Egypt"s grain, tallow, oils and fats storage and distribution facilities are operating but project not completed

Audit reports covers the period 9/77-l2/83 and is based on document review, site visits, and interviews with USAID/E, Government of Egypt (GOE), and contractor personnel. Of the three project facilities, the two in Alexandria have been completed: the pier 81 and 82 bagging system (capable of storing about 8,000 MT of grain in 20 storage tanks and 30 bagging bins) and the 60,000 MT tallow, oil, and fat (TOF) storage and distribution terminal. Operations began in the two facilities in 1/82 and 10/83 respectively. Delays of 3-4 years in building these facilities, however, substantially increased project costs: the cost of the engineering and construction supervising contract (amended seven times) rose from $3.8 million to $9.3 million, and the $9.3 million programmed for the TOF terminal rose to $23.l million. As a result, the third project facility, a grain silo at Safaga, is being constructed under a separate $80 million project, allowing A.I.D. to deobligate $5 million from this project. Other problems require resolution before the project"s 9/30/84 completion date. (1) Some $1.6 million worth of equipment has has not been used as intended, and insurance claims for items damaged during shipment to Egypt remain unresolved. (2) Four AID-funded vehicles are titled to the contractor instead of the GOE, contrary to the project agreement and the contract. This has led customs officials to block relicensing of the vehicles. (3) No purchase orders have yet been placed for the spare parts targeted for the TOF facility. Timely procurement is needed to avoid extended shutdowns. (4) Because of the low priority it accords capital projects, USAID/E has not evaluated the project for 6 years. (5) Instead of the required A.I.D. direct letters of commitment, USAID/E used bank letters of commitment to finance 23 of 24 project contracts and continues to do so for the Safaga contract, leading to $97,000 in unnecessary bank charges. Included are recommendations addressing the above issues - action on some of which USAID/E has already begun.