United States Government Accountability Office

GAO 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 

February 2007 

GAO-07-357 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

February 2007

FOREIGN ASSISTANCE

USAID Signature Tsunami Reconstruction 

Efforts in Indonesia and Sri Lanka Exceed 

Initial Cost and Schedule Estimates, and 

Face Further Risks 

Highlights of GAO-07-357, a report to 

congressional committees 

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 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. 

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. 

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. 
Contents 

Letter 1

Results in Brief 3

Background 7

Signature Project Cost Estimates Have Risen, Schedules May Be 

Extended, and Further Risks May Affect Current Plans 11 

USAID Acquired Financial and Technical Oversight, but Lacked 

Guidance for Disaster Recovery and Reconstruction and Faces 

Further Risks 24 

Required Reports to Congress Do Not Clearly Show USAID’s 

Progress or Address Risks to Signature Project Schedules and 

Cost Estimates 29 

Conclusions 31

Recommendations for Executive Action 31 

Agency Comments and Our Evaluation 32 

Appendix I Objectives, Scope, and Methodology 34 

Appendix II USAID’s Signature Projects in Indonesia and 

Sri Lanka 36 

Appendix III USAID’s Nonsignature Activities in Indonesia 

and Sri Lanka 39 

Appendix IV Comments from the Department of State 41 

Appendix V Comments from the U.S. Agency for International 

Development 43 

GAO Comment 46 

Appendix VI GAO Contact and Staff Acknowledgments 47

Page i GAO-07-357 Foreign Assistance
Tables 

Table 1: Funds Allocated to Tsunami Emergency Relief and 

Postemergency Reconstruction and Other Activities, as of 

December 31, 2006 8 

Table 2: Scope and Status of Indonesia Signature Road 

Construction Project 36 

Table 3: Description and Status of USAID’s Signature Project in Sri 

Lanka 38 

Table 4: Project Sectors, Amounts of Funds Budgeted, and 

Descriptions of Selected Activities for USAID’s 

Nonsignature Projects in Indonesia 39 

Table 5: Project Sectors, Amounts of Funds Budgeted, and 

Descriptions of Selected Activities for USAID’s 

Nonsignature Projects in Sri Lanka 40 

Figures 

Figure 1: Financial Information on USAID Tsunami Reconstruction 

Funds, as of December 31, 2006 9 

Figure 2: Initial and Revised Estimated Costs Per Mile and Length 

of Road for USAID Indonesia Signature Project 14 

Figure 3: Initial and Revised Plans for Indonesia Signature Road 

Construction Project 15 

Figure 4: Initial and Revised Timelines for USAID’s Signature 

Project Activities in Indonesia, as of February 2007 18 

Figure 5: Temporary Bridge Currently Spanning Arugam Bay near 

Site of Planned USAID-Funded Bridge in Sri Lanka 20 

Figure 6: Locations of Selected Signature Project Components and 

Recent Terrorist Incidents 22 

Figure 7: Initial and Revised Plans for USAID’s Signature Project 

Activities in Sri Lanka 23 

Figure 8: USAID Signature Project Funding Information Included 

and Not Included in Department of State Reports 30 

Page ii GAO-07-357 Foreign Assistance
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 

This is a work of the U.S. government and is not subject to copyright protection in the 

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Page iii GAO-07-357 Foreign Assistance
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.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

 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. 

Page 1 GAO-07-357 Foreign Assistance
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 2008.2

We began monitoring the delivery of U.S. assistance to the tsunamiaffected countries in May 2005.3

 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.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).5

Updating our April 2006 findings, this report examines (1) the status of 

USAID’s signature projects in Indonesia and Sri Lanka, including its 

 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. 

Page 2 GAO-07-357 Foreign Assistance
obligations6

 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 tsunamiaffected 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.) 

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 

Results in Brief 

 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. 

Page 3 GAO-07-357 Foreign Assistance
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.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-thanexpected labor and material costs and the availability of more accurate 

information than in March 2005.8

 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

 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. 

Page 4 GAO-07-357 Foreign Assistance
award the construction contract in May 2007.

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.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.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 

 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. 

10According 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. 

11The 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. 

Page 5 GAO-07-357 Foreign Assistance
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.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.

13 Further, as USAID moves forward, the agency faces risks that may 

affect its ability to complete its signature project activities as planned. 

 12GAO, 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).

13GAO, Foreign Assistance: USAID Completed Many Caribbean Disaster Recovery

Activities, but Several Challenges Hampered Efforts, GAO-06-645 (Washington, D.C.: May 

26, 2006). 

Page 6 GAO-07-357 Foreign Assistance
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. 

Of the $908 million that the United States appropriated for tsunami relief 

and reconstruction, $327 million (36 percent) was allocated to the Background 

Page 7 GAO-07-357 Foreign Assistance
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.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 Funds allocated

Emergency relief activities $327

Postemergency reconstruction and other activities 

 USAID 482

 Other U.S. departments and agencies 99

Subtotal $581

Total $908

Sources: USAID and Department of State.

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).

 14Other 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. 

Page 8 GAO-07-357 Foreign Assistance
Figure 1: Financial Information on USAID Tsunami Reconstruction Funds, as of

December 31, 2006 

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. 

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: 

U.S. dollars (in millions)

Type of funding

Allocated

Expended

“Obligated”

Source: USAID.

100% 100%

$482 $482

20%

$96

0

100

200

300

400

500

• 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; 

Page 9 GAO-07-357 Foreign Assistance
• 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: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.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 

 15In 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. 

16See appendix II for specific information on USAID’s signature project in Sri Lanka. 

Page 10 GAO-07-357 Foreign Assistance
and identify the need for additional sources of funding, if necessary. State 

agreed with both of the recommendations. 

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. 

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. 

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: 

Signature Project 

Cost Estimates Have 

Risen, Schedules May 

Be Extended, and 

Further Risks May 

Affect Current Plans 

Indonesia Signature 

Project Cost Estimates 

Have Increased, Scope of 

Work Has Been Reduced, 

and Completion Date May 

Be Extended 

Indonesia Signature Project Is 

Under Way, but Contract for 

Major Road Construction Work 

Has Not Been Awarded 

Page 11 GAO-07-357 Foreign Assistance
• 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.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 2005.18

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. 

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 

Indonesia Signature Project’s 

Estimated Costs and Budget 

Allocation Have Increased and 

the Project’s Scope Has Been 

Reduced 

 17In August 2005, USAID signed a contract with PT Wijaya Karya, an Indonesian firm, to

perform this work. 

18In November 2005, USAID signed a contract with Parsons Global Services, Inc., a U.S. 

firm, to perform this work. 

Page 12 GAO-07-357 Foreign Assistance
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.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.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.) 

 19At 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. 

20Before 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.

Page 13 GAO-07-357 Foreign Assistance
Figure 2: Initial and Revised Estimated Costs Per Mile and Length of Road for

USAID Indonesia Signature Project

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. 

150

91

$1.6

$2.7

Miles

Estimated cost

per mile

Length of road

to be built

U.S. dollars (in millions)

Estimates

Source: GAO analysis of USAID data.

Initial cost estimate and length of road, as of March 2005

Revised cost estimate and length of road, as of November 2006

0

50

100

150

200

0

1

2

3

4

5

Page 14 GAO-07-357 Foreign Assistance
Figure 3: Initial and Revised Plans for Indonesia Signature Road Construction 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 

Page 15 GAO-07-357 Foreign Assistance

Several Factors, Including 

Postdisaster Environment, Led 

to Higher Cost Estimates and 

Delayed Progress of the 

Indonesia Signature Project 

Maylasia

Indone s i a

0 500 miles

Medan

Jakarta

Singapore

Sumatra Indian

Ocean

0 10 miles 20 miles

Sources: GAO analysis of USAID data; Map Resources (inset map); and U.S. Army Corps of Engineers (Sumatra, Indonesia, map).

Government of Japan road

USAID road

Revised plans and events

a

a

Banda Aceh

Sumatra,

Indonesia

Meulaboh

Calang

91-mile planned USAID-funded 

road segment to be built between 

Banda Aceh and Calang

Japanese-funded road segment 

being built between Calang and 

Meulaboha

Plan: Construct a 150-mile 

paved road between Banda

Aceh and Meulaboh

Budget: $245 million

Estimated completion date:

September 2009

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 ( ) 

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

Initial plans and events Revised plans and events

a
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.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 environment22

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. 

 21National Research Council of the National Academies, “The Owner’s Role in Project Risk

Management” (Washington, D.C.; 2005). 

22GAO-06-645, appendix II. 

23GAO-06-488, 19. 

Page 16 GAO-07-357 Foreign Assistance
• 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.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.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. 

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. 

USAID May Extend Completion 

Date for Indonesia Signature 

Project 

 24GAO-06-488, 20. 

25GAO-06-488, 21. 

Page 17 GAO-07-357 Foreign Assistance
Figure 4: Initial and Revised Timelines for USAID’s Signature Project Activities in Indonesia, as of February 2007 

Source: GAO analysis of USAID data.

Sept. 2009

Complete

signature project

Initial

plans

and

events

Revised

plans

and

events

Nov. 2005

Award contract for

design and supervision

of signature project

Aug. 2006

Complete

priority contract

Sept. 2006

Award contract 

for large-scale

construction of 

signature project

May 2007

Award contract

for large-scale

construction of

signature project

Dec. 2007

Complete

priority contract

Feb. 2010

Complete

signature project

June 2006

Reduce signature

project scope based

on agreement with

governments of Japan

and Indonesia

Aug. 2005

Award contract

for priority 

contruction of

signature project

Feb./Mar. 2005

Assess conditions

and costs for

signature project

2005 2006 2007 2008 2009 2010

Dec. 26, 2004

Tsunami 

struck

May 11, 2005

Enact emergency 

supplemental legislation 

Dec. 2005

Complete nearly all

emergency relief projects

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.

USAID has made progress on several of the signature project’s five 

components: 

Sri Lanka Signature Project Is 

Largely Under Way 

• 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. 

Page 18 GAO-07-357 Foreign Assistance
• 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.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.27 Plans for two of the nine facilities call for the use of renewable 

energy and materials28 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 tourismrelated 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.

 26A quay is a structure built parallel to the bank of a waterway for use as a landing place. 

27USAID plans to provide an additional school in the east with educational supplies as

needed. 

28Use of renewable energy and materials will qualify the facilities for certification by

Leadership in Energy and Environmental Design, an internationally recognized 

organization. 

Page 19 GAO-07-357 Foreign Assistance
Figure 5: Temporary Bridge Currently Spanning Arugam Bay near Site of Planned 

USAID-Funded Bridge in Sri Lanka

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.

Source: GAO.

Rising Construction Costs, 

Deteriorating Security, and 

Other Factors Led to Increased 

Cost Estimate and Project 

Delays 

• 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.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 

 29Since 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. 

Page 20 GAO-07-357 Foreign Assistance
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. 

Page 21 GAO-07-357 Foreign Assistance
Figure 6: Locations of Selected Signature Project Components and Recent Terrorist Incidents 

Sources: USAID, United Nations, State Department, and Map Resources (map).

Construct a signature 

bridge and water 

treatment facility

Ten people killed in 

September 2006 in 

ethnic violence

At least 3,000 

civilians displaced 

by heavy fighting 

in December 2006

Southern and southeastern 

coastal areas: construct or 

reconstruct approximately 

nine vocational schools

Two people killed in October 

2006 by suicide attack on 

naval base

Assassination of Sri Lankan 

army general in June 2006 

about 10 miles southeast of 

Colombo

Thirteen Sri Lankan 

navy personnel killed in 

December 2005 in bus

and truck attack

India

Sri Lanka

Colombo

Trincomalee

Talaimannar

Pottuvil

Arugam Bay

Galle

Southern and southwestern 

coastal areas: rehabilitate 

three commercial ports and 

fishing facilities

0 50 miles

Initial plans

Recent events

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. 

Page 22 GAO-07-357 Foreign Assistance
The completion date for the Sri Lanka signature project is March 2008. 

However this date may be extended.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. 

USAID May Extend the Sri 

Lanka Signature Project 

Completion Date 

Figure 7: Initial and Revised Plans for USAID’s Signature Project Activities in Sri Lanka 

Source: GAO analysis of USAID data.

Initial

plans

and

events

Revised

plans

and

events

Sept. 2005

Contract awarded

for design and

supervision of

signature project

June 2006

Construction

of signature

project begins

June 2006

Construction

of “minor

works” begins

Sept. 2006

Contract awarded

for “major works”

restoration of

three harbors

Aug. 2006

Contract was awarded

for construction of

Arugam Bay Bridge

Dec. 2006

“Major works”

contract awarded and

construction begins

at three harbors

Apr. 2007

Construction of nine

vocational schools

expected to begin

Jan. 2007

Begin construction

of nine vocational

schools

Mar. 2008

Complete

signature project

May 2007

Award contract for

water treatment facility

Feb./Mar. 2005

Conditions and

costs for signature

project assessed

2005 2006 2007 2008

Dec. 26, 2004

Tsunami 

struck

May 11, 2005

Enact emergency 

supplemental legislation 

Dec. 2005

Complete nearly all

emergency relief projects

 30Several 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. 

Page 23 GAO-07-357 Foreign Assistance
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 tsunamiaffected 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 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. 

In addition to providing for required financial controls, such as preaward 

surveys of prospective award recipients and financial audits,31 USAID has 

provided for external and internal audits of its reconstruction program 

activities. 

USAID Acquired 

Financial and 

Technical Oversight, 

but Lacked Guidance 

for Disaster Recovery 

and Reconstruction 

and Faces Further 

Risks 

USAID Provided for 

Financial Audits and Is 

Helping Indonesia and Sri 

Lanka to Strengthen Audit 

Capabilities 

USAID’s Financial Controls 

Include External and Internal 

Audits 

• 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 

 31USAID 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. 

Page 24 GAO-07-357 Foreign Assistance
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.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. 

 32USAID 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). 

Page 25 GAO-07-357 Foreign Assistance
• 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. 

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. 

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. 

USAID Has Acquired 

Needed Technical 

Oversight for Tsunami 

Reconstruction Programs 

USAID Lacked Guidance 

and Faces Risks in 

Completing Signature 

Projects as Planned 

Page 26 GAO-07-357 Foreign Assistance
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.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.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: 

 33GAO-06-645, 20-21. 

34A 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. 

Page 27 GAO-07-357 Foreign Assistance
• 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.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 

 35Overall annual inflation rate in Aceh Province, as of December 2005. 

Page 28 GAO-07-357 Foreign Assistance
incidents, particularly in or near project sites, could increase the 

uncertainty of whether USAID’s efforts continue at the planned pace. 

In response to our April 2006 recommendation,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. 

Required Reports to 

Congress Do Not 

Clearly Show USAID’s 

Progress or Address 

Risks to Signature 

Project Schedules and 

Cost Estimates 

 36Our 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. 

Page 29 GAO-07-357 Foreign Assistance
Figure 8: USAID Signature Project Funding Information Included and Not Included 

in Department of State Reports 

Note: The amounts are as of December 31, 2006.

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.

Included in State’s 4102 reports to Congress

Not included in State’s 4102 reports to Congress

U.S. dollars (in millions)

Indonesia Sri Lanka

Type of funding

Allocated

Subobligated

Expended

“Obligated”

Source: GAO analysis of USAID data.

100% 100%

$254 $254

41%

$105

6%

$15

0

50

100

150

200

250

300

U.S. dollars (in millions)

Allocated

Subobligated

Expended

“Obligated”

0

50

100

150

200

250

300

100% 100%

$48 $48

73%

$35

10%

$5

Page 30 GAO-07-357 Foreign Assistance
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. 

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. 

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: 

Conclusions 

Recommendations for 

Executive Action 

Page 31 GAO-07-357 Foreign Assistance
• 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, 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 http://www.gao.gov. 

Agency Comments 

and Our Evaluation 

Page 32 GAO-07-357 Foreign Assistance
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. 

David Gootnick, Director

International Affairs and Trade 

Page 33 GAO-07-357 Foreign Assistance
Appendix I: Objectives, Scope, and Appendix I: Objectives, Scope, and Methodology 

Methodology 

We were directed1 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 tsunamiaffected 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 USAIDfunded 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. 

 1

H. Rept. 109-16, p. 49. 

Page 34 GAO-07-357 Foreign Assistance
Appendix I: Objectives, Scope, and 

Methodology 

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. 

Page 35 GAO-07-357 Foreign Assistance
Appendix II: USAID’s Signature Projects in 

Indonesia and Sri Lanka 

Table 2: Scope and Status of Indonesia Signature Road Construction Project 

Contract 

Scope (December 

2005) Status (December 2005) Status (February 2007) 

Priority segment 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-plusfixed-fee basis.

Perform the 

maintenance and 

construction work on a 

fixed-price basis. 

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. 

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. 

Design and 

construction

management 

Design the new road 

(except for the 3-mile 

priority segment). 

Supervise construction. 

Perform services on a 

cost-plus-fixed-fee 

basis. 

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. 

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. 

Appendix II: USAID’s Signature Projects in 

Indonesia and Sri Lanka 

Page 36 GAO-07-357 Foreign Assistance
Appendix II: USAID’s Signature Projects in 

Indonesia and Sri Lanka 

Contract 

Scope (December 

2005) Status (December 2005) Status (February 2007) 

Large-scale 

construction

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. 

Construction contract is expected to 

be awarded in September 2006, and 

construction is to be completed by 

September 2009. 

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. 

Page 37 GAO-07-357 Foreign Assistance
Appendix II: USAID’s Signature Projects in 

Indonesia and Sri Lanka 

Table 3: Description and Status of USAID’s Signature Project in Sri Lanka 

Project component description Status 

Construct a bridge over Arugam Bay in eastern Sri Lanka. USAID through CH2M HILL awarded the contract in 

August 2006 to a private contractor based in India. 

Construction began in September 2006. 

Drill wells for a water treatment facility to provide water for the town of Pottuvil 

and nearby communities near Arugam Bay. 

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. 

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. 

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. 

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. 

As of February 2007, construction is expected to begin 

by April 2007. 

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. 

Coastal management training is continuing and 

projected to be completed by June 2007. 

Source: USAID. 

Page 38 GAO-07-357 Foreign Assistance
Appendix III: USAID’s Nonsignature Appendix III: USAID’ Activities in Indonesia s Nonsignature and Sri Lanka 

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 

Funds

budgeted, as of 

December 31, 

2006 Descriptions of selected activities 

Small-scale infrastructure 

(construction of community buildings 

and sewage systems, reconstruction 

of schools, etc.) 

$23 USAID funds have been used to reconstruct community meeting centers 

and village offices, rehabilitate irrigation canals, clear agricultural land for replanting, and construct and repair water systems. 

Technical assistance and good 

governance (training and technical 

support to various Indonesian

government entities) 

$12 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 decisionmaking; 

and work with local service providers to deliver services. 

Transition assistance (rebuilding 

shelters and helping to restore 

livelihoods through microenterprise 

support) 

$62 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. 

Page 39 GAO-07-357 Foreign Assistance
Appendix III: USAID’s Nonsignature 

Activities in Indonesia and Sri Lanka 

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 

Funds budgeted, 

as of

 December 31,

2006 Descriptions of selected activities 

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.) 

$15 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. 

Technical assistance and good 

governance (providing training and 

technical assistance to Sri Lankan 

government agencies and civil society 

organizations) 

$10 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 longstanding conflict and the tsunami. 

Transition assistance (helping local 

organizations promote peace and 

democracy, through short-term

assistance targeted at key political 

transition and stabilization needs) 

$10 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. 

Page 40 GAO-07-357 Foreign Assistance
Appendix IV: Comments from the Department Appendix IV of State : Comments from the 

Department of State 

Page 41 GAO-07-357 Foreign Assistance
Appendix IV: Comments from the Department 

of State 

Page 42 GAO-07-357 Foreign Assistance
Appendix V: Comments from the U.S. Agency

Appendix V for International Development : 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. 

Page 43 GAO-07-357 Foreign Assistance
Appendix V: Comments from the U.S. Agency

for International Development 

See comment. 

Page 44 GAO-07-357 Foreign Assistance
Appendix V: Comments from the U.S. Agency

for International Development 

Page 45 GAO-07-357 Foreign Assistance
Appendix V: Comments from the U.S. Agency

for International Development 

The following is GAO’s comment on the U.S. Agency for International 

Development letter dated February 21, 2007. 

Although USAID has provided some information, the required reports have 

generally contained limited information that has not fully identified risks 

and included mitigation strategies. 

GAO Comment 

Page 46 GAO-07-357 Foreign Assistance
Appendix VI: 

A

GAO Contact and Staff 

cknowledgments 

Page 47 GAO-07-357

Appendix VI: GAO Contact and Staff 

Acknowledgments 

GAO Contact David Gootnick, (202) 512-3149 or gootnickd@gao.gov.

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. 

Foreign Assistance

Staff 

Acknowledgments 

(320423) 
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