The U.S. goal of building a self-sufficient power network in Afghanistan is threatened by an expiring subsidy and poor project management by the U.S. Agency for International Development, according to a new federal audit.
The U.S. government has committed $88 million to help Afghanistan’s national power utility boost revenue and improve its capacity to manage and maintain the country’s decrepit energy grid. Afghanistan ranks among the countries with the lowest energy production in the world.
The audit released Tuesday by the Special Inspector General for Afghanistan Reconstruction found that despite U.S. assistance, the Afghan national power utility in Kabul will be unable to pay its bills without an annual government subsidy, which will expire at the end of March 2014.
The audit also alleges that USAID may have inappropriately awarded a no-bid contract expansion to engineering firm Black & Veatch, based in Overland Park, Kan., and its former partner, Louis Berger Group of Morristown, N.J.
USAID initially awarded the contract in May 2009 to provide technical assistance, training and support to the Afghan national power utility for $3.4 million. Three months later, USAID modified the contract to focus on the commercialization of the power utility in Kandahar, and the original contract’s value jumped to $4.3 million.
USAID is required to seek bids from as many potential contractors as is practicable, but the agency gave the new task to the Black & Veatch/Louis Berger partnership “without full and open competition,” the audit found. At least two other potential bidders technically were capable of doing the work – including a contractor that already was providing similar commercialization services in Kabul, auditors said.
USAID justified the decision by saying that Black & Veatch had staff and processes in place ready to go, but the contractor didn’t even hold a “kickoff” meeting with Afghan national utility officials in Kandahar until August 2010, one year later, auditors said. It wasn’t until August 2011 – two years later – that the project’s task manager finally arrived, they said.
In addition, auditors found that the billing system Black & Veatch installed for the utility in Kandahar was inadequate, antiquated and incompatible with the system in Kabul. A Black & Veatch subcontractor responsible for the installation recommended replacing it with another system at a cost of more than $690,000. USAID now plans to replace that system, too, resulting in a waste of almost $700,000, auditors said.
Black & Veatch said in a written statement that the company hadn’t had time to thoroughly review the report, but it remains proud of its record of successfully completing numerous projects in Afghanistan.
“In doing so, we have helped bring power to the country’s hospitals, schools, businesses and homes,” the statement said. “Afghanistan remains a very difficult place to work and we put our lives on the line for the government and the people of Afghanistan.”
Asked about the no-bid contract extension, Black & Veatch stated that the company responds “fairly and within the requirements” to U.S. government requests for proposals.
USAID disagreed with the audit’s findings, saying that the Afghan national utility has made enormous progress in increasing revenues and capacity generation. Revenues have increased 50 percent in two years, and the power utility now covers about 28 percent of the Afghan population, the agency said in a written statement.
The audit “fails to account for the challenging task of supporting the establishment of an independently operating and sustainable national utility from the ground up,” the statement said.
USAID also defended its decision to grant a sole-source contract to Black & Veatch, explaining that the usual bidding process would have taken six to nine months and the contractor “already had relevant knowledge and skills that could allow them to complete the work.”
“USAID believes that open competitions are vital, and it is only under exceptional circumstances that exceptions are made,” the agency said.
USAID previously faced criticism for awarding a $266 million sole-source contract to Black & Veatch in 2010 to refurbish the Kajaki dam in southern Afghanistan. At the time, the agency claimed that competition would “have an adverse effect on programs.” Part of that project has since been turned over to Afghans to complete.
Founded in Kansas City, Mo., in 1915, Black & Veatch is one of the largest private companies in the United States. It has more than 110 offices worldwide and employs 8,000 people. In 2011, the company had revenues of more than $2 billion.