May 08, 2014
Last month Jacqueline Charles of the Miami Herald reported that the U.S. government had changed its plan for the development of a new port in support of the Caracol industrial park in Haiti’s north. The Herald report began:
After months of unsuccessfully trying to get private investors to cough up millions of dollars for the construction of a new, multimillion dollar port in northeastern Haiti, the U.S. government is scratching its plans and will instead revamp the existing port in the city of Cap-Haitien.
“The private sector was markedly unenthusiastic about investing in a new port,” said a U.S. government official familiar with the decision, but not authorized to speak publicly.
The new Fort Liberté port would have cost between $185 million and $257 million, and the U.S. government had committed to investing $70 million. A new port was viewed as being critical to the success of the nearby $300 million Caracol Industrial Park because the park’s five companies mostly ship out of ports in the neighboring Dominican Republic, a loss of valuable dollars to the Haitian treasury.
But while the Herald report points to a lack of private sector enthusiasm for the project as a key reason for its failure, an analysis of Government Accountability Office (GAO) reports and contractor documents reveals that this project has been plagued by a lack of in-house expertise and planning from the beginning.
It began in September 2011 when USAID awarded a contract to MWH Americas to conduct a feasibility study for port infrastructure in northern Haiti. MWH had previously been found by the New Orleans inspector general to have overcharged the city on reconstruction contracts related to hurricane Katrina. As HRRW reported in February 2013, “Within two weeks of receiving the $2.8 million contract, MWH Americas turned around and gave out $1.45 million in subcontracts to four different firms, all headquartered in Washington DC or Virginia.” The contract was extended multiple times, with the overall cost increasing to over $4.25 million. Still, the GAO later found that further studies “still need to be performed,” because the USAID “did not require the contractor to obtain all the information necessary to help select a port site,” according to the GAO.
USAID was overly reliant on the work of MWH and its cadre of beltway-based subcontractors because, as the GAO pointed out in 2011:
USAID’s program in Haiti has not previously involved port construction activities. With no staff who have port construction expertise or experience, USAID will rely on (1) a private firm to conduct a feasibility study and make recommendations regarding, among other things, port design, economic feasibility, and financial viability; and (2) a public private partnership to construct a new port.
A subsequent GAO report, from June 2013 reported that USAID had “not constructed a port anywhere in the world since the 1970s.” Further, the 2013 report found that a ports engineer and advisor position had been vacant for over two years. Nevertheless, the U.S. government’s post-earthquake reconstruction plan earmarked over $70 million to help construct a new port in northern Haiti. The investment was seen as a “critical to the success” to the Caracol industrial park – the flagship reconstruction project of the international community in Haiti.
The GAO also found that while USAID initially had planned on construction of the new port beginning within 2.5 years, after consulting with the Army Corp of Engineers, the agency “learned that port construction may take up to 10 years.” In addition to the time frame being grossly underestimated, the expected costs skyrocketed from the initial plan.
While USAID initially believed the money it had allocated to the ports sector would be a significant portion of the costs of any new port construction, it later found that the amount allocated would be a “significantly smaller portion,” of the overall cost. The GAO estimated that the financing gap for a new port was in the range of $117-$189 million, jeopardizing the chances of finding a private sector actor willing to invest.