Rising Costs and Scarcity of Materials and Labor Will Lead to Delays in Completing USAID Tsunami Reconstruction Projects

In May 2005, the U.S. Congress appropriated $908 million for tsunami relief, reconstruction, and related programs. Some $327 million was budgeted for immediate needs after the disaster struck, and $496 million for longer-term reconstruction ($349 million in Indonesia and $85 million in Sri Lanka), administered by USAID. The remaining money was budgeted to other U.S. agencies (principally, the Pentagon).

The UN Development Programme estimates that, overall construction spending in and around Aceh will increase 40-fold from pre-tsunami levels, rising from $50 million to $2 billion annually, and 200,00 additional construction workers will be needed.

The price for fuel oil used in construction equipment has risen 250 percent during 2005. In Sri Lanka, the cost of bricks has doubled and similar increases have occurred for cement and lumber.

GAO reports that by January 2006, less than 3 percent of the USAID funds had been expended. A contract for the agency’s key project in Aceh—replacing a 150-mile road on the west coast, from Banda Aceh to Meulaboh, that was destroyed by the tsunami—is to be awarded only in September 2006 (due to difficulties with right-of-way and other problems). The road, which is key to revitalizing Aceh’s economy, is expected to be finished by September 2009, almost 5 years after the disaster.

The lack of effective coordination of reconstruction efforts has resulted in overlaps and duplication of projects. In Aceh, this is particularly the case in coastal areas near the capital Banda Aceh. Meanwhile, survivors in harder-to-reach areas have received little or no aid. In Sri Lanka, the Task Force for Rebuilding the Nation (TAFREN) has lacked the capacity to ensure that donors coordinate their work with TAFREN. Moreover, TAFREN was disbanded after the November 2005 presidential elections.

Related Links:

U.S. Government Accountability Office, USAID Has Begun Tsunami Reconstruction in Indonesia and Sri Lanka, But Key Projects May Exceed Initial Cost and Schedule Estimates, GAO-06-488, Washington, DC, April 2006.
Link: http://www.gao.gov/cgi-bin/getrpt?GAO-06-488