UPDATE ON BASRAH CHILDRENS HOSPITAL

C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 000838

SIPDIS

SIPDIS

E.O. 12958: DECL: 03/07/2017
TAGS: EAID ECON ENRG IZ
SUBJECT: UPDATE ON BASRAH CHILDRENS HOSPITAL


Classified By: ZALMAY KHALILZAD, PER REASONS 1.4 (b,d).



1. (U) This is an action requested message, action requested
in paragraph 5.



2. (C) Summary: IRMO has worked closely with GRD over the
past two months to assure that the donation of Spain through
UNDP could be utilized as quickly as possible on the project.
UN required UNDP to treat funds as a new UNDP project,
subject to all regular contracting requirements. Process of
project approval has taken a full two months; only this week
is UNDP expected have contracting authority for the funds.
UNDP standard contract process, or waivers from same, is
expected to take additional 3-6 months, before work can
commence. In light of contract option deadlines already
missed due to these delays, critical path items which must be
funded in short term, and new cost of coordinating UNDP
funded contractors on site, an additional $9.98 million will
be needed to keep the project on schedule. If the schedule
can not be maintained there is a substantial risk of higher
costs. Also, there is a risk that donors of specialized high
value medical equipment may lose confidence, and withdraw
support.



3. (C) In mid-July 2006, the Government of Spain offered a
donation of USD$22M, as part of the USD$157 Basrah Children's
Hospital project. At that time Spanish Deputy Foreign
Minister told Embassy Madrid that he was "not currently aware
of any problems with transferring funds in time to reach
Embassy Baghdad by September 1." Later follow-up with Spain
resulted in the GOS saying that it hoped to reprogram funds
by the end of the year. On October 20, 2006 the Department
instructed Embassy Madrid to follow up with the GOS and noted
that the funds should be transferred to the DOS gift account.
Later the government of Spain instructed USG to obtain the
funds from its share of the UNDP account, which is part of
the UN trust fund for Iraq, IRFFI. UNDP initially requested
the funds be released as a single pass-through payment to the
State Department in December 2006. Such a payment would have
allowed BCH contracts to be processed on schedule, and option
deadlines to be met. The initial UNDP effort was turned down
by the UN Country Team. In late December, Embassy learned
definitively that the UNDP was required to make a project
proposal for the funds, as if the BCH project were a new
project. Within a week of learning of this requirement, IRMO
and GRD mobilized a team that traveled to UNDP Amman to
provide all information needed for project approval. This
process required a substantial application, approval and
review process, during which IRMO and GRD participated almost
daily to assist and expedite the process. UNDP Amman reports
that the process should be completed by the UN in the coming
days, after a two day non-objection period at UN New York and
the internal procedures to transfer the funds to the UNDP
Iraq account. To apply funds to the project, UNDP must
either follow its own bidding and contracting process, or
meet strict waiver requirements to award bids to existing GRD
contractors.


4. (C) Now that the extent of UNDP funding has been
clarified, the impact on USG funded efforts can be more fully
specified. Work that is on the critical path over the next
4-6 months may not be contracted quickly enough through the
UNDP process to avoid delays to the project, which would add
additional costs and negatively affect medical equipment
donor confidence. Options for work with existing contractors
at fixed prices have been missed, resulting cost increases to
the work for those options. Therefore, IRMO and GRD
recommend an additional USD$8.98 million to cover critical
path items, of which USD$2 million is attributable to past
delays. Finally, bringing new UNDP-selected contractors on
site who are not subcontractors to the prime contractor will
impose $1 million in additional construction management
costs. Below is an itemized list of these costs:

Current construction gap/change order items (additional,
delay-related cost):

Electrical and Mechanical Support High-Value, Donated Medical
Equipment
$300K

Residence Building
- critical path for medical integration timeline and tie-in
to the main facility
$730K

Exterior Stone Cladding
- critical path for weather tightening around windows and
door frames-2-month lead time on materials
$930K

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Utility Trench
- critical path to meet testing and commissioning milestones
of the plant room-also necessary to tie in to current rough
work
$120K

Off-site Utilities
- critical path to meet testing and commissioning milestones
of the plant room-also necessary to tie in to current rough
work
$2,500K

Final 10% of Electrical/Mechanical Work
- critical path to meet testing/commissioning milestones-up
to 3-month lead time on some materials
$1,540K

Rubber Flooring
- critical path for medical equipment integration-3-month
lead time for materials
$660K

Install Bed Head Units
- critical path for medical equipment integration-3-month
lead time for materials
$50K

Conveying Equipment/Hospital Kitchen/Hospital Laundry
Equipment
- critical path to meet installation, testing, commissioning
milestones
$390K

Medical Logistics Warehouse
- critical path to meet timeline for high-value equipment
$1,100K

Oxygen Generation Plant
- critical path to meet acquisition, testing, and
commissioning milestone
$350K

Steam Autoclave Facility
- critical path to meet acquisition, testing, and
commissioning milestone $310K

On-site construction coordinator/general contractor
- The likelihood of awarding all remaining work to the Prime
Contractor has decreased significantly. The current Prime
Contractor's will require additional contract capacity to
coordinate work between multiple contractors on site-whether
contracted by USG or UNDP $1,000K

TOTAL $9,980K


5. (C) Action Requested: IRMO and GRD believe that some
costs can be covered by expired funds, but that most will
need to be covered by re-obligating up to $9.98 million from
other de-obligated funds. Mission requests the support of
NEA/I and F for this proposed reobligation of funds and use
of expired funds, in coordination with U.S. Army Corps of
Engineers. Should UNDP award projects more promptly than
anticipated, USG funds will remain in reserve for the BCH
project. Mission and GRD recognize that implementing this
recommendation will require full cooperation with likely
inquiries from relevant Congressional committees.


6. (C) Lessons Learned: Donor funding requires close
attention to original commitment terms, and constant
follow-up to avoid delays in time sensitive projects. While
IRMO and GRD staff worked daily for over two months to create
a partner relationship with the UNDP-Iraq, legal and
structural impediments made faster utilization of funds
designated by GoS impossible. There are no remaining
outstanding donor funds that might cause future problems for
this project.
KHALILZAD