Foreign Assistance
USAID Signature Tsunami Reconstruction Efforts in Indonesia and Sri Lanka Exceed Initial Cost and Schedule Estimates, and Face Further Risks Gao ID: GAO-07-357 February 28, 2007In December 2004, an earthquake caused a tsunami that devastated several countries in the Indian Ocean region. In May 2005, Congress appropriated $908 million in aid, of which the U.S. Agency for International Development (USAID) is implementing $482 million in recovery projects in many affected countries, including Indonesia and Sri Lanka. This report examines (1) the progress of USAID's program; (2) USAID's financial and technical oversight of its efforts, and risks it faces; and (3) actions taken by the Secretary of State in response to an April 2006 GAO recommendation. Specifically, GAO recommended that State, in its required reports to Congress, provide updated cost estimates and schedules and show the need for additional funding sources, if necessary. GAO examined USAID's signature projects in both countries; reviewed project documents and periodic reports, interviewed USAID officials, and visited project sites in August and October 2006.
Although both of its signature projects--one in Indonesia and one in Sri Lanka--are under way, USAID has increased initial cost estimates, reduced or canceled some project activities, and may extend completion dates. As of December 31, 2006, USAID had obligated $140 million (46 percent) and expended $20 million (7 percent) of the $302 million it budgeted for the two signature projects, which consist of the construction of a major road in Indonesia and construction of a bridge and other infrastructure in Sri Lanka. In Indonesia, based on GAO's analysis, estimated construction cost per mile increased by 75 percent--from $1.6 million to $2.7 million; USAID reduced the length of road to be built by over one third--from 150 miles to 91 miles; and the agency may extend the planned completion date to February 2010--5 months later than initially planned. As of January 2007, construction had begun to build 26 miles of road, but USAID had not awarded a contract for construction of the remainder of the road and the government of Indonesia had acquired less than one-fourth of the nearly 3,700 parcels of land needed. In Sri Lanka, USAID increased the estimated costs for its signature project by nearly 40 percent--from $35 million to $48 million. USAID has taken steps to address some difficulties in both countries but continues to face risks that it may not complete the signature projects within cost and schedule estimates, and without reducing the projects' scope, as planned. USAID is carrying out measures that it previously established for financial oversight of reconstruction in Indonesia and Sri Lanka and has taken steps to enhance its technical oversight capacity. For example, USAID is conducting additional concurrent audits of its signature road construction project in Aceh Province, Indonesia, to address concerns about corruption, potential misuse of funds, and completing projects on schedule. To ensure technical oversight, USAID added experienced staff in both countries and acquired additional engineering services through the U.S. Army Corps of Engineers. However, when it began its tsunami assistance programs in early 2005, USAID lacked disaster recovery guidance, including lessons learned from prior disaster reconstruction efforts. These lessons include setting appropriate time frames, conducting thorough cost assessments, and understanding local land tenure systems. USAID continues to face several risks, such as rising costs and delays in land acquisition, that could affect its successful completion of signature projects in Indonesia and Sri Lanka as planned. In response to GAO's April 2006 recommendation, the Secretary of State agreed to provide updated cost estimates and schedules in its required semiannual report. However, State's two reports submitted since GAO made its recommendation show USAID obligations to recipient countries rather than amounts obligated to organizations implementing project activities (in USAID's terminology, "subobligations"). The current reported obligations do not clearly reflect USAID's progress and the reports do not include some risk information and a mitigation strategy for addressing the risks.
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Director: Team: Phone:GAO-07-357, Foreign Assistance: USAID Signature Tsunami Reconstruction Efforts in Indonesia and Sri Lanka Exceed Initial Cost and Schedule Estimates, and Face Further Risks
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United States Government Accountability Office:
GAO:
February 2007:
Report to Congressional Committees:
Foreign Assistance:
USAID Signature Tsunami Reconstruction Efforts in Indonesia and Sri
Lanka Exceed Initial Cost and Schedule Estimates, and Face Further
Risks:
GAO-07-357:
GAO Highlights:
Highlights of GAO-07-357, a report to congressional committees.
Why GAO Did This Study:
In December 2004, an earthquake caused a tsunami that devastated
several countries in the Indian Ocean region. In May 2005, Congress
appropriated $908 million in aid, of which the U.S. Agency for
International Development (USAID) is implementing $482 million in
recovery projects in many affected countries, including Indonesia and
Sri Lanka. This report examines (1) the progress of USAID‘s program;
(2) USAID‘s financial and technical oversight of its efforts, and risks
it faces; and (3) actions taken by the Secretary of State in response
to an April 2006 GAO recommendation. Specifically, GAO recommended that
State, in its required reports to Congress, provide updated cost
estimates and schedules and show the need for additional funding
sources, if necessary. GAO examined USAID‘s signature projects in both
countries; reviewed project documents and periodic reports, interviewed
USAID officials, and visited project sites in August and October 2006.
What GAO Found:
Although both of its signature projects”one in Indonesia and one in Sri
Lanka”are under way, USAID has increased initial cost estimates,
reduced or canceled some project activities, and may extend completion
dates. As of December 31, 2006, USAID had obligated $140 million (46
percent) and expended $20 million (7 percent) of the $302 million it
budgeted for the two signature projects, which consist of the
construction of a major road in Indonesia and construction of a bridge
and other infrastructure in Sri Lanka. In Indonesia, based on GAO‘s
analysis, estimated construction cost per mile increased by 75
percent”from $1.6 million to $2.7 million; USAID reduced the length of
road to be built by over one third”from 150 miles to 91 miles; and the
agency may extend the planned completion date to February 2010”5 months
later than initially planned. As of January 2007, construction had
begun to build 26 miles of road, but USAID had not awarded a contract
for construction of the remainder of the road and the government of
Indonesia had acquired less than one-fourth of the nearly 3,700 parcels
of land needed. In Sri Lanka, USAID increased the estimated costs for
its signature project by nearly 40 percent”from $35 million to $48
million. USAID has taken steps to address some difficulties in both
countries but continues to face risks that it may not complete the
signature projects within cost and schedule estimates, and without
reducing the projects‘ scope, as planned.
USAID is carrying out measures that it previously established for
financial oversight of reconstruction in Indonesia and Sri Lanka and
has taken steps to enhance its technical oversight capacity. For
example, USAID is conducting additional concurrent audits of its
signature road construction project in Aceh Province, Indonesia, to
address concerns about corruption, potential misuse of funds, and
completing projects on schedule. To ensure technical oversight, USAID
added experienced staff in both countries and acquired additional
engineering services through the U.S. Army Corps of Engineers. However,
when it began its tsunami assistance programs in early 2005, USAID
lacked disaster recovery guidance, including lessons learned from prior
disaster reconstruction efforts. These lessons include setting
appropriate time frames, conducting thorough cost assessments, and
understanding local land tenure systems. USAID continues to face
several risks, such as rising costs and delays in land acquisition,
that could affect its successful completion of signature projects in
Indonesia and Sri Lanka as planned.
In response to GAO‘s April 2006 recommendation, the Secretary of State
agreed to provide updated cost estimates and schedules in its required
semiannual report. However, State‘s two reports submitted since GAO
made its recommendation show USAID obligations to recipient countries
rather than amounts obligated to organizations implementing project
activities (in USAID‘s terminology, ’subobligations“). The current
reported obligations do not clearly reflect USAID‘s progress and the
reports do not include some risk information and a mitigation strategy
for addressing the risks.
What GAO Recommends:
To show progress, potential future risks, and enhance Congress‘s
oversight, GAO recommends that the Secretary of State include, in
State‘s reports to Congress, (1) the amount of funds obligated (in
USAID‘s terms, ’subobligated“) in implementing agreements and (2) risk
information and mitigation strategies.
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-357].
To view the full product, including the scope and methodology, click on
the link above. For more information, contact David Gootnick at (202)
512-3149 or gootnickd@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Signature Project Cost Estimates Have Risen, Schedules May Be Extended,
and Further Risks May Affect Current Plans:
USAID Acquired Financial and Technical Oversight, but Lacked Guidance
for Disaster Recovery and Reconstruction and Faces Further Risks:
Required Reports to Congress Do Not Clearly Show USAID‘s Progress or
Address Risks to Signature Project Schedules and Cost Estimates:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: USAID‘s Signature Projects in Indonesia and Sri Lanka:
Appendix III: USAID‘s Nonsignature Activities in Indonesia and Sri
Lanka:
Appendix IV: Comments from the Department of State:
Appendix V: Comments from the U.S. Agency for International
Development:
GAO Comment:
Appendix VI:
GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Funds Allocated to Tsunami Emergency Relief and Postemergency
Reconstruction and Other Activities, as of December 31, 2006:
Table 2: Scope and Status of Indonesia Signature Road Construction
Project:
Table 3: Description and Status of USAID‘s Signature Project in Sri
Lanka:
Table 4: Project Sectors, Amounts of Funds Budgeted, and Descriptions
of Selected Activities for USAID‘s Nonsignature Projects in Indonesia:
Table 5: Project Sectors, Amounts of Funds Budgeted, and Descriptions
of Selected Activities for USAID‘s Nonsignature Projects in Sri Lanka:
Figures:
Figure 1: Financial Information on USAID Tsunami Reconstruction Funds,
as of December 31, 2006:
Figure 2: Initial and Revised Estimated Costs Per Mile and Length of
Road for USAID Indonesia Signature Project:
Figure 3: Initial and Revised Plans for Indonesia Signature Road
Construction Project:
Figure 4: Initial and Revised Timelines for USAID‘s Signature Project
Activities in Indonesia, as of February 2007:
Figure 5: Temporary Bridge Currently Spanning Arugam Bay near Site of
Planned USAID-Funded Bridge in Sri Lanka:
Figure 6: Locations of Selected Signature Project Components and Recent
Terrorist Incidents:
Figure 7: Initial and Revised Plans for USAID‘s Signature Project
Activities in Sri Lanka:
Figure 8: USAID Signature Project Funding Information Included and Not
Included in Department of State Reports:
Abbreviations:
A-TARP: Aceh Technical Assistance Recovery Project:
DCAA: Defense Contract Audit Agency:
IG: USAID Office of the Inspector General:
LTTE: Liberation Tigers of Tamil Eelam:
NGO: nongovernmental organization:
USACE: U.S. Army Corps of Engineers:
USAID: U.S. Agency for International Development:
[End of section]
United States Government Accountability Office: Washington, DC 20548:
February 28, 2007:
The Honorable Patrick J. Leahy:
Chairman:
The Honorable Judd Gregg:
Ranking Minority Member:
Subcommittee on State, Foreign Operations, and Related Programs:
Committee on Appropriations: United States Senate:
The Honorable Nita M. Lowey:
Chairwoman:
The Honorable Frank R. Wolf:
Ranking Minority Member:
Subcommittee on State, Foreign Operations, and Related Programs:
Committee on Appropriations: House of Representatives:
The tsunami of December 2004, caused by an earthquake in the Indian
Ocean near Indonesia, widely devastated 12 Asian and East African
countries, leaving more than 200,000 dead and 40,000 reported missing.
In May 2005, Congress appropriated approximately $908 million in
assistance for tsunami relief, reconstruction, and related programs.
[Footnote 1] The U.S. Agency for International Development (USAID)
tsunami reconstruction programs in Indonesia and Sri Lanka”the two
affected countries with the greatest estimated needs”began later in
2005. USAID‘s programs in the two countries include signature projects,
intended to generate greater visibility for overall U.S. assistance. In
Indonesia, USAID initially planned to construct a 150-mile coastal
road, budgeted at $245 million (about 70 percent of its funds) and
scheduled for completion in September 2009; in Sri Lanka, USAID planned
to construct a bridge and other infrastructure, among other project
components, budgeted at $35 million (over 40 percent of its funds) and
scheduled for completion in March 2008. [Footnote 2]
We began monitoring the delivery of U.S. assistance to the tsunami-
affected countries in May 2005. [Footnote 3] In April 2006, we reported
that USAID had begun its reconstruction programs in Indonesia and Sri
Lanka but that costs and schedules for some projects might exceed
initial estimates; that the agency had established financial and
technical oversight of the assistance but had not filled some technical
oversight positions; and that several significant challenges, including
civil conflict, confronted its reconstruction efforts in both
countries. [Footnote 4] To help ensure the public availability of
current information on the assistance costs and schedules, our April
2006 report recommended that the Secretary of State provide updated
cost and schedule estimates in the Department of State‘s semiannual
report to Congress, required by Section 4102 of the act authorizing the
assistance (Section 4102 report). [Footnote 5]
Updating our April 2006 findings, this report examines (1) the status
of USAID‘s signature projects in Indonesia and Sri Lanka, including its
obligations [Footnote 6] and expenditures of funds for reconstruction
assistance in Indonesia and Sri Lanka; (2) USAID‘s financial and
technical oversight of the programs, and the extent to which it had
guidance for operating in postdisaster situations, including lessons
learned from prior disasters; and (3) actions taken by the Secretary of
State in response to our April 2006 recommendation. Appendix III
presents information about USAID‘s nonsignature tsunami reconstruction
projects in Indonesia and Sri Lanka.
To address these issues, we reviewed USAID data, including funding
obligations and expenditures, through December 2006, the agency‘s
progress in achieving program objectives for its signature projects,
and its oversight of the programs. These data included monthly progress
reports on project activities, monthly and quarterly expenditures, and
interviews with USAID officials. In Washington, D.C., Sri Lanka, and
Indonesia, we met with representatives from State, USAID, the U.S. Army
Corps of Engineers (USACE), nongovernmental organizations, private
firms, and governments of tsunami-affected countries. During our visits
to Indonesia and Sri Lanka, we visited numerous signature project sites
in the tsunami-affected areas and monitored the progress of USAID‘s
projects. We determined that USAID‘s funding and expenditure data were
sufficiently reliable for our analysis. We also considered previous GAO
work on U.S. disaster assistance efforts. We conducted our work from
June 2006 through February 2007 in accordance with generally accepted
government auditing standards. (App. I contains a more detailed
description of our scope and methodology.)
Results in Brief:
Although USAID‘s signature projects and other activities in Indonesia
and Sri Lanka are under way, various difficulties have led the agency
to increase initial cost estimates; reduce or cancel some activities in
Indonesia; and consider extending project completion dates of signature
projects in both countries. In addition, as of February 2007, USAID had
not awarded the contract for major signature road construction work in
Indonesia. USAID has taken steps to address some of these difficulties,
such as revising the length of road to be built in Indonesia and
assisting the government in acquiring land and property needed to
implement project activities. However, USAID continues to face risks
that it may not complete the signature projects within cost and
schedule estimates and without further reducing the scope of the work,
as currently planned.
* Indonesia. As of December 2006, USAID had obligated $186 million (53
percent) and expended $58 million (17 percent) of its $351 million
budget for tsunami reconstruction in Indonesia. USAID had obligated
$105 million (41 percent) and expended $15 million (6 percent) of its
$254 million budget for the signature road construction project. USAID
contractors completed the design work for the signature road
construction project in Aceh Province and began construction work on
some badly damaged road sections. However, in June 2006, because of
significant increases in estimated construction costs per mile, USAID
reduced the project‘s scope by over one third”from 150 miles to 91
miles of road construction”and reallocated approximately $9 million
from other USAID and State tsunami supplemental appropriations to the
road, resulting in a budget that has risen from the original $245
million to $254 million. [Footnote 7] Based on GAO‘s analysis, the
estimated per-mile costs as of June 2006 had risen to approximately
$2.7 million”a 68 percent increase from USAID‘s March 2005 projection
of $1.6 million per mile”reflecting both higher-than-expected labor and
material costs and the availability of more accurate information than
in March 2005. [Footnote 8] For example, the June 2006 estimate
indicates that 2.2 million cubic meters of excavation would be
required, compared with the March 2005 estimate of 1.5 million cubic
meters. Moreover, despite reducing the length of road to be
constructed, USAID may extend the project‘s completion date from
September 2009 to February 2010, in part because it did not award a
contract for the major road construction work in September 2006, as
planned; USAID expects to award the construction contract in May 2007.
[Footnote 9] Further, although USAID is currently assisting the
Indonesian government in its land acquisition efforts, the project‘s
completion date may be extended and estimated costs may increase
because of ongoing delays by the Indonesian government in acquiring
land for the road. [Footnote 10] For example, as of December 31, 2006,
the Indonesian government had acquired only 899 of the needed 3,679
parcels along the road‘s planned route. [Footnote 11] In addition,
several challenges increase the risk that USAID may not successfully
complete the project at planned cost and on schedule. Specifically,
delays by the government of Indonesia in acquiring land in a timely
manner and community unrest increase USAID‘s risk of not meeting its
schedule, and increasing costs for materials and labor, as well as
slippages in the schedule, increase USAID‘s risk of not meeting its
projected costs because longer projects generally cost more.
* Sri Lanka. As of December 2006, USAID had obligated $70 million (84
percent) and expended $15 million (18 percent) of its $83 million
budget for tsunami reconstruction. USAID had obligated $35 million (73
percent) and expended $5 million (11 percent) of its $48 million budget
for the signature project components. The contract completion date for
the Sri Lanka signature project, which includes building a bridge and
other infrastructure, constructing vocational education facilities, and
addressing coastal management issues, is March 2008. However, USAID may
extend the signature project completion date. In addition, the
projected cost has increased from $35 million to $48 million”about 37
percent”due to increases in the costs of labor and materials. To make
up for this shortfall, USAID reallocated approximately $13 million from
nonsignature project activities. As in Indonesia, several challenges
increase the risk that USAID may not successfully complete all the
project components at planned cost and on schedule. Specifically, other
factors such as delays in selecting the sites, determining what would
be taught, and designing the vocational educational facilities and
water treatment facilities, as well as increasing incidents of
terrorist-related violence increase USAID‘s risk of additional costs
and slippages in the schedule.
USAID is carrying out measures that it previously established for
financial oversight of its reconstruction programs in Indonesia and Sri
Lanka, and it has taken steps to enhance its technical oversight
capacity. In addition to USAID‘s standard requiring financial oversight
mechanisms, USAID has contracted with the Defense Contract Audit Agency
(DCAA) for concurrent audits of its signature road construction project
in Aceh Province, Indonesia. Also, USAID‘s Office of the Inspector
General (IG), using funding that was included in the supplemental
appropriation, has completed audits showing, among other things, that
USAID had not met certain interim milestone dates and was not
adequately accounting for funding; other IG audits are ongoing. To
ensure technical oversight of its reconstruction projects in both
countries, USAID has added experienced staff, including engineers in
both Sri Lanka and Indonesia, and enhanced its engineering services
through agreements with USACE. However, when USAID began its tsunami
reconstruction program in early 2005, the agency did not have disaster
reconstruction program guidance, including lessons learned from its
prior programs, such as the importance of setting appropriate time
frames, conducting thorough cost assessments, and understanding local
land tenure systems. In our July 2002 report focusing on USAID‘s
reconstruction efforts in Central America, several USAID missions
reported learning numerous lessons, such as the importance of
establishing longer implementation periods to complete projects.
[Footnote 12] In response to our May 2006 report, USAID issued
guidance, including lessons learned, on implementing disaster recovery
activities following hurricanes and tropical storms that struck several
Caribbean countries in 2004. [Footnote 13] Further, as USAID moves
forward, the agency faces risks that may affect its ability to complete
its signature project activities as planned.
In response to our April 2006 recommendation, the Secretary of State,
with information obtained from USAID, has provided some updated cost
estimates and schedules in its required reports to Congress. Data in
both the June and December 2006 reports included amounts of funds
obligated to the affected countries but did not include the amounts of
funds signed in agreements with implementing organizations (in USAID‘s
terminology, ’subobligated“). Also, the reports do not include USAID‘s
risk information and mitigation strategy for addressing the risks. As a
result, Congress lacks funding information that would more clearly
reflect the agency‘s progress; currently, State‘s required semiannual
reports to Congress do not include this information.
Therefore, to ensure that Congress has access to information that
clearly reflects both USAID‘s progress in its tsunami reconstruction
programs in Indonesia and Sri Lanka and factors that may slow its
progress, we make the following two recommendations regarding the
Secretary of State‘s required semiannual reports to Congress:
* To clearly show USAID‘s progress in using the appropriated funds for
tsunami reconstruction, the reports should include the amounts that
USAID obligated to recipient countries for tsunami reconstruction and
the amounts that it ’subobligated“ in transactions with implementing
organizations, such as contracts, grants, and cooperative agreements,
for specific reconstruction projects.
* To indicate risk of potential changes to the costs, schedules, and
scopes of work of USAID‘s signature projects in Indonesia and Sri
Lanka, the reports should identify factors that may impact the agency‘s
implementation of the projects and provide strategies for mitigating
any impact.
At our request, USAID and the Department of State provided written
comments and technical suggestions and clarifications on a draft of
this report. (See app. IV for State‘s written comments and app. V for
USAID‘s written comments.) In commenting on a draft of this report, the
Department of State and USAID fully agreed with our recommendation to
include cost data on ’subobligated“ funds in State‘s required reports
to Congress. USAID also agreed to separately identify risk and
mitigation strategies in State‘s reports. We have also incorporated
technical suggestions and clarifications from State and USAID, as
appropriate.
Background:
Of the $908 million that the United States appropriated for tsunami
relief and reconstruction, $327 million (36 percent) was allocated to
the Department of Defense and USAID for emergency relief activities
that have largely been completed. The remaining $581 million (64
percent) was budgeted for reconstruction and other postemergency
activities. Of this amount, $482 million (about 83 percent) is
currently allocated to USAID. [Footnote 14] Table 1 shows the amounts
of funds allocated to emergency relief and reconstruction and other
postemergency activities.
Table 1: Funds Allocated to Tsunami Emergency Relief and Postemergency
Reconstruction and Other Activities, as of December 31, 2006 (Dollars
in millions):
Type of tsunami assistance activity: Emergency relief activities;
Funds allocated: $327.
Type of tsunami assistance activity: Postemergency reconstruction and
other activities, USAID;
Funds allocated: $482.
Type of tsunami assistance activity: Postemergency reconstruction and
other activities, Other U.S. departments and agencies;
Funds allocated: $99.
Subtotal:
Funds allocated: $581.
Total:
Funds allocated: $908.
Source: USAID and Department of State.
[End of table]
As of December 31, 2006, USAID had signed bilateral agreements with
many tsunami-affected countries for the entire $482 million (100
percent); USAID considers these funds obligated. USAID had expended $96
million (20 percent) of the funds (see fig. 1).
Figure 1: Financial Information on USAID Tsunami Reconstruction Funds,
as of December 31, 2006:
This is a vertical bar graph with three bars: Allocated, Obligated, and
Expended. The vertical axis of the graph represents U.S. dollars in
millions. The horizontal axis represents Type of funding. The bars are
depicted as follows:
Allocated: 100% ($482);
Obligated: 100% ($482);
Expended: 20% ($96).
Source: USAID.
Note: Generally, an obligation is a definite commitment that creates a
legal liability of the U.S. government for the payment of goods and
services ordered or received (GAO-05-734SP, 70). Consistent with 31
U.S.C. 1501, which defines when an agency can record an obligation,
USAID treats as an obligation the bilateral agreements it makes with
other countries to deliver assistance. However, except where denoted by
quotation marks (’obligations“), this report defines obligations as
amounts of orders placed, contracts awarded, services received, and
similar transactions during a given period that will require payments
during the same or future period. USAID labels these actions
’subobligations.“ Expenditures are defined as the issuance of checks,
disbursement of cash, or electronic transfer of funds to liquidate a
federal obligation.
[End of figure]
As we reported in April 2006, USAID‘s signature project in Indonesia
initially consisted of 150 miles of coastal road construction in
western Aceh Province at an estimated cost of $245 million. The
road”parts of which were badly damaged or destroyed by the tsunami”was
considered vital to restoring the economic strength of the area and
promoting redevelopment of the affected communities. USAID planned to
implement the project under three separate contracts:
* a priority contract, awarded in August 2005, to temporarily maintain
an existing coastal road and to design and construct priority sections
of the new road;
* a design and construction management contract, awarded in November
2005, to design the signature road and supervise its construction; and;
* a large-scale construction contract, to be awarded in September 2006,
to construct major segments of the new road.
The contract for USAID‘s Sri Lanka signature project, awarded in
September 2005, and initially estimated to cost $35 million, has five
components: [Footnote 15]
* construction of a bridge;
* construction of water treatment facilities;
* rehabilitation of three commercial harbors;
* construction or rehabilitation of vocational education facilities,
and;
* provision of training in coastal management. [Footnote 16]
We reported in April 2006 that USAID might be unable to complete its
Indonesia signature project and some components of its Sri Lanka
signature project within initial cost estimates and time frames, owing
in part to factors such as limited site information, rising material
and labor costs, and delays in the acquisition of land. We also found
that although the agency had taken steps to ensure financial and
technical oversight for the Indonesia and Sri Lanka reconstruction
programs, it had not filled some needed technical oversight positions.
Finally, we noted that several challenges confronted USAID‘s tsunami
reconstruction programs, including long-standing conflicts between the
countries‘ governments and separatist groups in Aceh, Indonesia, and in
several areas of Sri Lanka. Our April 2006 report recommended that
State‘s semiannual Section 4102 report to Congress, due in June 2006,
provide updated cost estimates and schedules for the programs. We also
recommended that if the updated estimates differed substantially from
the initial estimates, State‘s report should include alternative cost
estimates, schedules, and project scopes and identify the need for
additional sources of funding, if necessary. State agreed with both of
the recommendations.
Signature Project Cost Estimates Have Risen, Schedules May Be Extended,
and Further Risks May Affect Current Plans:
USAID‘s signature projects in Indonesia and Sri Lanka are under way,
but respective projects‘ estimated costs have risen and the completion
dates may be extended. In addition, the scope has been reduced for the
signature road project in Indonesia. To cover the higher costs in both
countries, USAID revised its budget allocations for the signature
projects. Also, as of February 2007, USAID had not awarded the contract
for major road construction work in Indonesia. Factors typically
related to the difficulty of operating in postdisaster environments,
such as increased construction costs and delays in land acquisition,
have contributed to the higher cost estimates, reductions in project
scope, and the possible extension of completion dates. In both
countries, ongoing uncertainties have led to risks, such as increase in
costs that may further affect whether the signature projects will be
completed as planned.
Indonesia Signature Project Cost Estimates Have Increased, Scope of
Work Has Been Reduced, and Completion Date May Be Extended:
USAID‘s plans for its signature road construction include awarding and
implementing three separate contracts. Although the agency has made
some progress under two of the contracts, based on GAO‘s analysis, the
road‘s estimated cost per mile has increased, the scope of work has
been reduced, and the completion date may be extended. In addition, as
of February 2007, USAID has not awarded a contract for large-scale road
construction. (See app. II for more details on the status of the
contracts.) However, USAID took some actions in response to the
difficulties that arose. In addition, while cost increases have reduced
the length of road that USAID can build, it entered into an agreement
with the Japanese and Indonesian governments under which a coastal road
from Banda Aceh to Meulaboh will be jointly built by USAID and the
government of Japan. A number of factors, including several relating to
operating in a postdisaster environment”such as limited initial site
information, rising construction costs, and delayed land
acquisition”have contributed to the project‘s higher estimated costs
and slower-than-expected progress. As a result, USAID may extend the
project‘s completion date from September 2009 to February 2010.
Indonesia Signature Project Is Under Way, but Contract for Major Road
Construction Work Has Not Been Awarded:
As of February 2007, the agency had not yet awarded its large-scale
construction contract, as planned. The status of the contacts by which
USAID is planning to complete its signature road project in Indonesia
are as follows:
* Priority contract. Construction work on certain priority sections of
the road began in October 2006, and as of December 2006, bridge
construction and related work at one location had begun. [Footnote 17]
Priority construction work was initially expected to take place between
August 2005 and August 2006, but sufficient land was not available for
construction to begin. USAID modified the priority contract to increase
the length of road to be built, from 3 miles to 26 miles, and extend
the completion date to December 2007.
* Design and construction management contract. In June 2006, the
contractor completed a detailed design and cost estimate for the
coastal road, replacing USAID‘s initial cost estimate completed in
March 2005. [Footnote 18] The new design reflects more detailed
knowledge of the project site and contains more technical details than
were available in the initial estimate. According to USAID officials,
although the initial estimate provided by the U.S. Army Corps of
Engineers (USACE) was based on the best information available at the
time, it was lacking in specificity because the route of the planned
road had not been determined and on-the-ground access to most areas was
limited.
* Large-scale construction contract. Although USAID had expected to
award the contract for major segments of the coastal road in September
2006, it did not receive a qualifying proposal in August 2006. The June
2006 solicitation, restricted to U.S. firms, resulted in a single
proposal, which the agency was unable to negotiate to an acceptable
price. In October 2006, USAID began a new solicitation process, open to
international firms, that agency officials say has attracted interest
from prospective offerors. The agency now expects to award the contract
in May 2007 and, according to USAID officials, estimates that the road
may not be completed until February 2010, 5 months later than
originally planned.
Indonesia Signature Project‘s Estimated Costs and Budget Allocation
Have Increased and the Project‘s Scope Has Been Reduced:
Based on GAO‘s analysis, the road‘s estimated cost per mile as of June
2006 is $2.7 million, a 68 percent increase over the cost estimated by
USAID in March 2005”$1.6 million per mile. As we reported in April
2006, the initial estimate was based on limited site information
because the route of the planned road had not yet been determined and
most areas were not accessible for ground surveys to be performed.
Also, according to construction industry studies, in projects that are
not well defined, such as this one, actual costs are likely to vary by
a range of 50 percent less to 100 percent more than estimated costs.
Based on GAO‘s analysis, estimated costs as of June 2006 are currently
68 percent more than initial projections.
To account for future contingencies, USAID increased its budget
allocation for the signature project by $9 million (4 percent), from
$245 million to $254 million. [Footnote 19] At the same time, through
an agreement between USAID and the governments of Indonesia and Japan,
the Japanese government assumed responsibility for building about 69
miles of the southern section of the road, from Calang to Meulaboh,
reducing USAID‘s responsibility from building 150 miles to building
approximately 91 miles of the road. [Footnote 20] As a result, despite
potential estimated cost increases, USAID was able to meet its
commitment for the road while staying within budget constraints. (See
fig. 2.)
Figure 2: Initial and Revised Estimated Costs Per Mile and Length of
Road for USAID Indonesia Signature Project:
This figure is a vertical bar graph with the following bars: estimated
cost per mile and length of road to be built. The left vertical axis of
the graph represents U.S. dollars in millions from 0 to 5. The right
vertical axis represents miles from 0 to 200. The following data is
depicted:
Estimated cost per mile: Initial cost estimate and length of road, as
of March 2005: $1.6; Estimated cost per mile: Revised cost estimate and
length of road, as of November 2006: $2.7.
Length of road to be built: Initial cost estimate and length of road,
as of March 2005: 150 miles; Length of road to be built: Revised cost
estimate and length of road, as of November 2006: 91 miles.
Source: GAO analysis of USIAD data.
[End of figure]
USAID also has tentative plans to construct two bypasses, totaling
approximately 12 miles, at points along the Japanese-funded portion of
the road. In October 2006, the U.S. Ambassador to Indonesia asked State
to request additional funds from the Office of Management and Budget to
cover the costs of building the bypasses; USAID officials stated that a
decision on funding the construction of the bypasses will be made after
the large-scale construction contract is awarded and the project‘s
budget is reassessed. Figure 3 shows the initial and revised road
construction plan; appendix II provides further details of USAID‘s
revised project scope.
Figure 3: Initial and Revised Plans for Indonesia Signature Road
Construction Project:
This figure is a map representing the USAID road and the Government of
Japan road, as well as revised plans and events. The map depicts the
Government of Japan road with the following revised plans and events
noted: Japanese-funded road segment being built between Calang and
Meulaboha[a]. Also depicted is the USAID road with the following
revised plans and events noted: 91-mile planned USAID-funded road
segment to be built between Banda Aceh and Calang. There is also an
inset map of Indonesia.
Also depicted is a chart with the following data:
Initial plans and events:
Plan: Construct a 150-mile paved road between Banda Aceh and Meulaboh;
Budget: $245 million;
Estimated completion date: September 2009.
Revised plans and events:
Plan: Construct a 91-mile road between Banda Aceh and Calang (the
government of Japan will construct the road segment between Calang and
Meulaboh); Budget: $254 million;
[a] USAID may build bypasses totaling approximately 12 miles at two
locations (noted on the map) along this road segment, depending on
availability of USAID funds. On October 18, 2006, USAID requested
additional funds to construct the bypasses;
Estimated completion date: February 2010.
Sources: GAO analysis of USAID data; Map Resources (inset map); and
U.S. Army Corps of Engineers (Sumatra, Indonesia, map).
[End of figure]
Several Factors, Including Postdisaster Environment, Led to Higher Cost
Estimates and Delayed Progress of the Indonesia Signature Project:
Based on GAO‘s analysis, a number of factors contributed to the
signature road‘s increased estimated cost per mile for the signature
road and may lead USAID to extend the Indonesia signature project‘s
completion date. These factors include the delay in USAID‘s awarding of
the large-scale construction contract; inclusion of elements in the
June 2006 project design that were absent from the original estimate;
and several factors related to Indonesia‘s postdisaster
environment”namely, limited initial site information, rising
construction costs, and delays in land acquisition.
* Delayed award of contract. Because USAID did not award the large-
scale construction contract in September 2006 as it intended, it was
not able to begin construction under the contract as planned. Although
specific costs associated with this delay have not yet been quantified,
construction industry research shows that longer projects are almost
always associated with higher costs. [Footnote 21]
* Additional design elements. The June 2006 project design for the road
comprised several technical elements not included in the March 2005
cost estimate, raising the project‘s estimated cost per mile. For
example, the June 2006 design included new specifications for building
eight cofferdams”watertight enclosures that permit underwater
construction of bridge supports that were not factored into the March
2005 estimate.
*Postdisaster environment. Limited initial site information, rising
construction costs, and delays in acquiring land”factors commonly
encountered by reconstruction efforts in a postdisaster environment
[Footnote 22] contributed to the project‘s increased estimated costs
per mile and to its potentially late completion date. Our April 2006
report noted these factors as likely to raise costs and make it
difficult to complete the road within the intended time frame.
- Limited initial information. As our April 2006 report noted, USAID‘s
March 2005 cost estimate was based on limited knowledge of site
conditions, owing to difficulty in accessing sections of the road‘s
planned coastal route.23 The revised estimate provides a more detailed
assessment of the project‘s requirements. For example, USAID‘s initial
estimate showed that 1.5 million cubic meters of excavation would be
required to build 150 miles of road, while the revised estimate shows
that 2.2 million cubic meters of excavation will be required to build
91 miles of road.
* Rising construction costs. Our April 2006 report noted rapid growth
in the number of construction projects after the disaster and cost
inflation resulting from the greater demands for construction materials
and labor. [Footnote 24] Posttsunami construction spending was expected
to increase fortyfold from pretsunami levels, from $50 million to $2
billion per year. World Bank data provided by USAID show that
construction costs increased as a result. For example, between October
2004 and October 2005, the average wage for bricklayers, plumbers, and
construction supervisors in Aceh increased 55 percent, 72 percent, and
81 percent, respectively. USAID expects that ongoing demands for
materials and labor will continue to create inflationary pressures.
* Delays in land acquisition. As our April 2006 report further noted,
USAID‘s ability to complete its project within the intended time frame
depended in part on the Indonesian government‘s progress in acquiring
privately owned land along the road‘s planned route. [Footnote 25]
Subsequent delays in the land acquisition process contributed to
USAID‘s changing the expected completion date of the signature
project‘s priority contract from August 2006 to December 2007. As of
January 1, 2007, the Indonesian government had obtained 899 of the
estimated 3,679 needed parcels. According to USAID officials, the
Indonesian government expects to complete the land acquisition in March
2007.
USAID May Extend Completion Date for Indonesia Signature Project:
Owing to the delays affecting its signature road project, USAID may
extend the project‘s completion date by 5 months, from September 2009
to February 2010. Figure 4 shows USAID‘s initial and, as of February
2007, revised timelines for its Indonesia signature project.
Figure 4: Initial and Revised Timelines for USAID‘s Signature Project
Activities in Indonesia, as of February 2007:
This figure illustrates the timelines from December 26, 2004, when the
Tsunami struck, through 2010. The following key dates are shown:
* December 26, 2004: Tsunami struck;
* May 11, 2005: Enact emergency supplemental legislation;
* December 2005: Complete nearly all emergency relief projects.
The following dates are depicted on the Initial plans and events
timeline:
* February/March 2005: Assess conditions and costs for signature
project;
* August, 2005: Award contract for priority construction of signature
project;
* November, 2005: Award contract for design and supervision of
signature project;
* August, 2006: Complete priority project;
* September 2006: Award contract for large-scale construction of
signature project; September, 2009: Complete signature project.
The following dates are depicted on the Revised plans and events
timeline:
* June 2006: Reduce signature project scope based on agreement with
governments of Japan and Indonesia;
* May 2007: Award contract for large-scale construction of signature
project; December, 2007: Complete priority project; February, 2010:
Complete signature project.
Source: GAO analysis of USAID data.
[End of figure]
USAID Raised Cost Estimates, and May Extend Completion Date for Sri
Lanka Signature Project:
USAID has made progress in several components of its Sri Lanka
signature project. However, the agency raised its cost estimates and
increased its budget by approximately 37 percent since 2005 to meet
rising costs for materials, labor, and additional security protection.
USAID may extend its estimated completion date for the signature
project because of other factors and increasing violence in some areas
of the country.
Sri Lanka Signature Project Is Largely Under Way:
USAID has made progress on several of the signature project‘s five
components:
* Construction of a bridge. In August 2006, USAID awarded the contract
for construction of a bridge over Arugam Bay, in eastern Sri Lanka. As
of December 2006, the work was on schedule to be completed by February
2008 as initially planned. Figure 5 shows a temporary bridge spanning
Arugam Bay in Sri Lanka, near the site of the planned USAID-funded
bridge.
* Construction of a water treatment facility. USAID has not awarded a
contract for the water treatment facility; however, it expects to do so
in May 2007. USAID had planned to use surface water from a nearby lake
for the water source but opted to use groundwater because it is less
costly to operate, build, and maintain.
* Rehabilitation of three commercial harbors. USAID has largely
completed the first of two planned phases in rehabilitating three
commercial harbors in southern Sri Lanka. The first phase included
smaller project activities, such as removing debris, repairing damaged
plumbing, and replacing damaged roofs. USAID awarded a contract for the
second phase in December 2006; these larger activities will include
dredging the harbors and rebuilding quay walls. [Footnote 26]
* Construction of vocational education facilities. USAID initially
planned to rehabilitate 10 vocational educational facilities but later
reduced the number to 9, four of which are in eastern Sri Lanka and
five in southern Sri Lanka. [Footnote 27] Plans for two of the nine
facilities call for the use of renewable energy and materials [Footnote
28] As of January 2007, USAID had not awarded a contract for the
facilities; however, it plans to do so in April 2007.
* Provision of coastal management training. A management organization
is providing USAID-funded training in coastal construction and tourism-
related skills that USAID considers essential to rebuilding and
reactivating the economy in the Arugam Bay area. The training is
expected to be completed in June 2007.
Figure 5: Temporary Bridge Currently Spanning Arugam Bay near Site of
Planned USAID-Funded Bridge in Sri Lanka:
There are two photographs depicting the temporary bridge.
Source: GAO.
[End of figure]
Rising Construction Costs, Deteriorating Security, and Other Factors
Led to Increased Cost Estimate and Project Delays:
Since its 2005 budget allocation, USAID raised its cost estimate and
increased the budget allocation for its signature project by more than
37 percent. The budget allocation increased from $35 million to $48
million, based largely on a revised cost estimate that showed rising
costs for construction labor and materials. In addition, other factors
such as delays in design of two signature project components have
delayed the progress of the signature project.
* Rising construction costs. As in Indonesia, labor and material costs
in Sri Lanka have increased since the tsunami. For example, salaries
for certain types of skilled laborers, such as masons, have risen
substantially since early 2005. These costs increased primarily because
of shortages of skilled labor and increased demand for construction
materials owing to the large number of reconstruction efforts in
tsunami-affected areas.
* Worsening security. Conflict between the government of Sri Lanka and
a separatist group, which began in 1983, has intensified in the 2 years
since the tsunami. [Footnote 29] The violence, previously confined
largely to northern and northeastern areas controlled by the
separatists, has spread to other areas of the country, including some
areas where USAID‘s reconstruction activities are planned or ongoing.
For the 15-month period ending December 2006, CH2MHill officials told
us that USAID‘s additional security costs were approximately $104,000,
and total additional security through 2008 is projected to cost about
$237,000 unless the security situation changes significantly. Although
the projected additional security costs are small”less than 1 percent
of the overall program budget”terrorist-related violence could enhance
the risk that USAID may not be able to complete its efforts as planned.
Figure 6 shows the locations of recent terrorist incidents relative to
USAID‘s Sri Lanka signature project areas.
Figure 6: Locations of Selected Signature Project Components and Recent
Terrorist Incidents:
This figure is a map of Sri Lanka with initial plans and recent events
shown in relation to specific points on the map, as follows:
Initial plans:
* Southern and southwestern coastal areas: rehabilitate three
commercial ports and fishing facilities;
* Southern and southeastern coastal areas: construct or reconstruct
approximately nine vocational schools;
* Construct a signature bridge and water treatment facility (Arugam
Bay).
Recent events:
* Thirteen Sri Lankan navy personnel killed in December 2005 in bus and
truck attack;
* Assassination of Sri Lankan army general in June 2006 about 10 miles
southeast of Colombo;
* Ten people killed in September 2006 in ethnic violence (Pottuvil);
* Two people killed in October 2006 by suicide attack on naval base
(Galle);
* At least 3,000 civilians displaced by heavy fighting in December 2006
(Trincomalee).
Sources: USAID, United Nations, State Department, and Map Resources
(map).
[End of figure]
Other factors. Specifically, delays in selecting the sites, determining
what would be taught, and designing the vocational educational
facilities and water treatment facility have led to slippages in the
schedule for the signature project.
USAID May Extend the Sri Lanka Signature Project Completion Date:
The completion date for the Sri Lanka signature project is March 2008.
However this date may be extended. [Footnote 30] The possible extension
of the completion date resulted from other factors such as design
related delays and the upsurge of violent incidents. Figure 7 shows
USAID‘s initial and revised plans for signature project activities in
Sri Lanka.
Figure 7: Initial and Revised Plans for USAID‘s Signature Project
Activities in Sri Lanka:
This figure illustrates the timelines from December 26, 2004, when the
Tsunami struck, through 2010. The following key dates are shown:
* December 26, 2004: Tsunami struck;
* May 11, 2005: Enact emergency supplemental legislation;
* December 2005: Complete nearly all emergency relief projects.
The following dates are depicted on the Initial plans and events
timeline:
* February/March 2005: Conditions and costs for signature project
assessed;
* September, 2005: Contract awarded for design and supervision of
signature project;
* June, 2006: Construction of signature project begins;
* August, 2006: Contract was awarded for construction of Arugam Bay
Bridge;
* September 2006: Contract awarded for ’major works“restoration of
three harbors;
* January, 2007: Begin construction of nine vocational schools;
* May 2007: Award contract for water treatment facility;
* March 2008: Complete signature project.
The following dates are depicted on the Revised plans and events
timeline:
* June 2006: Construction of ’minor works“ begins;
* December 2006: ’Major works“ contract awarded and construction begins
at three harbors;
* April 2007: Construction of nine vocational schools expected to
begin.
Source: GAO analysis of USAID data.
[End of figure]
USAID Acquired Financial and Technical Oversight, but Lacked Guidance
for Disaster Recovery and Reconstruction and Faces Further Risks:
To ensure financial oversight of its reconstruction programs in
Indonesia and Sri Lanka, USAID augmented its standard financial
controls with external and internal audits. USAID is also implementing
project activities to strengthen the audit capabilities of government
entities in tsunami-affected countries. To strengthen its technical
oversight, USAID reassigned and hired needed staff and extended its
interagency agreement with the U.S. Army Corps of Engineers (USACE) for
engineering services. However, when beginning its tsunami
reconstruction program in early 2005, USAID did not have comprehensive
guidance and did not consider some lessons learned from prior disaster
reconstruction efforts. Further, USAID faces additional risks that may
affect its ability to complete its signature projects as planned.
USAID Provided for Financial Audits and Is Helping Indonesia and Sri
Lanka to Strengthen Audit Capabilities:
USAID has augmented its standard financial controls through external
and internal audits of its tsunami reconstruction activities in
Indonesia and Sri Lanka. USAID has also strengthened the audit
capability of the Indonesian and Sri Lankan governments through funding
for technical assistance.
USAID‘s Financial Controls Include External and Internal Audits:
In addition to providing for required financial controls, such as
preaward surveys of prospective award recipients and financial audits,
[Footnote 31] USAID has provided for external and internal audits of
its reconstruction program activities.
* External audits. USAID signed an agreement with the Defense Contract
Audit Agency (DCAA) to concurrently audit material and labor controls
for its signature road construction project in Aceh, Indonesia.
According to USAID officials, the audits are being undertaken because
of the additional risk inherent in large construction projects. The
initial DCAA audit began in December 2006 and, according to USAID
officials, is expected to be completed by April 2007.
* Internal audits. USAID‘s Office of the Inspector General (IG)
completed three audits of USAID‘s tsunami reconstruction projects in
Indonesia and Sri Lanka) in fiscal year 2006. The completed audit
reports identified some deficiencies in USAID‘s reconstruction programs
in the two countries.
- Indonesia. The IG completed two of the three audits it had planned
for Indonesia, finding that USAID could not account separately for some
project expenditures, as required. To correct this weakness, the IG
recommended that USAID (1) include clear and specific language
requiring separate tracking, recording, and reporting of expenditures
in its implementing agreements; and (2) develop and implement
procedures to ensure that funds are charged to the correct tsunami
appropriations. USAID generally agreed with both recommendations.
- Sri Lanka. The IG found that USAID was generally on schedule in its
Sri Lanka signature project, having met 25 of 46 interim milestones
dates. However, because of some uncertainties, the IG recommended that
USAID develop procedures, with time frames, for achieving specific
tasks. USAID generally agreed with the recommendations. [Footnote 32]
USAID Is Supporting Efforts to Strengthen Indonesian and Sri Lankan
Audit Capabilities:
USAID is funding several efforts to provide technical assistance and
training in fraud awareness, financial planning, and other activities,
aimed at increasing the audit capacities of the local Indonesian
government and Sri Lankan government audit organization.
* Indonesia. USAID is providing technical assistance to help local
government entities increase their capacity to plan and manage public
services and finances; be transparent and accountable in legislative
and administrative processes; respond to citizen priorities; include
opportunities for citizens to participate in local government decision
making; and work with local service providers to deliver services. For
example, the USAID-funded Aceh Technical Assistance Recovery Project (A-
TARP) is providing technical support to the Indonesian Rehabilitation
and Reconstruction Agency and the Office of the Governor of Aceh
Province. One of the aims of A-TARP is to assist Indonesian officials
in better planning, coordinating, managing, and overseeing tsunami
reconstruction efforts.
* Sri Lanka. USAID is providing support to the Sri Lanka Anti-
Corruption Program, to assist key government agencies and selected
civil society organizations in strengthening measures to combat
corruption and monitor the disbursement of tsunami-related assistance.
Some of the program‘s core government partners include the Auditor
General‘s Department, the Commission to Investigate Allegations of
Bribery or Corruption, and various civil society organizations. The
program goals include improving the delivery of technical services in
multiethnic communities, especially those affected by the long-standing
conflict and tsunami.
USAID Has Acquired Needed Technical Oversight for Tsunami
Reconstruction Programs:
In April 2006, we reported that USAID had not filled some needed
technical positions in both Indonesia and Sri Lanka. To establish
technical oversight, USAID has filled the positions with experienced
staff, such as engineers, and acquired additional technical expertise
through interagency agreements.
* Indonesia. As of October 2006, USAID had filled needed technical
positions with qualified and experienced staff, including a senior
engineer who is currently the team leader for the signature road
project. In addition to filling these internal technical positions,
USAID extended its interagency agreement with USACE to March 2007.
Under the agreement, USACE will assist in reviewing the technical
design to provide environmental protections involving the signature
road construction project.
* Sri Lanka. Our prior report noted that USAID had hired two of the
three engineers needed to oversee infrastructure construction
activities in Sri Lanka. In June 2006, USAID filled the third
engineering position needed for technical engineering services on the
Sri Lanka signature project.
USAID Lacked Guidance and Faces Risks in Completing Signature Projects
as Planned:
Since beginning its tsunami reconstruction program in 2005, USAID has
taken actions to address various problems, such as rising costs and
delays in acquiring land. However, when it began the tsunami
reconstruction program in early 2005, USAID missions in Indonesia and
Sri Lanka did not have disaster reconstruction program
guidance”including lessons learned from its prior programs, such as the
importance of setting appropriate time frames, conducting thorough cost
assessments, and understanding local land tenure systems. As USAID
moves forward in its efforts to implement the signature projects in
both countries, a variety of risks will continue to present challenges
that USAID must be prepared to address.
When faced with cost, schedule, and external difficulties in both
countries, USAID took some actions. For example, in Indonesia, when
USAID found that costs for building the signature road had escalated,
the agency (in cooperation with the Indonesian and Japanese
governments) reduced the length of road it planned to build, while
still preserving the original concept of building the entire 150-mile
road. Also, to facilitate progress in land acquisition in Indonesia,
the U.S. Ambassador and USAID Mission Director have engaged senior
Indonesian government officials and stressed the importance of
acquiring land more quickly. Further, in both Indonesia and Sri Lanka,
USAID reallocated funds from other sources to cover estimated cost
increases to its signature projects.
Although USAID took actions to address difficulties in its signature
projects, the agency did not have guidance, including lessons learned
from its prior disaster reconstruction efforts, in its planning
process. During recent years in which USAID has been involved in
postdisaster recovery situations, such as responding to hurricanes and
earthquakes, the agency has faced similar or nearly identical
circumstances that have shown the likelihood of cost increases,
schedule extensions, land acquisition delays, and other potential
problems. However, USAID‘s lack of guidance and lessons learned created
challenges that sometimes resulted in an ad-hoc approach to planning
its activities. For example, we reported in May 2006 that, if USAID had
had access to lessons learned regarding likely increases in demand for
construction materials and labor, it might have helped USAID establish
more realistic expectations for what could be achieved within a 1-year
time frame. [Footnote 33]
As the reconstruction progresses, USAID signature construction projects
continue to face risks that may further increase costs, extend
schedules, and threaten successful completion. As we reported in May
2006, numerous risk factors are commonly experienced when carrying out
postdisaster activities. [Footnote 34] Also, during our current review,
we identified at least three of these risk factors that are
particularly relevant to USAID‘s ongoing tsunami reconstruction
program:
* Schedule factors. The Indonesia signature road project schedule may
continue to slip, depending on the governments‘ pace in acquiring land
and property, and the current pace of acquisition may not be sufficient
to enable timely completion of construction. In addition, if USAID
experiences further delays in awarding its large-scale construction
contract, the project completion date may be later than February 2010,
as currently projected. In Sri Lanka, other factors, such as delays for
designs of the signature project components have affected the
schedule.
* Cost factors. As discussed earlier, uncertainties regarding the
projects‘ schedules increase cost risks, because longer projects
generally cost more. Additionally, continued price inflation increases
the risk that the project may cost more than USAID‘s budgets. As we
reported in April 2006, posttsunami construction spending in Aceh
Province, Indonesia, was expected to increase fortyfold from pretsunami
levels, from $50 million to $2 billion per year, creating inflationary
pressure. However, in its March 2005 cost estimate, USAID included a 20
percent contingency”less than the 41 percent annual inflation rate that
was later reported by the government of Indonesia‘s Reconstruction and
Rehabilitation Agency. [Footnote 35] Although the annual rate had
declined considerably to 6 percent, as of September 2006, USAID expects
that continuing cost increases in Indonesia are likely to affect
reconstruction efforts. In Sri Lanka, although USAID has already
increased its cost estimate for the signature project by over 37
percent because of rising costs for materials and labor, price
uncertainties may continue to affect overall costs.
* External factors. Community unrest related to the road in Indonesia
and the increasing threat of violence in Sri Lanka may limit USAID‘s
ability to continue the signature projects and complete them as
planned. In Indonesia, work under the priority construction contract
was hindered in late 2006 by Acehnese protesters demonstrating against
the Indonesian army‘s unreimbursed seizure of property to build a
temporary road immediately after the tsunami. The demonstrations were
not aimed directly at USAID. In January 2007, USAID reported that no
demonstrations had occurred since December 2006 and that, even if they
were to reoccur, they were not likely to cause delays in construction
of the new road. In Sri Lanka, the rising number of violent incidents
related to the long-running secessionist movement has had some impact
on USAID‘s progress to date. However, USAID officials acknowledged that
additional incidents, particularly in or near project sites, could
increase the uncertainty of whether USAID‘s efforts continue at the
planned pace.
Required Reports to Congress Do Not Clearly Show USAID‘s Progress or
Address Risks to Signature Project Schedules and Cost Estimates:
In response to our April 2006 recommendation, [Footnote 36] the
Secretary of State provided updated cost estimates and schedules in its
required semiannual report. However, the reports that State has
submitted to Congress since April 2006 have not clearly depicted the
agency‘s progress in its tsunami reconstruction program. Further, the
reports do not address the ongoing risks to its cost estimates and
schedules for the Indonesia and Sri Lanka signature projects or provide
plans for mitigating the effects of these risks.
State‘s two most recent semi-annual reports to Congress (June and
December 2006) show USAID‘s obligations to recipient governments rather
than amounts it committed to organizations implementing project
activities. The reports show as ’obligations“ the overall funding that
USAID agreed to provide to recipient countries for tsunami
reconstruction. The obligations shown also include funds that have not
yet been committed to specific USAID transactions, such as contracts,
grants, and cooperative agreements with implementing organizations.
USAID treats funds included in these agreements as ’subobligations“;
however, the Department of State does not include subobligations in the
reports. As a result, the data as reported to Congress do not clearly
reflect USAID‘s actual progress in funding of its tsunami
reconstruction programs. For example, State‘s December 2006 report to
Congress states that all of the $254 million budgeted for the signature
road construction project in Indonesia had been ’obligated.“ However,
this figure does not reflect that USAID had signed agreements with
implementing organizations for only $105 million”slightly more than 40
percent of the amount budgeted for the work. (See fig. 8.) Moreover,
the reported obligations for the Indonesia signature road project do
not reflect that USAID has not yet awarded the major contract for large-
scale construction.
Figure 8: USAID Signature Project Funding Information Included and Not
Included in Department of State Reports:
This figure is two vertical bar graphs with the following bars:
Allocated, Obligated, Subobligated, and Expended. The vertical axis of
the graph represents U.S. dollars in millions from 0 to 300. The
horizontal axis represents types of funding. One graph depicts data for
Indonesia; the other represents data for Sri Lanka.
The following data is depicted:
Indonesia:
Allocated (included in State's 4102 reports to Congress): $254 (100%);
Obligated: (included in State's 4102 reports to Congress): $254 (100%);
Subobligated: (not included in State's 4102 reports to Congress): $105
(41%); Expended: (included in State's 4102 reports to Congress): $15
(6%).
Sri Lanka:
Allocated (included in State's 4102 reports to Congress): $48 (100%);
Obligated: (included in State's 4102 reports to Congress): $48 (100%);
Subobligated: (not included in State's 4102 reports to Congress): $35
(73%); Expended: (included in State's 4102 reports to Congress): $5
(10%).
Source: GAO analysis of USAID data.
Note: The amounts are as of December 31, 2006.
[End of figure]
Generally, an obligation is a definite commitment that creates a legal
liability of the U.S. government for the payment of goods and services
ordered or received (GAO-05-734SP, 70). Consistent with 31 U.S.C. 1501,
which defines when an agency can record an obligation, USAID treats as
an obligation the bilateral agreements it makes with other countries to
deliver assistance. However, except where denoted by quotation marks
(’obligations“), this report defines obligations as amounts of orders
placed, contracts awarded, services received, and similar transactions
during a given period that will require payments during the same or
future period. USAID labels these actions subobligations. Expenditures
are defined as the issuance of checks, disbursement of cash, or
electronic transfer of funds to liquidate a federal obligation.
USAID‘s required semiannual reports to Congress do not include
information on cost and schedule risks to the Indonesia and Sri Lanka
signature projects or provide mitigation strategies for addressing the
risks. For example, the reports omit information on the government of
Indonesia‘s slow progress in acquiring land parcels and how this
challenge may affect the successful completion of the Indonesia
signature road project. Similarly, the report does not present USAID‘s
strategy for completing the Sri Lanka signature project in the face of
rising conflict and an upsurge in violence.
Conclusions:
USAID has assisted numerous countries, including Indonesia and Sri
Lanka, in recovering from the December 2004 tsunami. A variety of USAID
tsunami reconstruction projects have made progress toward restoring the
lives of the survivors. However, some key project activities in
Indonesia and Sri Lanka”particularly its signature projects intended to
generate increased visibility for U.S. assistance”have experienced
increased estimated costs, are behind initial schedules, and in the
case of Indonesia have been reduced in scope. In both countries, USAID
has taken some measures to adjust the scope, budget, and schedule of
the projects in an attempt to account for conditions that have affected
the projects‘ progress, while preserving the initial project goals.
Although the Department of State has included updated information in
its reports to Congress on the progress of the tsunami reconstruction
program, the reports do not clearly reflect USAID‘s progress in the
programs or risks that could affect its progress. The reports show as
obligations the amounts that USAID intends to use for specific
activities rather than amounts”’subobligations“”that it has agreed to
in transactions with implementing agreements, such as contracts for
specific projects. In addition, the reports do not indicate ongoing
risks in both countries that may impact signature projects‘ costs,
schedules, and scopes of work. As a result, Congress lacks some
information that it needs to oversee USAID.
Recommendations for Executive Action:
To ensure that Congress has access to information that clearly reflects
both USAID‘s progress in its tsunami reconstruction programs in
Indonesia and Sri Lanka and factors that may slow its progress, we are
making the following two recommendations regarding the Secretary of
State‘s required semiannual reports to Congress:
* To clearly show USAID‘s progress in using the appropriated funds for
tsunami reconstruction, the reports should include the amounts that
USAID obligated to recipient countries for tsunami reconstruction and
the amounts that it ’subobligated“ in transactions with implementing
organizations, such as contracts, grants, and cooperative agreements,
for specific reconstruction projects.
* To indicate risk of potential changes to the costs, schedules, and
scopes of work of USAID‘s signature projects in Indonesia and Sri
Lanka, the reports should identify factors that may impact the agency‘s
implementation of the projects and provide strategies for mitigating
any impact.
Agency Comments and Our Evaluation:
At our request, the Department of State and USAID provided written
comments and technical suggestions and clarifications on a draft of
this report. (See app. IV for State‘s written comments and app. V for
USAID‘s written comments.) The Department of State and USAID agreed to
fully implement our recommendation to include ’subobligation“ cost data
in State‘s required reports to Congress. USAID also stated that it has
regularly provided risk information and mitigation strategies in
various sections of State‘s required reports to Congress, but agreed to
separately identify such data in future reports. We have incorporated
technical suggestions and clarifications from USAID and State, as
appropriate.
The U.S. Army Corps of Engineers declined our request to provide
written comments on a draft of this report.
We are sending copies of this report to interested congressional
committees as well as the Administrator, USAID; Commander, U.S. Army
Corps of Engineers; and the Secretary of State. We will also make
copies available to others upon request. In addition, the report will
be available at no charge on GAO‘s Web site at [hyperlink,
http://www.gao.gov].
If you or your staff have any questions about this report, please
contact me at (202) 512-3149, or gootnickd@gao.gov. Contact points for
our Offices of Congressional Relations and Public Affairs may be found
on the last page of this report. Individuals making key contributions
to this report are listed in appendix VI.
Signed by:
David Gootnick:
Director:
International Affairs and Trade:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
We were directed [Footnote 37] by Congress to monitor the delivery of
U.S. reconstruction assistance to the tsunami-affected countries
through periodic visits. In this report, we review (1) the status of
the U.S. Agency for International Development‘s (USAID) signature
projects in Indonesia and Sri Lanka, including its obligations and
expenditures of funds for reconstruction assistance in Indonesia and
Sri Lanka; (2) USAID‘s financial and technical oversight of the
programs, and the extent to which the agency had issued guidance that
includes lessons learned from prior disasters in order to identify and
address project uncertainties; and (3) actions taken by the Secretary
of State in response to our April 2006 recommendation regarding its
provision of updated costs estimates and schedules to Congress.
To determine the progress of USAID‘s reconstruction programs in
Indonesia and Sri Lanka, we met with officials of USAID‘s Bureau for
Asia and the Near East and with the U.S. Army Corps of Engineers
(USACE). We traveled to Sri Lanka in July 2006 and to Indonesia in
October 2006. In Jakarta and Banda Aceh, Indonesia, and in Colombo, Sri
Lanka, we reviewed USAID‘s status reports, applicable contracts, and
cooperative agreements and discussed with USAID and other U.S.
officials how their respective programs addressed reconstruction
needs.
During our visit to Indonesia, we reviewed USAID‘s activities in
tsunami-affected areas, including the signature road construction
project in Aceh Province. During 2 days in Aceh, we visited and
photographed 2 locations consisting of several building construction
projects which were in various stages of completion. We also visited a
36-mile section of road where USAID-funded road maintenance work was
ongoing or where USAID-funded construction had begun. During our visit
to Sri Lanka, we reviewed and photographed USAID‘s activities in
tsunami-affected areas, including the signature project components in
the eastern and southern part of Sri Lanka. During these trips, we
interviewed representatives of contractors, nongovernmental
organizations (NGO), government ministries, and other entities
responsible for day-to-day project implementation. We also interviewed
many of the intended recipients of U.S. assistance, asking about the
tsunami‘s impact on their homes, livelihoods, and communities and about
the effectiveness of U.S.-funded projects in helping them rebuild
infrastructure, restore their livelihoods, and obtain basic services.
Finally, we reviewed prior GAO reports on USAID disaster assistance
efforts.
To assess USAID‘s financial and technical oversight, we reviewed
USAID‘s financial procedures and discussed the procedures with
cognizant USAID officials. In Indonesia, a licensed GAO professional
engineer met with USAID and USACE engineers and other technical staff
to discuss the level of technical oversight and planning. To determine
the challenges that USAID faces in implementing its program, we
discussed oversight procedures and financial systems with officials of
host governments, multilateral and bilateral donors, and NGOs involved
in reconstruction efforts. We also met with host government officials,
including national and local officials, to discuss their procedures for
ensuring that donor activities did not conflict or overlap and their
views on donor coordination.
We assessed the reliability of funding and expenditure data compiled
and generated by USAID‘s Office of the Controller in Washington, D.C.,
and by the USAID missions in Indonesia and Sri Lanka. We met with USAID
officials to review the internal controls for the collection of data,
comparing the consolidated reports with mission-specific reports, and
discussed relevant data reliability issues with cognizant agency
officials. In addition, we interviewed knowledgeable USAID officials
about the systems and methodology they use to verify the completeness
and accuracy of the data. Finally, we reviewed relevant reports from
the USAID Office of the Inspector General and several GAO reports of
USAID disaster reconstruction program funding since 1999. None of these
sources noted any significant discrepancies or concerns about the
reliability of USAID‘s data. Based on our comparison of data generated
from different USAID sources at USAID headquarters and mission, we
found that the sources generally corroborated each other, increasing
our confidence that the data were reliable. We determined that USAID‘s
funding and expenditure data were sufficiently reliable for our
analysis.
[End of section]
Appendix II: USAID‘s Signature Projects in Indonesia and Sri Lanka:
Table 2: Scope and Status of Indonesia Signature Road Construction
Project:
Contract: Priority segment
Scope (December 2005): Repair and maintain existing 50-mile segment
from Banda Aceh to Lamno; Design and construct a short priority (3-
mile) segment between Banda Aceh and Lamno; Perform the design work on
a cost-plus-fixed-fee basis; Perform the maintenance and construction
work on a fixed-price basis;
Status (December 2005): Contract awarded
to an Indonesian firm (PT Wijaya Karya) on August 23, 2005; Contract
cost is $12.8 million; Maintenance and repair work is ongoing; route is
passable; Design of the new 3-mile road segment is under way;
Construction of new 3-mile road segment is expected to be completed by
August 2006;
Status (February 2007): Contract modified to construct
segments totaling 26 miles between Banda Aceh and Calang[a]; Contract
cost increased to $81.4 million; Construction work began October 2006
and is expected to be complete in December 2007.
Contract: Design and construction management;
Scope (December 2005):
Design the new road (except for the 3-mile priority segment). Supervise
construction. Perform services on a cost-plus-fixed-fee basis;
Status (December 2005): Contract awarded to U.S. firm (Parsons Global Services
Inc.) on November 10, 2005; Estimated contract cost up to $34.9
million; amount obligated is $20 million; Design work ongoing and
planned to be completed in June 2006; Contractor required to prepare an
updated estimate of construction costs; Construction management
services being provided on the priority road segment and will continue
in September 2006, when the contract for construction of Banda Aceh to
Meulaboh road is awarded;
Status (February 2007): Design of new 91-mile road between Banda Aceh and
Calang is complete[b]; Management of priority construction work is ongoing;
Management of large-scale construction expected to begin when contract is
awarded in May 2007; Estimated contract cost up to $35.1 million.
Contract: Large-scale construction;
Scope (December 2005): Placement of new road along a 150-mile route from
Banda Aceh to Meulaboh (except for the portion covered under the priority segment);
Construction will be done on a fixed-price basis according to the plans and
specifications of the design prepared under separate contract;
Status (December 2005): Construction contract is expected to be awarded in
September 2006, and construction is to be completed by September 2009;
Status (February 2007): Scope reduced to construct 65 miles of road between
Banda Aceh and Calang; 26 additional miles of road between these 2 cities to be
built under the priority contract; Contract was not awarded in
September 2006, as planned, due to inability to reach agreement on
price with prospective contractor; New contract solicitation process is
ongoing with planned award in May 2007 and estimated completion in
February 2010.
Source: GAO analysis of USAID data.
[a] Design for approximately 23 of the 26 miles of road to be
constructed will be provided by the design and construction management
contractor. The priority contractor will complete the design for the
remaining 3 miles.
[b] The contractor is also completing design for two separate bypasses,
totaling 12 miles, along the segment of road between Calang and
Meulaboh. According to USAID officials, construction of the bypasses is
contingent on availability of funds.
[End of table]
Table 3: Description and Status of USAID‘s Signature Project in Sri
Lanka:
Project component description: Construct a bridge over Arugam Bay in
eastern Sri Lanka;
Status: USAID through CH2M HILL awarded the contract in August 2006
to a private contractor based in India. Construction began in September
2006.
Project component description: Drill wells for a water treatment
facility to provide water for the town of Pottuvil and nearby
communities near Arugam Bay;
Status: USAID funds are being used for drilling wells for a water
treatment facility. Cost estimates for construction and maintenance were
reduced after USAID decided not to use surface water from a nearby lake.
Project component description: Rehabilitate three commercial harbors in
southern Sri Lanka, including:
* Minor works: construct/repair toilets, repair roofs, clean up debris,
etc.;
* Major works: dredge harbors, repair quay walls, etc.;
Status: The minor works, scheduled to be completed in December 2006, were
substantially completed on January 31, 2007. Work to complete punch
list items is ongoing; The contract for major works was awarded and
construction began in December 2006.
Project component description: Construct nine vocational education
facilities (four are located in eastern Sri Lanka and five in southern
Sri Lanka). USAID plans to make two of the facilities ’green“ (i.e.,
they will be built using renewable energy and materials whenever
possible), and USAID also plans to obtain Leadership in Energy and
Environmental Design certification for these two;
Status: As of February 2007, construction is expected to begin by April
2007.
Project component description: Provide coastal management training. A
USAID-funded firm is providing training in construction and tourism-
related skills, which USAID considers essential to rebuilding and
reactivating the economy in the Arugam Bay area;
Status: Coastal management training is continuing and projected to be
completed by June 2007.
[End of section]
Appendix III: USAID‘s Nonsignature Activities in Indonesia and Sri
Lanka:
As of December 31, 2006, USAID‘s tsunami reconstruction programs in
Indonesia and Sri Lanka include nonsignature projects budgeted at $97
million and $35 million, respectively. Tables 4 and 5 show the project
sectors, amounts of funds budgeted, and descriptions of selected
activities in each country.
Table 4: Project Sectors, Amounts of Funds Budgeted, and Descriptions
of Selected Activities for USAID‘s Nonsignature Projects in Indonesia
(dollars in millions):
Project sectors: Small-scale infrastructure (construction of community
buildings and sewage systems, reconstruction of schools, etc.);
Funds budgeted, as of December 31, 2006: $23;
Descriptions of selected activities: USAID funds have been used to
reconstruct community meeting centers and village offices, rehabilitate
irrigation canals, clear agricultural land for re-planting, and construct
and repair water systems.
Project sectors: Technical assistance and good governance (training and
technical support to various Indonesian government entities);
Funds budgeted, as of December 31, 2006: $12;
Descriptions of selected activities: The USAID-funded Aceh Technical
Assistance Recovery Project (A-TARP) activity is providing technical
assistance to national and sub-national government ministries in planning,
coordinating, managing, and overseeing reconstruction efforts. The
USAID-funded Local Governance Support Program supports local governments‘
efforts to increase their capacity to plan and manage public services
and finances; improve transparency and accountability in legislative
and administrative processes; respond to citizen priorities; include
opportunities for citizens to participate in local government decision
making; and work with local service providers to deliver services.
Project sectors: Transition assistance (rebuilding shelters and helping
to restore livelihoods through microenterprise support);
Funds budgeted, as of December 31, 2006: $62;
Descriptions of selected activities: The USAID-funded Support for
Peaceful Democratization program supports projects targeted at conflict
prevention, mitigation, and resolution in selected areas of Indonesia.
Local and international NGOs are provided with grants for building local
and national constituencies for peace, promoting cooperation among diverse groups,
increasing community-level participation in local governance, improving
livelihoods, and increasing economic opportunities.
Source: USAID.
Note: Dollars are rounded to the nearest number.
[End of table]
Table 5: Project Sectors, Amounts of Funds Budgeted, and Descriptions
of Selected Activities for USAID‘s Nonsignature Projects in Sri Lanka
(Dollars in millions):
Project sectors: Small-scale infrastructure (evaluating environmental
impacts of building public facilities, improving access for disabled
persons, building playgrounds in areas where many children are tsunami
survivors, etc.);
Funds budgeted, as of December 31, 2006: $15;
Descriptions of selected activities: USAID funds are being used to
evaluate the environmental impacts of building an agricultural
reservoir, community health centers, and others facilities. A USAID-
funded NGO is implementing construction projects to provide or improve
access for disabled persons in at least seven facilities, such as
hospitals and schools. USAID plans to construct approximately 85
playgrounds in Sri Lanka, with about half to be built in eastern Sri
Lanka. Increasing security issues may affect USAID‘s progress and may
ultimately impact its ability to achieve the goal of building all 85
playgrounds. As of February 2007, 18 playgrounds had been completed.
Project sectors: Technical assistance and good governance (providing
training and technical assistance to Sri Lankan government agencies and
civil society organizations);
Funds budgeted, as of December 31, 2006: $10;
Descriptions of selected activities: The USAID-funded Sri Lanka
Anti-Corruption Program is intended to assist key government agencies
and selected civil society organizations in strengthening measures to
combat corruption and monitor the uses and disbursements of tsunami-
related assistance. Key government agencies include the Auditor
General‘s Department, the Commission to Investigate Allegations of
Bribery or Corruption (also known as the Bribery Commission), and
various civil society organizations. This activity also includes plans
to improve transparency and relationships in multi-ethnic communities,
especially those affected by the long-standing conflict and the
tsunami.
Project sectors: Transition assistance (helping local organizations
promote peace and democracy, through short-term assistance targeted at
key political transition and stabilization needs);
Funds budgeted, as of December 31, 2006: $10;
Descriptions of selected activities: USAID‘s efforts are focused on
three main activities: (1) building small scale infrastructure projects;
(2) improving communication between local governments and affected
community members, and; (3) improving and restoring livelihoods of
those affected by the tsunami.
Source: USAID.
Note: Dollars are rounded to the nearest number.
[End of table]
Appendix IV: Comments from the Department of State:
United States Department of State:
Washington, DC 20520:
February 15, 2007:
Ms. Jacquelyn Williams-Bridgers:
Managing Director:
International Affairs and Trade:
Government Accountability Office:
441 G Street, N.W.:
Washington, D.C. 20548-0001:
Dear Ms. Williams-Bridgers:
We appreciate the opportunity to review your draft report, "Foreign
Assistance: USAID "Signature" Tsunami Recovery Projects in Indonesia
and Sri Lanka Exceed Initial cost and Schedule Estimates, and Face
Further Risks," GAO Job Code 320423.
The enclosed Department of State comments are provided for
incorporation with this letter as an appendix to the final report.
If you have any questions concerning this response, please contact
Jonathan Weyer, Financial Economist, Bureau of Economic, Energy, and
Business Affairs at (202) 647-7411.
Sincerely,
Signed by:
Bradford R. Higgins:
cc:
GAO – Emil Friberg:
EEB – Elizabeth Dibble:
State/OIG – Mark Duda:
Department of State Comments on GAO Draft Report
Foreign Assistance: USAID "Signature" Tsunami Recovery Projects in
Indonesia and Sri Lanka Exceed Initial Cost and Schedule Estimates, and
Face Further Risks (GAO-07-357, Job Code 320423):
The State Department appreciates the opportunity to review and comment
on the draft report, "Foreign Assistance: USAID `Signature' Tsunami
Recovery Projects in Indonesia and Sri Lanka Exceed Initial Cost and
Schedule Estimates, and Face Further Risks."
As USAID also noted in its comments on this report, we will ensure that
cost data on "sub-obligated" funds are included in the semiannual
report that the Secretary of State submits to Congress.
[End of section]
Appendix V: Comments from the U.S. Agency for International
Development:
Note: GAO comments supplementing those in the report text appear at the
end of this appendix.
USAID:
From The American People:
U.S. Agency for International Development:
1300 Pennsylvania Avenue, NW:
Washington, DC 20523:
[hyperlink, http://www.usaid.gov]:
February 21, 2007:
Jacquelyn L. Williams-Bridgers:
Managing Director:
International Affairs and Trade:
U.S. Government Accountability Office:
441 G Street, N.W.:
Washington, D.C. 20548:
Dear Ms. Williams-Bridgers:
We appreciate the opportunity to comment on your draft report, "Foreign
Assistance: USAID `Signature' Tsunami Recovery Projects in Indonesia
and Sri Lanka Exceed Initial Cost and Schedule Estimates, and Face
Further Risks," GAO-07-357.
We are pleased that you reported progress on the U.S. Government's most
significant tsunami recovery projects in Indonesia and Sri Lanka, and
that USAID funding and expenditure data was sufficiently reliable for
your. analysis. We also thank you for acknowledging the steps USAID has
taken to fill needed positions in both countries to ensure continued
progress.
USAID is particularly pleased that construction on the road project in
Indonesia is continuing apace, despite difficulties experienced by the
Government of Indonesia in acquiring land and the unexpected setback on
award of the second construction contract. In order to launch visible
work on the coastal highway as quickly as possible, USAID engaged an
Indonesian contractor to rebuild less damaged parts of the highway.
With the delay in the award of the second contract to rebuild the most
damaged parts of the highway, USAID added more miles to the first
contract, for a total of 25.7, to ensure steady progress. Construction
of the remaining 64.8 miles will begin as soon as a new contract is
awarded with a large construction firm. The first recommendation in the
draft report is that USAID provide cost data to the Secretary of State
on agreements with contractors and grantees ("sub-obligations") in
addition to agreements with governments ("obligations"), for the semi-
annual reports to Congress. Although Congress did not ask for this
information in the semi-annual reports, we agree to provide such data
in the future to more clearly reflect USAID progress on these important
projects.
The second recommendation is for USAID to provide risk information and
mitigation strategies to the Secretary of State to be included in the
semi-annual reports to Congress. USAID has regularly provided such
information in various sections of the reports relating to specific
projects. To clarify risks and mitigation strategies in future reports,
USAID will separately identify such data in the future. (See comment).
Finally, USAID is pleased to update you on progress made since the
preparation of your report. A list of the projects and updates is
provided with this letter.
If you have any questions concerning this response, please contact
Debra Banks at 202-712-0821.
Sincerely,
Signed by:
Mosina H. Jordan:
Counsel to the Agency:
Enclosure:
Project Status Update as of February 15, 2007
Indonesia:
* 899 of the total 3,679 parcels of land for the road have been
acquired;
* 22 of the total 26 miles of government land along the road have been
released;
* 38 miles of the total 90.5-mile road alignment have been acquired;
* 280 of the 954 parcels of land for the priority road section have
been acquired;
* Seven miles of alignment on the 25.7-mile priority road section were
acquired;
* Notices to proceed for six miles of priority road sections were
provided;
* P.T. Wijaya Karya started structural backfill on three miles of
priority road;
* Two bridge superstructures were fabricated and are underway to the
sites;
* P.T. Wijaya Karya started constructing one bridge substructure;
* The road blockages were resolved;
* Graves and utility structures were moved from critical areas of the
road.
Sri Lanka:
* 18 playgrounds were completed;
* Nine playgrounds are under construction;
* Pre-construction activities, such as site evaluation, documentation,
and community consultation are ongoing for the remaining 58 of the
total 85 playgrounds;
* Civil conflict has presented delays for the program team to visit and
conduct pre-construction site assessments in certain districts in the
East/North; the overall program has been able to proceed by
reprioritizing construction of playgrounds in the South;
* Construction of bridge over Arugam Bay began in September 2006;
* "Substantial completion" of minor works for three harbors in the
South was completed on January 31, 2007; minor punch list correction
items are still ongoing.
The following is GAO‘s comment on the U.S. Agency for International
Development letter dated February 21, 2007.
GAO Comment:
Although USAID has provided some information, the required reports have
generally contained limited information that has not fully identified
risks and included mitigation strategies.
[End of section]
Appendix VI: GAO Contact and Staff Acknowledgments:
GAO Contact:
David Gootnick, (202) 512-3149 or gootnickd@gao.gov.
Staff Acknowledgments:
In additional to the contact named above, Michael Armes, Mark Dowling,
Emil Friberg, Phillip Herr, Dorian Herring, Reid Lowe, George Taylor,
and Wilda Wong made key contributions to this report.
[End of section]
Footnotes:
[1] Emergency Supplemental Appropriations Act for Defense, the Global
War on Terror, and Tsunami Relief, 2005, Pub. L. 109-13. In addition to
$327 million budgeted for survivors‘ immediate needs for medicine,
food, and shelter, approximately $482 million is currently budgeted for
longer-term reconstruction and related programs to be directed by the
U.S. Agency for International Development (USAID). This amount includes
$351 million for Indonesia, $83 million for Sri Lanka, and $48 million
for other countries and regional programs. The remaining $99 million is
budgeted to other U.S. agencies.
[2] USAID also initiated ’nonsignature“ projects that it initially
planned to complete by September 2007.
[3] In March 2005, the House Appropriations Committee requested that we
review U.S. assistance for reconstruction efforts in response to the
December 2004 earthquake and tsunami (H.Rept. 109-16, p. 49).
[4] GAO, Foreign Assistance: USAID Has Begun Tsunami Reconstruction in
Indonesia and Sri Lanka, but Key Projects May Exceed Initial Cost and
Schedule Estimates, GAO-06-488 (Washington, D.C.: Apr. 14, 2006).
[5] Section 4102 of the Emergency Supplemental Appropriations Act for
Defense, the Global War on Terror, and Tsunami Relief, 2005, Pub. L.
109-13, required that the Secretary of State report to Congress in June
2005, on a project-by-project basis, on the proposed uses of all
appropriated funds for which State anticipated obligating funds and
every 6 months thereafter on the expenditure of the funds, on a project-
by project basis, until all funds are fully expended.
[6] Generally, an obligation is a definite commitment that creates a
legal liability of the U.S. government for the payment of goods and
services ordered or received (GAO-06-382SP, vol. II, 7-3). Consistent
with 31 U.S.C. 1501, which defines when an agency can record an
obligation, USAID treats as an obligation the bilateral agreements it
makes with other countries to deliver assistance. However, except where
denoted by quotation marks (’obligations“), this report defines
obligations as amounts of orders placed, contracts awarded, services
received, and similar transactions during a given period that will
require payments during the same or future period. USAID labels these
actions subobligations. Expenditures are defined as the issuance of
checks, disbursement of cash, or electronic transfer of funds to
liquidate a federal obligation.
[7] The government of Japan has agreed to build a 69-mile road that
will connect to the U.S. road (91 miles). The total length of the road,
160 miles, differs from the 150-mile road initially planned by USAID
because the Japanese road follows a different alignment than the U.S.
road would have followed.
[8] Based on GAO‘s analysis, the current $2.7 million cost per-mile
estimate does not account for certain administrative and support costs
and certain activities performed previously that are not directly
related to the costs for constructing 91 miles of road. As such, the
$2.7 million per-mile estimate does not directly correlate with the
$254 million currently budgeted to the signature road.
[9] Also, in October 2006, the U.S. Ambassador to Indonesia requested
that the Department of State ask for additional funds from the Office
of Management and Budget to cover anticipated excess costs of
constructing two bypasses not included in the revised 86-mile project.
The bypasses, totaling approximately 12 miles, are along the section of
road being constructed by the government of Japan.
[10] According to the National Research Council, a private, nonprofit
institution chartered by Congress that provides science, technology,
and health policy advice, extending the completion date for
construction projects is likely to increase costs.
[11] The 3,679 parcels account for privately owned land along
approximately 65 miles of the 91-mile route between Banda Aceh and
Calang. The 899 parcels of privately owned land that have been acquired
by the Indonesian government are noncontiguous and account for
approximately 16 miles of the road‘s route. Twenty-six miles along the
91-mile route are owned by the Indonesian government, and 22 miles of
this land had been released to USAID as of December 31, 2006.
[12] GAO, Foreign Assistance: Disaster Recovery Program Addressed
Intended Purposes, but USAID Needs Greater Flexibility to Improve Its
Response Capability, GAO-02-787 (Washington, D.C.: July 24, 2002).
[13] GAO, Foreign Assistance: USAID Completed Many Caribbean Disaster
Recovery Activities, but Several Challenges Hampered Efforts, GAO-06-
645 (Washington, D.C.: May 26, 2006).
[14] Other U.S. departments and agencies are currently allocated $99
million for other posttsunami-related activities. For example,
components of the Departments of Commerce and the Interior are
supporting development of regional early warning systems and disaster
preparation plans and the Department of the Treasury was involved in
providing debt relief to some affected countries. USAID‘s current
allocation of $482 million is $14 million less than we reported in
April 2006 due to transfers of funds to other agencies.
[15] In April 2006, we reported that the signature project had three
components (construction of a bridge and other infrastructure,
provision of coastal management training, and construction of
vocational educational facilities). (See GAO-06-488). The project has
since been redefined as having five components.
[16] See appendix II for specific information on USAID‘s signature
project in Sri Lanka.
[17] In August 2005, USAID signed a contract with PT Wijaya Karya, an
Indonesian firm, to perform this work.
[18] In November 2005, USAID signed a contract with Parsons Global
Services, Inc., a U.S. firm, to perform this work.
[1] 9At the revised estimated cost of $2.7 million per mile,
approximately $405 million would be required to construct the 150-mile
road that was initially planned. The current $2.7 million cost per-mile
estimate does not account for certain administrative and support costs
and certain activities performed previously that are not directly
related to the costs for constructing 91 miles of road. As such, the
total cost of building 91 miles based on a $2.7 million per-mile
estimate (approximately $246 million) differs from the $254 million
currently budgeted.
[20] Before the cooperative agreement was reached, the government of
Japan had intended to rebuild the road between Calang and Meulaboh that
was roughly parallel to the road planned by USAID between these two
locations. According to USAID officials, Indonesian government
officials indicated that, in April 2006, the Indonesian government
decided that one Japanese-built road, rather than two parallel roads,
could be built, to reduce the costs of maintenance. The USAID officials
said that the Indonesian government‘s agreement formed the basis for
the revised road construction plan. The Japanese road (69 miles)
follows a different alignment than the U.S. road would have followed.
So the combined length of the de-scoped U.S. road (91 miles) and the
Japanese road, 160 miles, differs from the 150 mile road initially
planned by USAID.
[21] National Research Council of the National Academies, ’The Owner‘s
Role in Project Risk Management“ (Washington, D.C.; 2005).
[22] GAO-06-645, appendix II.
[23] GAO-06-488, 19.
[24] GAO-06-488, 20.
[25] GAO-06-488, 21.
[26] A quay is a structure built parallel to the bank of a waterway for
use as a landing place.
[27] USAID plans to provide an additional school in the east with
educational supplies as needed.
[28] Use of renewable energy and materials will qualify the facilities
for certification by Leadership in Energy and Environmental Design, an
internationally recognized organization.
[29] Since the 1980s, some areas of Northern and Northeastern Sri Lanka
have been under the control of the Liberation Tigers of Tamil Eelam
(LTTE). According to the U.S. Department of State, the LTTE is a
terrorist organization that has advocated secession of these areas to
form a separate ethnic Tamil state.
[30] Several signature project components have experienced delays of
longer than one month. For example, the minor works at three harbors,
expected to be completed by September 2006 and formally extended to
November 2006, was substantially completed by January 31, 2007.
[31] USAID requires an annual audit of foreign nonprofit organizations
expending $300,000 or more of USAID funds and a preaward survey or
audit before negotiating a contract of $500,000 or more.
[32] USAID Inspector General, Audit of USAID/Indonesia‘s Tsunami
Recovery and Reconstruction Program Activities Implemented by
Development Alternatives, Inc., Audit Report No. 5-497-06-009P (Manila,
Philippines; Sept. 15, 2006); and Audit of USAID/Sri Lanka‘s Large-
Scale Infrastructure Rebuilding Activities Under Its Sri Lanka Tsunami
Reconstruction Program, No. 5-383-07-001P (Manila, Philippines; Nov.
30, 2006).
[33] GAO-06-645, 20-21.
[34] A May 2006 GAO report (GAO-06-645) summarized common lessons and
examples of USAID‘s efforts to address disaster recovery challenges.
Prior to the issuance of this report, USAID‘s planning efforts for
posttsunami reconstruction did not provide adequate contingencies and
allowances for cost, schedule, and scope changes. In response to our
recommendation in the report, USAID issued guidance that is now
available for staff involved in disaster recovery activities.
[35] Overall annual inflation rate in Aceh Province, as of December
2005.
[36] Our April 2006 report recommended that the Secretary of State, in
the department‘s required semiannual report to Congress in June 2006,
provide updated cost estimates and schedules obtained from USAID. We
also recommended that if the updated information differed substantially
from initial projections, the report should include alternative cost
estimates, schedules, and project scopes and the need for additional
sources of funding, if necessary.
[37] H. Rept. 109-16, p. 49.
[End of section]
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