AFGHANISTAN: Iraq Lessons Ignored at Kabul Power Plant

Publisher Name: 
Inter Press News Service

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

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

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

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.

AMP Section Name:War & Disaster Profiteering
  • 21 Reconstruction