AFGHANISTAN: Iraq Lessons Ignored at Kabul Power Plant

A diesel-fueled power plant, nearing completion just outside Kabul, demonstrates that the U.S. Agency for International Development (USAID) and its contractors have failed to learn lessons from identical mistakes in Iraq, despite clearly signposted advice from oversight agencies.

Conclusions gleaned from three independent investigations into U.S.-financed reconstruction of the Afghan electricity sector, as well as IPS interviews with Afghan government officials and contractors, suggest that the power plant - which will cost taxpayers almost three times as much as comparable projects - may never be used.

First the U.S. planners chose to ignore other ongoing reconstruction projects that were cheaper and more likely to succeed, or to pay attention to alternative recommendations from Afghan government officials.

Second, the planners picked expensive technologies that the city of Kabul could not afford to maintain or utilise.

Finally, USAID asked for the plant to be built in record time - by a complex system of multiple contractors - causing costs to soar.

Costs Soar as Project Stumbles

In May 2007, USAID signed an agreement with the Afghan government to build a 105 megawatt plant at Tarakhil, just a couple of kilometres from the Kabul airport. The contract was awarded to a joint venture of Louis Berger, a construction company from New Jersey, and Black & Veatch, another construction company from Kansas.

This venture was guaranteed a profit based on the amount of money spent to complete the project (known as cost-plus contracting).

Black & Veatch sub-contracted on a fixed price basis to Symbion Power from Washington DC, which has completed six fixed-price projects for the U.S. government in some of Iraq's most conflicted areas in the last four years, including two 400 kilovolt transmission lines from Haditha in Anbar province to Al Qaim near the Syrian border and to Baiji in northern Iraq.

Symbion in turn hired several Kabul companies like AB Managers and Afghan Electrical Power Corporation (AEPC) to provide local workers.

The problems began when USAID decided that they wanted the project completed before the Afghan elections in 2009. So Black & Veatch ordered Caterpillar engines custom-built in Germany at an exorbitant price and then had them flown to Kabul.

Typically the cost of building a diesel plant in the Middle East and Asia is about one million dollars per megawatt or less. For example, Wartsila, a Finnish company, is completing a 200-megawatt project in neighbouring Pakistan for 180 million dollars.

In fact, some says they can do it for less. "I built a 22-megawatt plant in Kandahar (in 2008) for 550,000 dollars a megawatt," says Abdul Ghaffar, an Afghan engineer who runs his own power plant construction company in Dubai.

By the time the project started, the price tag for the fast-track turbines and multiple layers of contractors was 259 million dollars, two-and-a-half times that of similar projects.

Then, at every turn, the project hit delays. Black & Veatch took over a year to sign the contracts with Symbion to build the power plant. Once that paperwork was completed on Jun. 13, 2008, Symbion started to look for Afghan labour - a process that took another three months.

Nine months later, some 60 percent of the project was complete. By this time, the 260-million-dollar price tag was looking unrealistic - it would eventually exceed 300 million dollars.

On May 19, 2009, Symbion stopped work - because Black & Veatch had failed to pay them for four months. A USAID Inspector General audit published in November 2009 found that Black & Veatch "had charged USAID for subcontractor costs that the contractor had not paid the subcontractor."

"This situation illustrates the twin policy evils of the cost-plus contracts," says R. Scott Greathead, a New York lawyer who advised Symbion on the project. "First, they impose no cost or penalty on the cost-plus contractor for its incompetence, inefficiency or failure to perform, and second, they punish two victims, the fixed-price subcontractor, who incurs costs that may never be fully reimbursed, and the U.S. government, which pays in the end for everything."

Symbion and Black & Veatch are now in arbitration over the missed payments. Officials from both companies declined to be interviewed over the dispute until the legal proceedings are completed. (Black & Veatch's official position is that the contract with Symbion did not allow the sub-contractor to stop working).

The power plant is expected to be completed this spring. But the electricity is no longer urgent. One year ago, a 300-megawatt power line to Kabul from Uzbekistan was completed, with funding from the World Bank, German and Indian governments. The construction cost was just 35 million dollars and the operation costs are expected to be just over six cents a kilowatt hour compared to the 22 cents a kilowatt hour that it will cost to run the diesel plant.

Chronicle of Mistakes Foretold

Every one of these mistakes could have been predicted.

Afghan planners say that they never asked for the Tarakhil plant. At his office in central Kabul, Juma Nawandish, the former deputy minister of energy and water who was in charge of the electricity sector for four years, pulls out a series of slides and engineering studies of the northern Afghanistan Shebhergan gas fields where he once worked.

"I advised USAID to put their money here," he said. "If they had rehabilitated the gas wells, and used our local engineers, we would have saved a lot of money."

In March 2007, two months before USAID signed an agreement with the Afghan government to build the power plant, the Special Inspector General for Iraq Reconstruction (SIGIR) released its final report on programme and project management during the U.S.-led reconstruction mission in Iraq that specifically pointed out the perils of poor planning and supervision.

In fact, a January 2006 report by SIGIR faulted U.S. government planners and some of the very same contractors - namely Black & Veatch - for supplying turbines to a combined cycle gas turbine facility at Qudas outside of Baghdad that were unsuitable for the available fuel supply in Iraq, and for failing to provide adequate training and maintenance for the plant.

Thus it may seem ironic that on Jan. 20, 2010, exactly four years later, an audit of the Tarakhil power plant conducted by the Special Inspector General for Afghanistan Reconstruction (SIGAR) would question the wisdom of building a diesel and heavy fuel plant that has a "technically sophisticated fueling operation that [the Afghans] may not have the capacity to sustain."

The report also noted that 40 million dollars of the cost escalation was "directly linked to project delays."

In a written response to SIGAR, William Van Dyke, the president of Black & Veatch's federal services division, noted that the cost disputes were under arbitration at the International Chamber of Commerce. He added: "B&V remain(s) fully committed to completing and turnover a high-quality plant that will service Afghanistan for years to come."

A second SIGAR report on the overall Afghan power sector was even more scathing about the lack of planning for the 732 million dollars that the U.S. has provided to the Afghan government to date.

Retired Marine General Arnold Fields, the head of SIGAR, commented: "It is troubling that we have been participating in the reconstruction of Afghanistan for eight years and there is no updated energy sector master plan against which the U.S. and the international community can contribute and measure success."

In fact, according to the USAID inspector general report, two other major USAID energy projects have also failed to produce results. In February 2008 Black & Veatch was tasked with figuring out how to rehabilitate the Shebhergan gas fields. In June 2009 after spending 7.1 million dollars, USAID "terminated" Black & Veatch from the project for "poor performance." Black & Veatch says it failed because of security problems and because necessary equipment was held up at the border.

USAID also says that it only been able to complete 16.5 megawatts of a planned 35-megawatt upgrade to the Kajakai dam project in Helmand province. Work was put on hold after two workers were killed in 2007 in an attack.

*Pratap Chatterjee is a senior editor at CorpWatch. This article was produced in partnership with CorpWatch.