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Costs and criticism piling up

Some experts say U.S. rebuilding of Afghanistan is plagued by wasted spending and grand expectations

By Marisa Taylor
McClatchy Newspapers

Flipping a switch on one of Afghanistan's long-awaited power plants in August, U.S. Ambassador Karl Eikenberry urged Afghans to think of U.S. taxpayers' support when they turn on their lights at night.

Only about 6 percent of Afghans are estimated to have electricity, and in his appearance with President Hamid Karzai east of Kabul, Eikenberry hailed the project as part of the country's emergence out of the "darkness" of oppression and isolation.

To some U.S. experts, however, the project is the latest example of exaggerated political expectations and wasted American taxpayers' dollars in the effort to rebuild Afghanistan.

Plagued by delays and rising costs, the project reveals how the U.S. government continues to ignore the hard lessons of Iraq, critics say, where contractors received billions of dollars with little oversight and inspectors have found rampant waste, fraud and abuse.

Far from representing Afghanistan's budding energy independence, the project also demonstrates how dependent the country remains on its neighbors and the U.S.

The Afghan government is expected to need up to $70 million in aid a year to truck in diesel fuel for the plant and at least another $60 million to maintain and repair it. U.S. officials who once envisioned the project as a major supplier of electricity in the region now describe it as an expensive backup system.

"It's a sophisticated power plant," said Guy Sands, an assistant inspector general who's overseeing an inspection of the plant for the special inspector general for Afghanistan reconstruction that's due out soon. "But the reality is that it's totally dependent on diesel fuel, which comes from outside sources."

Meanwhile, the plant's construction costs have ballooned from about $240 million to $310 million, according to U.S. officials. Eikenberry's visit marked the completion of only the project's first phase, which was supposed to have been completed last December.

In a written response to questions posed by McClatchy Newspapers, the plant's two contractors - the Louis Berger Group of New Jersey and Black & Veatch of Kansas - said the price tag would be only $15 million more than expected, not $70 million. But the companies acknowledged delays.

"The original target dates were a 'best case' schedule," the statement said.

Critics say that the U.S. Agency for International Development, the government organization that's overseeing the project, should have foreseen many of the power plant's setbacks but made matters worse by setting an unrealistic deadline from the outset, requiring the first phase to be done in five months.

Among Afghans, the power plant became known as "Karzai's winter coat" - designed to keep him comfortably in power through the winter of 2009 - and also a project that the Bush administration could hold up as a success before George W. Bush left office in order to counter reports of cost overruns and delays.

Kohestani Hamayoon, technical deputy at Afghanistan's Ministry of Energy and Water, said a diesel-fueled plant had appeared to be the only alternative at the time because hydropower would have taken seven years to develop.

Later, another option emerged: importing electricity from neighboring Tajikistan, which now provides cheaper power to Afghanistan than the plant does.

The plant, near a sprawling industrial park, is part of a five-year, $1.4 billion contract to build many of the roads and energy projects that now are under way in Afghanistan. The USAID awarded it jointly to the two U.S.-based companies in 2006.

Like Halliburton, which by some estimates took in more than $10 billion in Iraq reconstruction contracts, Louis Berger/Black & Veatch received a so-called "cost-plus contract," which reimburses costs and pays a percentage of those expenses as a fee.

At the time, U.S. officials thought that cost-plus was the best way to encourage two major companies to take on the risks of overseeing a wide range of complex projects in a region in which expenses - and security - are difficult to predict.

Carl Petz, Black & Veatch's associate vice president for strategic marketing and communications, said the two companies worked closely with the USAID to manage the contracts despite challenges that were "inevitable and often unpredictable" because of the serious and ongoing security problems in the war-torn country.

Even so, cost-plus contracts can encourage waste and overbilling, experts said. Auditors and investigators who scrutinized Halliburton's contracts over several years in Iraq, for instance, found millions of dollars in double billing and inflated costs.

"When we're talking about numbers as high as $50 billion in contracts like we are in Afghanistan, we're talking about significant amounts of money," said Ray DiNunzio, the assistant inspector general for investigations for the special inspector general for Afghanistan reconstruction.

"We're seeing fraud not only within U.S. contractor companies, but within government agencies that are responsible for overseeing the contracts and even on a larger scale among Afghan nationals who are being awarded some of the contracts."

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