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

Letter

Background

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.

Most of USAID’s 2010 Supplemental Funds Have Not Been Disbursed

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.

USAID Completed Power Plant’s First Phase, but Port Is Delayed and Their Sustainability Depends on CIP’s Success

USAID Completed First Phase of Power Plant in Time to Deliver Power to CIP

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.

Port Project Is Delayed, and Current Estimates for Construction Costs Are Higher Than Expected

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.

Sustainability of CIP, Power Plant, and Port Are Interdependent and Rely on Haitian Government Capacity

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.

USAID’s New Settlements Program Has Been More Costly and Slower Than Expected, and Sustainability Challenges Remain

USAID’s Cost Estimates Increased Sharply and Program Funding Has Significantly Increased

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.

New Housing Settlements Face Sustainability Challenges

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.

Contacts and Staff Acknowledgments

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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