IEEE Spectrum Questions for the U.S Agency for International Development [USAID]
Question 1, IEEE Spectrum: For the Tarakhil plant, Black & Veatch ordered diesel-generators from Caterpillar in January 2007. And yet Black & Veatch waited more than a year, until April 2008, to award request bids to do the subcontracting to build the balance of the plant. The contract was awarded to Symbion Power in June 2008—18 months after the diesel-generators were ordered. Why the delay? A source informs me that Black & Veatch told him that Black & Veatch did not have final approval from USAID. Is that true? If so, why was approval withheld for so long?
Answer 1, USAID: At the beginning, USAID was under pressure to move quickly on the power plant. Thus, Black & Veatch was urged to release tenders for generators as soon as possible. The balance of plant bids were released at the end of 2007, once land was obtained from the Government of the Islamic Republic of Afghanistan (GIRoA). It took until April 2008 to select the best bid, which was awarded by June.
Q2, Spectrum: A 10 November 2009 audit by USAID’s inspector general says that the Tarakhil plant was delayed for months because USAID had failed to secure the title to the land where it intended to build the plant. The title problem plagued the project intermittently from May 2007 until April 2008. The audit also faults USAID for writing a project plan so vague that it did not require the contractor to provide "specific deliverables with concrete delivery dates."
"Furthermore," the audit goes on, "the contract contained no consequences for failing to provide power by the specified milestone dates." The USAID inspector general also said the omission was "compounded by the inexperience of the original mission personnel tasked with preparing the statement of work." Comment?
A2, USAID: This was a GIRoA issue, not a USAID issue. USAID had secured the title from GIRoA by the end of 2007 and mobilized to the site to begin work. In early spring of 2008, however, the local tribe (Hotak) disrupted the construction of the perimeter wall, and it took GIRoA until April of that year to settle the issue. Black & Veatch worked continually at the site through this period with a private security company and the Afghan National Police.
We would refer you to the SIGAR Audit Report of 2010, which documents both the issues surrounding the implementation of the Tarakhil project AND the strong actions taken in 2009 by USAID and Black & Veatch to successfully complete the project. The audit report also noted the improved performance of both USAID and Black & Veatch on subsequent projects throughout Afghanistan.
Q3, Spectrum: Though the Bush administration first proposed the diesel plant (later built at Tarakhil), Black & Veatch seized on the idea and kept it alive. "Black & Veatch were the ones that identified the need for the Tarakhil diesel plant," a provincial reconstruction officer wrote in a letter to Spectrum. "Their power flow studies clearly indicated that the imported power from the ’stans to the north would be insufficient and not available in a timely fashion. Turns out the imported power arrived prior to diesel plant operations such that the diesel plant was obsolete before it even started."
In other words, Black & Veatch, a contractor that stood to make (as it turned out) roughly $25 million by building a huge diesel power plant, was the very same organization that also "proved" that the plant was necessary. Question: Did USAID do any independent analysis to determine whether the Tarakhil plant was needed?
A3, USAID: In 2007, per the request of GIRoA, the United States government (USG) agreed to fund the construction of the Tarakhil 105-megawatt power plant in Kabul to provide electricity to the city whenever insufficient power was available from the NEPS [North East Power System] line or the existing hydro facilities.
Looking ahead to the upcoming Afghanistan presidential elections in 2009, the USG was forced to weigh the risk that the transmission line to Central Asia and ongoing hydroelectric repairs would be delayed or subject to sabotage. At the time, the negotiations with Uzbekistan on the power imports had stalled, and the existing Kabul power plant was failing. We worried that this would leave Kabul in the dark for winter of 2008–2009, in advance of a critical election which was viewed as vital to help ensure the stability of Afghanistan.
The overall concept of the Tarakhil power plant was considered technically sound at that time, and the plant has since proven its worth. It was designed to include diesel fuel, as that was the kind of fuel that Afghans already knew how to work with and also because Afghanistan lacked the equipment to keep any heavy fuel oil from turning into a gel during cold weather. In May 2010, a rockslide interrupted the flow of imported power from Central Asia to Kabul, and the Tarakhil plant was run to seamlessly fill the gap in supplies in a way that few if any consumers in Kabul even knew that the NEPS line had been damaged.
Q4, Spectrum: (Symbion CEO Paul) Hinks wrote to Karl Eikenberry, who had been recently appointed U.S. ambassador to Afghanistan, urging him to reconsider and restart the Southeastern Power System (SEPS) project. Eikenberry passed the message to William M. Frej, USAID’s mission director in Afghanistan, who in an e-mail to Hinks dated 29 January 2010 told Hinks that the SEPS project was "a high priority" and that as soon as the security situation around Kajaki improved, "the United States Agency for International Development will contract services for this project through its normal full and open procurement procedures." Frej repeated the pledge in another e-mail to Hinks on 2 February.
It turned out to be a hollow promise. Subsequent e-mails from Hinks prompted either no response or one from a low-level bureaucrat at USAID. Finally, on 29 November 2010, USAID disclosed its intention to "sole source," to Black & Veatch, the entire $266 million contract for SEPS. Frej’s assurances notwithstanding, there was no competitive bidding at all. In choosing Black & Veatch, USAID bypassed not just Symbion but also at least a dozen other qualified contractors to select a company that it had excoriated over and over again in dozens of memos for its performance on the Tarakhil plant, the Sheberghan gas field study, and the Kajaki hydroelectric facility. Comment?
A4, USAID: In the summer of 2010, the USG determined that the delivery of power to Kandahar was a top priority in order to show tangible benefits to Afghans in the region and support military counterinsurgency efforts. The Department of Defense and other U.S. government agencies were depending on USAID to ensure that work on the Kandahar Power Initiative could begin as soon as possible so that construction was in full swing by March 2011. This was and remains a critical example of our partnership with the military in a time of war.
To meet the tight timelines required to have an urgent impact, USAID made the decision to grant a sole source contract. USAID believes that open competitions are vital, and it is only under exceptional circumstances that exceptions are made. In this case, the usual bid process would have taken six to nine months, and the immediate civilian-military schedule was a significant component in this decision.
Black & Veatch had been involved extensively in the preparatory work for the Kandahar Power Initiative through a competitively awarded contract implemented in a joint venture between Louis Berger and Black & Veatch. In addition, Black & Veatch was already mobilized within the theater of operations. Mobilizing a contractor not in the region under these circumstances would have resulted in significant delays.
Q5, Spectrum: Many analyses, studies, and reports have harshly criticized the use of cost-plus contracting in Iraq reconstruction. By its very nature, cost-plus contracting encouraged overspending, waste, and abuse, according to these studies. And yet USAID has relied on it heavily, if not exclusively, in Afghanistan. Question: Why did USAID rely on cost-plus contracting in Afghanistan?
A5, USAID: USAID will award cost-reimbursement contracts—that often are more of a hybrid between fixed-price and cost-reimbursement awards—when working in volatile arenas. The reason often involves the unknown risks that the service will require. For example, it is often unknown or difficult to predict in a war zone or period of country turmoil whether the price of construction materials will remain, fall, and or increase in-country during the three- to five-year span of an award. The risks of increased pricing can be great, as we have seen in Afghanistan, and many vendors are unwilling to solely take on that risk when working in a volatile arena.
Additionally, a cost-reimbursement contract allows USAID to have more hands-on control for a given activity, especially as prices, situations, and security risks fluctuate during the period of award.
Q6, Spectrum: As I noted in my recent op-ed article for The New York Times, [LINK TO: http://www.nytimes.com/2011/07/06/opinion/06zorpette.html] USAID intends to allow DABS [Da Afghanistan Breshna Sherkat, the Afghan national utility] to control some US $906 million, the lion’s share of the funding for the NEPS/SEPS initiatives. Although you specify that USAID will supervise and oversee the funding and contracting, many observers still see this as a recipe for disaster, because DABS is not, in their view, at all capable of monitoring and controlling contracting work on such a scale. Some speculate that putting DABS in control is simply a political ploy to appease Afghanistan president Hamid Karzai, who for years has wanted control over more of the reconstruction budget. Comment?
A6, USAID: USAID is NOT relinquishing DABS control of the USG funds for NEPS/SEPS initiatives. In helping to build the capacity of Afghans to manage their country and in keeping with our Afghan First policy, we work side by side with DABS to implement these projects and to safeguard tax dollars.
Building off of our success with other Afghan entities (e.g., the Ministry of Public Health), USAID will be providing extensive technical assistance and oversight of DABS as we move forward with these construction projects. These efforts build the capacity of our Afghan counterparts slowly, steadily, and sustainably with vigilant oversight to prevent potential mismanagement of any projects paid for with USG tax dollars.
The mechanism USAID is developing with the Ministry of Finance (MOF) for the NEPS/SEPS initiatives includes numerous safeguards to ensure the project is run efficiently and effectively, including a financial safeguard under which DABS will execute contracts under the watchful eyes of expatriate advisors. Contractor performance will be overseen by an additional construction management company retained by USAID which will provide confirmation that invoices for payments reflect contractor work. Invoices will be routed through DABS, the MOF, and the Afghanistan Treasury before the Ministry of Finance requests that USAID pays the contractors directly for each and every payment.
Already DABS is performing well and is proving to be a reliable partner. With USAID assistance, DABS revenues have reached $175 million per year and are increasing—a situation that now permits the government of Afghanistan to cease providing an annual operating subsidy of $150 million per year as it has had to do in the past. In Kabul only, year-on-year power consumption has increased 18 percent, collections have increased by 30 percent, and revenues have nearly doubled—increasing cash for power utility operations by over $40 million.