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. 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. 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.