Questions and Answers
GAO Report 07-357
February 2007
Foreign Assistance: USAID Signature Tsunami Reconstruction Efforts in Indonesia and Sri Lanka Exceed Initial Cost and Schedule Estimates, and Face Further Risks
USAID is pleased to report that it has already made progress in response to the GAO's recent report on USAID's tsunami reconstruction efforts in Indonesia and Sri Lanka. We also thank the GAO for acknowledging progress on the U.S. Government's tsunami recovery projects in Indonesia and Sri Lanka and the steps USAID has taken to fill needed positions in both countries to ensure continued progress.
A wide variety of reconstruction projects are underway in the tsunami-affected countries. USAID is implementing programs that have been identified by the affected governments and communities including: rebuilding roads, bridges, harbors, and houses; helping individuals return to their original livelihoods; training individuals (particularly women) to develop new skills; strengthening the community governance and political infrastructure; and supporting early warning/disaster preparedness efforts.
For more details on the programs underway with the $656 million provided by the Tsunami Relief and Reconstruction Fund, please view our latest fact sheet at http://www.usaid.gov/press/factsheets/2006/fs061222.html
Below are USAID's comments on findings and recommendations in the GAO report.
Q: The contract for the signature road project in Indonesia has not been awarded - what are the delays?
A: In order to allow construction work on the coastal highway to begin as quickly as possible, USAID engaged an Indonesian contractor in August 2005 to rebuild less damaged parts of the highway while the remainder of the work was being bid. USAID anticipated awarding a contract for the rest of the road in September 2006, however, U.S. firms failed to meet USAID cost requirements. As a result, USAID added more miles to the first contract, for a total of 25.7 miles, to ensure steady progress.
USAID proceeded to re-bid the large road contract and an internationally competed procurement is now underway to increase competition and lower construction costs. Construction of the remaining 64.8 miles will begin as soon as a new contract is awarded with the winning construction firm. A new contract is expected in May 2007, bringing the estimated completion date to less than six months behind the original timeframe.
Q. The February 2007 GAO Report states that road project costs have exceeded initial estimates. Why are costs rising?
A: The extreme destruction of the tsunami rendered the area inaccessible for months. As a result, the U.S. Army Corps of Engineers initially estimated the cost of the road based on limited information, primarily through aerial reviews. A final estimate could not be made until floodwaters subsided and engineers could fully consider all design and alignment issues including the environmental and social impact assessments of construction.
An additional factor contributing to higher cost estimates is higher-than-expected post-disaster inflation. According to the Aceh Reconstruction and Rehabilitation Agency (BRR), inflation in Banda Aceh reached 41% by December 2005. Wages nearly doubled and prices for materials such as sand and cement increased by 164% and 47% respectively between December 2004 and 2005. Significant fuel price increases also contributed to rising costs.
Q. How are the rising costs affecting the road project?
A: Based on current engineering estimates, the $245 million originally planned for the road project is no longer sufficient to cover the entire cost of reconstructing the highway from Banda Aceh to Meulaboh. To compensate for the shortfall and still meet local needs, USAID is sharing the construction effort with the Government of Japan. Under this partnership, Japan will build the road from Meulaboh to Calang, which will link to the USAID road from Banda Aceh to Calang. In addition, we have added $9 million to the road project and we expect the sum of these funds will be sufficient to construct the northern section of road running 91 miles from Banda Aceh to Calang.
Q: The GAO report cites worsening security in Sri Lanka. Has the conflict in Sri Lanka impacted the program there and, if so, what are we doing to compensate?
A: USAID has experienced some delays in eastern Sri Lanka due to stringent requirements for detailed supply lists in order to get through military checkpoints and occasional general strikes that bring commerce to a standstill. USAID and the U.S. Embassy are in regular government dialogue regarding any issues that can impede delivery of humanitarian assistance in conflict areas. The U.S. Ambassador is a member of the Consultative Commission on Humanitarian Assistance, which has been working to reduce paperwork requirements to get through checkpoints in less time, but disseminating decisions from the capital city (Colombo) to security personnel in the provinces is difficult.
The Sri Lanka Tsunami Reconstruction Program has incurred justifiable expenditures to upgrade security and communications at project sites and in vehicles. Thus far, there have been no security-related delays in the east, nor are we expecting delays for the upcoming overland shipment of materials for USAID's construction of the Arugam Bay Bridge.
While there are security-related issues in Sri Lanka that have delayed construction of the small-scale playground programs in the east/north, up to this point the overall program has proceeded by reprioritizing construction of playgrounds in the south. Thus far, 23 of the 85 playgrounds have been completed and seven are near completion.
Q: What is USAID's position on the GAO's assertion that when USAID began its tsunami assistance programs in early 2005, we lacked disaster recovery guidance, including lessons learned from prior disaster reconstruction efforts?
A: Internally, we keep track of our lessons learned from each disaster response. Task forces are created that include experts from previous disaster teams, but each disaster is unique and rehabilitation and reconstruction issues are different. However, we are making use of common lessons. For example, we have learned that it is critical to engage our regional offices immediately when a disaster strikes and to engage the public and private sector early. Issues that have specific nuances to the area, such as land tenure, are more difficult to predict.
Q: The first recommendation in the report is that USAID provide cost data on agreements with contractors and grantees ("sub-obligations") in addition to agreements with governments ("obligations") for the semi-annual reports to Congress.
A: Although Congress did not ask for this information in the semi-annual reports, we agree with the GAO recommendation to provide such data in the future to more clearly reflect USAID's progress on these important projects.
Q: The second recommendation is for USAID to provide risk information and mitigation strategies in the semi-annual reports to Congress.
A: USAID has regularly provided such information in various sections of the reports relating to specific projects. However, to clarify risks and mitigation strategies in future reports, USAID will separately identify such data.
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