SEMARANG STEAM POWER PLANT

EVALUATION COVERS THE PERIOD 6/15/71 TO 2/14/80, AND IS BASED ON AUDIT TESTS OF PROJECT RECORDS. HOME OFFICE COST RECORDS OF THE CONSULTING ENGINEER BLACK AND VEATCH, INC (BV) WERE NOT EXAMINED. PLANT OPERATIONS STARTED IN 3/79, 39 MONTHS AFTER THE TARGET DATE OF 12/75. REASONS FOR THE DELAY INCLUDED: (1) THE 1973 OIL EMBARGO; (2) A PROLONGED DELAY BY THE GENERAL CONSTRUCTION CONTRACTOR IN COMPLETING THE SITE CONSTRUCTION; (3) GOI"S SLOWNESS IN AWARDING THE BV CONTRACT, AND (4) AID/W"S INSISTENCE ON AN ALTERNATIVE GENERATING STUDY AFTER THE BEGINNING OF TENDERING. OVERALL COSTS ESCALATED FROM THE US$ EQUIVALENT OF 25.5 MILLION TO AN ESTIMATED $67.1 MILLION. OVERRNUS WERE FUNDED BY THE GOI AND OTHER DONORS. A US COMMODITY SUPPLIER FURNISHED DEFECTIVE EQUIPMENT, AND WAS SLOW IN REMEDYING THE SITUATION. USAID/INDONESIA WAS RIGHTLY CONCERNED THAT THE REPUTATION OF US SUPPLIERS GENERALLY WOULD BE HARMED. THE GENERAL CONSTRUCTION CONTRACT CONSISTED OF A JOINT VENTURE UNDERTAKEN BY TWO AMERICAN FIRMS (MWK/BLACK) UNDER THE SUPERVISION OF BV. QUARTERLY REPORTS FROM BV CONTAINED RECURRING THEMES OF POOR INVENTORY RECEIVING PROCEDURES AND CONTROLS, INFERIOR QUALITY MATERIALS, AND FAILURE TO CONSTRUCT TO SPECIFICATION. IN ADDITION, THE RAPPORT BETWEEN BV AND MVK/BLACK WAS POOR. ALTHOUGH PROBLEMS WITH THE CONSTRUCTION CONTRACTOR WERE BROUGHT TO THE ATTENTION OF USAID AS EARLY AS 12/75 AND AT REGULAR INTERVALS THEREAFTER, NO CORRECTIVE ACTION BY EITHER USAID OR GOI WAS TAKEN. AUDITORS RECOMMEND THAT USAID DEVELOP PROCEDURES TO INITIATE AND FOLLOW-UP WITH CORRECTIVE ACTIONS TO PROBLEMS REPORTED IN QUARTERLY REPORTS.