OFFICE OF THE SPECIAL INSPECTOR GENERAL FOR AFGHANISTAN RECONSTRUCTION

Contract Delays Led to Cost Overruns for the Kabul 

Power Plant and Sustainability Remains a Key Challenge 

January 20, 2010

SIGAR Audit-10-6 Contractor Performance and Oversight
SIGAR Audit-10-6 Contractor Performance and Oversight Page i 

OFFICE OF THE SPECIAL INSPECTOR GENERAL FOR AFGHANISTAN RECONSTRUCTION

January 20, 2010

The Honorable Karl W. Eikenberry

U.S. Ambassador to Afghanistan

Dr. Rajiv Shah

Administrator 

U.S. Agency for International Development 

William M. Frej

USAID Mission Director to Afghanistan

This report presents the results of our review of U.S. assistance to the Government of the Islamic 

Republic of Afghanistan to construct the 105 megawatt Kabul Power Plant at a total cost of more than

$300 million. This report updates and builds upon the audit report issued by the Office of the Inspector 

General of the U.S. Agency for International Development (USAID) in November 2009, which provided a 

number of recommendations designed to improve the management of the Kabul Power Plant contract. 

In addition to the concerns raised by the Office of the USAID Inspector General, we are concerned that 

the long-term sustainability of the plant could be compromised by the decision to build a dual fuel plant 

that is capable of running on diesel or heavy fuel oil. The use of heavy fuel oil requires a level of 

technical knowledge and sophistication which may prove difficult for the Afghans to achieve–with no 

clear economic benefit compared to running the plant exclusively on diesel fuel. In line with this 

concern, this report includes a recommendation to USAID to help ensure the project is maintained in a 

sustainable manner. 

A summary of this report is on page ii. The audit was conducted by the Office of the Special Inspector 

General for Afghanistan Reconstruction (SIGAR) under the authority of Public Law 110-181, Section 

1229, and the Inspector General Act of 1978, as amended. When preparing the final report, we 

considered joint comments from the U.S. Embassy Kabul and the USAID Mission in Afghanistan and 

comments provided by USAID’s prime contractor for the Kabul Power Plant. These comments indicated 

concurrence with the findings and recommendation in this report. Copies of these comments are 

provided in appendices III and IV to this report.

John Brummet

Assistant Inspector General for Audits

Office of the Special Inspector General

 for Afghanistan Reconstruction
SIGAR Audit-10-6 Contractor Performance and Oversight Page ii 

 Special inspector General for Afghanistan Reconstruction

i

.

`

 

What SIGAR Reviewed

The United States, other international donors, and the Afghan government agree that improving Afghanistan’s energy infrastructure is 

essential for the future economic progress and the long-term viability of the elected government of Afghanistan. This report assesses 

assistance provided by the U.S. Agency for International Development (USAID) to Afghanistan to build a 105 megawatt power plant on 

the outskirts of Kabul. Building on the results of an audit of the Kabul Power Plant issued by the Office of the USAID Inspector General 

in November 2009, our report provides an updated assessment of (1) the basis for reported project delays and cost overruns, (2) 

actions taken to respond to these problems, and (3) whether the Afghan government will be able to sustain the plant’s operations. 

SIGAR conducted this performance audit in Kabul, Afghanistan and Washington, D.C. from August to December 2009 in accordance 

with generally accepted government auditing standards.

 SIGAR Special Inspector General for Afghanistan Reconstruction

What SIGAR Found 

Under the direction of USAID’s general contractor (Black & Veatch), the plant was originally scheduled for completion by March 31, 

2009; however, due to project delays the plant’s current completion date has been moved to March 31, 2010 or 12 months behind 

schedule. The Kabul Power Plant’s total project costs have risen to approximately $300 million—of which $40 million has been directly 

linked to project delays. As discussed in the Office of the USAID Inspector General’s report, factors contributing to this delay included (1) 

an initial inability to obtain adequate title to land for construction, (2) USAID’s inclusion of an ambiguous statement of work resulting in 

poor planning and implementation, (3) Black & Veatch delays in subcontractor award and mobilization, (4) subcontractor performance 

problems related to generator delivery delays and an inability to find enough qualified workers to keep the project on schedule, (5) lack 

of on-site quality assurance, (6) delays in getting timely approvals from USAID’s contracting officer, (7) poor communication between 

USAID and Black & Veatch, and (8) transportation and customs clearance problems.

USAID and Black & Veatch have taken steps to address these problems and mitigate the impact of cost overruns. These steps include

preparing a project execution plan in July 2009 and a related detailed work plan, hiring an independent contractor to provide USAID 

with on-site quality assurance reporting, developing an internal USAID assessment of lessons learned on the Kabul Power Plant and 

other USAID-funded infrastructure projects in Afghanistan, and instituting lower-cost engineering options where feasible. The success of 

these efforts is evidenced by the fact that USAID and Black & Veatch met the revised deadline of having all 18 generators on line by 

December 2009; efforts to complete balance-of-plant construction by March 31, 2010 appear to be on schedule; and SIGAR estimates 

that USAID implemented cost-saving measures have lowered overall project costs by $5 million.

The long-term sustainability of the Kabul Power Plant depends, in part, on the ability of the Government of the Islamic Republic of 

Afghanistan’s (GIRoA) to fund required fuel purchases and operations and maintenance (O&M) costs. Despite the initial commitment to 

cover these costs, the GIRoA will likely require assistance to cover fuel expenses and USAID has already agreed to provide O&M support 

for several years after the plant’s completion in order to protect the United States’ $300 million investment. USAID and other 

international donors have taken steps to assist the GIRoA with long-term commercialization efforts designed to generate sufficient 

revenues to allow the government to cover its fuel costs and O&M expenses. If these commercialization efforts falter, the United States 

may face the difficult decision whether to continue funding the operation of the Kabul Power Plant or allowing it to fall into disuse. The 

long-term sustainability of the Kabul Power Plant is further complicated by the initial design decision to build a dual fuel plant (that is,

capable of running on diesel or heavy fuel oil) as opposed to a diesel-only plant since heavy fuel oil is not commercially available in 

Afghanistan and requires more technical knowledge and sophistication to operate. 

SIGAR Audit-10-6 January 2010

Contract Delays Led to Cost Overruns for the 

Kabul Power Plant and Sustainability 

Remains a Key Challenge

What SIGAR Recommends 

To help ensure the long-term sustainability of the Kabul Power 

Plant, SIGAR recommends that the USAID Mission Director in 

Afghanistan produce a definitive study on the technical 

feasibility and advisability of using heavy fuel in the Kabul 

Power Plant and factor this information into plant completion 

decisions and any decisions regarding post-construction use of 

heavy fuel oil by the GIRoA.

For more information contact: SIGAR Public affairs at (703) 602-8742 or 

PublicAffairs@sigar.mil

USAID, Black 

& Veatch, 

and SIGAR 

staff visit to

the Kabul 

Power Plant

Source: SIGAR
SIGAR Audit-10-6 Contractor Performance and Oversight Page iii 

TABLE OF CONTENTS

Background 2 

Numerous Factors Contributed to Project Delays, Resulting in A $40 Million Cost Overrun 4 

Steps Taken to Address the Causes of Project Delays and Reduce Total Project Costs 7 

Significant Risks to Sustainability Exist 10

Conclusions 13 

Recommendation 13 

Comments 13 

Appendix I: Scope and Methodology 14 

Appendix II: Task Order 9 Contract Modifications 15 

Appendix III: Comments from USAID Embassy Kabul and USAID Mission to Afghanistan 17 

Appendix IV: Comments from Black & Veatch 21 

TABLES

Table 1: Factors Contributing to Project Delays 5 

ABBREVIATIONS

AIRP Afghanistan Infrastructure and Rehabilitation Program

COTR Contracting Officer’s Technical Representative

GIRoA Government of the Islamic Republic of Afghanistan

IQC Indefinite Quantity Contract

NEPS North East Power System

O&M Operations and Maintenance

SIGAR Special Inspector General for Afghanistan Reconstruction 

USAID U.S. Agency for International Development

 
SIGAR Audit-10-6 Contractor Performance and Oversight Page 1 

Contract Delays Led to Cost Overruns for the Kabul Power 

Plant and Sustainability Remains a Key Challenge

Years of conflict severely damaged Afghanistan’s generation, transmission, and power systems—leaving 

the country with an aging, inefficient, and incomplete power network. The national electrification rate is 

10 percent and only about a third of the households in Kabul are connected to service, which 

experiences frequent outages. As highlighted in the Afghanistan National Development Strategy and 

other key planning documents, the United States, other international donors, and the Afghan 

government agree that improving this key component of Afghanistan’s infrastructure, through projects 

such as the Kabul Power Plant, is essential for the future economic progress and the long-term viability 

of the elected government of Afghanistan. 

This report assesses assistance provided by the U.S. Agency for International Development (USAID) to 

the Government of the Islamic Republic of Afghanistan (GIRoA) to build a 105 megawatt1 power plant 

on the outskirts of Kabul which, as reported by the Office of the USAID Inspector General in its 

November 2009 report,2

Building on the results of the Office of the USAID Inspector General’s report, our report provides an 

updated assessment of (1) the basis for reported project delays and cost overruns, (2) actions taken to 

respond to these problems, and (3) whether the Afghan government will be able to sustain the plant’s 

operations upon completion. To achieve these objectives, we coordinated our efforts with the Office of 

the USAID Inspector General to avoid potential duplication of audit activities. We reviewed U.S. and 

Afghan energy sector strategies, USAID contacting policies and guidelines, and contracting documents

provided by U.S. government officials and contracting officials in Washington, D.C., and Kabul, 

Afghanistan. We also interviewed USAID, contractor, and Afghan government officials with 

implementation and oversight responsibilities for the plant’s construction and future operations. Finally, 

we conducted an on-site inspection of the plant in September 2009 to verify and review construction 

progress and quality. We conducted our work in Kabul, Afghanistan, and Washington, D.C., from August 

to December 2009 in accordance with generally accepted government auditing standards. A discussion 

of our scope and methodology is included in appendix I.

is 12 months behind schedule and $40 million over budget. 

 

1 A megawatt equals one million watts.

2 See Audit of USAID/Afghanistan’s Power Sector Activities Under Its Afghanistan Infrastructure Rehabilitation 

Program, Office of the Inspector General, USAID. (Audit Report No. 5-306-10-002-P, Manila, Philippines, November 

10, 2009). This report is based on fieldwork conducted in Afghanistan through May 2009. 
SIGAR Audit-10-6 Contractor Performance and Oversight Page 2 

BACKGROUND

Beginning in 2003, the United States and other foreign donors launched an energy sector assistance 

program, consistent with the Afghanistan National Development Strategy, which attempted to address 

Afghanistan’s chronic shortage of electricity through a wide variety of infrastructure, commercialization, 

and sustainability projects.3

USAID’s decision to a build a power plant in Kabul was based on a number of factors including:

As part of this assistance program, USAID agreed in May 2007 to provide the 

GIRoA with a 105 megawatt, diesel-powered plant in Kabul with 18 generators organized in three blocks 

(referred to as blocks A, B, and C) of 6 generators each—with each block capable of generating 35 

megawatts of electricity. With a contract start date of July 2007, blocks A and B were originally 

scheduled to be operational by December 2008, with block C and the balance-of-plant operational by 

March 31, 2009. USAID officials noted that this represented a highly ambitious construction schedule for 

a plant of this type in a country like Afghanistan. Therefore, the Kabul Power Plant was considered a 

“fast track” project from the start.

• Concerns that a lack of power in Kabul during the winter of 2008/2009 could affect national 

election results in 2009.

• Additional power needs in Kabul expected for the winter of 2008/2009 due to an expected 

shortfall in electricity from the donor-funded North East Power System.4

• A desire to provide Kabul with a back-up/peaking source of energy in anticipation of rapid 

growth in Kabul’s demand for electricity; expected shortfalls in hydroelectric power availability 

during the winter months;

 

5

• A desire to provide a cheaper alternative to Kabul’s older, less efficient diesel power plant. 

and potential shortfalls due to insurgent attacks on Afghanistan’s 

electric infrastructure, natural disasters, or neighboring country decisions to reduce power 

exports.

 

3 SIGAR recently issued an audit report evaluating the donors’ energy sector assistance strategy in Afghanistan. See 

Afghanistan Energy Supply Has Increased but An Updated Master Plan Is Needed and Delays and Sustainability 

Concerns Remain, SIGAR-Audit-10-4 (Washington, D.C. Jan. 15, 2010).

4 The North East Power System (NEPS) is expected to provide Afghanistan with up to 500 megawatts of daily 

imported electricity from Uzbekistan, Tajikistan, and Turkmenistan. According to USAID officials, it became 

apparent in early 2007 that NEPS was unlikely to meet its target date for commercial operations of October 2008, 

putting Kabul’s winter power supply at risk. 

5 USAID officials noted that the Kabul Power Plant will be used sparingly when cheaper sources of power are 

available, while potentially running 24 hours a day, seven days a week when lower cost options are not available 

(for example, during the Winter months when water levels are low and hydro electric power is less plentiful). 

USAID officials noted that power sources such as hydro electric or imported electricity cost, respectively, onefiftieth and one-fifth the expected per kilowatt hour cost of electricity versus the Kabul Power Plant. The per 

kilowatt hour cost of the Kabul Power Plant, in turn, is estimated to be approximately half the cost of running 

Kabul’s older and less efficient diesel generator plant.
SIGAR Audit-10-6 Contractor Performance and Oversight Page 3 

Contract Organization and Requirements

The contract for the Kabul Power Plant was awarded to the Louis Berger Group, Inc./Black & Veatch

Joint Venture as a cost-plus-fixed-fee contract completion task order (task order 9) in July 2007. This 

task order is part of USAID’s $1.4 billion indefinite quantity contract (IQC) for its Afghanistan 

Infrastructure and Rehabilitation Program (AIRP) awarded in August 2006 to the Joint Venture.6

• Civil site work. Design and land preparation of the power plant, sub-station, and transmission 

line.

Task 

order 9 was divided into eight sub-tasks, as follows:

• 18 diesel generators and associated equipment.

• Balance-of-plant construction. All electro-mechanical installation and provision of associated 

equipment required for power plant operations.

• Connect the plant to the Kabul grid. Construct a switchyard with transmission lines from the site 

to the existing Kabul grid. 

• Logistics services including shipping the power plant equipment from the manufacturing 

facilities to the Kabul site 

• Security services. 

• Camp construction. Fabricating, delivering, and installing office buildings, accommodation units, 

laundries, kitchens, recreation buildings, server buildings and storage facilities.

• Operating and maintaining the camp facilities. 

Black & Veatch served as the Joint Venture’s general contractor for task order 9 and awarded three 

primary contracts—one to Caterpillar Power Generation Systems for the manufacture of generators and 

related equipment at its facilities in Germany and Mexico, one to a Symbion Power/AREVA joint venture 

for the plant substation and connecting power lines, and one to Symbion Power for balance-of-plant 

construction. In a contract dispute with Black & Veatch, Symbion Power ceased work on the balance-ofplant contract effective June 2, 2009, after a two-week notice period, upon which Black & Veatch 

assumed Symbion Power’s contract responsibilities.

7

 

6 This IQC covers most of USAID’s large-scale construction projects in Afghanistan.

7 Black & Veatch and Symbion Power have filed claims with the International Chamber of Commerce regarding a 

range of complex issues. The chamber’s arbitration process will likely take approximately 12 more months with a 

hearing expected in early 2011. A final decision is expected a few months after the hearing. 
SIGAR Audit-10-6 Contractor Performance and Oversight Page 4 

Photo of Kabul Power Plant as of October 21, 2009

 Source: Black & Veatch

NUMEROUS FACTORS CONTRIBUTED TO PROJECT DELAYS, RESULTING IN A $40 MILLION COST 

OVERRUN

The Kabul Power Plant is behind schedule and over budget due to a wide range of factors attributable to 

USAID, Black & Veatch, and subcontractor mismanagement. Between initial contract award in July 2007 

and December 2008, USAID issued 15 contract modifications which progressively raised contract costs 

from approximately $125 million for initial long-lead equipment and design to nearly $260 million for 

the total plant construction, commissioning, and initial operations and maintenance.8

The Office of the USAID Inspector General’s report identified a number of factors that contributed to 

delays in the plant’s construction. As shown in table 1, these factors included (1) an initial inability to 

obtain adequate title to land for construction, (2) USAID’s inclusion of an ambiguous statement of work 

A later

modification to task order 9 extended the project’s final completion by 12 months to March 31, 2010, 

and raised total project costs by nearly $40 millionto a total of approximately $300 million. In contrast 

to earlier cost increases, USAID officials noted the $40 million in additional program costs resulted 

directly from the failure to meet the original project completion dates. Although these initial deadlines 

were missed, SIGAR noted that the first six generators in block A were fully commissioned and 

connected to the Kabul power grid in July 2009. In addition, according to Black & Veatch officials, blocks 

B and C became operational in December 2009 and all 18 generators are now available to provide up to 

105 megawatts of power to the Kabul electrical grid, leaving only balance-of-plant construction to be 

completed.

 

8 See appendix II for a complete description of all task order modifications. 
SIGAR Audit-10-6 Contractor Performance and Oversight Page 5 

resulting in poor planning and implementation, (3) Black & Veatch’s delays in subcontractor award and 

mobilization, (4) subcontractor performance problems, (5) delays in getting timely approvals from 

USAID’s contracting officer, (6) lack of on-site quality assurance, (7) inconsistent communication

between USAID and Black & Veatch, and (8) transportation and customs problems.

Table 1: Factors Contributing to Project Delays

Factors Office of the USAID Inspector General’s Findings 

Land Issues The project was partly delayed by a land ownership issue which took 

almost a year to resolve due to USAID/Afghanistan’s failure to obtain an 

advance commitment from the host government. 

Ambiguous Statement of Work Under the pressure of political urgency, the mission wrote a vaguely 

worded statement of work. The original statement of work was not 

comprehensive and did not require specific deliverables with concrete 

delivery dates. Black & Veatch commented that, under normal 

circumstances, it would have submitted a comprehensive schedule, 

detailing the required resources along with a list of critical tasks that must 

be implemented on time to prevent delays in the project. However, to 

complete the project by the required date, the project was carried out as a 

series of separate tasks specified by the mission. For example, the initial 

award included only the purchase of equipment to be manufactured, such 

as the 18 generators and supporting equipment, and an initial search for 

potential bidders for other critical tasks, such as constructing the 

transmission lines to the main power grid. Modifications were made 

subsequently, as the project progressed, without the benefit of a missionor contractor-developed construction schedule.

Delays in Subcontract Award and 

Mobilization

Numerous delays occurred in the award and mobilization of the 

subcontract. According to the Office of the USAID Inspector General’s 

report, Black & Veatch told Symbion Power its subcontract would be 

awarded in April 2008 and that its mobilization efforts could begin in May 

2008. However, the final subcontract was not signed until early June 2008, 

putting the subcontractor a month behind schedule from the start. 

Symbion Power’s mobilization encountered delays as well. Black & Veatch

was supposed to provide Symbion Power with certain work site 

infrastructure by the end of June 2008, including office and residential 

space as well as site preparation. However, when Symbion Power 

mobilized, it discovered that these items had not been completed. 

Symbion Power stated that the site preparation was not completed until 

approximately the end of August 2008 and that its offices were not 

completed until mid-September 2008.

Subcontractor Performance 

Problems

Caterpillar—the firm that manufactured the 18 generators—notified Black 

& Veatch that a quality control problem would delay delivery of the 

generators for blocks B and C. The delivery schedule for block B slipped by 

88 days and for block C by 15 days.

Symbion Power had trouble obtaining qualified local labor and was slow to 

respond to the Black & Veatch’s request to use more foreign labor. 
SIGAR Audit-10-6 Contractor Performance and Oversight Page 6 

Factors Office of the USAID Inspector General’s Findings 

Subcontractor Performance 

Problems (continued)

Symbion Power finally obtained foreign labor through its subcontractor; 

however, the subcontractor brought in the foreign workers under tourist 

visas instead of work visas. As a result, when the workers were notified 

that they could no longer work under the tourist visas, they left the 

country, and Symbion Power’s difficulty in finding qualified labor 

continued. The mission commented that, had Symbion Power notified the 

mission through the contractor that visas were a problem, the mission 

could have assisted in obtaining the required work visas. 

Lack of Timely Approvals Black & Veatch contended that approval for critical tasks required for a 

fast-track project like this was delayed at the mission. For example, the 

contractor had prepared a detailed analysis of the various transportation 

options available to transport the generators, which were being built by 

Caterpillar in Germany. This analysis involved a cost assessment as well as 

an assessment of security risks in transporting the generators overland 

through insecure areas. According to the mission, the contractor originally 

had received approval from USAID’s Regional Acquisition Office in 

Bangkok but then was required to provide additional justification to the 

contracting officer in Kabul before the contract modification was signed 

for transporting the generators from Germany to Kabul. The mission 

agrees that all parties to the process should have been involved from the 

beginning in deciding how to transport the generators and that this 

particular approval took longer than expected. This one contract 

modification took two months to approve—a critical delay for a fast-track 

project.

Lack of On Site Quality Assurance Quality assurance oversight of construction activities is normally 

conducted on site, by either independently contracted engineers or the 

mission’s local staff. However, USAID/Afghanistan does not have this 

practice documented in its procedures, and in this case the mission did not 

have an on site presence. The mission stated that it was not sure why an 

on site quality assurance engineer had not been assigned to the project, 

but the mission agreed that one should have been assigned. Had an on 

site engineer been assigned to the project, the mission would have been 

aware of problems sooner. 

Inconsistent Communication 

Between USAID and Black & 

Veatch

USAID/Afghanistan contended that it was unable to assist the contractor 

in moving the project forward because the contractor did not convey 

critical information to the mission promptly enough to be useful. 

Specifically, a contractor’s internal report, dated December 2008 and 

detailing problems in delivering the completed facility on time, was not 

provided until mid-January. Further, delays in customs clearance as well as 

the inability to obtain work visas were not communicated promptly to the 

mission. The mission contended that, had it known of all the problems the 

contractor was experiencing, it could have intervened sooner to help 

resolve the problems. 
SIGAR Audit-10-6 Contractor Performance and Oversight Page 7 

Factors Office of the USAID Inspector General’s Findings 

Transportation and Customs 

Delays

The project also suffered from a series of transportation delays. 

Specifically, there were problems with clearing items through customs at 

border crossings and with finding drivers willing to transport items from 

the Pakistani border to Kabul. Also, items such as transmission towers and 

raw materials were delayed at border crossings.

Source: Office of the USAID Inspector General’s report.

STEPS TAKEN TO ADDRESS THE CAUSES OF PROJECT DELAYS AND REDUCE TOTAL PROJECT 

COSTS

SIGAR found that both USAID and Black & Veatch have taken a number of steps to help ensure that all 

18 generators were installed by December 2009, prevent any further delays beyond the end of March 

2010, and help reduce overall project costs. These steps were taken in response to the Office of the 

USAID Inspector General’s report,9

Project Execution Plan and Work Plan Prepared

SIGAR briefs provided to USAID and Black & Veatch managers in 

Kabul during the course of our audit, and USAID-initiated actions. These steps include (1) the creation of 

a project execution plan by Black & Veatch and related work plans, (2) USAID’s hiring of an independent 

quality assurance firm which now has staff on site at the Kabul Power Plant, (3) an extensive internal 

review of all AIRP task orders to identify systemic causes for the project delays and cost overruns, (4) 

efforts to reduce total project costs by implementing lower-cost engineering options and seeking 

voluntary fee reductions from Black & Veatch. 

Black & Veatch submitted a project execution plan in July 2009 to USAID describing how the firm 

planned to manage construction efforts in the wake of Symbion Power’s release from the project. This 

plan outlines a number of key operating concepts, identifies a series of critical risks to timely project 

completion, and suggests that separate mitigation plans would be developed for each identified risk. 

The plan describes the management strategy, concepts, and controls that will be implemented to help 

ensure that the project is efficiently executed and managed. Identified risks include project funding, 

inadequate construction and inventory records, resolution of remaining subcontracts, delays in 

material/equipment deliveries, labor availability and productivity, safety and security events, and client 

approvals. 

In its response to the Office of the USAID Inspector General’s report, USAID officials noted that the 

mission now has an overall implementation plan for the Kabul Power Plant focused on completing the 

plant by March 31, 2010. The agency’s response notes that modification 17 to task order 9 puts the 

implementation plan into operation by: 

• Defining very specific deliverables and delivery dates for the different components of the power 

plant. 

 

9 A complete description of USAID actions taken to respond to the Office of the USAID Inspector General’s report is 

included in the management comments section of that report.
SIGAR Audit-10-6 Contractor Performance and Oversight Page 8 

• Requiring the contractor to prepare a work plan establishing the timeline for implementation, 

personnel requirements, proposed accomplishments toward achieving results, details of 

collaboration with counterparts and donors, management structure, proposed schedule, quality 

assurance/quality control plan and performance monitoring plan. 

• Establishing dates for the submission of design and engineering drawings and documents. 

• Requiring the submission of specific progress reports. 

Quality Assurance and Quality Control Oversight Improved

Significant steps have been taken to improve both USAID’s quality assurance process and Black & Veatch 

and its sub-contractor’s quality control procedures.10

Black & Veatch staff noted that they have instituted additional quality control procedures since June 

2009 to ensure that ongoing and future work meets all contract requirements and specifications. During 

the course of this audit, we reviewed and verified that these quality control procedures were in place. 

During our visit to the plant, SIGAR noted examples of periodic progress reports provided to USAID, the 

existence of sub-contractor quality control plans, and recent records of detailed quality control 

inspections and testing. 

These steps include the provision of on site quality 

assurance oversight, increased contact between USAID and Black & Veatch staff, and increased visits by 

the Contracting Officer’s Technical Representative (COTR) to the project site. USAID’s senior engineer in 

Kabul noted that the biggest lesson he learned from his experience on the Kabul Power Plant is the 

importance of having on site quality assurance in addition to having a USAID COTR assigned to the 

project. In the wake of Symbion Power’s release from the project, USAID hired an independent 

contractor to provide on site oversight. According to senior USAID officials, the agency also increased 

the number of meetings between the COTR and Black & Veatch staff and required more on site visits by 

the COTR to verify that the project remains on schedule. 

USAID’s Review of Contracting Shortfalls and Problems

In March 2009, USAID’s office in Kabul completed an assessment of the structure and operations of the 

$1.4 billion Afghanistan Infrastructure and Rehabilitation Program (AIRP) IQC with the Joint Venture. The 

assessment notes an urgent need to strengthen the operations and performance of the Joint Venture, 

which has missed a large number of extremely important milestones on the Kabul Power Plant and on a 

number of other task orders under the IQC. The assessment identifies a number of planned actions. 

As of January 2010, planned corrective actions and reported implementation progress included: 

• Requiring the joint venture to prepare a project management plan for the AIRP. USAID 

completed and approved a project management plan for all AIRP projects. 

• Improving project communication and developing more specific statements of work. USAID 

holds weekly project meetings to discuss all AIRP project progress and issues. USAID performs 

 

10 Quality assurance consists of agency attempts to monitor the effectiveness of a contractors’ quality control 

procedures which should be designed to gauge that all contract terms and specifications, including quality of 

materials and workmanship, are adhered to.
SIGAR Audit-10-6 Contractor Performance and Oversight Page 9 

weekly site visits to Kabul Power Plant, although some weekly site visits have been canceled due 

to the security office’s limitations in supporting these trips.

• Conducting independent cost estimates. USAID establishes independent government cost 

estimates for each AIRP project. Both the technical office and the contracting office review and 

approve each request for sub-contract approval.

• Investigating cost recovery options to address unacceptable project delays. USAID investigated 

and determined that liquidated damages were not an option under task order 9. However, 

when negotiating the increase in budget and time, the contracting office was able to get the 

contractor to agree to waive their fees for this extension.

• Requiring annual work plans. USAID now requires an annual work plan for each AIRP task order. 

These work plans are reviewed by the respective COTR and comments are transmitted to the 

contractor. The latest workplan submission and review cycle occurred in November 2009.

• Implementing independent quality assurance oversight. USAID has implemented independent

on site quality assurance at the Kabul Power Plant. USAID receives weekly written reports of 

progress against milestones, engineering, and safety issues.

• Addressing USAID staffing limitations that limit the agency’s contract oversight capabilities.

USAID is carrying out a recruitment and hiring effort to address staffing shortfalls. 

Cost Control Efforts

USAID and Black & Veatch reduced total program costs by $5 million as a result of certain cost-saving 

measures and a voluntary fee reduction by Black & Veatch. In the absence of these efforts, project 

overrun costs would have exceeded the current total of $40 million. Specific actions include:

• USAID and Black & Veatch staff conducted a value engineering session at the Kabul Power Plant 

in July 2009 in order to identify appropriate ways to reduce project costs through lower-cost 

construction options. Several cost-saving ideas were identified and incorporated in modification 

17. USAID and Black & Veatch officials estimated these savings totaled $3.4 million.

• USAID requested that Black & Veatch reduce its fixed fee on a voluntary basis for work already 

completed and eliminate its fixed fee and management fees (that is, general and administrative 

expenses) for future work under modification 17. Black & Veatch agreed to eliminate its fixed 

fee with regard to future work, saving the government an estimated $1.6 million, but did not 

accept the other proposed reductions. 

• USAID considered other cost recovery options such as asking Black & Veatch to pay for the extra 

fuel costs USAID had to cover as a result of relying on Kabul’s older, less efficient diesel power 

plant past the Kabul Power Plant’s target completion date,11

 

11 USAID estimated that the failure to complete the Kabul Power Plant’s first two blocks by December 2008 cost 

USAID, which provided fuel support to Kabul’s other diesel powered plant during the winter of 2008/2009, 

approximately $100,000 a day in extra fuel costs for a 90 day period from December 2008 to March 2009. 

but declined to pursue this option 

further given the cost-plus-fixed-fee nature of task order 9, which does not allow for liquidated 

damages.
SIGAR Audit-10-6 Contractor Performance and Oversight Page 10 

SIGNIFICANT RISKS TO SUSTAINABILITY EXIST

According to USAID officials in Washington, project sustainability is a top priority for the agency 

worldwide and in particular Afghanistan. These officials noted that the United States and the GIRoA 

could be left with “stranded assets” if project implementation and follow-up are not handled correctly. 

They noted that, unlike Iraq, Afghanistan has a weak economy, a limited ability to generate government 

revenues, an unskilled workforce, a problematic security environment, and an almost complete lack of 

existing infrastructure. Despite early commitments by the GIRoA, it is now evident that the Afghan 

government may not be able to pay for fuel costs for several years and USAID has already indicated its 

willingness to cover the plant’s operations and maintenance (O&M) expenses for several more years 

based on a planned request for proposals to be issued in early 2010. In addition to these revenue 

concerns, SIGAR noted that the decision to build a dual use fuel plant capable of running on either diesel 

or heavy fuel oil has significant sustainability implications. In the absence of any definitive studies, it is 

not clear whether the Afghan government will ever have the required infrastructure or technical 

capability to utilize heavy fuel oil, which requires special equipment and handling procedures in order to 

avoid potentially irreparable damage to the plant’s generators.

GIRoA Commitments to Sustainability

The U.S. Government sought the participation of the GIRoA in deciding to proceed with the Kabul Power 

Plant. On April 2, 2007, the Cabinet of the GIRoA approved the procurement of the plant and committed 

to provide the following: 

• Provide $20 million toward the capital cost of the power plant, with the balance funded by 

USAID.

• Pay for the fuel required to operate the plant.

• Implement and pay for the plant’s O&M expenses beginning one year after the plant’s 

completion. 

• Commercialize the operations of Afghanistan’s electricity utilities sector in order to produce 

sufficient revenues to cover fuel costs and O&M expenses.

Section 611 (e) of the Foreign Assistance Act of 1961 provides that whenever certain types of funds are 

proposed to be used for a capital assistance project exceeding $1 million, the USAID Mission Director

must certify that the country has the capability to effectively maintain and utilize the project. In June 

2008, USAID’s Mission Director for Afghanistan certified that the USAID Office of Infrastructure, 

Engineering and Energy in Kabul had concluded that the GIRoA would be able to meet these 

commitments.

One key basis for this certification was the expectation that the GIRoA would commercialize its utility 

sector which, for the Kabul area alone, is projected to suffer an operating loss of $250 million in 2010. 

USAID and the GIRoA are seeking to turn the Kabul electric utility into a profitable entity, capable of 

funding the Kabul Power Plant’s operating expenses. USAID has awarded two contracts to U.S. firms to 

promote this specific objective and more broadly to increase the profitability of the utility sector across 

Afghanistan. 
SIGAR Audit-10-6 Contractor Performance and Oversight Page 11 

GIRoA Commitments Only Partially Met

The GIRoA did provide 148 acres for the Kabul Power Plant site and transferred $20 million to USAID, 

however, efforts to commercialize the GIRoA’s electric utility operations remain to be fully 

implemented—a process USAID officials said could take at least another five years. However, USAID 

officials noted that commercialization efforts were significantly advanced on September 30, 2009, when 

a memorandum of understanding was signed between the Ministry of Energy and Water and a new 

privatized national utility created to operate outside the Ministry on a commercial basis.12 

While USAID has not yet provided any direct fuel support for the Kabul Power Plant, USAID did provide 

fuel support for the North West Kabul Power Plant during the winter of 2008/2009 and the potential 

exists that funds left over from this earlier request may be used to pay for future fuel needs at the Kabul 

Power Plant. 

USAID Support for Fuel Costs

In response to a request from the Afghan Minister of the Economy, USAID held back $28 million in funds 

originally set aside for USAID’s contribution to the Afghan Reconstruction Trust Fund managed by the 

World Bank. A total of $15.6 million in fuel support was provided to the North West Kabul Power Plant 

during the winter of 2008/2009, leaving a balance of $12.4 million for additional fuel purchases or 

possible return to the Trust Fund. In May 2009, USAID informed the GIRoA that it is responsible for 

providing the operating costs, including fuel, for the Kabul Power Plant. Despite this communication, the 

GIRoA has verbally requested fuel support for the Kabul Power Plant and other diesel-fired power plants 

in the south of Afghanistan. The GIRoA has also formally requested that the $12.4 million in funds be set 

aside for fuel support. USAID has not yet responded to this latest request. 

Actual fuel costs and the potential level of support which may be requested by the GIRoA will depend on 

the level of demand for Kabul Power Plant electricity. As noted in the Office of the USAID Inspector 

General’s report, these costs could be substantial due, in part, to the configuration of the Kabul 

transmission system.

13 The current segregation of Kabul into two distinct power transmission sectors 

prevents the use of lower-cost alternative sources of electricity, such as imported power, in the sector 

served by the Kabul Power Plant.

According to USAID’s sustainability certification, the principal strategy for facility-level O&M is the use of 

outside professional contractors that have the skills and familiarity with the day-to-day and periodic 

O&M requirements of a large power generation station. During the first year, O&M will be provided as 

part of the installation contract financed by USAID. Beginning with the second year of operations, 

however, the GIRoA committed to outsourcing and financing the O&M function. However, USAID has 

USAID Support for O&M Expenses Needed for Several Years

 

12 Originally scheduled for July 2009, the transition was temporarily blocked by the Minister of Energy and Water 

citing several labor and inventory concerns which needed to be addressed. According to USAID officials, U.S. and 

other donor officials prevailed upon the Minister to reconsider his position, leading to the signing of the 

memorandum of understanding.

13 Kabul is divided into two sectors: one receives electricity from hydroelectric plants as well as diesel plants, and 

the other receives electricity from imported sources. 
SIGAR Audit-10-6 Contractor Performance and Oversight Page 12 

now concluded that the GIRoA will not be able to pay for O&M expenses for several years. USAID 

officials noted that they are planning to issue a request for proposal in the near future for a multi-year, 

follow-on O&M contract for the Kabul Power Plant. This O&M support contract will begin after the O&M 

portion of modification 17 expires in April 2010.

While USAID plans to contract for the bulk of O&M support over the next several years, USAID and Black 

& Veatch are seeking to develop the capabilities of the Afghans to maintain and operate the Kabul 

Power Plant using their own personnel and resources. These efforts take the form of (1) training and 

documentation requirements included in task order 9,14

Sustainability Risks Associated with Dual Fuel Use

(2) the funding of a technical training institute in 

Kabul which includes courses specifically designed to support the training of staff for the Kabul Power 

Plant, and (3) ministry-level capability development, including training on establishing and maintaining a 

dedicated budget for O&M expenses for all government-run facilities.

The decision by the GIRoA and the United States to build a dual fuel plant (that is, a plant capable of 

operating on diesel or heavy fuel oil) has long-term implications for project costs and plant sustainability 

if GIRoA staff or contractors do not properly manage and implement the more complex processes and 

procedures required to operate such a plant.15

According to Black & Veatch staff, a senior GIRoA official advocated the option of a dual fuel plant since 

heavy fuel oil is considerably cheaper than diesel fuel and would increase the chances that the GIRoA 

could operate the plant with its own resources. Black & Veatch staff noted, however, that the full costs 

of using heavy fuel oil include additional infrastructure investments,

As noted by senior Black & Veatch officials, the improper 

use of heavy fuel oil could lead to the complete failure of the generators. 

16

USAID and Black & Veatch staff considered the option of a diesel fuel only plant at their July 2009 value 

engineering meeting. Potential savings include the removal of fuel holding tanks 2 and 3, which are 

being built explicitly for the purpose of storing heavy fuel oil. Black & Veatch staff estimate that up to 

$4 million could be saved if the plant was converted to a diesel-only plant. USAID staff declined to 

pursue this option due to the political sensitivities surrounding this issue and prior commitments with 

the GIRoA.

handling costs, and O&M 

expenses associated with the greater wear and tear placed on the generators. According to Black & 

Veatch’s senior manager in country, a definitive assessment of the use of heavy fuel oil remains to be 

prepared. 

Finally, Black & Veatch officials noted that the GIRoA has agreed to limit the Kabul Power Plant’s first 

two years of operation to diesel fuel only in order to ensure smooth plant operations at start-up. It is 

unclear whether two years will provide GIRoA staff with sufficient time to develop or contract for the 

 

14 A limited number of Ministry of Energy and Water staff are being trained and utilized on the project. Black & 

Veatch officials noted that additional staff and training would be provided as the plant gets closer to full 

operational status.

15 Heavy fuel oil solidifies at lower temperatures if not heated and is considered a lower grade oil requiring the use 

of multiple additives and processing steps. 

16 Heavy fuel oil is not available in Afghanistan (as is the case with diesel fuel) and would require the creation of a 

heavy fuel oil import and distribution network just for the Kabul Power Plant. 
SIGAR Audit-10-6 Contractor Performance and Oversight Page 13 

technical expertise need to operate a plant on heavy fuel oil and construct the fuel distribution network 

needed to make this a viable option.

CONCLUSIONS

Current risks for the Kabul Power Plant focus on its long-term sustainability, which will be affected by 

the GIRoA’s ability to generate sufficient revenue to pay for fuel and O&M expenses. USAID has taken 

steps to assist the GIRoA with its ongoing commercialization efforts. Nonetheless, USAID officials believe 

this process will take at least five years to complete and plans exist to cover the plant’s O&M costs for 

several years after turnover to the GIRoA. Whether the Kabul electric utility will have sufficient revenues 

in five years to assume these costs is open to debate. If the plant is not turned over to Afghan 

authorities within this time frame, USAID may face the difficult decision of whether to continue funding 

the plant’s operations or terminating U.S. involvement with the project and placing the plant’s future 

operation at risk. SIGAR further found that long-term sustainability is complicated by the decision by the 

GIRoA and USAID to construct a dual fuel instead of a diesel-only plant, providing the Afghans with a 

technically sophisticated fueling option they may not have the capacity to sustain. 

RECOMMENDATION

To help ensure the timely completion and sustainability of the Kabul Power Plant, SIGAR recommends 

that the USAID Mission Director in Afghanistan: 

• Produce a definitive study on the technical feasibility and advisability of using heavy fuel in the 

Kabul Power Plant and factor this information into plant completion decisions and any decisions 

regarding post-completion use of heavy fuel oil by the GIRoA.

COMMENTS

The U.S. Embassy Kabul and the USAID Mission in Afghanistan provided joint written comments on a 

draft of this report. Black & Veatch provided written comments as well. These comments are provided in 

appendix III and IV, respectively. In their response, the U.S. Embassy Kabul and USAID Mission in 

Afghanistan indicated concurrence with the report’s findings and recommendation. They indicated that 

a definitive study of the option to run the Kabul Power Plant on heavy fuel oil will be completed before 

the end of March 2010. Black & Veatch’s comments addressed some factual issues and areas where it

believed additional clarification might help avert possible misunderstandings related to the project.

The U.S. Embassy Kabul and USAID Mission in Afghanistan, Black & Veatch, and Symbion Power also 

provided technical comments which SIGAR incorporated into this report, as appropriate.
SIGAR Audit-10-6 Contractor Performance and Oversight Page 14 

APPENDIX I: SCOPE AND METHODOLOGY

This report discusses SIGAR’s review of the USAID-funded Kabul Power Plant project, which is scheduled 

for completion by March 31, 2010. This report updates and builds upon the audit report issued by the 

Office of the USAID Inspector General in November 2009, which provided a number of

recommendations designed to improve the management of the Kabul Power Plant contract. Given the 

value of this project, the critical role it plays in advancing U.S. strategic interests in Afghanistan, and the 

number of outstanding issues surrounding the plant’s completion and operations, we concluded that a 

follow-on assessment conducted by SIGAR staff was warranted. 

To identify the basis for project delays and cost overruns, we reviewed the Office of the USAID Inspector 

General’s November 2009 report and reviewed documentation from and conducted interviews with 

USAID energy sector officials at the U.S. Embassy in Kabul as well as Black & Veatch staff in Washington, 

D.C. and Kabul, and Symbion Power staff in Washington, D.C. 

To assess the actions taken to address problems identified by the Office of the USAID Inspector General 

and SIGAR, we reviewed documentation provided by USAID, Black & Veatch, and Symbion Power; 

interviewed agency and contractor officials; and conducted an on site visit to the Kabul Power Plant 

from September 1-3, 2009.

To evaluate the long-term sustainability of the Kabul Power plant, we reviewed documentation provided 

by USAID, Black & Veatch, and Symbion Power; interviewed agency and contractor officials in both 

Washington, D.C., and Kabul; and met with a senior GIRoA energy official to discuss the Afghan 

government’s plans for the Kabul Power Plant.

This report is part of a series of SIGAR audits of major infrastructure contracts funded by the United 

States in Afghanistan. We conducted work from August to December 2009 in Kabul, Afghanistan, and 

Washington, D.C., in accordance with generally accepted government auditing standards. Those 

standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to 

provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe 

the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit 

objective. The audit was conducted by SIGAR under the authority of Public Law 110-181, Section 1229,

and the Inspector General Act of 1978, as amended. 
SIGAR Audit-10-6 Contractor Performance and Oversight Page 15 

APPENDIX II: TASK ORDER 9 CONTRACT MODIFICATIONS

Modification 

Number

Date 

Approved

Total 

Estimated 

Cost

(in millions)

Nature/Purpose of Modification

Letter 

Contract

5/24/2007 $3.8 Authorize negotiations and provide payment for 

securing manufacturing slots with Caterpillar Power 

Generation Systems for long lead equipment. 

1 6/16/2007 3.8 Correct certain accounting and appropriation 

information. 

2 7/14/2007 29.3 Increase the non-refundable payment for holding 

manufacturing slots and add the following services 

in the statement of work: negotiation and award of 

equipment procurement, review and analysis of 

design package, and initiation of tenders for 

balance-of-plant construction and other 

components. 

 

3/Original

Task Order

7/31/2007 125.8 Replace the Letter Contract and provide additional 

funding and contractual authority for Louis Berger 

Group, Inc./Black & Veatch Joint Venture to place 

orders and perform work necessary to assure the 

delivery of 105 megawatts of additional generating 

capacity. 

4 12/23/2007 126.4 Add perimeter/security wall. 

5 4/24/2008 126.4 Adjust records to reflect the GIRoA’s financial 

contribution to the project. 

6 5/8/2008 134.4 Add site civil works design and construction. 

7 5/9/2008 137.9 Add camp facilities. 

8 5/15/2008 162.0 Add logistic support including shipping the 

generators from point of manufacture to Kabul. 

9 5/15/2008 177.8 Add 110 kilovolts sub-station/intertie to connect the 

power plant to the existing 110 kilovolts 

transmission lines. 
SIGAR Audit-10-6 Contractor Performance and Oversight Page 16 

Modification 

Number

Date 

Approved

Total 

Estimated 

Cost

(in millions)

Nature/Purpose of Modification

10 6/9/2008 205.8 Add balance-of-plant construction costs and extend 

completion date to 8/31/09. 

11 8/3/2008 251.5 Add camp services, facility maintenance, and 

security services, and increase balance-of-plant and 

other direct costs. 

12 9/30/2008 257.9 Provide for additional staffing requirements. 

13 10/16/2008 257.9 Provide incremental funding. 

14 12/7/2008 259.0 Add supervision and management of fuel delivery. 

15 12/17/2008 259.0 Provide incremental funding. 

16 8/31/2009 259.0 Extend the completion date to October 31, 2009. 

17 10/20/2009 301.6 Revise the statement-of-work, increase sub-contract 

costs, add operations and maintenance expenses for 

6 months, extend the completion date to May 31, 

2010, and provide incremental funding. 

18 12/8/2009 $301.6 Provide incremental funding. 

Source: USAID Mission in Afghanistan.
SIGAR Audit-10-6 Contractor Performance and Oversight Page 17 

APPENDIX III: COMMENTS FROM U.S. EMBASSY KABUL AND USAID MISSION TO AFGHANISTAN

The U.S. Embassy Kabul and USAID Mission to Afghanistan provided joint comments. However, each 

entity signed the comments separately. We are including both sets of identical comments below to 

show that each agency signed the comments.
SIGAR Audit-10-6 Contractor Performance and Oversight Page 18 
SIGAR Audit-10-6 Contractor Performance and Oversight Page 19 
SIGAR Audit-10-6 Contractor Performance and Oversight Page 20 
SIGAR Audit-10-6 Contractor Performance and Oversight Page 21 

APPENDIX IV: COMMENTS FROM BLACK & VEATCH

(This report was conducted under the project code SIGAR-006-I).
SIGAR Audit

-10-6 Contractor Performance and Oversight Page 22 

(This report was conducted under the project code SIGAR-09-006-I)
_________________________________________________________________________________ 

SIGAR’s Mission The mission of the Special Inspector General for Afghanistan

Reconstruction is to enhance oversight of programs for the 

reconstruction of Afghanistan by conducting independent and 

objective audits, inspections, and investigations on the use of 

taxpayer dollars and related funds. SIGAR works to provide 

accurate and balanced information, evaluations, analysis, and 

recommendations to help the U.S. Congress, U.S. agencies, and 

other decision-makers to make informed oversight, policy, and 

funding decisions to: 

• improve effectiveness of the overall reconstruction strategy 

and its component programs; 

• improve management and accountability over funds 

administered by U.S. and Afghan agencies and their 

contractors; 

• improve contracting and contract management processes;

• prevent fraud, waste, and abuse; and 

• advance U.S. interests in reconstructing Afghanistan.

 

Obtaining Copies of SIGAR To obtain copies of SIGAR documents at no cost, go to 

Reports and Testimonies SIGAR’s Web site (www.sigar.mil). SIGAR posts all released 

 reports, testimonies, and correspondence on its Web site.

To Report Fraud, Waste, and To help prevent fraud, waste, and abuse by reporting 

Abuse in Afghanistan allegations of fraud, waste, abuse, mismanagement, and

Reconstruction Programs reprisal contact SIGAR’s hotline: 

 

• Web: www.sigar.mil/fraud

• Email: hotline@sigar.mil

• Phone Afghanistan: +93 (0) 700-10-7300 

• Phone DSN Afghanistan 318-237-2575 

• Phone International: +1-866-329-8893 

• Phone DSN International: 312-664-0378 

• U.S. fax: +1-703-604-0983 

Public Affairs Public Affairs Officer

• Phone: 703-602-8742 

• Email: PublicAffairs@sigar.mil 

• Mail: SIGAR Public Affairs

400 Army Navy Drive

Arlington, VA 22202