UPDATE ON KABUL-KANDAHAR ROAD: AMBASSADOR'S MAY 7

C O N F I D E N T I A L SECTION 01 OF 03 KABUL 001225

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E.O. 12958: DECL: 05/11/2013
TAGS: EAID ECON PGOV ASEC AF
SUBJECT: UPDATE ON KABUL-KANDAHAR ROAD: AMBASSADOR'S MAY 7
MEETING WITH ARC VP LANE

Classified By: AMBASSADOR ROBERT P. FINN FOR REASONS
1.5 (B) AND (D)


1. (C) On May 7, Ambassador met with the Afghan
Reconstruction Company,s Vice President, Tim Lane, and
Managing Director, Zaher Yaqoubi. Lane presented the
Ambassador with a summary of progress on the Kabul-Kandahar
road and shared concerns over the end-of-2003 completion
deadline.


2. (C) Lane acknowledged ARC could have performed better to
date. He pointed out, however, that ARC started operations
with no infrastructure in place and significant demining
required. ARC had to import and build up all production
facilities and faced considerable delays in importation and
transportation of relevant equipment. Right now, operations
were proceeding very quickly. Lane noted that the most
visible work ) blacktopping ) was done last and
comparatively took very little time.


3. (C) Lane noted three factors of concern. First, the
material amounts detailed in Louis Berger,s bid document
were not sufficient to complete the project ) partially due
to the following two factors. Second, after conducting
survey work, ARC determined that heavily overloaded truck
traffic traditional to Afghan transport would necessitate
much thicker layers than originally planned. Third, the
Afghan government had mandated that the road, including
shoulders, be 12 meters wide, rather than the originally
planned 10.5 meters. Lane acknowledged that the second
factor could be alleviated if weight restrictions could be
enforced on the road, but felt this was unrealistic in the
near term. Addressing these factors, while maintaining
world-class road building standards, would cost an estimated
additional $8.5 million.


4. (C) Lane said ARC was determined to build a world-class
road as they had agreed and the USG had promised. The
Ambassador noted that completion of the road was a foreign
policy priority of the USG in Afghanistan. Indeed, it held
the personal attention of President Bush. No one would
benefit if the road fell apart in a few years. Lane agreed,
noting that ARC also had a reputation to maintain. Lane
added another factor that would require possible changes to
ARC,s original plans ) the issue of frost depth. After
study, ARC had determined that ensuring longevity of the road
required modification of the original plan to account for
frost depth.


5. (C) Lane detailed an often-troubled relationship between
ARC and Louis Berger. Lane noted Berger was defensive
regarding reasons it had not included the Afghan
government,s requirement of 12-meter width in the original
agreement. Lane also detailed intense disagreements over
minor accounting discrepancies. Finally, Lane shared his
concern that Berger or USAID would think that ARC was trying
to &scam8 them by raising their concerns over anticipated
additional costs for completion of the project. The key
issue, Lane asserted, was that if Berger and/or USAID
&pushed back8 against these additional requirements, the
result would be a diminution in quality of the finished road.
(USAID Comment: USAID has heard many complaints from TISA
officials about the &high8 costs associated with this road.
ARC,s comments will likely generate more criticism. End
comment.)


6. (C) Lane also noted that security issues were perhaps not
being fully reported by Berger. According to Lane and
Yaqoubi, on Saturday, April 3, an armed group forced ARC,s
workers to cease working. According to Yaqoubi, the workers
involved were all Afghan, and the gunmen reportedly asked
them &When will the Turkish workers be here.8 ARC reported
the incident to Louis Berger, and has taken steps to enhance
security along the road project. At the May 8 Emergency
Action Council meeting, both RSO and USAID confirmed they had
not received any report about the incident. ARC has agreed
to pass their security incident report to the Embassy. USAID
subsequently raised this issue with Louis Berger.

7. (C) Lane told Ambassador that ARC would soon be fully
active, with blacktop scheduled to be laid beginning in July
at 1-2 km a day. He was confident that ARC would complete
the project on schedule. It was unfortunate, however, that
just when ARC had its operations going at full speed, it
would be completing its contracted project. ARC had not bid
on future segments of the road, Lane said, because they
wanted to complete their existing obligation to standard and
they were assured that the entire road would be built to this
same standard. Now it appeared that this standard would be
diluted on the remaining portions of the road to meet a
December 31, 2003 deadline. Given this situation, Lane
maintained that ARC could complete additional portions of
road at substantially lower cost per km ($100,000 less) than
their own project had required, and vastly less than the
accelerated plans for completion of the remainder of the road
entailed. For this reason, Lane asked if arrangements could
be made to maneuver upcoming tender allocations of the road
so that ARC could push on with its now-efficient work on the
section adjoining their current project.


8. (C) Finally, Lane noted that ARC was preparing to test the
output of their asphalt plant through a demonstration in
Kabul sometime in June, and suggested the road from the
airport to the Presidential palace might be appropriate.
FINN