Main construction partnership
Early expansion
Whereas Larson had married Margaret Moran, her sisters Susan and Elizabeth had married Welch and Stewart respectively.[2] In 1907, John and Thomas Foley and Peter Larson died. The new partnership name became Foley Bros, Welch & Stewart or Foley, Welch & Stewart (FW&S),[4] but it was not uncommon for projects to operate under the names of the individual partners.
In March 1908, Foley Bros was awarded the Superior Junction–Fort William, Ontario leg of the GTP.[17]
In May 1908, Foley Bros was awarded the rock work on the double-tracking of the Fort William–Winnipeg leg of the CP.[18]
In May 1908, FW&S commenced work[19] on the 1,400-kilometre (900 mi)[20] Edmonton–Prince Rupert leg of the GTP[4] from both ends.[21] Subcontractors were allocated sections of less than 8 kilometres (5 mi) each but some undertook multiple sections.[22] The project was completed in April 1914.[23]
In February 1909, after another subcontractor had failed, the GTP subcontracted FW&S to complete 240 kilometres (150 mi) eastward from a point 13 kilometres (8 mi) west of the Abitibi River crossing (Cochrane, Ontario) for the National Transcontinental Railway.[24]
In 1910, J.W. Stewart & Co was awarded the Princeton–Coalmont and Abbotsford–Hope legs of the VV&E within BC.[25] In May 1913, the eastward advance of the Canadian Northern Railway (CNoR) rail head reached Hope.[26] When the VV&E track reached Cannor in September 1916, the junction with the CNoR, GN acquired running rights on the Cannor–Hope leg.[27] Consequently, the FW&S contract was substantially reduced.
In the early 1910s, FW&S was the largest railway contracting firm in the west with 50,000 workers and 3,200 kilometres (2,000 mi) of railway under construction.[28]
In July 1911, P. Welch & Co was awarded the 887-kilometre (551 mi) Port Arthur–Sudbury leg of the CNoR in Ontario.[29] That month, a joint venture between P. Welch & Co and Northern Construction (NorCon) was awarded the 262-kilometre (163 mi) Hope–Kamloops leg of the CNoR in BC.[30] Northern Construction was the contracting name of partners Mackenzie and Mann.[31]
PGE ramifications
In February 1912, the province entered an understanding with FW&S to build, own, and operate, a Vancouver–Fort George line.[32] By this time, Timothy Foley was in his 70s, so the day-to-day management rested with Welch and Stewart, who were in their 50s.[33] That month, the Conservative administration of Premier Richard McBride introduced legislation for the Pacific Great Eastern Railway (PGE) to create a new 740-kilometre (460 mi) railway (later corrected to 770-kilometre (480 mi)).[34]
Financially supported but not owned by government, the PGE model defied business logic.[35] The railway was authorized to issue 4 per cent interest bonds to a total value of $35,000 per mile of the projected mileage, upon which the government guaranteed the principal and interest.[36]
In September 1912, P. Welch & Co was awarded the construction contract.[37][38] Stewart took extended medical leave August 1912–August 1913, an extremely busy period for FW&S, when Welch divided his supervisory time between multiple major projects.[39]
McBride allowed the PGE and FW&S to be controlled by the same parties, which removed any incentive to build as quickly and economically as possible. The former sacrificed value for money,[40] while the latter profiteered.[41] In fact, the PGE was only partially completed before becoming insolvent, while FW&S made a 38 per cent profit on $16,475,630 billed.[42] The FW&S profits from land sales were handled separately.[43]
Since both the PGE promoters and government suspected up front that the bond funding would be insufficient for the project, McBride had allegedly promised to provide additional aid to complete the project if this proved the case.[44] Although construction began in October 1912, the first cost estimate was not prepared until late 1913, which revealed a $10 million projected funding shortfall.[45]
To attract investors in 1913, the interest rate on new bond issues increased to 4+1⁄2 per cent.[46] Although legally, the bond money should only have been dispensed in proportion to the work completed, the release of funds was far in excess. In February 1914, the government raised the bond issue limit from $35,000 to $42,000 per mile.[47] The announcement of an extension into the Peace Country was intended to soften the news of huge cost over-runs to date.[48]
Welch underwent a major operation and took medical leave November 1913–November 1915, while Stewart shouldered the daily responsibilities.[49]
Rather than reducing or suspending operations, which could have preserved almost 70 per cent of the bond money, the government continued releasing funds.[50] When the bond money was exhausted in November 1915, the line was only 35 per cent complete, the PGE was insolvent, and as guarantor of principal and interest on the bonds, the BC Government faced a debt burden.[51] Squamish and Clinton became the terminals of the 264-kilometre (164 mi) line.[52]
Stewart left for overseas service in August 1916.[53] During World War I, he was promoted to brigadier general in order to direct railway construction in France. His skills in the rapid construction of track elevated him to command all British and Canadian rail units.[54]
Later audits and enquiries revealed that the PGE Act, which usurped the basic checks and balances of the Railway Act, was itself laxly followed by the government,[55] resulting in an overpayment of more than $5.7 million to FW&S.[56]
In late 1917, limited grading having ceased, FW&S proposed a government takeover of the PGE. To avoid lengthy and expensive legal proceedings, FW&S agreed in February 1918 to hand over PGE assets and a cash payment of $750,000.[57] Although released from all obligations and the dropping of government litigation, FW&S was allowed to retain ownership of the PGE Land Development Company. The degree to which financial assets had been transferred to this company since 1912 was never revealed.[58] Although Welch had promised at the hearings to provide information on land sale profits, he instead relocated to Seattle with the corporate records.[59]
The PGE insolvency had forced the BC government to assume the ownership and debt of the railway.[60] As second premier of the following Liberal administration, John Oliver engaged NorCon to extend the line northward to Quesnel. A subsequent royal commission found many similar abuses by Norcon to those of FW&S.[61] When Norcon took away equipment estimated at up to $1 million, the government stated it belonged to FW&S and not the PGE.[62] Assumedly, Norcon directly compensated FW&S.
Concurrent projects
In August 1912, P. Welch & Co was awarded the Coalmont–Brookmere extension of the VV&E in BC.[63]
In September 1912, FW&S was awarded the Victoria–Port Alberni leg of the CNoR in BC.[64]
In January 1913, a joint venture between FW&S and Edward Peterson was awarded the Weyburn–Lethbridge branch of the CP in Saskatchewan.[65]
In July 1913, FW&S was awarded the CP Connaught Tunnel construction and connecting trackage by offering the lowest bid and earliest completion projection.[66] The 8-kilometre (5 mi) tunnel opened in December 1916.[67]
In November 1913, FW&S was awarded the new harbour and terminal works at Halifax, Nova Scotia.[68] Carried out as a joint venture with Fauquier, Welch supervised the project. Following the 1917 Halifax Explosion, the project was suspended, and the military expropriated the floating cranes for priority needs.[67]