Millennium Challenge Corporation: Georgia and Benin Transportation Infrastructure Projects Varied in Quality and May Not Be Sustainable
Published: 2012-06-27T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: 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.
section_title: What GAO Found
paragraphs: 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 ¼ hours to 2 ¾ 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.
section_title: What GAO Recommends
paragraphs: 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.

section_title: Letter
paragraphs: 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. As of June  2012, MCC had signed 26 compacts with 25 countries, committing a total  of approximately $9.3 billion in U.S. funding.
In the fiscal year 2008 Consolidated Appropriations Act, Congress  directed GAO to review the results achieved by MCC compacts. Seven  of the 26 compacts were completed in 2010 or 2011, including those with  the Republic of Georgia and Benin. 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   To improve planning  address the need for better planning and design.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.
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. 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.
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 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.
subsections: section_title: Background
subsections: section_title: MCC Organization
paragraphs: 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. 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.
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.
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  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.
section_title: Quality Assurance Framework
paragraphs: 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.
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.
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.
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  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.
section_title: Transportation Infrastructure Projects
paragraphs: 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. 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  a mechanism for repairing defects that may arise during the defects  liability period.
section_title: In Georgia, Quality and Sustainability Issues Jeopardize the Long-Term Usefulness of the Samtskhe- Javakheti Road Project
paragraphs: In Georgia, MCC funded the rehabilitation of about 217 kilometers of  road linking the previously isolated Samtskhe-Javakheti region with  Tbilisi, the country’s capital. 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. 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.
subsections: section_title: MCC Compact Funded the Rehabilitation of the Samtskhe-Javakheti Road in Georgia
paragraphs: 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; expand international trade by providing a more direct link from Tbilisi  and eastern and southern Georgia to Turkey and Armenia; develop the tourism potential of Vardzia, a 13th century rock-cut  monastery.
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). 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.
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  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.
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.)
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.
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. 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.
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, years remained under the compact to complete the work.   and 7). At this point, only about 2  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.
Lot 6iii was added as an addendum to the contract for lot 6ii in August 2009.
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 re- awarded 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  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. 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.
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.
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.
In February 2009, MCA-Georgia increased the number of construction  supervision staff to oversee the three lots added to the project’s  scope. 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. Nonetheless, MCA-Georgia chose not to fund  additional staff for the construction supervision firm.
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.
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.
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 8¼ hours. The project decreased the road’s roughness, and after  rehabilitation, the same trip could be made in about 2¾ 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. 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  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.
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. 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.
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.
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.
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.
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  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 full- depth 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.
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  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 MCA- Georgia 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.
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).
In lots 2, 6i, and 6ii, we found the concrete drainage channels with  defects because of poor concrete construction (see fig. 13).
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).
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).
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.
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  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.
Additional factors present challenges to ensuring the defective work is  adequately repaired:
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   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. 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.
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:
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.
section_title: MCC Took Steps to Ensure Sustainability, but the Georgian Government Shows Limited Ability to Keep the Road Operational and Well Maintained
paragraphs: 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. 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.
MCC took steps to ensure sustainability by including conditions precedent  in the compact and by funding some equipment for road maintenance.
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. 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.
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).
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.
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.
section_title: In Benin, Port Construction Is Generally Good Quality, but Full Operability of Port Components Is Uncertain
paragraphs: 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.
subsections: section_title: MCC Compact Funded Infrastructure Improvements to the Port of Cotonou in Benin
paragraphs: 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. 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.
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.
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.
section_title: The Quality of Construction Was Generally Good, but Many Defects Left for Repair or Minor Works to Be Completed after Compact Closure
paragraphs: 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).
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 MCA- Benin 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.
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.
We observed some of these items during our field work and also  concluded that they were generally minor in nature; however, lot 3 had  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.
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).
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.
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   Meeting the code means that  Ship and Port Facility Security code.that ships stopping later at U.S. ports would not be required to  undergo increased security scrutiny, thus decreasing costs to shipping  companies.
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.
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: 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.
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).
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  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.  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.
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  our December 2011 visit.staff, enforced its security policies, or maintained its security perimeter.
The Port Authority had not hired sufficient
The security system requires 150 to 257 individuals to staff the  operations on a 24-hour basis. 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.
As of April 2012, there were about 90
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 MCC- funded access system was still not in full operation as of April 2012.
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).
The 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.
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.
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.
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).
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.  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  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.
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.
section_title: Conclusions
paragraphs: 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  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.
section_title: Recommendations for Executive Action
paragraphs: 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 MCC- funded infrastructure following the compact.
section_title: Agency Comments and Our Evaluation
paragraphs: 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  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.
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.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: 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. 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.
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.
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  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 Samtskhe- Javakheti 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 MCC- funded 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  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.
section_title: Appendix II: Additional Photographs Related to Figure 20: Compact-Funded Improvements in the Port of Cotonou
section_title: Appendix III: Comments from the Millennium Challenge Corporation
section_title: Appendix IV: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: 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.
section_title: Related GAO Products
paragraphs: 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.