MILLENNIUM 

CHALLENGE 

CORPORATION

Georgia and Benin 

Transportation 

Infrastructure 

Projects Varied in 

Quality and May Not 

Be Sustainable

Report to Congressional Committees

June 2012

GAO-12-630

United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-12-630, a report to 

congressional committees

June 2012

MILLENNIUM CHALLENGE CORPORATION 

Georgia and Benin Transportation Infrastructure 

Projects Varied in Quality and May Not Be 

Sustainable 

Why GAO Did This Study

MCC was established in 2004 to help 

developing countries reduce poverty 

and stimulate economic growth 

through multiyear compact 

agreements. As of June 2012, MCC 

had signed 26 compacts totaling about

$9.3 billion in assistance. Seven 

compacts, including those with Georgia 

and Benin, closed in 2010 or 2011. 

Most had a transportation 

infrastructure project (a road or a port) 

that received about 50 percent of the

compact’s total funding. This report, 

prepared in response to a 

congressional mandate to review 

compact results, examines how MCC 

ensured the quality and sustainability 

of MCC’s two transportation 

infrastructure projects in Georgia and 

Benin. GAO analyzed MCC 

documents, interviewed MCC officials 

and stakeholders, and observed the 

transportation infrastructure projects in 

those countries. 

What GAO Recommends

To ensure that compact projects are 

implemented to established quality 

standards, GAO recommends that 

MCC (1) review how it uses

information from its independent 

engineers, and (2) develop a 

mechanism to maintain influence on 

contractor repairs after compact

closure. To ensure sustainability of 

compact projects, GAO recommends 

that MCC evaluate the tools it uses to 

ensure that partner countries have 

adequate resources to operate and 

maintain MCC-funded infrastructure. 

MCC agreed with all three 

recommendations but did not commit 

to taking any actions to address them.

What GAO Found

In Georgia, quality and sustainability issues jeopardize the long-term usefulness 

of the Samtskhe-Javakheti road project. The Millennium Challenge Corporation 

(MCC) funded the rehabilitation of about 217 kilometers of road linking the 

previously isolated Samtskhe-Javakheti region with Tbilisi, the country’s capital, 

and reducing the driving time from 8 1⁄4 hours to 2 3⁄4 hours. The project was 

intended to increase exports from the region, integrate people in the region with 

the rest of Georgia, and expand trade with Turkey and Armenia. However, the 

urgency to meet fixed time frames resulted in problems implementing the

project’s quality assurance framework. For example, the construction supervisor 

did not have enough staff to properly monitor construction and ensure quality. 

Despite several recommendations from MCC’s independent engineer, MCC and 

its Georgian counterpart, the Millennium Challenge Account (MCA-Georgia), did 

not adequately increase the number of construction supervisors, which resulted 

in pavement defects in parts of 5 of the 11 road sections and deterioration of 

structures such as drainage and retaining walls. One 15-kilometer section 

contained enough defects that the road had to be completely repaved. 

Furthermore, much of the repair work was to be done in the contracts’ 1-year 

defects liability period, after the compact closed and at a time when MCC no 

longer had oversight authority. Although MCC took steps to ensure the road 

project’s sustainability, the Georgian government has demonstrated limited ability 

to keep the road operational and maintained.

In Benin, construction for the Port of Cotonou project generally met established 

quality standards, but several components were not in operation at the compact’s 

end. MCC funded the construction of several port infrastructure improvements, 

including a jetty, a wharf, internal port roads, a railway, and security and 

electricity distribution systems. The project was intended to increase the efficient 

transport and volume of goods flowing through the port. However, several 

components—including the new south wharf, the port security system, and the 

electricity distribution system—were not in operation at compact completion 

because the Port Authority had not ensured that the necessary infrastructure, 

staffing, or policies were in place to operate them. For example, the new south 

wharf, which was intended to increase the cargo tonnage moving through the 

port, is not in operation in part because the Port Authority does not have the 

funds to complete the dredging needed to allow large vessels to access the new 

wharf. Even though MCC took steps to ensure that the government of Benin 

could sustain the operations and maintenance of the project—such as 

conducting a feasibility study, incorporating conditions precedent into the 

compact, hiring a port advisor, requiring a compact closure plan, and identifying 

steps the government of Benin should take to support sustainability in the 

compact letter of completion—they were not sufficient. As a result, Benin’s 

inability to supply the resources, manpower, or policies needed to operate all of 

the port’s components calls into question whether the port project will achieve 

expected compact results or be sustained throughout the life of the infrastructure. 

View GAO-12-630. For more information, 

contact David Gootnick at (202) 512-3149 or 

gootnickd@gao.gov.
Page i GAO-12-630 Millennium Challenge Corporation

Letter 1

Background 4

In Georgia, Quality and Sustainability Issues Jeopardize the LongTerm Usefulness of the Samtskhe-Javakheti Road Project 9

In Benin, Port Construction Is Generally Good Quality, but Full 

Operability of Port Components Is Uncertain 39

Conclusions 57

Recommendations for Executive Action 58

Agency Comments and Our Evaluation 58

Appendix I Objectives, Scope, and Methodology 61

Appendix II Additional Photographs Related to Figure 20 Compact-Funded 

Improvements in the Port of Cotonou 64

Appendix III Comments from the Millennium Challenge Corporation 65

Appendix IV GAO Contact and Staff Acknowledgments 68

Related GAO Products 69

Tables

Table 1: Defects as of Substantial Completion by Lot 31

Table 2: Uncompleted Works and Outstanding Defects as of 

Substantial Completion, by Lot 46

Table 3: Status of Key Components of Port of Cotonou 49

Contents
Page ii GAO-12-630 Millennium Challenge Corporation

Figures

Figure 1: MCC’s Contract Management Structure for Infrastructure 

Projects 7

Figure 2: MCC-Georgia Compact Funding at Signature and at 

Completion 10

Figure 3: Scope Changes for the Samtskhe-Javakheti Roads 

Rehabilitation Project 12

Figure 4: Division of the Samtskhe-Javakheti Roads Rehabilitation 

Project into Lots 14

Figure 5: Georgia Construction Timeline 16

Figure 6: Example of the MCC-Funded Road, Lot 1 (Inset: 

Unrehabilitated Road Bypassed by MCC-Funded Road) 21

Figure 7: MCC-Funded Bridge in Lot 7 22

Figure 8: Seal Coat Repair on Center of Road in Lot 4 23

Figure 9: Failed Patch and Continued Deterioration in Lot 3 23

Figure 10: Additional Pavement Cracking in Lot 2 24

Figure 11: Pavement Milling and Patching Under Way in Lot 3A 25

Figure 12: Defective Drain Tops 26

Figure 13: Drainage Channel Construction Defects in Lots 2 and 6i 27

Figure 14: Drainage System Drain Holes Too High to Allow Water 

to Drain in Lot 3 28

Figure 15: Failed Retaining Wall in Lot 2 29

Figure 16: Erosion 30

Figure 17: Damaged Concrete Barrier Wall, Drainage Channel 

Needing Maintenance, and Erosion-Filled Drainage 36

Figure 18: Snow on Roads in Lot 4 38

Figure 19: MCC Benin Compact Funding at Signature and 

Completion 40

Figure 20: Compact-Funded Improvements in the Port of Cotonou 41

Figure 21: Benin Construction Timeline 43

Figure 22: Jetty Is Complete and Serving Its Intended Purpose 45

Figure 23: Lighting Pole under Construction 47

Figure 24: Constructed South Wharf without Landside 

Infrastructure 51

Figure 25: Breach in Boundary Wall 54

Figure 26: Congestion on the East-West Port Road 56
Page iii GAO-12-630 Millennium Challenge Corporation

Abbreviations

CEO chief executive officer

IRI International Roughness Index

ISPS International Ship and Port Facility Security

km kilometer

MCA Millennium Challenge Account

MCC Millennium Challenge Corporation

SOLAS International Convention for the Safety of Life at Sea

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

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Page 1 GAO-12-630 Millennium Challenge Corporation

United States Government Accountability Office

Washington, DC 20548

June 27, 2012

The Honorable Patrick Leahy

Chairman

The Honorable Lindsey Graham

Ranking Member

Subcommittee on the Department of State, 

Foreign Operations, and Related Programs

Committee on Appropriations

United States Senate

The Honorable Kay Granger

Chairwoman

The Honorable Nita Lowey

Ranking Member

Subcommittee on State, Foreign Operations, 

and Related Programs

Committee on Appropriations

House of Representatives

The Millennium Challenge Corporation (MCC), a U.S. government 

corporation, was established in 2004 to provide aid to developing 

countries that have demonstrated a commitment to ruling justly, 

encouraging economic freedom, and investing in people. MCC provides 

assistance to eligible countries through multiyear compact agreements to 

fund programs targeted at reducing poverty and stimulating economic 

growth. MCC compacts may not be longer than 5 years.1 As of June 

2012, MCC had signed 26 compacts with 25 countries, committing a total 

of approximately $9.3 billion in U.S. funding.2

 1

22 U.S.C. § 7708(j).

2

MCC commits funding when a compact is signed and obligates funds after the compact 

enters into force. As of June 2012, MCC had signed initial compacts with, in order of 

signature, Madagascar, Honduras, Cape Verde, Nicaragua, Georgia, Benin, Vanuatu, 

Armenia, Ghana, Mali, El Salvador, Mozambique, Lesotho, Morocco, Mongolia, Tanzania, 

Burkina Faso, Namibia, Senegal, Moldova, the Philippines, Jordan, Malawi, Indonesia and 

Zambia. In February 2012, MCC signed a second compact with Cape Verde. 
Page 2 GAO-12-630 Millennium Challenge Corporation

In the fiscal year 2008 Consolidated Appropriations Act, Congress 

directed GAO to review the results achieved by MCC compacts.3 Seven 

of the 26 compacts were completed in 2010 or 2011, including those with 

the Republic of Georgia and Benin.4 All 7 compacts included a 

transportation infrastructure project (a road or a port) which—except in 

the case of Armenia—received 50 percent or more of the compact’s total 

funding. In response to the congressional mandate, this report examines 

the quality and sustainability of MCC’s transportation infrastructure 

projects in Georgia and Benin. GAO has previously reviewed other 

compact results and found that insufficient planning, escalation of 

construction costs, and insufficient MCC review led to project delays, 

scope changes, and cost increases. We made recommendations to 

address the need for better planning and design.5

 3

Consolidated Appropriations Act, 2008, Pub. L. No. 110-161, § 668(d)(1)(A). The act also 

required us to examine the financial control and procurement practices of MCC and its 

accountable entities. We responded to this requirement separately in GAO, Millennium 

Challenge Corporation: MCC Has Addressed a Number of Implementation Challenges, 

but Needs to Improve Financial Controls and Infrastructure Planning,

To improve planning 

and designs, MCC has committed specific funds and has increased the 

length of time between compact signature and project implementation. 

MCC developed the compacts with Georgia and Benin before it revised 

these practices.

GAO-10-52 

(Washington, D.C.: Nov. 6, 2009).

4

The 5 other completed compacts are Honduras, Cape Verde, Nicaragua, Vanuatu, and 

Armenia. We do not include the Madagascar compact in this list of compacts because, as 

the result of a pattern of actions inconsistent with MCC policy, MCC formally terminated 

the compact effective August 31, 2009. Protests and instability in Madagascar in January 

2009 ultimately led to the forced resignation of the country’s elected president.

5

See GAO-10-52 and GAO, Millennium Challenge Corporation: Compacts in Cape Verde 

and Honduras Achieved Reduced Targets, GAO-11-728 (Washington, D.C.: July 27, 

2011). In GAO-10-52, GAO recommended that MCC should (1) establish a programmatic 

goal that MCAs conclude all project planning efforts—to include MCC final approvals of 

the MCAs’ final feasibility surveys, engineering surveys, environmental surveys, and 

resettlement studies—prior to entry into force, but not later than the point at which the 

MCAs issue contract solicitations; and (2) require MCAs to obtain detailed reviews of 

project cost estimates—to include the extent that risks to projects, such as cost escalation, 

schedule delays, and other issues, have been considered—and of project designs before 

contract solicitation for large construction projects to better ensure that projects can be 

successfully bid and built. In GAO-11-728, GAO recommended that MCC should work 

with partner countries to make project planning, design, and construction decisions that 

reduce long-term maintenance needs and costs to maximize the sustainability of MCCfunded infrastructure projects and reduce the amount of maintenance required after 

compact completion.
Page 3 GAO-12-630 Millennium Challenge Corporation

To assess the quality and sustainability of the two MCC-funded 

transportation infrastructure projects in Georgia and Benin, we analyzed 

U.S. agency documents and observed project results in both countries. 

We interviewed MCC officials in Washington, D.C., and MCC and 

Millennium Challenge Account (MCA) officials in Georgia and Benin 

regarding the results of the transportation infrastructure activities, 

including their quality and sustainability.6

MCC enters into a legal relationship with partner country governments 

that vests responsibility for day-to-day management of compact project 

implementation to the MCA, including monitoring and evaluation activities 

such as setting and revising targets, but such MCA actions require MCC’s 

direct oversight and approval. Therefore, throughout this report, we 

attribute all decisions related to project rescoping and compact targets to 

MCC. See appendix I for further details on our objectives, scope, and 

methodology.

We also met with partner 

country government officials, contractors, project managers, construction 

supervisors, and relevant private businesses. We based our assessment 

of the projects’ quality on observations of defects in a site visit to the 

projects, a review of reports provided by MCC, interviews of officials, and 

the quality assurance framework established by MCC, MCA, and their 

contractors. For this report, the definition of sustainability is based on the 

Organisation for Economic Cooperation and Development definition, 

which defines “sustainability” as “the continuation of benefits from a 

development intervention (such as assets, skills, facilities, or improved 

services) after major development assistance has been completed.” We 

operationalized this definition by specifying that sustainability is the ability 

of MCC’s partner country government to operate and maintain the new 

infrastructure in such a condition as is required to produce the projected 

benefits for the period of time those benefits are expected.

We conducted this performance audit from November 2011 to June 2012 

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 

 6

Partner country governments vest responsibility for day-to-day management of MCC 

compact project implementation in accountable entities, usually referred to as Millennium 

Challenge Accounts.
Page 4 GAO-12-630 Millennium Challenge Corporation

evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

MCC is managed by a chief executive officer (CEO), appointed by the 

President with the advice and consent of the Senate, and is overseen by 

a Board of Directors. The Secretary of State serves as board chair and 

the Secretary of the Treasury serves as vice-chair.7

In keeping with the MCC principle of country ownership, MCC enters into 

a legal relationship with partner country governments. During the 5-year 

compact implementation period, the partner government vests 

responsibility for day-to-day management, including monitoring and 

evaluation of the progress of compact projects, to an accountable entity 

established to implement the compact (an entity’s name is usually formed 

from “MCA” plus the country’s name—for example, MCA-Benin). MCC 

provides the framework and guidance for compact implementation, 

monitoring, and evaluation that MCAs are to use in implementing 

compact projects.

MCC’s model is 

based on a set of core principles deemed essential for effective 

development assistance, including good governance, country ownership, 

focus on results, and transparency. According to MCC, country ownership 

of an MCC compact occurs when a country’s national government 

controls the prioritization process during compact development, is 

responsible for implementation, and is accountable to its domestic 

stakeholders for decision making and results.

Following the compact end date, the partner government must close the 

program within 120 days (the closure period). During the closure period, 

MCC funds may be used only for project goods, works, or services 

incurred before the compact end date, or for closure expenses. For 

example, the government may expend MCC funds to settle final invoices 

and claims, secure unfinished project sites against potential health or 

 7

Other board members are the U.S. Trade Representative, the Administrator of the U.S. 

Agency for International Development, the CEO of MCC, and up to four Senate-confirmed 

nongovernmental members appointed by the President from lists of individuals submitted 

by congressional leadership.

Background

MCC Organization
Page 5 GAO-12-630 Millennium Challenge Corporation

safety hazards, prepare final reports, and conduct other activities 

specified in MCC’s closeout guidelines. However, the government may 

not expend MCC funds to undertake or continue activities that were 

planned for completion within the compact term, including expenses for 

activities such as completion of works, supervising engineer services, and 

consulting services.

MCC places several requirements on MCAs to ensure proper 

management and quality assurance of MCC-funded infrastructure 

projects. These requirements create a quality assurance framework for 

infrastructure projects that requires that each MCA have an individual 

project director—for example, a roads director—who oversees the 

activities of the other actors, including outside implementing entities or 

project management consultants, construction supervisors, and 

construction contractors.8

• Project management consultant/implementing entity: Before receiving 

project funding, MCC requires the MCAs to engage the services of a 

project management firm or an implementing entity to help manage 

administrative aspects of compact projects.

• Construction supervisor: MCAs contract with construction supervisors 

to conduct oversight of day-to-day construction and the activities of 

the construction contractors to ensure compliance with contract 

requirements. Construction supervisors play an important role in 

ensuring construction quality by performing such tasks as approving 

construction materials, overseeing testing, and inspecting completed 

work.

• Construction contractor: MCAs contract with construction firms to 

build the project. The construction contractor is also responsible for 

controlling the quality of its work, which involves, among other tasks, 

material and construction testing.9

 8

The organization of the management structure may vary across compacts and projects.

9

Testing is typically completed to ensure construction materials meet performance 

characteristics. For example, compaction tests are done to ensure underlying soils can 

support pavement structures. In addition, completed work is tested to ensure that it was 

installed properly and performs as intended. For example, smoothness tests are 

performed on newly placed pavements.

Quality Assurance 

Framework
Page 6 GAO-12-630 Millennium Challenge Corporation

In general, MCAs deliver infrastructure projects through a design-bid-build 

approach in which the MCA contracts with a design engineer to develop 

technical plans and specifications that are used by a construction 

contractor, hired under a separate MCA procurement action, to build the 

project. In some cases, project designs already exist and MCAs do not 

engage a design engineer in implementing the project. In other cases a 

design-build approach is used and MCA contracts with a contractor that 

becomes responsible for both project design and construction.

In addition, MCC may hire an independent engineer to assist in 

overseeing the progress of construction as managed by the MCAs and 

executed by their contractors. The objective of engaging an independent 

engineer is to obtain high-quality technical support in order to strengthen 

MCC’s ability to better assess the quality of ongoing program activities 

and to make better informed judgments about the status of ongoing 

activities, particularly where assessment of project activities affects 

MCC’s ability to further disburse funds. An independent engineer may 

also provide technical input on program decisions and documents 

submitted by MCC partner-country counterparts and help MCC ensure 

that funds are being spent according to the conditions and frameworks 

established in the compact. Figure 1 depicts the oversight, management, 

and contractual relationships among MCC, the MCA, and their 

contractors for infrastructure projects.
Page 7 GAO-12-630 Millennium Challenge Corporation

Figure 1: MCC’s Contract Management Structure for Infrastructure Projects

MCC takes steps to ensure the sustainability of the projects it funds 

during both the design and implementation phases. First, MCC compacts 

are to be designed so that projects are sustainable for about 20 years, or 

as appropriate for the structure. Also, during the compact development 

process, MCC assesses the mechanisms in place to enhance 

sustainability, including a partner country’s policies and practices that will 

enable MCC investments to continue to provide benefits. For instance, as 

Sustainability of MCC 

Projects
Page 8 GAO-12-630 Millennium Challenge Corporation

part of compact proposals submitted to MCC, partner countries are 

required to identify risks to project sustainability and describe the 

measures needed to ensure that project benefits can be sustained 

beyond the period of MCC financing. Partner countries are to consider a 

number of issues affecting sustainability, including environmental 

sustainability; institutional capacity for operations and maintenance; and, 

for proposed infrastructure projects, recent funding, performance, and 

expected expenses for operations and maintenance.

During compact implementation, MCC tracks progress against key policy 

reforms and institutional improvements that were included as conditions 

in the compact to enhance project impact and sustainability. Such 

conditions in an agreement are known as conditions precedent, which 

must be met by one party before a second party to the agreement can 

perform or do its part. In the case of an MCC compact, MCC establishes 

conditions precedent that must be met by the partner government or MCA 

before financial disbursements are made. For example, MCC may require 

that the government increase its budget allocation for road maintenance 

before releasing final payments.

For the purposes of this report, transportation infrastructure comprises 

public works that provide the conveyance of passengers or goods from 

one place to another. It includes structures such as roads, seaports, 

airports, and railways. Such projects may take years to plan and 

implement. For example, typical highway projects in the United States 

can take from 10 to 15 years for planning, design, and construction.

Transportation infrastructure construction contracts may contain a defects 

liability clause that obligates a contractor to repair or rectify defects in the 

construction for a set period after the construction supervisor has deemed 

the works substantially complete.10

 10In essence, “substantially complete” means that the works can generally be used as 

intended and that only minor work remains.

In a construction agreement, a 

contractor’s main obligation is to carry out the works to final completion, 

free of defects and to the standard set out in the agreement. A defects 

liability clause is intended to supplement this obligation by ensuring that 

the contractor remedies any defective work that becomes noticeable 

during the defects liability period, usually 1 year. The clause also provides 

Transportation 

Infrastructure Projects
Page 9 GAO-12-630 Millennium Challenge Corporation

a mechanism for repairing defects that may arise during the defects 

liability period.

In Georgia, MCC funded the rehabilitation of about 217 kilometers11 of 

road linking the previously isolated Samtskhe-Javakheti region with 

Tbilisi, the country’s capital.12 However, the urgency to meet fixed time 

frames resulted in problems implementing the quality assurance 

framework and led to construction defects in parts of 5 of the 11 road 

lots.13 Furthermore, while MCC took steps to ensure the road project’s 

sustainability, the Georgian government has demonstrated limited ability 

to keep the road operational and maintained up to this point.

MCC signed a compact with the Republic of Georgia in September 2005 

to stimulate growth in regions outside Tbilisi where more than 40 percent 

of the country’s total population resides. A rough asphalt road before the 

compact, the Samtskhe-Javakheti Road was in such disrepair it 

prevented residents in the region from easily reaching Tbilisi. The 

purpose of the rehabilitation was to improve transportation for regional 

trade to

• increase exports from the region;

• increase social, political, and economic integration of the people in the 

region with those in the rest of Georgia;

 11The number of kilometers of road rehabilitated (217) is based on GAO’s review of MCC 

provided takeover certificates indicating the number of kilometers of road accepted from 

the construction contractors as complete and a March 2012 trip report issued by MCC’s 

independent engineer. In some documents, MCC reports rehabilitating 220 kilometers of 

road, including sections of the road where small amounts of finishing work (e.g. painting) 

were undertaken even through major road works were not done on those sections.

12Actual construction began in the town of Teleti, at the outskirts of Tbilisi.

13Each section of road to be constructed in Georgia is described as a lot. The lots include 

construction works such as pavement rehabilitation, bridge rehabilitation or replacement, 

drainage systems, guardrails and concrete barrier walls, signage, and pavement 

markings. MCA-Georgia named the lots as follows: 1, 2, 3, 3A, 4, 5i, 5ii, 6i, 6ii, 6iii, and 7. 

We have used its nomenclature.

In Georgia, Quality 

and Sustainability 

Issues Jeopardize the 

Long-Term Usefulness 

of the SamtskheJavakheti Road 

Project

MCC Compact Funded the 

Rehabilitation of the 

Samtskhe-Javakheti Road 

in Georgia
Page 10 GAO-12-630 Millennium Challenge Corporation

• expand international trade by providing a more direct link from Tbilisi 

and eastern and southern Georgia to Turkey and Armenia;14

• develop the tourism potential of Vardzia, a 13th century rock-cut 

monastery.

and

MCC originally granted $295.3 million for the compact’s two projects—

Enterprise Development and Regional Infrastructure Rehabilitation, which 

included the Samtskhe-Javakheti Roads Rehabilitation activity (see fig. 

2).15

Figure 2: MCC-Georgia Compact Funding at Signature and at Completion

In November 2008, after Georgia’s war with Russia over South 

Ossetia, MCC increased the compact by $100 million. The compact 

entered into force in April 2006 and ended in April 2011.

Note: MCC added $100 million to the compact in November 2008 after Georgia’s war with Russia. 

Other projects include funds disbursed before entry into force to facilitate the implementation of the 

compact. At compact close, $8.1 million remained undisbursed.

MCC originally planned to rehabilitate 245 kilometers of existing road at a 

cost of $102.2 million (or $417,000 per kilometer), but after several 

changes to the project’s scope, rehabilitated about 217 kilometers at a 

cost of about $212.9 million (or $981,000 per kilometer). The road 

project’s length was first reduced after the initial contract solicitation 

 14As of our December 2011 site visit, the border crossing with Turkey was not open 

because the Turkish government had not yet installed the necessary infrastructure on its 

side of the border. The government of Georgia anticipates its opening in 2013.

15For additional information on the projects included in the Georgia Compact, see GAO, 

Millennium Challenge Corporation: Summary Fact Sheets for 17 Compacts, 

GAO-10-797R (Washington, D.C.: July 14, 2010).
Page 11 GAO-12-630 Millennium Challenge Corporation

attracted bids that exceeded the amount of funding originally available for 

the road work. As a result, the project was divided into shorter sections 

and contracts were let for about 170 kilometers of road. In the winter of 

2008-2009, after MCA-Georgia allocated an additional $60 million to the 

road project, about 50 kilometers of road were added to the project (see 

fig. 3). MCA-Georgia also reallocated an additional $50.7 million from 

other activities to the road project between May 2008 and January 2011 

to cover additional cost increases, including costs to accelerate work to 

ensure its completion before the end of the compact.16

 16Funds were transferred from the regional infrastructure development project, energy 

rehabilitation project, Georgia regional development fund project, agribusiness 

development project, program administration, audit, and fiscal and procurement 

management activities. 
Page 12 GAO-12-630 Millennium Challenge Corporation

Figure 3: Scope Changes for the Samtskhe-Javakheti Roads Rehabilitation Project
Page 13 GAO-12-630 Millennium Challenge Corporation

The road was rehabilitated at an increased cost in a compressed 

construction time frame because of insufficient planning, work added late 

in the compact, and poor performance by one contractor. Because of the 

compressed construction time frames, MCA-Georgia’s construction 

supervision and construction contractors had difficulty fully implementing 

the quality assurance framework. In addition, problems identified by 

MCC’s independent engineer were not adequately addressed. As a 

result, repair work remained at the end of the compact and the quality of 

construction varied across the lots. Although some infrastructure, such as 

the bridges, appeared to be well built, parts of 5 of the 11 lots—

representing about 60 percent of the kilometers rehabilitated—had 

noticeable pavement deterioration and other defective structures. The 

extent of the defects varied among the lots, with some lots requiring 

pavement surface sealing or a relatively small amount of patching. 

However, the road in one lot was planned to be entirely repaved. As of 

March 2012, work was ongoing. (Figure 4 shows how the road was 

divided into lots and handled by different contractors.)

The Urgency to Meet 

Compressed Construction 

Time Frames Resulted in 

Problems Implementing 

the Quality Assurance 

Framework and 

Construction Defects in 5 

of the 11 Road Lots
Page 14 GAO-12-630 Millennium Challenge Corporation

Figure 4: Division of the Samtskhe-Javakheti Roads Rehabilitation Project into Lots
Page 15 GAO-12-630 Millennium Challenge Corporation

MCA-Georgia awarded most of the final construction contracts with 2 

years or less before the compact end date because of planning delays, 

work added late in the compact, and poor performance by one contractor. 

See figure 5 for a timeline of the compressed time frame under which the 

road rehabilitation occurred.

Road Was Rehabilitated at 

Increased Cost under 

Compressed Construction Time 

Frames because of Several 

Factors
Page 16 GAO-12-630 Millennium Challenge Corporation

Figure 5: Georgia Construction Timeline
Page 17 GAO-12-630 Millennium Challenge Corporation

Note: Contractor A lot lengths were as of the time the event occurred, Contractors B, C, and D lot 

lengths were as of the end of the compact. Individual lot lengths may not add to total lengths because 

of rounding.

a

Insufficient planning delayed construction: MCC reports that conducting 

feasibility studies and preparing designs and bid documents took over a 

year of compact time. In addition, a lack of accurate cost estimates 

resulted in a delay of 8 to 10 months in the first contract’s award. In April 

2007, MCA-Georgia made its initial procurement for two road contracts 

and found that the project cost was greater than estimated and exceeded 

the funds available for the road work.

When lot 3 was awarded to contractor A, it included work later re-awarded as lot 3A as well as 4 

kilometers of road at Tsalka that were eventually removed from the project altogether.

17

New work was added when additional funding became available late in 

the compact implementation period: In November 2008, MCC made 

additional funds available for the road project. The following spring, 3 

years after the compact entered into force, MCA-Georgia awarded three 

additional road contracts (lots 1, 6ii,

As a result, it removed about 75 

kilometers from the scope, revised the project into smaller lots, conducted 

a new procurement, and awarded contracts for lots 2, 3, and 4 (about 120 

kilometers total) to contractor A in March 2008 and for lots 5i, 5ii, and 6i 

(about 50 kilometers total) to contractor B in May 2008—23 and 25 

months after the compact entered into force, respectively.

18

Poor performance by one contractor delayed implementation by about a 

year: Contractor A failed to meet its contractual obligations. After 

removing segments from contractor A’s scope of work in July and 

December 2009 and awarding them to other contractors, MCA-Georgia 

terminated the contract in August 2010. While reassigning the work from 

contractor A to the other contractors allowed the contract to be completed 

before the end of the compact, MCC officials reported that the process 

cost MCA-Georgia about $45 million more than the original $65 million 

contract and added at least 1 year of construction time.

and 7). At this point, only about 2 

years remained under the compact to complete the work.

 17GAO discussed these initial cost escalation and planning challenges in a previous 

report. See GAO-10-52.

18Lot 6iii was added as an addendum to the contract for lot 6ii in August 2009.
Page 18 GAO-12-630 Millennium Challenge Corporation

• MCA-Georgia provided a notice of nonperformance to contractor A in 

April 2009. That July, MCA-Georgia removed lot 4 from the contract 

(48 kilometers) and awarded it to another contractor through a limited 

procurement process. By using the quicker limited procurement 

process, MCA-Georgia hoped to take advantage of time remaining in 

the 2009 construction season and improve the likelihood of getting the 

work completed in the 21 months remaining in the compact.

• In December 2009, contractor A’s performance was still a problem, 

and MCA-Georgia removed an additional 15 kilometers from the 

contract (lot 3A). According to MCC officials, MCA-Georgia reawarded this work through a full, competitive procurement process. 

As a result, the procurement took more than 4 months, mostly over 

the winter season, which left about 1 year to complete the work.

• In August 2010, MCC terminated the contract with contractor A for the 

remaining 57 kilometers of road (work for this section was about 80 

percent complete, according to MCC’s independent engineer). With 

only 8 months left before the compact was to end—and most of those 

being winter months—MCA-Georgia removed about 4 kilometers from 

the project and re-awarded the other 53 kilometers using a limited 

procurement process so that work could begin immediately. According 

to MCC, MCA-Georgia paid contractor B $31.8 million to complete the 

work before the compact’s April 2011 deadline. An independent 

adjudicator found the additional cost for completing the work to be 

within the bounds of what may reasonably be expected in such 

circumstances.

The MCC-required quality assurance framework was in place, but issues 

identified by MCC’s independent engineer—the technical advisor MCC 

hired to assist in overseeing the progress of construction—were not 

always addressed. Specifically, the contractors did not always perform 

their quality control responsibilities, the construction supervision firm had 

insufficient staff to conduct its work, and MCA-Georgia did not always use 

the construction supervisor as set out in the quality assurance framework.

Contractors did not always conduct quality control activities: The 

contractors did not always fulfill their contractual quality control role, 

according to MCC officials and MCC’s independent engineer’s reports. 

For example, MCC’s independent engineer reported that some 

contractors continued work in less-than-favorable conditions, such as cold 

and rainy weather, to complete the work before the end of the compact. 

Conducting work in these conditions can cause problems with curing 

Quality Assurance Problems 

Identified by MCC’s 

Independent Engineer Not 

Always Addressed
Page 19 GAO-12-630 Millennium Challenge Corporation

concrete (such that it does not reach its design strength) or with asphalt 

raveling (not bonding to other asphalt layers). In addition, to meet time 

frames, much work was completed at night when poor lighting, less 

inspection, and colder temperatures made it more difficult to perform 

high-quality work. Finally, one contractor did not supply a required quality 

assurance plan.19

Construction supervisor had insufficient staff: Quality control errors by the 

contractors should have been caught by the construction supervisor, but 

the construction supervisor had insufficient numbers of staff to adequately 

implement the quality assurance framework, according to MCC’s 

independent engineer. MCA-Georgia did increase the contract 

supervision, but not to the independent engineer’s recommended level. 

While MCC had taken steps to try to ensure sufficient supervision of the 

construction, it did not have authority to enforce the independent 

engineer’s recommendations.

Without the contractor’s quality assurance plan for the 

specific contract, the construction supervisor did not know when the 

contractor would be testing materials or who to contact regarding 

identified problems. In addition, the same contractor turned in test reports 

after the tested work had already been covered by subsequent stages of 

work. As a result, if the construction supervisor found that the earlier work 

was defective, the contractor would have to remove the subsequent work 

to repair it.

• MCC’s independent engineer, accompanied by MCC officials, visited 

the road project and provided written reports almost quarterly between 

February 2009 and November 2010—the compressed construction 

time frames under which most of the roadwork occurred. The reports 

stated that there were not enough construction supervision staff, and, 

in four of those reports, the independent engineer advised that the 

supervisory situation was jeopardizing the project’s quality and 

success. A project management official told us that, because of the 

insufficient number of staff, the construction supervisor did not 

observe some quality testing that was done by the construction 

contractors, as required in its contract.

 19A contractor’s quality assurance plan identifies such things as the type of tests to be 

conducted, the frequency at which materials will be tested, and how the results will be 

reported.
Page 20 GAO-12-630 Millennium Challenge Corporation

• In February 2009, MCA-Georgia increased the number of construction 

supervision staff to oversee the three lots added to the project’s 

scope.20 In addition, MCA-Georgia hired a separate construction 

supervisor to oversee lot 3A when it was created, increasing the staff 

available overall for construction supervision on the project. However, 

the MCC independent engineer recommended that additional 

construction staff were still needed to ensure the quality of the work 

under way. The independent engineer also reported that the 

construction supervisory firm’s fee was lower than typical for this type 

of international work.21

• MCC had included a condition precedent in the compact that required 

MCA-Georgia to engage a construction supervisor. However, because 

the condition was satisfied once MCA-Georgia engaged a supervisor, 

MCC stated that the condition precedent did not give it any authority 

to withhold funds because of insufficient supervision staffing.

Nonetheless, MCA-Georgia chose not to fund 

additional staff for the construction supervision firm.

Construction supervisor was not always used in accordance with the 

quality assurance framework: According to two reports by MCC’s 

independent engineer, MCA-Georgia did not always use the construction 

supervision staff effectively. According to the quality control framework in

the construction firms’ contracts, the construction supervisor should issue 

all instructions to the contractors. However, MCC’s independent engineer 

noted that the MCA-Georgia staff responsible for the road project 

communicated directly with construction contractors and issued oral 

instructions directly to the contractors to accelerate work. The 

independent engineer further noted that this practice could lead to claims 

of additional work, increasing costs, because contractors received 

different instructions from the construction supervisor and MCA-Georgia.

The MCC project generally improved the road by reducing its driving time 

and roughness and installing bridges that appeared well built. However,

several sections of the road had pavement defects and structures such as 

drainage systems and retaining walls that are deteriorating.

 20 MCC stated the value of the construction supervisor’s contract increased from an initial 

value of $2.7 million to a final value of $7.4 million.

21The independent engineer reported that the firm’s fee was 3.5 percent of the contract 

cost, while the international norm is 5 to 6 percent. According to MCC, MCA-Georgia 

spent a total of 4.2 percent of the overall construction costs on supervision of all road lots.

Road Was Improved, but 

Quality Problems Exist in the 

Pavement and Some Structures
Page 21 GAO-12-630 Millennium Challenge Corporation

MCC Project Created Improved Road and Bridges

The MCC project improved the condition of the road. Before rehabilitation, 

the Samtskhe-Javakheti road was passable but rough, with a driving time 

of about 81⁄4 hours. The project decreased the road’s roughness, and after 

rehabilitation, the same trip could be made in about 23⁄4 hours. MCC 

reported roughness measurements before rehabilitation that indicated a 

vehicle would have to drive under about 30 miles per hour for passengers 

to ride comfortably.22

Figure 6: Example of the MCC-Funded Road, Lot 1 (Inset: Unrehabilitated Road 

Bypassed by MCC-Funded Road)

Road roughness measurements made after project 

completion indicated that passengers could ride comfortably even at 

speeds of 75 miles per hour. We traveled a portion of the road that was 

bypassed by the rehabilitation project and found it to be filled with 

potholes and patches. We found the new road was much smoother (see 

fig. 6).

The scope of the project also included rehabilitating or rebuilding 27 

bridges (see fig. 7). In March 2012, MCC’s independent engineer 

reported that all bridges were performing well and had only a few defects 

 22MCC reports indicated an average International Roughness Index (IRI) of 16.6 before 

the rehabilitation and 1.5 after the rehabilitation. IRI is a measure of road pavement 

roughness in terms of meters per kilometer. The IRI affects vehicle operating costs, ride 

quality, and road damage.
Page 22 GAO-12-630 Millennium Challenge Corporation

such as erosion of embankment slopes, and incomplete guardrail 

hardware. We observed only minor defects such as a small chip in a 

bridge beam but no apparent quality problems.

Figure 7: MCC-Funded Bridge in Lot 7

Pavement Defects Occur in Parts of 5 of the 11 Road Lots

While the pavement in some lots appeared to be in good condition, the 

pavement in other lots was not. We observed that the pavement in road 

lots 1 and 7 was smooth with minimal defects. However, we found 

pavement deterioration in parts of 5 of the 11 road lots.23

 23We found noticeable pavement deterioration and repairs in lots 2, 3, 3A, 4, and 6ii. 

The amount of 

deterioration and completed repair work varied in those lots, which 

constituted about 60 percent of the total kilometers of the final project.
Page 23 GAO-12-630 Millennium Challenge Corporation

• In lots 4 and 6ii, surface deterioration had been treated with a surface 

sealer to keep the surface from deteriorating further (see fig. 8). While 

seal coating may keep water from entering the cracks and make the 

road look better in the short term, it does not add pavement strength. 

As a result, deterioration will continue under the anticipated increased 

traffic loads for the project if the underlying cause of the cracking is 

not repaired.

Figure 8: Seal Coat Repair on Center of Road in Lot 4

• Lots 2 and 3 had undergone patching, but in one case the patch failed 

and the deterioration had continued beyond the patch, as shown in 

figure 9.

Figure 9: Failed Patch and Continued Deterioration in Lot 3
Page 24 GAO-12-630 Millennium Challenge Corporation

• In other places, we found continued cracking in need of repair, as 

shown in figure 10. This type of cracking—known as alligator 

cracking—is caused by fatigue failure of the asphalt surface, which is 

related to weakened layers of asphalt beneath the pavement, 

insufficient pavement thickness, excessive loading, or some 

combination of these factors.

Figure 10: Additional Pavement Cracking in Lot 2

• In lot 3A, much of the pavement was failing and under repair. The 

contractor was in the process of milling the top layer of pavement in 

some areas and full-depth patching of the pavement in other areas 

(see fig. 11). In June 2011, MCC’s independent engineer noted that 

the entire lot 3A section of road (15 kilometers) had been constructed 

poorly and had moderate to severe levels of distress in the pavement, 

which indicated that a poor quality of asphalt had been used. The 

construction supervisor stated that the contractor paved the road in lot 
Page 25 GAO-12-630 Millennium Challenge Corporation

3A in two layers and that the second layer was paved when the 

weather was rainy to complete the project on time. However, the 

second layer did not bond to the first and thus fell apart. According to 

the independent engineer, some portions of the road will require fulldepth reconstruction of the road. A Georgian government official 

stated that the lot 3A contractor had agreed to replace the base 

materials in some places and repave the entire lot.

Figure 11: Pavement Milling and Patching Under Way in Lot 3A

The construction supervisor’s most recent (December 2011) list of 

pavement defects indicated pothole patching and surface dressing was 

needed for lots 2, 3, 3A, 5i, and 5ii. However the independent engineer’s 

March 2012 trip report stated there were more extensive pavement 

defects that required correction measures such as pothole repair, surface 

dressing, crack repairs, or full-depth reconstruction for lots 1, 2, 3, 3A, 4, 

5ii, 6ii, 6iii, and 7. The independent engineer also noted in several 

locations that the defects resulted from incorrectly repaired previous 

defects, the inadequate winter maintenance of the roads, and, in one 
Page 26 GAO-12-630 Millennium Challenge Corporation

section of road, traffic loads heavier than the road was designed to carry. 

The independent engineer also stated that if the roads are not correctly 

repaired, they will worsen. Defects not properly repaired will likely fail 

under increased traffic loads or further deteriorate, creating potholes as 

water enters the cracks in the winter and then freezes. On the basis of the 

independent engineer’s assessment that some of the project contractors 

were not meeting contract specifications, MCC sent a letter to MCAGeorgia in September 2010, noting that the work methods on lots 2, 3, 

3A, and 4 were not to the standards expected and that the base material 

and pavement compaction required immediate improvement. The letter 

also stated that if the contractors did not improve the work, it would not be 

accepted.

Some Drainage Structures and Retaining Walls Were Defective

Structures such as drains and retaining walls are critical to a road’s 

longevity. A working drainage system helps to keep water off the road, 

which is critical to safety and to keep pavement from prematurely 

deteriorating. However, we found defects in the drainage systems of 7 of 

the 11 lots. For example:

• In lots 1, 5ii, 6i, 6ii, and 7, we found some of the drainage channels 

collapsing or cracked, which could cause the drains to become 

blocked (see fig. 12).

Figure 12: Defective Drain Tops

In lots 2, 6i, and 6ii, we found the concrete drainage channels with 

defects because of poor concrete construction (see fig. 13).
Page 27 GAO-12-630 Millennium Challenge Corporation

Figure 13: Drainage Channel Construction Defects in Lots 2 and 6i

• In lots 3, 5i, and 5ii, drains were installed above the water level in 

some places, making it impossible for water to drain off the road (see 

fig. 14).
Page 28 GAO-12-630 Millennium Challenge Corporation

Figure 14: Drainage System Drain Holes Too High to Allow Water to Drain in Lot 3

According to MCC’s independent engineer, the quality of the drain 

placement and the construction of the tops were inadequate because the 

concrete did not cure properly or had already started to harden before it 

was poured. If the drainage system does not work properly, the water will 

saturate and weaken the underlying ground and cause the road to 

deteriorate or freeze in the winter and create a safety hazard.

Furthermore, we observed a failed retaining wall that, if left unrepaired, 

could damage the road. Because the retaining wall had failed, serious 

erosion had occurred, and if the erosion continues, it will progress until it 

reaches the road, jeopardizing the road’s future usefulness (see fig. 15).
Page 29 GAO-12-630 Millennium Challenge Corporation

Figure 15: Failed Retaining Wall in Lot 2

We also found additional erosion in lots 2, 6ii, and 7 (for example, see fig. 

16). The independent engineer in his March 2012 report indicated a few 

erosion concerns for lots 2, 3, and 7 that needed to be corrected. The 

corrections are necessary for motorist safety and to protect the pavement, 

bridges, and retaining walls.
Page 30 GAO-12-630 Millennium Challenge Corporation

Figure 16: Erosion

Although the construction supervisor certified the contracted road work as 

substantially complete by the end of the compact, the previously 

described construction defects had not been repaired. Once the work was 

certified as substantially complete, responsibility for the roads moved 

from the contractors to MCA-Georgia, and final contract payments with 

MCC funds were made. However, according to the contracts, contractors 

continue to be responsible for the completion of any work or defects 

related to work quality during a 1-year defects liability period. The transfer 

of the road lots to MCA-Georgia included a list of about 700 defects 

identified by the construction supervisor to be completed or repaired after 

substantial completion and before the end of the defects liability period 

(see table 1). Additional defects can be added to the list by the 

construction supervisor if they appear in the 1-year liability period. MCC 

officials stated that it is desirable to complete as much of the work as 

possible before the defects liability period starts. However, it was 

necessary to accept the work as substantially complete before the end of 

the compact time frame so that final MCC funds disbursement could be 

Work and Defects Remained 

after Compact End Date, but 

MCC Has No Authority to 

Ensure Their Completion and 

Repair
Page 31 GAO-12-630 Millennium Challenge Corporation

made to MCA-Georgia. As a result, the work that remained and the repair 

of the remaining defects were moved into the defects liability period.24

Table 1: Defects as of Substantial Completion by Lot

Lot Number of defects

1 33

2 85

3 24

3A 70

4 128

5i 43 a

5ii 37 a

6i 129 a

6ii 58

6iii 13

7 32

Other 49 b

Total 701

Source: GAO analysis of MCC documents

a

An additional 49 defects were listed on bridges on lots 5i, 5ii and 6i, which we could not attribute to a 

specific lot.

b

Additional factors present challenges to ensuring the defective work is 

adequately repaired:

Defects not attributable to a specific lot.

• MCC’s independent engineer reported in October 2011 that the repair

work under way on lot 3A was not in accordance with standard 

procedures and that the road that had been patched was 

unsatisfactory. For example, the contractor did not apply sufficient 

bonding material to ensure that the layers of asphalt would adhere to 

each other before laying additional asphalt. In addition, the 

 24We received an update from the construction supervisor of the construction defects 

remaining as of March 2012, but the reporting format is not the same as used at the time 

of takeover, and as a result, it is not possible to evaluate how many of those defects 

remain or new defects have appeared.
Page 32 GAO-12-630 Millennium Challenge Corporation

independent engineer commented that patch cutting and laying of 

asphalt were not properly done.

• We observed in December 2012 that much repair work remained to 

be done. In addition, during the summer construction season in 2011 

no construction supervision firm was in place for about 2 months of 

August and September 2011. According to the October 2011 report of 

MCC’s independent engineer, this may have affected the contractors’

progress in rectifying construction defects. The gap in supervision 

occurred because the Georgian government contracted with a new 

construction supervisor for the defects liability period after the 

compact-funded construction supervisor’s contract ended. The new 

construction supervisor provided us with a summary of defects 

remaining at the end of 2011, but it was not in the same format as the 

original defects list. It was thus impossible to determine which defects 

had been corrected and which had been added.

The Georgian government held performance guarantees from the 

contractors to ensure the work was completed.

25 However, correction of 

the work could not be completed in the 1-year defects liability period, and 

the independent engineer reported in March 2012 that the performance 

guarantees for lots 1, 4, 6ii, and 6iii had expired before the lots were 

accepted as complete. The independent engineer also reported the 

performance guarantees for lots 2, 3, 3A, 5i, 5ii, 6i, and 7 were extended 

until August 2012, after the expected date that those lots will be 

accepted.26

Although several officials in Georgia stated that the repairs will be made, 

MCC has little ability to ensure the work will be done or done correctly. 

MCC has little oversight ability to ensure the work is completed now that 

the compact has ended. For example:

 25These performance guarantees are contractual instruments with a third party that allow 

the Georgian government to ensure a contractor meets its contractual obligations or the 

Georgian government can have the third party pay to complete the contractors’

commitments, up to the amount of the guarantee. 

26The MCC independent engineer reported in March 2012 that it expected final 

acceptance of lots 1, 4, 6ii, and 6iii in April 2012—about 3 to 4 months after the end of 

their 1-year defects liability periods and final acceptance of lots 2, 3, 3A, 5i, 5ii, 6i, and 7 in 

July 2012—about 4 to 8 months after the end of their defects liability periods.
Page 33 GAO-12-630 Millennium Challenge Corporation

• MCC reported that documentation regarding the status of the projects 

in the defects liability period is held by the Georgian government. 

While the Georgian government provided MCC the project status for 3 

of the 11 lots as of April 2012, the documentation provided was not in 

English.

• MCC’s independent engineer’s last trip to Georgia to review the status 

of the project was in March 2012, just before its contract expired. 

MCC will have little technical assistance in determining the extent to 

which all quality issues were addressed through the planned end of all 

of the defects liability periods in July 2012. MCC stated that it is 

considering other arrangements to support a site inspection in June 

2012.

• All funds have been paid to the Georgian government for the project,

and the conditions precedent for the compact are no longer in force, 

such as requiring a project management consultant and a 

construction supervisor to be in place. MCC officials stated that they 

therefore have no authority to ensure the road is repaired 

appropriately before the Georgian government takes final acceptance 

of the roads and releases the funds retained to the contractors.

To sustain planned benefits such as reduced travel times and reduced 

user costs, Georgia will need to keep the road operational and maintain 

the pavement in good condition.27

MCC took steps to ensure sustainability by including conditions precedent 

in the compact and by funding some equipment for road maintenance.

Before signing the compact, MCC took 

several steps to ensure that Georgia would be able to sustain the planned 

benefits of the rehabilitated road. However, we found that regular 

maintenance requirements, snow removal operations, and limited funds 

will challenge the Georgian government’s ability to sustain MCC’s 

investment in the road.

28

 27User costs include such items as vehicle maintenance, tire wear, increased fuel and oil 

costs, and vehicle depreciation.

28“Conditions precedent” are terms in an agreement that indicate that certain conditions 

must be met by one party before a second party to the contract is obligated to perform or 

do its part. In the case of an MCC compact, MCC establishes conditions precedent that 

must be met by the partner government or MCA before MCC disburses funds.

MCC Took Steps to Ensure 

Sustainability, but the 

Georgian Government 

Shows Limited Ability to 

Keep the Road Operational 

and Well Maintained

MCC Took Steps to Ensure 

Sustainability
Page 34 GAO-12-630 Millennium Challenge Corporation

MCC officials stated that the Georgia compact included a condition 

precedent requiring the Georgian government to maintain a certain level 

of funding to ensure proper maintenance of the road during the 

compact.29 MCC officials further stated that the condition precedent 

followed a similar requirement set in a World Bank loan agreement that 

had been entered into slightly earlier than the MCC compact, which 

emphasized ensuring that the government has the resources necessary 

to care for its national roads. MCC reported that, to sustain the economic 

opportunities generated by the road improvements, Georgia increased 

road maintenance funding from $33.6 million in 2006 to $56 million in 

2010. In addition, MCC officials stated that the Roads Department of the 

Ministry of Regional Development and Infrastructure had been working 

with the World Bank to develop the institutional framework and technical 

capacity to provide good road maintenance. MCC officials also stated that 

they allowed MCA-Georgia to use funds left over at compact end to 

purchase some equipment (such as an excavator and a road-patching 

vehicle) that would help equip the Georgian road department to perform 

maintenance. Finally, MCC officials stated that Georgia, similar to other 

developing countries, will face difficult decisions in how it spends its 

money. They noted that the Georgian government has a preference for 

constructing new roads instead of maintaining old ones; however, they 

believed that Georgia would maintain the new road as a source of 

national pride and hoped that, by working with MCC and other 

infrastructure development partners such as the World Bank, the 

government had come to realize the value of maintaining its 

investments.30

 29According to MCC, the funding requirements set out as the condition precedent were for 

the entire Georgian road network and not just for the MCC-funded road.

30In its response to a draft of this report, MCC again stated that the government of 

Georgia has communicated its commitment to ensuring the defects are fixed and to 

maintain the road over the long term. See appendix III.
Page 35 GAO-12-630 Millennium Challenge Corporation

During our visit to the road, we found that many maintenance items not 

covered under the contractors’ defects liability period were not being 

done. For example, we found several lots where the pavement markings 

were worn and needed to be repainted, guardrails and concrete barrier 

walls had been damaged and not repaired, drainage systems needed 

repair, and erosion was filling the drainage system and had not been 

cleaned (see fig. 17).

Routine and Emergency 

Maintenance Not Done
Page 36 GAO-12-630 Millennium Challenge Corporation

Figure 17: Damaged Concrete Barrier Wall, Drainage Channel Needing 

Maintenance, and Erosion-Filled Drainage
Page 37 GAO-12-630 Millennium Challenge Corporation

The MCC independent engineer also noted in June 2011, October 2011, 

and again in March 2012 that routine maintenance seemed to be lacking 

on some lots, including cleaning drainage channels and culverts, 

repairing damaged guardrails, and repairing erosion spots, and other 

miscellaneous damages. A Georgian official stated that there were 

maintenance contracts in place to make these kinds of repairs, and the 

MCC independent engineer stated in March 2012, that it did find 

Georgian road department contractors performing some routine 

maintenance tasks, but additional efforts were needed, and that a lack of 

snow removal in the 2011-2012 winter had likely resulted in increased 

road deterioration.

The feasibility study for the road project noted that portions of lots 3, 4, 

5ii, 6i, and 6ii are prone to snow drifts and part of lot 4 is sometimes 

closed from October to March. Snow removal is part of keeping the road 

operational. In its absence, the road is closed to traffic and the planned 

benefits of the improved road such as reduced user costs, reduced travel 

time to Tbilisi, and economic benefits from increased trade will not be fully 

realized.

In the curved areas of the road prone to icing, we saw small piles of salt 

and sand; however, we did not see snow removal equipment or any 

winter maintenance operations, even though the Georgian government 

officials stated they had maintenance contracts in place to provide snow 

removal operations. The project’s feasibility study had recommended 

installing snow fences to minimize snow drifts on the road, but on the 

basis of environmental concerns, MCA-Georgia chose to plant trees 

(living snow fences) to stop the snow drifting across the road and reduce 

maintenance costs. However, many of these trees did not survive. Living 

snow fences take several years to provide effective snow control.

During our December 2011 field work, we found that the road was closed 

in lot 4 for the 2 days we were on-site because of snow drifts on one short 

(about a quarter of a kilometer) portion of lot 4. The project included 

electronic message signs on the road leaving Tbilisi to allow motorists to 

choose an alternate route. In addition, we found other portions of lot 4 to 

have only one lane open to traffic (see fig. 18). The independent 

engineer’s March 2012 trip report stated that the Georgian road 

department’s snow removal operations had been lacking during the 2011-

2012 winter season, which had heavy and repeated snow storms. The 

engineers stated the road had been closed in lot 4 from December 2011 

until they visited in March 2012 and they found other sections of the road 

with only narrow lanes open, resulting in traffic jams and minor accidents.

Lot 4 Is Subject to Road 

Closure because of Snow
Page 38 GAO-12-630 Millennium Challenge Corporation

Figure 18: Snow on Roads in Lot 4

The Georgian government may not have a sufficient maintenance budget 

to maintain and operate the road. A Georgian government official stated 

that it had about $63 million in its 2012 budget to maintain roads. This 

appears to be a decrease from previous years’ road maintenance 

budgets ($81 million in 2011 and $90 million in 2010). However, this is 

still an increase over the $56 million MCC reported that it had budgeted in 

2010 to fulfill a condition precedent in the compact. Furthermore, of the 

overall 2012 road maintenance budget, the government had budgeted 

about $720,000 for maintaining the MCC road specifically. However, this 

amount of funding may be insufficient because MCA-Georgia approved 

paying contractors almost $700,000 to provide winter snow removal for 

only part of the road (lots 2, 3, 3A, and 4) during the 2010-2011 winter.

The road construction defects discussed above may increase 

maintenance costs, decrease the life span of the project, and result in 

reduced benefits from the project. Even if the road defects are adequately 

repaired, they could increase the cost of maintenance because of the 

need to seal cracks at the edges of pavement patches and reseal road 

surface treatments periodically to provide protection to the pavement. If 

not adequately repaired, the roads will need ongoing maintenance to 

keep them in such condition that they can provide benefits to the citizens 

of Georgia.

Available Maintenance Budget 

May Be Insufficient for Road 

Upkeep and Operation

Road Construction Defects 

Jeopardize Long-Term 

Sustainability
Page 39 GAO-12-630 Millennium Challenge Corporation

In Benin, MCC constructed several infrastructure improvements to the 

Port of Cotonou, including a jetty, a wharf, internal port roads, a railway, 

and security and electricity distribution systems. The project was intended 

to increase the efficient transport and volume of goods flowing through 

the port. At project completion, the quality of construction generally met 

established quality standards. However, several of the port’s critical 

components were inoperable at the end of the compact, including the new 

south wharf, the port security system, and the electricity distribution 

system. The government of Benin’s inability to supply the resources, 

manpower, or policies needed to operate all of the port’s components 

calls into question whether the port project will meet expected compact 

results or be sustainable for the life of the infrastructure.

In February 2006, MCC signed a compact with Benin, providing $307 

million for four projects—Access to Land, Financial Services, Justice, and 

Markets—to improve physical and institutional infrastructure and increase 

private sector activity and investment.31

 31For additional information on the projects included in the Benin compact, see

The Access to Markets activity, 

which accounted for just over $169 million, or 55 percent of the total 

compact funding, went to improve the Port of Cotonou’s infrastructure, 

specifically to increase efficiency and the volume of goods flowing 

through the port. By the time the compact ended, the final cost of the 

infrastructure improvements increased to about $188 million, accounting 

for over 60 percent of the final compact amount (see fig. 19). The 

compact entered into force in October 2006 and ended in October 2011.

GAO-10-797R.

In Benin, Port 

Construction Is 

Generally Good 

Quality, but Full 

Operability of Port 

Components Is 

Uncertain

MCC Compact Funded 

Infrastructure 

Improvements to the Port 

of Cotonou in Benin
Page 40 GAO-12-630 Millennium Challenge Corporation

Figure 19: MCC Benin Compact Funding at Signature and Completion

Note: Other projects include funds disbursed before entry into force to facilitate the implementation of 

the compact. At compact close, $5.5 million funds remained undisbursed.

The project components were awarded to construction contractors in a 

series of lots, as follows (see fig. 20):

• lot 1: jetty to slow the rate at which sand will fill the access channel;

• lot 2: south wharf, a new wharf intended to increase volume of goods;

• lot 3: east-west road, security, electricity distribution system, fire 

protection, and lighting; and

• lot 3A: bypass road, railway, boundary wall, truck parking lot, and 

lighting.

In addition, the MCC funds allowed the port to purchase oceanographic 

equipment, antipollution equipment, and a tugboat.
Figure 20: Compact-Funded Improvements in the Port of Cotonou

Source: GAO analysis of MCC data; Map Resources (map).

Source: GAO analysis of MCC data; Map Resources (map).

N

Lot 1: Jetty

Benin

Port of Cotonou 

Lot 2: South wharf

Lot 3: East-west road, security, 

electrical, fire protection, and lighting

Lot 3A: Bypass road, boundary 

wall, parking area, lighting, 

and railway

Perimeter security boundary wall Atlantic Ocean

A f r i c a

Togo Nigeria

Niger Mali

Ghana

Benin

Cote 

d'Ivoire

Burkina 

Faso

Cotonou

Interactive graphic Directions:

Online: Mouse over each TEXT LABEL below for more information and photo

Print: To print photos and additional information, go to appendix II.

Page 41 GAO-12-630 Millennium Challenge Corporation
Page 42 GAO-12-630 Millennium Challenge Corporation

While the project was largely completed as planned, components for a 

proposed Lot 4—which included a storage facility for dry bulk goods such 

as grains and sand and a fish quality inspection station—were deemed 

not viable once MCA-Benin conducted its feasibility studies. As a result, 

MCA-Benin did not tender a bid for that lot. According to MCC officials, 

the funds originally planned for those items were shifted to the other 

infrastructure components. The funds also helped cover cost increases 

and additional work on the wharf such as increasing wall length and 

dredging the berth.32

MCC’s two primary challenges in completing the port project were 

overcoming a late start to the construction, and managing the 

underperformance of one contractor. Despite these challenges, most of 

the infrastructure components had no or only minor quality issues. 

However, one lot had over 500 uncompleted tasks or defects when the 

compact closed.

MCA-Benin did not sign contracts with its construction contractors until 

almost 3 years after the compact entered into force. During those years, 

MCA-Benin studied what components of the port project would be 

feasible. As a result, construction contractors had just 2 years to complete 

their work (see fig. 21).

 32Additional dredging is required to accommodate larger ships as set out in the conditions 

of the concession agreement negotiated by the Port Authority for a private firm to operate 

the new south wharf.

The Quality of 

Construction Was 

Generally Good, but Many 

Defects Left for Repair or 

Minor Works to Be 

Completed after Compact 

Closure

Implementation Challenged by 

Delayed Start and One 

Underperforming Contractor
Page 43 GAO-12-630 Millennium Challenge Corporation

Figure 21: Benin Construction Timeline
Page 44 GAO-12-630 Millennium Challenge Corporation

In addition, MCA-Benin had to manage the poor performance of the 

contractor for lot 3 to get the project finished within the compact’s time 

frame. According to MCC, the lot 3 contractor experienced internal 

management problems, missed important contract deadlines, did not 

perform contracted work, and provided inconsistent information to MCABenin and MCC. In August 2010, MCA-Benin terminated components of 

the contract, including the bypass road, railway, parking lot, and boundary 

wall. MCA-Benin awarded the terminated components as lot 3A to the 

contractor for the jetty that had been successful in meeting the time 

frames for the jetty component. After several extensions of time, the lot 3 

contractor’s remaining work was certified as substantially complete, 

months after the originally anticipated contract completion date and 1 day 

after the end of the compact. However, several components were left to 

be finished or corrected during the defects liability period.

We found some of the project components to be completed and 

functioning for their intended use with only minor repairs needed during 

the defects liability period. For example, the lot 1 jetty was installed and 

reducing the amount of sand coming into the port from the ocean, thereby 

reducing periodic dredging maintenance costs (see fig. 22). We did 

observe that some areas of the jetty’s concrete surface had small areas 

of cracking, which will require future maintenance.

Some Project Components 

Were Well Constructed, but 

One Lot Had Over 500 

Problems
Page 45 GAO-12-630 Millennium Challenge Corporation

Figure 22: Jetty Is Complete and Serving Its Intended Purpose

The construction supervisor reported that some project components 

needed to be repaired or completed upon substantial completion of the 

contracts. However, because the construction supervisor deemed these 

issues minor, he was able to certify each contract as substantially 

complete and allow each contractor to make repairs or finish the work 

during the 1-year defects liability period following the substantial 

completion of the contract. MCC officials stated that the use of the defects 

liability period to complete work was not an ideal situation, but it was 

appropriate for situations in which the contractor needed to rely on an 

outside entity to complete the work (such as for the electricity distribution 

system) and in cases where the construction supervisor deemed the work 

to be minor.33

We observed some of these items during our field work and also 

concluded that they were generally minor in nature; however, lot 3 had 

 33 In technical comments on a draft of this report, MCC noted that MCA-Benin’s works 

contracts were based on the FIDIC yellow book, pursuant to which a third-party engineer, 

hired by MCA-Benin, was contractually responsible for determining when the works had 

achieved substantial completion. MCC also noted that all but 5 have been remediated.
Page 46 GAO-12-630 Millennium Challenge Corporation

over 500 items to be completed or corrected in the defects liability period 

(see table 2). As of April 2012, the project management consultant 

provided documentation that only 20 items remained to be completed and 

5 items were listed as outstanding defects in lot 3. The consultant 

reported no uncompleted work or outstanding defects reported to be 

remaining from the takeover date on lots 1, 2, or 3A.

Table 2: Uncompleted Works and Outstanding Defects as of Substantial 

Completion, by Lot 

Lot Uncompleted work Outstanding defects Total 

1 0 0 0

2 13 30 43

3 219 290 509 

3A 4 120 124

Total 236 440 676

Source: GAO analysis of MCA-Benin construction supervisor documents.

Note: The lots’ dates of substantial completion range from December 2010 to October 2011.

For lot 3, the construction supervisor reported that minor items needed to 

be completed or corrected included connecting the fire pump to the power 

supply, completing some paved areas, and installing a truck weigh 

station. In lot 3A, we also observed uncompleted work—such as lighting 

poles had not been completed in the 250-truck parking lot—and some 

minor defects needing repair—such as missing manhole covers in the 

road and a leaking pipe connecting the water tank to the fire control 

system (see fig. 23).
Page 47 GAO-12-630 Millennium Challenge Corporation

Figure 23: Lighting Pole under Construction

Although MCC took steps to ensure the port project’s sustainability, many 

of the project’s key components—the south wharf, the security system, 

the electricity distribution system, and the fire station—were either not 

operational or only partially operational at the end of the compact. The 

south wharf had additional work remaining to be completed by the Port 

Authority and the concessionaire hired to operate the wharf for it to be 

functional, and the Port Authority had not ensured that all other necessary 

infrastructure and staffing were in place for the security system, the 

electricity distribution system, and the fire station.

MCC took several steps to ensure that the government of Benin could 

sustain the operations and maintenance of the project components. 

These steps included conducting a feasibility study, incorporating 

conditions precedent into the compact, hiring a port advisor, requiring a 

compact closure plan, and identifying steps the government of Benin 

should take to support sustainability in the compact letter of completion.

Feasibility study: In accordance with its policies, MCC funded a study to 

determine the technical and financial feasibility of the port activities 

proposed by the government of Benin. Through this process, MCC 

identified activities that would provide an economic benefit to Benin and 

ensure the likelihood for future sustainability.

Conditions precedent: Two conditions precedent were included in the 

compact to help ensure the sustainability of the port.

MCC Took Steps to Ensure 

Sustainability, but Port 

Authority Has Not Been 

Able to Operate Key 

Project Components

MCC Took Steps to Ensure 

Sustainability
Page 48 GAO-12-630 Millennium Challenge Corporation

• First, the compact required the Port Authority to enter into a contract 

with a private firm to operate the new south wharf to ensure its open 

and transparent operation, eliminate corruption, and improve 

operations.

• Second, MCC required the Port of Cotonou to meet the International 

Ship and Port Facility Security code.34

Port advisor: MCC funded the hiring of a port advisor to review port 

operations and make recommendations to improve the operations of the 

port and ensure an adequate cash flow through increased shipping fees 

to operate the port.

Meeting the code means that 

that ships stopping later at U.S. ports would not be required to 

undergo increased security scrutiny, thus decreasing costs to shipping 

companies.

Compact closure plan: MCC requires all MCAs to create a Program 

Closure Plan, outlining the steps it will take when the compact ends to 

finalize any compact commitments in an orderly fashion. The Program 

Closure Plan for Benin includes some steps aimed at helping sustain the 

compact’s investment, including for the Port of Cotonou. Most notably, the 

compact closure plan describes the government of Benin’s intention to 

establish an agency, in part, to complete and implement a “MCA-Benin 

experience sustainability program.”

Compact completion letter: MCC also sent a letter to the government of 

Benin in January 2012 to formally mark the conclusion of the compact 

and to provide final recommendations to ensure the sustainability of 

compact investments, among other things. In addition, MCC noted that

efforts made by Benin to maximize the results and ensure the 

sustainability of this compact would be considered in decisions related to 

a potential second compact. The letter specifically identified the following 

as actions the government of Benin needs to complete:

 34The International Ship and Port Facility Security (ISPS) code is a comprehensive set of 

measures to enhance the security of ships and port facilities. The purpose of the ISPS 

code is to provide a standardized, consistent framework for evaluating risk, enabling 

governments to offset changes in threat with changes in vulnerability for ships and port 

facilities through determination of appropriate security levels and corresponding security 

measures. The ISPS code is implemented through chapter XI-2 special measures to 

enhance maritime security in the International Convention for the Safety of Life at Sea 

(SOLAS), 1974.
Page 49 GAO-12-630 Millennium Challenge Corporation

• ensure the competitiveness of the Port of Cotonou and increase its 

throughput (including ensuring the fluidity of traffic through the port, 

implementing a suitable operations scheme for the truck parking 

facility, and controlling total fees charged to importers);

• complete customs department reforms;

• enforce port security systems (including control of truck and 

pedestrian access traffic); and

• execute the port channel access improvements required to meet the 

terms of the south wharf concession agreement and to achieve the 

intended increase in port capacity.

Despite the steps MCC took to help ensure sustainability, several key port 

components were not operational at the end of the compact because the 

Port Authority had not taken the necessary steps to operate all project 

components (see table 3). The Port Authority’s inability to operate all 

components of the port at compact completion calls into question its 

ability to maintain port operations and to achieve MCC’s anticipated 

economic return.

Table 3: Status of Key Components of Port of Cotonou

Lot Component

Status as of 

December 2011 GAO findings a Status as of 

April 2012 April 2012 updates b

1 Jetty ● Jetty is slowing the entry of 

sand into the port.



2 South wharf  Concessionaire needs to 

install paving, cranes, and 

other infrastructure. Planned 

operational date: January 

2013.

 Port Authority has requested 

the International Finance 

Corporation to assist in finding 

a way to fund its commitment 

to dredge the port entry as 

required in the concession 

agreement.

3 East-west road  Congestion worse than before; 

28 hours average truck-inport-time versus 24 before 

compact.

 Congestion still a problem.

The Port Authority Has Been 

Unable to Operate Key 

Components of the Port, 

Calling into Question the Port’s 

Long-Term Sustainability
Page 50 GAO-12-630 Millennium Challenge Corporation

Lot Component

Status as of 

December 2011 GAO findings a Status as of 

April 2012 April 2012 updates b

Security system  Lacks staff. Planned 

operational date: unknown.

 Facilities turned over to the 

Port Authority in February 

2012, about 10 staff in the 

control centers, in the process 

of hiring additional staff to

operate the system, and 

identification badge system not 

in use.

Electricity distribution 

system 

 Needs new increased power 

feed from local utility. Planned 

full operational date: unknown.

 Waiting on increased power 

feed from local utility, but not 

expected before January 

2013.

Fire protection (station, 

trucks, and water tank)

 Lacks staff, and traffic 

congestion prevents 

circulation of fire trucks. 

Planned full operational date: 

unknown.

 Port Authority is using fire 

trucks, developing operation 

plan, increasing staff, 

recruiting staff, training staff, 

and waiting for correction of 

construction defects to be fully 

operational.

Weigh station  Under construction.  Construction complete, 

calibration of scales and 

training under way; plan is to 

be operational in June 2012.

Lighting  In operation. 

3A Bypass road  Parked trucks prevent one 

lane from being used.

 Trucks still using one lane of 

road for parking.

Railway  In operation. 

Boundary wall  At least one breach in wall 

identified, gates need to be 

installed by concessionaire at 

south wharf site.

 Gates not yet constructed by 

concessionaire.

Truck parking lot  Lot not in use and no 

concessionaire hired to 

operate the lot. Planned 

operational date: unknown.

 Port Authority plans to sign a 

concession agreement in July 

2012, and Port Authority 

occasionally uses the lot.

Lighting for parking lot  Lights not yet installed.  Lighting completed.

: In operation

: In operation but not fully utilized

: Not in operation

Source: GAO analysis of data from MCC, the Autonomous Port of Cotonou, Bolloré Africa Logistics, Maersk Line, and Royal 

Haskoning.

a

GAO conducted a site inspection in December 2011.

b

Update based on April 2012 correspondence with the construction supervisor, Port Authority, and 

port shipping companies.
Page 51 GAO-12-630 Millennium Challenge Corporation

South Wharf Is Not in Use

Although MCC funded a new south wharf to increase tonnage moving 

through the port, and ensured that the Port Authority contracted a 

concessionaire to operate the south wharf, to increase private investment 

and generate income for the Port Authority, it is not in operation because 

the Port Authority has not completed additional dredging and the 

concessionaire has not finished the landside works, such as paving the 

wharf area or installing cranes (see fig. 24).35

Figure 24: Constructed South Wharf without Landside Infrastructure

In exchange for the right to manage and operate the south wharf, the 

concessionaire paid the Port Authority a concession fee. The Port 

Authority intended to use that fee to deepen the access channel—its 

contractual obligation under the agreement—so that larger cargo ships 

 35In technical comments provided by MCC on a draft of this report, MCC stated that there 

was never an expectation that all landside works required to operate the new south wharf 

at full capacity would be completed by the end of the compact term (October 2011). 

However, the economic analysis prepared for MCC’s investment decision in 2005 shows 

that the expansion of shipping capacity due to the South Wharf investment would be fully 

available in 2010.
Page 52 GAO-12-630 Millennium Challenge Corporation

could use the concessionaire’s facility. The concessionaire also agreed to 

construct or install the necessary landside equipment and infrastructure. 

However, because of an error in assessing the amount of work to be 

done and an underestimation of the cost, the concession fee was 

insufficient to fund the required dredging. A Port Authority official stated in 

April 2012 the Port Authority is currently evaluating bids for the work. The 

concession agreement also stipulated that the concession should be 

operational 18 months after the concession start date. However, 

according to a concessionaire official, the concession company had not 

yet agreed upon a start date with the Port Authority as of April 2012.36

However, the concessionaire was proceeding with constructing its portion 

of the landside works. MCC officials stated that the concessionaire’s 

construction will be completed in December 2012, and a concessionaire 

official told us the wharf would be operational in January 2013; however, 

if the Port Authority does not honor its part of the concession agreement 

and finish the dredging, a concessionaire official stated it may reduce the 

amount of landside works it is going to finish, such as not install as many 

cranes or not pave the entire wharf area, because it could operate the 

south wharf only for smaller ships. Smaller ships and reduced wharf area 

would likely reduce the amount of cargo tonnage through the port and the 

fees the port would receive from the concession. As of April 2012, the 

Port Authority had requested the International Finance Corporation’s 

assistance investigating how it could fund the required dredging and meet 

its commitment of the concession agreement, but it had not yet awarded 

any contracts to perform the work.

37

Security System Is Not Being Fully Utilized

The Port of Cotonou may be unable to provide effective security for the 

port or retain its International Ship and Port Facility Security certification 

because the MCC-funded port security system was not in operation as of 

 36In its initial economic rate of return analysis, MCC had anticipated that, by 2010, the 

south wharf would have increased the capacity of the port by almost 30 percent. 

37The International Finance Corporation is a member of the World Bank Group.
Page 53 GAO-12-630 Millennium Challenge Corporation

our December 2011 visit.38

• The security system requires 150 to 257 individuals to staff the 

operations on a 24-hour basis.

The Port Authority had not hired sufficient 

staff, enforced its security policies, or maintained its security perimeter.

39

• The Port Authority was not fully enforcing established security 

policies, as of December 2011. For example, the port was not fully 

controlling access to the port. Even though a Port Authority official 

stated that everyone entering the port is required to wear some form 

of identification (a badge, arm bracelet, or uniform), in our December 

2011 site visit we observed several visitors with improper or no 

identification at all. According to a Port Authority official, the MCCfunded access system was still not in full operation as of April 2012.

As of April 2012, there were about 90 

security personnel on staff and, according to a port authority official, 

the port authority was recruiting an additional 25 people. The 

construction supervisor stated that as of April 2012 the Port Authority 

had about 10 individuals staffing only the operation of two control and 

surveillance centers, which, according to MCC officials, were being 

operated only during the day. Without adequate trained staff, the 

security system cannot function to its full capacity.

• In December 2011, we also observed a railway access gate had not 

been installed on the south wharf site, creating a breach in the 

boundary wall allowing people to bypass the security system and gain 

entry into the port. The gate was not a part of the MCC-funded work, 

and while the Port Authority is working with the wharf concessionaire 

to install a gate at the location, the temporary measure implemented 

by the Port Authority leaves the port vulnerable (see fig. 25).

 38The new security system was turned over to the Port Authority in February 2012 and 

includes a control and surveillance center, a secondary control and surveillance center, a 

visitors’ reception center to issue badges, six access control stations, perimeter fencing 

with port intrusion detection, security cameras, alarms, radio communications, and 

computer equipment to operate it.

39The port authority estimated 150 security personnel are required to operate the new 

security system, while the contractor installing the system calculated about 192 security 

personnel are required to operate the system 24 hours a day, 7 days a week, and the 

project management consultant for the project calculated 257 security personnel were 

required to adequately secure the port 24 hours per day.
Page 54 GAO-12-630 Millennium Challenge Corporation

Figure 25: Breach in Boundary Wall

Electricity Distribution System Lacks Sufficient Power to Operate 

at Capacity

MCC funded an electricity distribution system for the port that does not 

function to capacity because the Port Authority had not ensured that the 

amount of power transmitted to the port from the power company would 

be adequate. The MCC-funded distribution system was designed to 

distribute 15 megavolt-amps of electricity and planned to initially provide 

10 megavolt-amps; however, the current conduit to the port provides only 

2 megavolt-amps. Until the 10 megavolt-amps of power is provided, the 

contractor cannot make final connections or test the system. As of April 

2012, a project management official reported that the increased power 

service had not yet been provided to the system and the officials did not 

expect it to be provided before the October 2012 end of the defects 

liability period. That same month MCC officials told us that they did not 

expect the power service to be upgraded before January 2013.
Page 55 GAO-12-630 Millennium Challenge Corporation

Fire Station Lacked Sufficient Staff to Operate MCC-Funded Fire 

Engines

The MCC-funded fire station was not in use as of December 2011 

because the Port Authority had not hired sufficient staff. The Port 

Authority received three new fire engines as part of the MCC project, but 

had not increased the staffing level, which MCA-Benin’s feasibility study 

stated was necessary to operate the fire engines on a 24-hour basis. In 

addition, truck congestion on the roads within the port prevents the fire 

engines from circulating when needed.

As of April 2012, port authority officials stated that the fire protection 

system was still not in service because of construction defects in the 

water tank valve and testing had not been completed. However, the port 

officials stated that they had recruited and trained additional firemen, and 

were recruiting other personnel to operate and maintain the system, such 

as inspectors, a diesel mechanic, and plumbers. At the time of the 

feasibility study, the Port Authority had 14 fire prevention staff. In April 

2012, a Port Authority official stated that the authority plans for a total 

staff of 25.

Port Roads Are Severely Congested

Although the east-west port road and the bypass road were completed 

with only minor quality issues such as missing manhole covers, significant 

truck congestion jeopardizes their utility. The compact goal was to reduce 

the average number of hours trucks stayed at the port from 24 hours to 7 

hours. However, the average after the compact ended is 28 hours. 

According to officials from two shipping companies, one of their primary 

concerns was that truck congestion at the port would likely limit their 

ability to increase the volume of merchandise passing through the port 

(see fig. 26).
Page 56 GAO-12-630 Millennium Challenge Corporation

Figure 26: Congestion on the East-West Port Road

The Port Authority has taken some steps to alleviate the truck congestion. 

For example, the Benin government engaged a private firm to install 

tracking and communication devices in trucks beginning in December 

2011 that would allow trucks to enter the port when their shipper is ready 

to load or unload them. However, an official from the firm stated that, as 

of April 2012, the Benin government had not allowed the firm to initiate 

the system even though it has been ready to operate since late 

November 2011. The government of Benin also has plans to move some 

operations to off-site “dry ports” where containers will go through customs 

and be loaded and emptied. However, shipping company officials 

questioned whether the existing railway will be able to transfer the cargo 

to the dry ports. According to March 2012 statements by shipping 

company officials, the Port Authority attempted to implement the use of 

the railway and a privately operated dry port for containers going to 

hinterland countries at a site about 55 kilometers away from the port.40

 40Hinterland countries are those inland countries that lie behind a port. For Benin, the 

hinterland countries include Niger, Burkina Faso, Chad, and Mali. Togo and Nigeria are 

also common destinations for goods transiting through the Port of Cotonou. 

However, according to one of the shipping company officials, the railway 

could transport only 90 of the 200 containers needed to be transported 

daily to the dry port. One shipping company official stated the company 
Page 57 GAO-12-630 Millennium Challenge Corporation

had over 1,700 containers backlogged in the port in early March 2012, 

taking an average of more than 25 days to get a container from the port to 

the dry port. Shipping officials reported that as of late March 2012, port 

officials have allowed the containers to be either loaded and emptied in 

the port or transported by truck to another dry port, but congestion was 

still a problem.

Parking Lot In Operation but Not Being Fully Utilized

MCC funded the construction of a 250-truck parking lot that was handed 

over to the Port Authority in September 2011; however, as of April 2012, 

Port Authority officials stated the parking lot was not in full use because 

they had not engaged a company to manage the concession. MCC 

officials stated that trucks are occasionally moved to the lot to alleviate 

congestion. Port Authority officials stated that they plan to sign a 

concession agreement In July 2012 to manage the lot.

Some of the challenges MCC faced in Georgia and Benin were not 

unique. As with other early compacts, insufficient planning, escalation of 

construction costs, and insufficient MCC review led to project delays, 

scope changes, and cost increases. In the case of Georgia, MCC 

specifically had problems ensuring the quality of its transportation 

infrastructure project even though it had a quality assurance framework 

because it did not adequately address problems in contract supervision 

identified by the independent engineer. As a result, the road had 

significant pavement defects and numerous quality issues at compact 

completion. Furthermore, MCC has no leverage over the government or 

contractors once compacts end, even though contractors may be 

expected to continue work in the 1-year defects liability period following 

the contract. In Georgia, the construction contractors were required to 

remediate quality issues after the end of the contract, but MCC cannot at 

this point ensure that the repair work is properly done.

Even though MCC took steps to provide for the sustainability of its 

investments in both Georgia and Benin, the projects in both countries 

have maintenance and operability challenges that jeopardize the benefits 

they were projected to achieve. In Georgia, the ability of the government 

to maintain the road is in question. Without sustained maintenance—such 

as repairing drainage systems and removing snow—the road will need 

additional repairs and have limited usefulness in the winter. In Benin, key 

project components, including security and electricity distribution systems 

and the south wharf, were not operational at the end of the compact. The 

Conclusions
Page 58 GAO-12-630 Millennium Challenge Corporation

operation of these and other interconnected systems depends on the 

partner government, which to date has been unable to fund and 

implement the work required to begin port operations. As a result, MCC 

may have invested considerable U.S. resources in equipment and 

structures that will not be used to maximum benefit and thus not provide 

the expected economic benefits. MCC should take this opportunity to 

review the problems that emerged from Georgia, Benin, and other 

completed compacts and to establish or strengthen mechanisms by which 

it can better invest U.S. resources in future compacts.

To maximize the quality and sustainability of future projects, we 

recommend that the MCC Chief Executive Officer take the following

actions:

To ensure that its quality assurance framework is fully implemented and 

to ensure that transportation infrastructure projects are built to the 

established quality standards, MCC should

• review how MCC uses information and professional recommendations 

provided by its independent engineers to address identified 

deficiencies and to ensure projects are constructed to the quality 

standards set out in contracts, and

• develop a mechanism to maintain influence through contracts’ defects 

liability periods when they extend beyond the compact end date.

To ensure sustainability of compact projects, MCC should evaluate the 

effectiveness of the tools it uses (such as its feasibility studies and 

conditions precedent) to ensure that partner countries have adequate 

infrastructure, staff, and policies necessary to operate and maintain MCCfunded infrastructure following the compact.

In written comments on a draft of this report, MCC stated that it agrees 

with our three recommendations; however, it did not commit to 

undertaking any specific actions to address them. With respect to the first 

recommendation to review its use of information and recommendations 

from its independent engineers, MCC stated that it does guide its 

oversight of compact projects using the analysis provided by its 

independent engineers, but that the quality of advice can vary and 

independent engineers are not always privy to all factors affecting 

compact programs. However, MCC did not state that it would review its 

Recommendations for 

Executive Action

Agency Comments 

and Our Evaluation
Page 59 GAO-12-630 Millennium Challenge Corporation

practices regarding how it uses information from these independent 

engineers. With respect to our second recommendation regarding the 

need for a mechanism to maintain influence on contracts whose defects 

liability periods extend beyond compact end dates, MCC noted that it 

sustains a dialogue with its partner countries after compact closure to 

emphasize the importance of continued oversight. However, as MCC 

officials have noted, because its authorizing legislation limits the term of 

compacts to 5 years, MCC’s ability to assist partner countries directly 

once a compact closes is restricted. MCC did not state that it would seek

any additional authority to maintain influence after the end of a compact. 

With respect to our third recommendation, to evaluate the tools it uses to 

ensure projects’ sustainability, MCC listed ways that it works to ensure 

sustainability throughout the development, implementation, and closure of 

compact programs. MCC also noted that it revised its Compact 

Development Guidelines in January 2012 and included steps to 

strengthen the agency’s assessment of sustainability during compact 

development. However, MCC did not commit to evaluate the 

effectiveness of the tools it has used or plans to use to ensure its projects’

sustainability.

We have reprinted MCC’s comments in appendix III. We have also 

incorporated technical comments from MCC in our report where 

appropriate.

We are sending copies of this report to interested congressional 

committees and the Millennium Challenge Corporation. In addition, this 

report is available at no charge on the GAO website at 

http://www.gao.gov.
Page 60 GAO-12-630 Millennium Challenge Corporation

If you or your staff have any questions about this report, please contact 

David Gootnick 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. GAO staff members who made 

major contributions to this report are listed in appendix IV.

David Gootnick

Director

International Affairs and Trade
Appendix I: Objectives, Scope, and 

Methodology

Page 61 GAO-12-630 Millennium Challenge Corporation

The fiscal year 2008 Consolidated Appropriations Act, Public Law 110-

161, mandated that GAO review the results of Millennium Challenge 

Corporation’s (MCC) compacts. For the purpose of this engagement, we 

examined the quality and sustainability of MCC’s two transportation 

infrastructure projects in Georgia (the Samtskhe-Javakheti Road 

Rehabilitation Activity) and Benin (the Port of Cotonou Access to Markets 

Project). Transportation infrastructure is defined as public works that 

provide the conveyance of passengers or goods from one place to 

another.

GAO selected MCC’s compacts in Georgia and Benin as the focus of this 

engagement through a subjective process. Our selection universe was 

those compacts ending in 2010 and 2011 that had a transportation 

infrastructure project. In a previous engagement we had reviewed the 

MCC-funded transportation infrastructure projects in Cape Verde and 

Honduras.1

We based our assessment of the projects’ quality on the quality 

assurance requirements established by MCC, the partner countries’

Millennium Challenge Accounts (MCA), and their contractors. MCC 

requires the MCAs to (1) have an individual project director or to engage 

the services of a project management firm to help manage the 

administrative aspects of compact programs, (2) contract with 

implementing partners (such as construction firms) using MCC’s 

procurement guidelines, and (3) engage a construction supervisor to 

oversee the day-to-day construction and ensure compliance with contract 

requirements.

Georgia and Benin, in combination with these previously 

reviewed projects, provided some geographic variety as well as the ability 

to compare two port projects and two large road projects.

For this report, the definition of sustainability is based on the definition 

from the Organisation for Economic Cooperation and Development’s 

Development Assistance Committee, which defines “sustainability” as 

“the continuation of benefits from a development intervention after major 

development assistance has been completed.” The Organisation for 

Economic Cooperation and Development’s Development Assistance 

Committee is an international forum of many of the largest funders of aid 

 1

GAO, Millennium Challenge Corporation: Compacts in Cape Verde and Honduras 

Achieved Reduced Targets, GAO-11-728 (Washington, D.C.: July 25, 2011).

Appendix I: Objectives, Scope, and 

Methodology
Appendix I: Objectives, Scope, and 

Methodology

Page 62 GAO-12-630 Millennium Challenge Corporation

with a mandate to promote development cooperation and other policies 

so as to contribute to sustainable development. We operationalized this 

definition by specifying that sustainability is the ability of MCC’s partner 

country governments to operate and maintain the new infrastructure in 

such a condition as is required to produce the projected benefits for the 

period of time those benefits are calculated.

To assess the quality and longer-term sustainability for compacts in 

Georgia and Benin, we analyzed MCC, MCA, and other documents; 

interviewed MCC officials and stakeholders; and observed project results 

in both countries.

• We reviewed the compact agreement for Georgia and Benin. We also 

reviewed documents prepared by MCA officials, independent 

construction supervisors, project management consultants, MCC 

independent engineers, and government officials, including monthly 

reports, special studies, testing reports, and daily inspections. We 

also reviewed final reports submitted to MCA by contractors on 

compact activities.

• We interviewed MCC and MCA officials in both countries regarding 

the results of each compact activity, including the quality and 

sustainability of the projects. We visited infrastructure projects in both 

countries, including visits to the port in Benin, and to the SamtskheJavakheti road in Georgia. We met with project construction 

contractors, independent construction supervisors, and MCA project 

management consultants. In addition, we interviewed officials from the 

governments of Georgia and Benin about compact implementation, 

results, and sustainability, including Benin’s Ministry of Maritime 

Economy and Port Authority, and Georgia’s Ministry of Infrastructure.

• We traveled to Benin and the Republic of Georgia in December 2011 

and conducted site inspections to verify the extent to which the MCCfunded transportation infrastructure projects had been completed and 

to observe whether there were any visible deficiencies in construction. 

All photographs in this report attributed to GAO were taken during this 

time period.

These interviews, document reviews, and site visits were used to 

determine if the MCAs had implemented MCC’s quality assurance 

framework, if there was supporting documentation to verify that quality 

testing had been undertaken, if any quality deficiencies were encountered 

during construction, if any quality deficiencies remain, and whether the 
Appendix I: Objectives, Scope, and 

Methodology

Page 63 GAO-12-630 Millennium Challenge Corporation

infrastructure projects would be sustainable. We were not able to view 

actual work in progress or visit testing facilities for most infrastructure 

contracts because the work had already been completed.

To determine the amount of funding used for transportation infrastructure 

projects, we reviewed MCC financial data. We included compact 

implementation funding—funds disbursed before entry into force to 

facilitate the implementation of the compact—with other projects not 

related to transportation infrastructure.

MCC enters into a legal relationship with partner country governments, 

which vest responsibility for day-to-day management of compact project 

implementation in the MCA, including monitoring and evaluation activities 

such as setting and revising targets, but such MCA actions require MCC’s 

direct oversight and approval. Therefore, throughout this report, we 

attribute all decisions related to project rescoping and compact targets to 

MCC.

Finally, some of the reports and documents referenced above were 

written in French or Georgian. We translated these documents internally 

to enable our analysis.

We conducted this performance audit from November 2011 to June 2012 

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 objectives.
Appendix II: Additional Photographs Related to 

Figure 20: Compact-Funded Improvements in 

the Port of Cotonou

Page 64 GAO-12-630 Millennium Challenge Corporation

Appendix II: Additional Photographs Related 

to Figure 20: Compact-Funded Improvements 

in the Port of Cotonou
Appendix III: Comments from the Millennium 

Challenge Corporation

Page 65 GAO-12-630 Millennium Challenge Corporation

Appendix III: Comments from the Millennium 

Challenge Corporation
Appendix III: Comments from the Millennium 

Challenge Corporation

Page 66 GAO-12-630 Millennium Challenge Corporation
Appendix III: Comments from the Millennium 

Challenge Corporation

Page 67 GAO-12-630 Millennium Challenge Corporation
Appendix IV: GAO Contact and Staff 

Acknowledgments

Page 68 GAO-12-630 Millennium Challenge Corporation

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

In addition to the contact named above, Emil Friberg Jr. (Assistant 

Director), Michael Armes (Assistant Director), Leslie Locke, and Miriam 

Carroll Fenton made key contributions to this report. Additional technical 

assistance was provided by John Bauckman, Lynn Cothern, George 

Depaoli, David Dornisch, Aryn Ehlow, Etana Finkler, Heather Hampton, 

Ernie Jackson, and Jena Sinkfield.

Appendix IV: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments
Related GAO Products

Page 69 GAO-12-630 Millennium Challenge Corporation

Millennium Challenge Corporation: Compacts in Cape Verde and 

Honduras Achieved Reduced Targets. GAO-11-728. Washington, D.C.: 

July 25, 2011.

Millennium Challenge Corporation: Summary Fact Sheet for 17 

Compacts. GAO-10-797R. Washington, D.C.: July 14, 2010.

Millennium Challenge Corporation: MCC Has Addressed a Number of 

Implementation Challenges, but Needs to Improve Financial Controls and 

Infrastructure Planning. GAO-10-52. Washington, D.C.: November 6, 

2009.

Millennium Challenge Corporation: Independent Reviews and Consistent 

Approaches Will Strengthen Projections of Program Impact. GAO-08-730. 

Washington, D.C.: June 17, 2008.

Management Letter: Recommendations for Improvements to MCC’s 

Internal Controls and Policies on Premium Class Air Travel.

GAO-08-468R. Washington, D.C.: February 29, 2008.

Millennium Challenge Corporation: Projected Impact of Vanuatu Compact 

Is Overstated. GAO-07-1122T. Washington, D.C.: July 26, 2007.

Millennium Challenge Corporation: Vanuatu Compact Overstates 

Projected Program Impact. GAO-07-909. Washington, D.C.: July 11, 

2007.

Millennium Challenge Corporation: Progress and Challenges with 

Compacts in Africa. GAO-07-1049T. Washington, D.C.: June 28, 2007.

Millennium Challenge Corporation: Compact Implementation Structures 

Are Being Established; Framework for Measuring Results Needs 

Improvement. GAO-06-805. Washington, D.C.: July 28, 2006.

Analysis of Future Millennium Challenge Corporation Obligations.

GAO-06-466R. Washington, D.C.: February 21, 2006.

Millennium Challenge Corporation: Progress Made on Key Challenges in 

First Year of Operations. GAO-05-625T. Washington, D.C.: April 27, 

2005.

Millennium Challenge Corporation: Progress Made on Key Challenges in 

First Year of Operations. GAO-05-455T. Washington, D.C.: April 26, 2005.

Related GAO Products

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