been successfully managing business – successful, judging by workload, awarded contracts and trending share price.

Secondly, if one engineering firm is denied access to a profitable market sector or region, the work will still be done – albeit by other contractors. In this case (as happens every day in industry) there is a transfer or migration of revenue and employment to other qualified firms. There is little loss of jobs from the region, unless the procurement process drives the work beyond the borders.

Mr. Bruce has every right (and obligation to his employees and shareholders) to lobby government for a softer landing. After all, the company is not even run by the same people, and the lengthy delay in due legal process finds only the company name being consistent across the arc of ten years. Sympathies ought to go to the thousands of employees, managers and executive who are without fault, and have endured and shaped the organization it is today. They are the victims of protracted legal process.

The PMO’s reactionary claim of dire consequences warrants rational explanation; perhaps more importantly - the concern over economic impacts is misleading. It appears that vanity is at cause here and it must not be allowed to supersede the operation of law and due process. That would be true corruption.

Further, the ominous corollary of the PMO’s motivations slants the table - the western provinces are without their own Energy Heuristic to put the very same EPC industry in equal favour. SNC Lavalin, along with Jacobs, WorleyParsons, Amec, and many other reputable engineering firms in western Canada shed thousands of jobs without a backstop between 2014 and today. And those losses comprise only about 10% of the aggregate impact on regional employment.

If Canada has a corruption – or perceived corruption – problem, it is best addressed with integrity and intelligence in our highest form of government. I suspect the last thing SNC Lavalin’s image needs is unlawful influence by anyone holding political office.

R W Harms

President, EPC Lens, Inc.

March 9, 2019