Foreign Assistance: Actions Needed to Help Ensure Quality and Sustainability of USAID Road in Indonesia
Released: 2012-07-19T00:00:00

Letter

Background

The December 26, 2004, earthquake and tsunami in the Indian Ocean near Indonesia left more than 200,000 dead and 40,000 reported missing and caused an estimated $10 billion in damages to property and infrastructure such as buildings, roads, and bridges. The Indonesian province of Aceh, about 150 miles from the epicenter of the earthquake, experienced the heaviest loss of lives and damage to property and infrastructure, largely along the west coast. Figure 1 shows the tsunami- affected countries; numbers of dead, missing, and displaced persons; and estimated damage.

In Indonesia, the affected infrastructure included a major road and numerous bridges along the west coast—a key transportation artery in the region—that was destroyed in many locations and severely damaged in many others. Figure 2 shows two of the destroyed road sections in December 2005, 1 year after the tsunami.

We began monitoring USAID’s delivery of assistance to the tsunami- affected countries, including its reconstruction of the Indonesian coastal road, in May 2005, and issued reports on our work in 2006 and 2007.

In April 2006, we reported that USAID planned to construct and rehabilitate 150 miles of paved road between Banda Aceh and Meulaboh at an estimated cost of $245 million, or $1.6 million per mile, with an estimated completion date of September 2009. We noted that the initial plans and cost estimates for rehabilitating and constructing the road were based on limited site information because much of the road’s planned route was inaccessible. We also reported that costs and schedules for the road construction project might exceed initial estimates owing to several factors, including growing costs for materials and labor, long-standing civil conflict in the region, and difficulties that the Indonesian government might encounter in acquiring land parcels needed for the road right-of-way.

The Japanese government agreed to rehabilitate the coastal road from Calang to Meulaboh. activities. In 2005 USAID allocated $245 million of this amount for the coastal road, and in 2006 USAID increased its allocation to $254 million. USAID reported that the final estimated cost, as of July 2012, was $256 million, or $2.8 million per mile.

Figure 3 shows USAID’s initial and revised plans and completed results for the Indonesia coastal road.

USAID Constructed Road under Several Major Contracts, with Numerous Factors Delaying Completion

From August 2005 to September 2010, USAID awarded five contracts to reconstruct the coastal road in Aceh Province, Indonesia—three contracts for construction, one contract for design and supervision, and one contract for project management. Factors related to contractor performance as well as local conditions delayed USAID’s progress in designing and constructing the road and led to increased costs.

Road Construction, Design and Supervision, and Project Management Were Performed under Five Contracts

Construction of the 91 miles of road completed in April 2012 took place under two contracts—designated by USAID as the “priority” and “prime” contracts—for a combined estimated 83 miles of the road, and under a third “8-mile” contract for the remaining 8 miles. USAID also awarded two additional contracts for, respectively, the design and supervision of the road construction and the management of the project.

Priority construction contract. In August 2005, USAID awarded a contract to an Indonesia firm, PT Wijaya Karya (WIKA).initially expected to take place from August 2005 to August 2006, WIKA’s construction work did not begin until October 2006. To expedite construction on certain “priority” sections of the road, USAID modified the contract to include, among other things, expanding the scope from 3 miles to 26 miles and extending the completion date from August 2006 to December 2007 for the 26 miles. In May 2008, USAID partially terminated the priority contract, removing 8 miles from the contract’s scope.

Design and supervision contract. In November 2005, USAID awarded a contract to Parsons Global Services (Parsons), a U.S.- based multinational engineering firm, to design most of the road sections—about 88 miles—and supervise construction of 91 miles of road work.

Project management contract. In April 2006, approximately 6 months after hiring its design and supervision contractor, USAID hired a U.S.-registered professional engineer as its overall Project Managerto the Project Manager. The Project Manager served as the project’s chief technical officer; was USAID’s principal interface with Indonesian government officials; advised in the development of the project’s design and, to ensure its conformance with design specifications, inspected construction work and directed changes as required prior to road sections being turned over to the Indonesian government. for the road construction project. Parsons reported directly

Prime construction contract. In June 2007, USAID awarded the prime contract to SsangYong-Hutama Karya Joint Association (SsangYong-Hutama), a collaboration between a Korean firm and an Indonesian firm, for 65 miles of road construction in five noncontiguous sections. USAID had expected to award the prime construction contract in September 2006. However, its initial solicitation was restricted under USAID policy to U.S. firms, and USAID received only a single proposal, which the agency was unable to negotiate to an acceptable price. issued a second solicitation that, in an approved deviation from USAID policy, was opened to international firms. According to USAID officials, the second solicitation attracted interest from several prospective offerors and included a revised estimated completion date of March 2010, 6 months later than originally planned.

In December 2006, USAID

Eight-mile construction contract. In September 2010, USAID awarded a third construction contract to SsangYong Engineering & Construction (SsangYong) for the 8 contiguous miles removed from the priority contract, which was completed in January 2012.

Table 1 shows the five major contracts that USAID awarded for the construction, design and supervision, and overall project management of the 91-mile road, as well as the contractors’ completed activities.

USAID originally intended that the “prime” contract would be used to construct the majority of the originally planned 150-mile road. However, the inability to award the contract based on the initial solicitation caused USAID to both increase the scope of construction under the “priority” contract to 26 miles and reduce the scope of construction under the “prime” contract to 65 miles, reflecting the revised project goal of building a 91- mile road.

Legend: N/A = not applicable.

WIKA designed the initial 3-mile “priority” road section; Parsons designed the remaining 88-mile road sections.

Figure 4 shows road sections, key features, and funding levels for each of the three road construction contractors.

Figure 5 shows a timeline of events related to the five contracts.

Factors related to contractors’ performance delayed USAID’s progress in designing and constructing the road and led to increased costs.

Priority construction contractor. Lack of acceptable progress by the priority contractor resulted in USAID’s reducing the scope of the work, partially terminating the contract, and hiring a third construction contractor to complete the unfinished work. According to USAID, the mission determined that WIKA was not making satisfactory progress, owing in part to financial constraints and lack of equipment as well as WIKA’s changing its project leader three times. WIKA’s limited progress was primarily evident in one of the sections that comprised the priority contract. By May 2008, this 8-mile section was about 20 percent complete compared with other sections that were approximately 50 percent to 90 percent complete. Work in this section lagged in all areas of production including earthwork, concrete placement, and bridge and culvert construction. As a result, USAID eliminated this section from the scope of the priority contract through a termination action. USAID’s decision to eliminate this section from the priority contract enabled WIKA to concentrate resources on remaining sections and continue making progress. USAID later awarded the 8-mile section to another contractor, SsangYong. However, because of the lengthy processes involved in terminating its contract with WIKA and procuring a new contract, USAID did not award its contract with SsangYong until September 2010.

Prime construction contractor. Slower-than-expected progress, as well as the correction of work that did not comply with specifications, contributed to delays in the prime contractor’s completion of the 65 miles of road construction. In addition, SsangYong-Hutama’s project leader was changed five times, according to USAID, which may also have contributed to the contractor’s repeatedly missing key schedule milestones.

In addition, several local factors affected construction progress and costs.

Delays in land acquisition. According to USAID, the Indonesian government had difficulty acquiring over 4,000 parcels of land needed for the new road alignment and right-of-way. The land was needed because, in many areas, the tsunami had changed the entire landscape such that parts of the road alignment, as it existed prior to the tsunami, were now underwater or otherwise inaccessible or unusable. In its efforts to acquire the land parcels, the Indonesian government experienced delays in determining ownership and locating owners because many owners had died in the tsunami. Also, in some instances, ownership documents, which were the only existing ownership records, were destroyed by the tsunami. Delays also occurred because, in some instances, the land parcels that were acquired were not contiguous and, as a result, construction contractors did not have a sufficient amount of land on which to initiate construction and store equipment and materials. For example, initiation of work to construct the priority 3-mile segment was delayed for approximately a year because the Indonesian government had acquired less than a quarter mile of right-of-way, significantly less land than USAID had expected to be available.

Community opposition. Community opposition to the new road alignment resulted in delays, according to USAID. For example, construction was delayed because of disagreement between the Indonesian government and individuals and communities about the prices for land parcels. Also, for example, the proposed new alignment involved laying pavement over more than 600 gravesites. Upon learning that gravesites would be affected, some individuals and communities erected roadblocks and conducted demonstrations in opposition. To resolve the situation, Indonesian government officials, with USAID coordination assistance, had to negotiate settlements and identify and acquire new sites for the graves.

Security problems. According to USAID, delays occurred because of security concerns and violence. For example, security threats caused delays in areas with a 30-year history of civil conflict between an insurgency group and the Indonesian government. Also, delays occurred when contractors received security threats, equipment was intentionally damaged, and workers were assaulted in land-value disputes. Figure 6 shows examples of community opposition that involved community protests, in some cases resulting in damage to contractor equipment.

Flooding. During construction, delays resulted from flooding, caused by unusually heavy rains that destroyed temporary access to construction sites and to construction facilities where materials and equipment were located. In some instances, according to USAID, roads flooded even though drainage culverts had been built according to design specifications (see fig. 7). Subsequent to this flooding, the contractor corrected inaccurate design assumptions, caused by a lack of reliable historical climatological data for the area, and increased the capacities of some culverts.

USAID Took Several Actions to Ensure Quality of Indonesia Road Design and Construction but Lacks Quality Assurance Mechanism for Sections Still under Warranty

USAID’s actions to ensure the Indonesia road’s quality included, among others, hiring an experienced project manager and requiring 1-year warranties for completed road sections. USAID also required that the road’s design adhere to established quality standards and required inspections of road sections during and after construction. However, as of July 2012, USAID had not arranged for final inspections to ensure the quality of around 50 miles—about 55 percent—of the completed road that are still under warranty.

USAID Established Organizational and Operational Controls to Help Ensure Quality

To help ensure the quality of the road’s design and construction, USAID established organizational and operational controls by contracting with experienced personnel for key management positions and including a 1- year warranty in each construction contract.

Project Manager. In April 2006, USAID hired a U.S.-registered professional engineer as its Project Manager for the entire road construction project. The Project Manager had previous experience managing several USAID infrastructure projects overseas as well as managing regional operations with a U.S. state’s department of transportation. The Project Manager served as the project’s chief technical officer and USAID’s principal interface with design/construction supervision and construction contractors and Indonesian government officials.

Design and supervision. Approximately 6 months before hiring its Project Manager, USAID contracted with Parsons as the project’s construction management contractor to complete the design of most of the road and manage the supervision of its construction. According to a Parsons official, USAID’s hiring of a single firm to complete the design and management of construction supervision facilitated communication between design engineers and construction supervision staff and promoted quality in construction. USAID required that key Parsons design personnel have appropriate qualifications. For example, geotechnical, pavement, and structural designers were all required to be registered professional engineers with a minimum of 5 years experience on projects of a similar scope. In addition, USAID required that key Parsons’ staff in Indonesia have certain qualifications, such as skills and experience in contract administration, inspection, and quality monitoring, to help ensure that the work complied with specifications and conformed to standard construction practices.

One-year warranty. USAID included a 1-year warranty period in all of its contracts with construction firms. Specifically, for a period of 1 year after each road section is completed, the contractor is required to correct any poor-quality or faulty work that USAID or Parsons finds during inspections.the Indonesian government until the contractor completes the corrective actions, and contractors are not released from their responsibilities until the Indonesian government formally accepts the section of road.

USAID Required That Road Design Adhere to Established Quality Standards

To promote quality in the road’s design, USAID required that Parsons adhere to established engineering standards. These standards define, among other things, key parameters such as lane and right-of-way widths, pavement structure, curve geometry, and weight-carrying capacity. To design pavement and bridge structures that would be capable of carrying anticipated vehicle loads, for example, design engineers used the widely accepted U.S. standards of the American Association of State Highway and Transportation Officials (AASHTO) as well as regionally and locally applicable Indonesian standards, such as those of the Association of Southeast Asian Nations. Use of AASHTO pavement design standards enabled engineers to determine the thickness of the road’s layers (aggregate base layers covered with an asphalt surface) that would be needed to sustain anticipated traffic volumes and vehicle weights over its 10-year design life. In addition, use of AASHTO and Indonesian bridge standards allowed engineers to determine appropriate structural configurations for bridges in consideration of site-specific traffic, thermal, and seismic conditions.

Parsons also included several safety features in the design—for example, guardrails, warning signs, pavement markings, and protected walkways on bridges—that contributed to the road’s quality. Figure 8 illustrates these features.

During construction, USAID’s Project Manager and Parsons took actions to help ensure quality by observing ongoing work, witnessing tests by construction contractors, conducting their own inspections, and requiring that the contractor correct any deficiencies or substandard work. For example, after determining that use of improper materials had resulted in the deterioration of approximately 6 miles of paved lanes, USAID directed the prime contractor to remove and replace these sections of the road. Parsons’ staff were involved in performing daily quality tests and conducting inspections. Parsons provided information to USAID’s Project Manager through frequent communication, correspondence, joint site reviews, and periodic reporting.

USAID’s Project Manager and Parsons inspected road sections during construction, when construction was completed, and when the completed sections were handed over to the Indonesian government following the 1- year warranty period. Key project stakeholders—USAID’s Project Manager, Parsons, the construction contractor, and Indonesian government officials—attended these inspections. When an inspection identified deficiencies, USAID and Parsons ensured that they were corrected before the road section was formally turned over to the Indonesian government. For example, during our March 2012 visit to Aceh Province, Indonesia, we observed one of the construction contractors repairing defective pavement that USAID’s Project Manager had identified during an inspection near the end of the 1-year warranty for the affected section. Figure 9 shows a contractor using a milling machine to remove pavement on this section in preparation for corrective repaving.

USAID currently lacks the capacity to ensure the quality of several sections of recently completed road that are still within the 1-year warranty period. Several sections totaling approximately 50 miles in length, or about 55 percent of the recently completed road, are currently under warranty—about 25 miles with warranties expiring at various times through the end of 2012 and about 25 miles with warranties expiring from January 2013 through April 2013. Figure 10 shows the locations of road sections with unexpired warranties, as of June 2012, and section expiration dates.

USAID officials in Jakarta told us in April 2012 that USAID was considering rehiring the former Project Manager on an intermittent basis to perform inspections of the approximately 50 miles of road sections prior to expiration of the sections’ 1-year warranties. However, as of July 2012, USAID had not yet reached an agreement with the Project Manager or made other arrangements to inspect the sections.

USAID Took Actions to Enhance Indonesia Road’s Sustainability, but Several Factors Could Decrease Its Life Expectancy

To enhance the Indonesia road’s sustainability, USAID designed and constructed it to withstand heavy weights, included in the design several features intended to minimize environmental impact, and provided assistance to the Indonesian Directorate General of Highways (the Directorate). However, several factors, such as the Directorate’s limited capacity and resources and failure to restrict overweight vehicles, could lessen the road’s sustainability during its intended 10-year life expectancy.

USAID Took Numerous Actions Intended to Enhance Road’s Sustainability

USAID took several actions intended to enhance the road’s sustainability for the intended 10-year life expectancy. For example, in designing and constructing the road, USAID anticipated the effects of heavy trucks—the most significant factor affecting the rate of pavement deterioration. USAID also included in the road’s design the following features intended to enhance sustainability and minimize environmental impact: rock placement, known as armoring, along the shoreline to protect road from storm surges; shaped slopes and rock-fall retaining walls in mountainous areas to protect the road from damage; retainer and drainage systems to protect the road from rock falls and prevent flooding; concrete lining of drainage channels to prevent erosion; slope stabilization using Gabion baskets; galvanized steel bridge structures that do not require periodic painting.

Figure 11 illustrates these features intended to enhance the road’s sustainability.

In addition, USAID’s Project Manager developed an operations and maintenance plan for the Directorate. The plan included recommended practices such as establishing road maintenance facilities and placing equipment at three locations to maintain the road, with specific maintenance responsibilities for each site. The plan also outlined necessary maintenance tasks, such as patching pavement, repairing guardrails, and cleaning culverts and drains, and it provided a checklist of equipment needed by the Directorate. Further, USAID’s Project Manager suggested, among other things, that the Directorate limit the width and size of vehicles permitted to pass through narrow mountainous road sections. Figure 12 shows a truck passing through a narrow mountainous section of road that was repaved.

USAID also took other actions, such as employing local workers and donating used vehicles, that could enhance the road’s sustainability. USAID encouraged contractors to employ Indonesian workers from Aceh Province during the construction work to enhance local skills and experience. For example, construction contractors employed Indonesian heavy equipment operators and truck drivers, and Parsons trained Indonesians to fill several key positions such as Finance Manager and Public Information/Media Specialist. Also, according to USAID officials, after the construction work was completed, USAID and Parsons provided the Directorate with used vehicles for use in maintaining the road.

Several Factors Could Affect Road’s Sustainability during Intended 10-Year Life Expectancy

Several factors—the Directorate’s limited capacity and resources, failure to restrict overweight vehicles, construction in the road right-of-way, and unauthorized access roads—could lessen the road’s sustainability for its intended 10-year life expectancy.

Limited capacity and resources. Although the Directorate has provided a 5-year funding plan for the road and taken some actions to replace missing guardrails, the Directorate lacks some equipment as well as a sufficient number of staff for maintenance and repairs, according to USAID and Directorate officials. For example, USAID recommended in its checklist that the Directorate keep a jackhammer, compressor, and four vibrator rollers at each of three proposed maintenance facilities, but as of May 2012, the Directorate had not established the maintenance facilities and had not provided the equipment. Also, according to Directorate officials in Banda Aceh, the Directorate has a limited number of staff to maintain existing roads throughout Aceh Province.

Overweight vehicles. The Directorate has not taken action to restrict the use of overweight vehicles on the road, which could reduce the road’s life expectancy. USAID’s design of the road with a 10-year life expectancy is based on certain assumptions concerning the impact of the number and weight of vehicles on the road’s deterioration. For example, USAID’s design assumes that the heaviest trucks anticipated (100,000-pound, 3-axle trucks) on the road will comprise less than 1 percent of total traffic; however, this low volume of heavy truck traffic will cause more than 60 percent of the road’s deterioration over its 10-year design life. A greater than expected volume of heavy truck traffic, or use of the road by trucks that exceed 100,000 pounds, will lead to a higher amount of deterioration and reduced life for the road. To thwart acceleration of pavement damage resulting from overweight vehicles using the road, USAID recommended that the Directorate use portable scales to weigh suspected overweight vehicles. However, as of May 2012, the Directorate had not taken any actions to weigh vehicles. During our March 2012 inspection of the road, we observed several heavily loaded trucks but saw no permanent weigh stations and saw no vehicles being weighed with portable scales.

Construction in right-of-way. The road’s intended 10-year life expectancy is also based on keeping drainage culverts in the right-of- way clear of blockage, according to USAID’s Project Manager. However, the Directorate has not taken action to prevent the construction of buildings and has not removed existing buildings that have been constructed in the right-of-way. Such construction could obstruct drainage channels and cause erosion and flooding. According to USAID officials, USAID informed the Directorate of numerous instances where buildings had been or were being constructed in the right-of-way, but as of May 2012, the Indonesian government had not taken any actions to remove or prevent such construction. When we traveled the length of the road in March 2012, we observed a completed building that had been constructed in the right-of-way over the drainage channel.

Unauthorized access roads. As of March 2012, according to USAID’s Project Manager, the Directorate had not taken action to prevent the creation of unauthorized access roads, which also can prevent proper drainage and cause erosion and flooding. These unauthorized access roads have been constructed by removing guardrail or moving soil, rocks, and other materials; in some instances, these access roads may obstruct drainage channels and cause erosion and flooding. During our March 2012 inspection of the road, we saw several access roads that had been built by removing guardrails and moving soil and other materials.

Figure 13 shows a building that was constructed in the right-of-way and an unauthorized access road where the guardrail was removed.

Conclusions

USAID has completed the construction of a major 91-mile road in a coastal area of northern Indonesia that was heavily affected by the December 2004 tsunami and, in doing so, has helped to provide an opportunity for economic growth in the region. Although USAID completed the road construction more than 2 years later than planned, the agency finished the work by confronting and overcoming significant obstacles while working in a challenging environment. However, despite taking several actions to help ensure the road’s quality, USAID currently lacks the capacity to ensure that approximately 50 miles of recently completed road sections—55 percent of the entire road—still under warranty perform as intended through the 1-year warranty period, as stipulated in USAID’s contracts with construction firms. Specifically, although USAID officials in Jakarta told us that they are considering rehiring the Project Manager on an interim contract, the agency has not finalized this arrangement. Without qualified personnel inspecting these road sections before their warranties expire, USAID cannot ensure that the quality standards are met and that the contractor corrects any deficiencies as required within the 1-year warranty period.

To help ensure that the road will reach its intended 10-year life expectancy, USAID took actions such as designing the road in accordance with established standards and supporting the Indonesian government’s Directorate for Highways. However, the road may not achieve its 10-year life expectancy unless the Indonesian government properly maintains the road, restricts usage by overweight vehicles, and prevents construction in the road right-of-way and creation of unauthorized access roads.

Recommendations for Executive Action

We recommend that the Administrator of USAID take the following two actions:

To help ensure that recently completed sections of the Indonesia road meet quality standards as required during the 1-year warranty period, ensure that the road sections are inspected in a timely manner and, if deficiencies are found, require that the construction contractor repair the sections before they are formally turned over to the Indonesian government.

To help ensure that the constructed road remains sustainable for 10 years as intended, direct the USAID Mission in Indonesia to work with the Indonesian government to develop and implement a process addressing factors that could affect the road’s sustainability.

Agency Comments and Our Evaluation

We provided a draft of this report, as well as a video of our March 2012 inspection of the road, to USAID and State for their review. USAID provided written comments about the draft report, which are reprinted in appendix II, and provided technical comments about the draft report and the video that we incorporated as appropriate. State did not provide comments on either the draft report or the video.

In its written comments, USAID stated that our report presented an accurate assessment of its construction operations and its efforts to ensure the road’s quality and sustainability. In addition, USAID concurred with our recommendation that it ensure that road sections still under warranty are inspected in a timely manner and that it require the contractor to repair any defective sections. The agency stated that it will retain qualified personnel who can perform inspections before the warranties expire. USAID concurred with the intent of our recommendation that, to help ensure the road’s sustainability for the intended 10 years, it should work with the Indonesian government to develop and implement a process addressing factors that could affect the road’s sustainability. USAID noted that many of the factors that could affect the road’s sustainability are outside the agency’s managerial control and that, apart from the road sections still under warranty, the road is under the Indonesian government’s administration. USAID indicated that any additional technical assistance it might offer the Indonesian government would be contingent on the government’s receptiveness as well as the availability of USAID resources. We maintain that it is essential that USAID work proactively with the Indonesian government to develop and implement a process that addresses certain factors, such as the use of overweight vehicles, construction in the right- of-way, and the creation of unauthorized access roads, that could affect the road’s sustainability.

We are sending copies of this report to interested congressional committees, the Secretary of State, and the USAID Administrator. We will also provide copies to others on request. In addition, the 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 me at (202) 512-3149 or gootnickd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III.

Appendix I: Scope and Methodology

We reviewed the 91-mile road constructed by the U.S. Agency for International Development (USAID) in Aceh Province, Indonesia, following the December 2004 tsunami. This is the third report we have conducted on USAID’s post-tsunami reconstruction efforts. Our objectives in this report were to (1) describe USAID’s road construction operations as well as factors that delayed the road’s completion, (2) assess USAID efforts to ensure the road’s quality, and (3) examine factors that could affect the road’s sustainability.

To determine the status and funding of USAID’s road reconstruction activities in Aceh Province, Indonesia, we reviewed documents and interviewed officials from USAID’s Bureau for Asia and the Near East and the Department of State’s (State) Office of Foreign Assistance Resources in Washington, D.C.; and USAID’s Office of Financial Management at its mission in Jakarta, Indonesia. We obtained information from USAID officials on internal controls for collection of data, reviewed consolidated reports and mission-specific reports, and interviewed cognizant officials at USAID and State about data reliability. In addition, we interviewed knowledgeable USAID officials about the systems and methodology they use to verify the completeness and accuracy of the data. We determined that the data were sufficiently reliable for the purposes of our report.

To assess the reliability of USAID and State funding and expenditure data, we reviewed USAID Office of the Inspector General and previous GAO reports on USAID disaster reconstruction programs and funding since 2002; we found that none of these sources noted any discrepancies or concerns about the reliability of USAID’s data. Based on our comparison of data generated from various USAID and State sources, we found that the sources generally corroborated each other. We determined that USAID and State funding and expenditure data were sufficiently reliable for our report.

To assess the quality, construction features, and sustainability of the road construction, we traveled the full 91-mile length of the road from Banda Aceh to Calang, Indonesia, with USAID’s Project Manager for the road construction project. We also traveled the road from Calang to Meulaboh, Indonesia, for comparative purposes. During our trip between Banda Aceh and Calang, we photographed and recorded video of several road construction features and activities, and recorded testimonyUSAID’s Project Manager on construction features, obstacles, challenges, quality, and potential impediments to sustainability. In Banda Aceh, we met with representatives from the Indonesian Directorate General of Highways (the Directorate), which is responsible for maintaining the road. To better understand construction, quality, potential obstacles to sustainability, and general construction challenges, we met with representatives of both SsangYong and Hutama, the two firms that constitute the SsangYong-Hutama Joint Association.

To identify obstacles that USAID encountered, we examined USAID Office of Inspector General and State reports which provide information on construction status as well as summarize major construction accomplishments and challenges. In Jakarta, Indonesia, we met with representatives from the Directorate. We also reviewed USAID road construction files to better understand the obstacles that led to delays and cost increases; this review included reviewing status reports, contracts, and correspondence.

To examine the extent to which USAID ensured quality, we reviewed USAID road construction contracts and met with USAID’s Project Manager to discuss oversight procedures. We also discussed USAID’s road quality inspections and procedures for ensuring that construction contractors make repairs to damaged sections of road within the 1-year warranty period, as required. Members of our staff, including a U.S.- registered professional engineer, traveled the road and examined road quality through direct observation of road conditions, construction features, and repair work being performed.

To examine the extent to which USAID helped ensure sustainability, we examined road operations and maintenance plans developed by USAID for the Directorate, which included practices that the USAID Project Manager recommended that the Directorate adopt and implement. We also examined the checklist of equipment developed by USAID’s Project Manager and needed by the Directorate to maintain the road. Members of our staff, including a U.S.-registered professional engineer, made direct observations of road features that were designed and constructed for road sustainability.

We conducted this performance audit from January 2012 to July 2012 in accordance with generally accepted government auditing standards. These 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.

Appendix II: Comments from the U.S. Agency for International Development

Appendix III: GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

In addition to the contact named above, Emil Friberg, Jr. (Assistant Director), Michael Armes (Assistant Director, registered Professional Engineer), Ryan Barlow, Mason Calhoun, Reid Lowe, and George Taylor made key contributions to this report. Ashley Alley, Martin De Alteriis, Theresa Perkins, Jeremy Sebest, Jena Sinkfield, and Cynthia Taylor provided technical assistance.

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