Haiti Reconstruction: USAID Infrastructure Projects Have Had Mixed Results and Face Sustainability Challenges
Published: 2013-10-09T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: On January 12, 2010, an earthquake in Haiti is estimated to have caused about 230,000 deaths, resulted in 300,000 injuries, and displaced about 2 million persons. Following immediate relief efforts, Congress provided $1.14 billion for Haiti reconstruction in the Supplemental Appropriations Act, 2010. USAID, which is responsible for implementing $651 million of this amount, has allocated about $268 million of this and other funding to construct a power plant and port to support the CIP in northern Haiti and permanent housing in several locations in the Port-au-Prince, St-Marc, and Cap-Haitien areas.
This testimony draws from GAO's June 2013 report on Haiti reconstruction and further examines (1) USAID's funding obligations and disbursements; (2) USAID's progress in two CIP-related activities--a power plant and port; and (3) USAID's progress in constructing permanent housing. For this statement, GAO updated funding information and data regarding progress, based on information from USAID and Department of State officials.
section_title: What GAO Found
paragraphs: As of June 30, 2013, the U.S. Agency for International Development (USAID) had obligated $336 million (52 percent) and disbursed $229.5 million (35 percent) of $651 million in funding for Haiti earthquake reconstruction from the Supplemental Appropriations Act, 2010.
USAID has allocated $170.6 million to construct a power plant and port to support the newly developed Caracol Industrial Park (CIP). According to USAID documents and other studies, the CIP, power plant, and port are interdependent; each must be completed and remain viable for the others to succeed. USAID completed the first phase of the CIP power plant in time to supply the first CIP tenant with power. Port construction will begin more than 2 years later than originally planned, in part because of a lack of USAID expertise in port planning at the Haiti mission. According to current estimates of port construction costs, USAID funding will be insufficient to cover a majority of projected costs. The estimated gap of more than $117 million to $189 million is larger than initially estimated, and it is unclear whether the Haitian government will be able to find a private sector company willing to finance the remainder of the project.
USAID has reduced the targets for its permanent housing program in Haiti, to which it has allocated $97.3 million. The agency decreased the projected number of houses by more than 80 percent, from 15,000 to 2,649. The estimated number of beneficiaries was reduced from a range of 75,000 to 90,000 to its current estimate of approximately 13,200 to 15,900. These reductions resulted from inaccurate original cost estimates that used inappropriate cost comparisons and from the Haitian government's request for larger houses with improvements such as flush toilets. USAID currently estimates that construction will be completed more than 2 years later than initially scheduled. Delays occurred primarily because of difficulties in securing land titles and coordinating with partner donors. USAID is attempting to mitigate potential sustainability risks, such as affordability and community cohesion, through community development mechanisms. However, it is uncertain whether these mechanisms will fully cover all sites.
section_title: What GAO Recommends
paragraphs: GAO is not making new recommendations in this testimony. In its June 2013 report, GAO recommended that USAID (1) hire a port engineer to oversee port planning and construction and (2) provide timely community support mechanisms for each new settlement to help ensure the sustainability of its permanent housing program. USAID agreed with both recommendations.

section_title: Letter
paragraphs: Thank you for this opportunity to discuss our recent work reviewing U.S.  efforts to aid Haiti in its reconstruction from the earthquake that struck on   That earthquake, centered near Port-au-Prince, Haiti,  January 12, 2010.caused physical, social, and economic devastation to the poorest country  in the Western hemisphere. The earthquake is estimated to have caused  approximately 230,000 deaths, resulted in 300,000 injuries, and displaced  approximately 2 million people from their homes. In June 2013, the  International Organization for Migration estimated that about 279,000  displaced persons remained in camps. According to Department of State  (State) and U.S. Agency for International Development (USAID) officials,  the disaster generated the largest international humanitarian relief effort  ever undertaken and prompted the international community to pledge  billions for reconstruction, including a pledge of $1.15 billion over the first  2 years by the U.S. government—more than triple the average annual  assistance provided by the U.S. government to Haiti between 2006 and  2009.
In July 2010, the U.S. Congress passed the Supplemental Appropriations  Act, 2010,  which provided more than $1.14 billion in reconstruction funds  for Haiti, including $651 million provided to USAID for bilateral  reconstruction activities. USAID has allocated approximately 40 percent  of this supplemental funding,construction of (1) a power plant that will provide electricity for the new  Caracol Industrial Park (CIP) in northern Haiti; (2) a new port near the  CIP; and (3) permanent housing in new settlements in the Port-au-Prince,  St-Marc, and Cap-Haïtien areas. My statement draws from our June 2013   as well as other funds, to support the  report that reviewed (1) USAID’s funding obligations and disbursements;  (2) USAID’s progress on the CIP-related power plant and port; and (3)  USAID’s progress in constructing permanent housing.
For our June 2013 report, we reviewed reports, documents, and funding  data and interviewed officials from USAID and State in Washington, D.C.,  and Haiti. To assess the reliability of funding data, we examined USAID  and State data sources and conducted interviews with USAID and State  officials. We determined that the data we used were sufficiently reliable  for our purpose of reviewing U.S. funding provided for Haiti  reconstruction. In Haiti, we visited sites under construction or planned for  construction for the power plant, port, and permanent housing, and visited  the CIP. information, assessed the reliability of these funding data and determined  the data to be reliable, and further assessed progress based on  information provided by USAID and State officials. The information  contained in this testimony was reviewed for technical accuracy by  USAID officials.
For this statement, in August 2013, we updated funding  The work on which this testimony is based was conducted 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 that the evidence obtained  provides a reasonable basis for our findings and conclusions based on  our audit objectives.
subsections: section_title: Background
paragraphs: In response to the destruction caused by the earthquake, Congress  provided more than $1.14 billion in reconstruction funds for Haiti. As table  1 shows, USAID received $651 million of these funds for bilateral  reconstruction activities.
Our June 2013 report contains a detailed description of its scope and methodology.
Transferred to Haiti Reconstruction Fund USAID = U.S. Agency for International Development  Out of the $773.0 million provided to USAID, the agency transferred $2.0 million to the Smithsonian  Institution.
The Haiti Reconstruction Fund is a multidonor trust fund organized to help finance high-priority post- earthquake reconstruction projects.
In January 2011, the U.S. government released its 5-year strategy for  Haiti, titled the Post-Earthquake USG Haiti Strategy: Toward Renewal  and Economic Opportunity. This strategy encourages reconstruction and  long-term economic development in three regions of the country, known  as “development corridors.” In addition to assisting with reconstruction in  the Port-au-Prince corridor, which suffered the most damage from the  earthquake, the strategy notes the U.S. government’s intent to provide  assistance to the Cap-Haïtien region on Haiti’s northern coast and the St- Marc region on Haiti’s western coast (see fig. 1).
On January 11, 2011, the U.S. government, the Haitian government, the  Inter-American Development Bank (IDB), and a private South Korean  garment manufacturer, Sae-A Trading Co. Ltd. (Sae-A), signed an  agreement to support development of the CIP that included the following  commitments.
The IDB committed to provide funding to the Haitian government to  build the CIP and some associated facilities;  the U.S. government committed to build a power plant, contribute to  the building of a nearby port, and support the construction of 5,000  nearby housing units; and
Sae-A committed to be the anchor tenant and hire 20,000 local  employees at the CIP.
Progress is ongoing in building the CIP and filling it with tenants. Sae-A  moved into the first CIP building in March 2012, and two other  companies, a paint manufacturer and a textile manufacturer, have since  moved into the CIP, together employing about 1,450 Haitian employees  as of August 2013, according to State officials. According to State’s  Senior Advisor for the CIP, these tenants project that they will create  approximately 21,000 jobs by 2016. As of August 2013, according to  State officials, the government of Haiti was progressing in talks with  another four potential tenants.
section_title: Most of USAID’s 2010 Supplemental Funds Have Not Been Disbursed
paragraphs: As of June 30, 2013, almost 3 years after passage of the 2010  Supplemental Appropriations Act, USAID had obligated $336.0 million  (52 percent) and disbursed $229.5 million (35 percent) of the $651 million  it allocated for bilateral earthquake reconstruction activities in Haiti.  Figure 2 shows the percentage of funding obligated and disbursed.
The amount of funds obligated and disbursed varies among six sectors of  activities, as shown in table 2.
section_title: USAID Completed Power Plant’s First Phase, but Port Is Delayed and Their Sustainability Depends on CIP’s Success
subsections: section_title: USAID Completed First Phase of Power Plant in Time to Deliver Power to CIP
paragraphs: As of June 30, 2013, USAID had allocated $98.1 million to the CIP power  plant project and had obligated 22 percent of these funds. Using this  funding, USAID completed the first phase of the power plant with a  designed capacity of 10 megawatts,  began to distribute some electricity  outside the CIP, and procured a contractor to handle the operations and  maintenance of the power plant for 3 years.commissioned in June 2012, 5 months later than initially planned but in  time to provide power to the CIP as needed. The power plant project  benefited from the mission having a Senior Energy Advisor on staff from  April 2011 through February 2013, who used his background in electrical  engineering to oversee and manage the project.
USAID is planning to undertake other activities related to the power plant,  including further expanding distribution of electricity to local communities  over the next 2 years; building a solar energy farm with 2-megawatts capacity; and expanding the power plant’s capacity to at least 25  megawatts, as needed.
section_title: Port Project Is Delayed, and Current Estimates for Construction Costs Are Higher Than Expected
paragraphs: USAID has allocated $72.5 million to plan and contribute toward building  a new port in northern Haiti; however, as of June 2013, the agency had  obligated only $4.3 million (6 percent) because of planning delays. A lack  of staff with technical expertise in port planning, construction, and  oversight, such as a port engineer, at the USAID mission in Haiti  contributed to these delays. According to a USAID planning document  for the port sector, the agency planned to complete a feasibility study by  March 2012, to initiate construction in spring 2013 through a private  company that would supplement USAID’s funding contribution for port  construction, and to complete construction in fall 2015. However, the  feasibility study was not completed until February 2013 because of  unrealistic initial time frames; delays in awarding the contract for the  study; and a statement of work for the feasibility study that did not require  the contractor to include all information necessary to help select a port  site. Lacking staff with port expertise, USAID consulted with officials from  the U.S. Army Corps of Engineers (USACE), the U.S. Environmental  Protection Agency, and the National Oceanic and Atmospheric  Administration, who informed USAID officials that more studies should be  undertaken to identify the additional economic, environmental, technical,  and other information necessary to make a final site selection and design  the port. According to USAID officials, USACE estimates that the  necessary studies and design will take an additional 18 months to 2  years. As a result of these planning delays, port construction will not  begin until more than 2 years later than initially planned. USAID officials  also initially estimated that port construction would take 2.5 years but  have since learned that port construction may take up to 10 years,  depending on the complexity of the port designed.
Port construction costs remain uncertain because the port site, design,  and needed mitigation measures have not been determined. However,  rough estimates in the February 2013 feasibility study project that the cost  of port construction will range from $185 million to $257 million. Excluding  funding for feasibility studies, $68 million of USAID’s allocation to the port  project remain for planning, design, and construction. USAID does not  know what portion of this funding is needed for the additional planning  and design; however, it is clear that the amount remaining will be a  significantly smaller portion than USAID had initially planned to contribute  to the port’s total construction cost, given the estimated funding gap of at  least $117 million to $189 million. As a result, USAID officials recognize  a risk that private companies interested in operating the port may not be  willing to cover the remaining construction costs. Thus, the Haitian  government may need to secure additional donor funding to build the  port.
Because of the complexity of port construction and the lack of port  expertise at the USAID mission, we recommended that USAID fill the  vacant port engineer position at its Haiti mission within time frames that  will help avoid future project delays. In written comments on the report,  USAID agreed with this recommendation, noting that it issued a  solicitation for a ports advisor in May 2013. According to USAID officials,  this solicitation did not result in any qualified applicants; thus, as of  September 2013, the mission was in discussions with USACE about this  agency providing a port advisor to fill the position.
section_title: Sustainability of CIP, Power Plant, and Port Are Interdependent and Rely on Haitian Government Capacity
paragraphs: The sustainability of the CIP, port, and power plant are interdependent in  several respects.
The CIP depends on a functioning power plant and port access.
Before the CIP, northern Haiti did not have the energy infrastructure  or port capacity to support a completed industrial park. The existing  ports in Haiti have high port costs and ports in the Dominican  Republic are distant from the CIP, raising the cost of doing business  at the CIP.
The port and power plant depend on revenues from the CIP, so the  viability of these projects will depend on the Haitian government  finding additional tenants and maintaining the park.
All three projects depend on Haitian government capacity to maintain  and manage the CIP and power plant and oversee the private  company that will operate the new port. USAID documents and  external studies on these projects have cited concerns about the  ability of the Haitian ministries to succeed in these areas because of  limited staff and technical resources as well as the need for legal,  regulatory, and management reforms.
section_title: USAID’s New Settlements Program Has Been More Costly and Slower Than Expected, and Sustainability Challenges Remain
subsections: section_title: USAID’s Cost Estimates Increased Sharply and Program Funding Has Significantly Increased
paragraphs: USAID allocated $97.3 million to the New Settlements Program and as  of June 30, 2013, had obligated about $50.3 million (52 percent) of this  amount. USAID underestimated the construction costs of its New  Settlements program. These costs are comprised of two main categories:  (1) cost of site preparation per plot and (2) cost of construction per house.  In its 2010 planning documents, USAID originally estimated costs at  $1,800 per plot and $8,000 per house. However, as of April 2012, when  USAID had awarded contracts for construction at its first two  settlements—Caracol-EKAM and DLA 1.5—the total cost for a plot and  house had increased by 151 percent, to $24,625. These cost increases  stemmed primarily from the inaccuracy of USAID’s original estimates,  which were based in part on costs reported by the World Bank and an  NGO that was building houses in northern Haiti. As a result, according to  USAID officials, the original estimates did not adequately consider the  stringent international building codes and disaster resistance standards  planned for New Settlement houses and did not take into account the  extent or complexity of service infrastructure USAID intended to provide.  Furthermore, USAID officials noted that the demand for and cost of  construction materials had increased.
After USAID awarded these initial contracts, construction costs increased  further as a result of Haitian government requests for design changes.  The requested changes included an increase in the size of housing units,  from about 275 square feet to about 450 square feet, and the inclusion of  flush toilets rather than the traditional dry toilet system. The Haitian  government’s design changes increased the total cost for a plot and a  house by an additional 34 percent, to $33,007. Therefore, as of April  2013, average costs based on awarded contracts at the first two sites to  undergo construction had increased by 433 percent per plot and by 193  percent per house. Figure 3 compares the original estimates, initial  contract costs, and revised contract costs.
As of August 2013, USAID had reduced the number of houses it expects  to complete, and therefore the number of beneficiaries, by more than 80  percent. Of the 15,000 houses that it originally planned, USAID expects  that only 2,649 will be completed across eight settlement sites. USAID  plans to fund the construction of 906 of these houses and expects NGOs  and other partner donors to fund the construction of the remaining 1,743.  USAID also reduced the total number of projected beneficiaries, from an  original estimated range of 75,000 to 90,000 to its current estimated  range of approximately 13,200 to 15,900. Approximately 74 percent of  these houses are to be built in the Cap-Haïtien corridor, with the  remainder in the Port-au-Prince and St-Marc corridors (see table 3).According to USAID officials, the first 26 families moved in to DLA 1.5 at  the end of September 2013, with more families planned to occupy houses  at DLA 1.5 and Caracol-EKAM in October 2013.
The U.S. government’s January 2011 strategy projected that all USAID  permanent housing construction and site preparation under the New  Settlements program would be completed by July 2012, but completion of  some sites will likely occur more than 2 years later than planned. The  following factors have mainly accounted for these delays.
Land titling issues. According to USAID officials, USAID spent  substantial time trying to secure clear title to private and government- owned land. In the end, USAID was able to acquire only one site from  private owners because of difficulties in confirming legitimate  ownership. In addition, USAID found that secure land title for some  government-owned sites could not be confirmed because of unclear  or disputed ownership, which further reduced the number of site  options and delayed site selection.
Difficulties partnering with NGOs and other donors.
USAID’s New Settlements program relied heavily on partners, which  led to delays in the program when these partnerships encountered  difficulties. For example, in January 2011, the American Red Cross  (Red Cross) announced that it would partner with USAID to build  homes on at least two sites; however, USAID did not sign an  agreement with the Red Cross until August 2013 and the agreement  was for just one site. According to USAID officials, that partnership did  not develop as planned because of the delays in securing land title  and because of turnover in Red Cross leadership that resulted in  shifting approaches to housing in Haiti.
section_title: New Housing Settlements Face Sustainability Challenges
paragraphs: The sustainability of the new housing settlements will depend on factors  such as available economic opportunities and support for community  development. USAID is attempting to ensure the sustainability of new  settlements by locating them in areas with employment, health care,  education, and transportation. If those efforts do not provide adequate  economic opportunities, beneficiaries may not be able to afford the fees  and services connected with their new homes or may have to relocate  altogether. The sustainability of the settlements will also depend on their  ongoing support, maintenance, and management by local governments  and community members. Specifically, beneficiaries will face site-specific  issues such as affordability and community cohesion.
Affordability. The Haitian government has determined that  beneficiaries must make monthly payments of 1500 Haitian gourdes  for 5 years before receiving title to a house. These monthly fees will  go toward the maintenance of housing, public spaces, and septic  tanks; management costs incurred by the Haitian government; and  incidental expenses. Beneficiaries will also face charges for utilities  and services, such as electricity and water.
Community cohesion: The New Settlements program currently  plans to create eight new “communities,” each consisting of 148 to  1,283 households, with beneficiaries from various locations in Haiti  and with varied income levels. USAID officials acknowledged that  discord may arise among the beneficiaries or between the settlements  and surrounding communities.
To mitigate these concerns, USAID has put community development  programs in place at two sites and plans to fund or pursue NGO  partnerships to support such programs at the remaining sites. For  Caracol-EKAM, USAID obligated about $4.8 million to develop and  manage the beneficiary selection process, establish a provisional  community management committee, and create other mechanisms to  support community development. In addition, in August 2013, USAID  signed a $1.5 million agreement with another implementing partner to  provide support for the phased occupation of Caracol-EKAM and  management of the settlement, among other activities designed to help  ensure its sustainability. For community development activities at DLA  1.5, USAID has entered into a partnership with an NGO that is providing  such support through its own funding. USAID has allocated an additional  $3.3 million to support community development efforts, including  beneficiary selection and site management and operations, at the eight  new settlement sites. In addition, USAID plans for partner organizations  to contribute to these activities at some of the settlement sites. For  example, the memorandum of understanding between USAID and partner  donors building houses on three sites notes that partner donor funds are  to be provided for community development activities at those settlements;  however, that memorandum does not fully secure such a financial  commitment. In addition, it is unclear whether such partnerships will be  available to support all of the remaining settlements. USAID officials have  stated that it is crucial that these support mechanisms are in place to  ensure a smooth transition when beneficiaries move in and to set the tone  for interaction among beneficiaries.
In our June report, we recommended that the USAID Administrator direct  the mission in Haiti to ensure that each new settlement has community  support mechanisms in place prior to beneficiary occupation, including by  making funds available as necessary to help ensure this support. USAID  agreed with this recommendation and noted that the mission is prepared  to provide additional resources if they are needed to finance community  development activities. USAID also elaborated on the ongoing and  planned activities to facilitate community development and sustainability  at the first two settlement sites. We acknowledge USAID’s efforts to  provide community development support at these two sites and support  the agency’s intentions to implement our recommendation at future  settlement sites.
Chairman Royce, Ranking Member Engel, and Members of the  Committee, this concludes my prepared statement. I would be pleased to  respond to any questions you may have at this time.
section_title: Contacts and Staff Acknowledgments
paragraphs: If you or your staff have any questions about this statement, please  contact me at 202-512-3149 or gootnickd@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this statement. GAO staff who made key contributions  to this testimony include Leslie Holen (Assistant Director), Lynn Cothern,  and Heather Latta. Michael Armes, Ashley Alley, Etana Finkler, Justin  Fisher, Courtney LaFountain, Mary Moutsos, and Brian Tremblay  provided technical assistance.
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