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President Mori discusses reorganization of Compact infrastructure Program Management Unit and is assured that goal to implement $35 million per year in infrastructure development is on track

Palikir, POHNPEI (FSM Information Service): March 24, 2008 - President Manny Mori has received assurances that the newly restructured FSM Program Management Unit (PMU) is on track in its target to implement at least $35 million per year in Compact Infrastructure Development Program projects over the next four years.

In a briefing called by President Manny Mori and Vice President Alik Alik, PMU Contracting Officer, Mr Robert A. Westerfield III, reported that the PMU has now been relocated to the Office of the President from its previous location in the Department of Transportation, Communications and Infrastructure and is being staffed to meet its new expanded role as principal technical manager of the Compact Infrastructure Development Program (IDP).

The IDP is a prescribed component of the Amended Compact of Free Association between the FSM and the United States. At least 30 percent of the annual Compact grant funds from the US must be spent on approved infrastructure, principally for Education and Health.

Management of the IDP PMU was previously contracted to GMP, Hawaii, Inc. However, in April 2007, the US Government informed the FSM Government that US Compact funds could not be used to fund any additional task orders under the contract between FSM and GMP after May 17, 2007. This action followed a report by the US Department of Interior Office of Inspector General that was critical of the GMP contract on the grounds that it contained conflicts of interest and questionable procurement provisions. There had also been concerns raised by both the FSM and US Government about the pace, quality and cost of IDP implementation. As a result of the US decision the FSM Government could not certify the availability of funds and thus no new work could be undertaken by GMU under the PMU contract. Therefore the FSM Government informed GMP that its contract had expired.

In January, 2008, during the Chief Executive's Conference (CEC), held in Pohnpei, the four state Governors and the President adopted a Resolution to relocate the FSM PMU to the Office of the President for closer supervision.

Mr Westerfield reported that staffing of the reorganized PMU would be completed as soon as the enabling Executive Order is completed. The PMU is expected to eventually have 20 staff, with four persons responsible for overall management to be based in Palikir and four-person teams of field engineers, inspectors and local support staff to be based in each of the four states.

An FSM citizen will be recruited for the top position of PMU Manager, to facilitate coordination with state governments and stakeholders. The other PMU staff members already recruited are Mr. Dana Smith, Special Project Manager for Legal Affairs based in the Palikir office, and Mr. Glen Bagley who has just been recruited as PMU Field Engineer, Yap office. Both were present in the briefing.

President Mori set a target date of June 1, 2008, by which all essential PMU posts at both state and national levels should be filled.

Mr. Westerfield reported that the establishment budget for the FSM PMU is expected to be around $1 million in 2008 but annual operating costs thereafter should be around $600,000 per year. He said this is significantly lower than the cost previously incurred by the FSM Government in its contract with GMP & Associates. Under that arrangement GMP had charged overseas based differentials for professional costs and was paid a percentage of project construction costs for management services.

Mr. Westerfield told the President and Vice President that the FSM PMU will need to address nearly $100 million worth of IDP projects in 2008 due to the slow rate of implementation of the IDP over the past four years. Out of a portfolio of 20 projects approved, pending and identified to date under the IDP, estimated to cost $65.2 million, only four projects, totaling $7,393,000, have yet been fully completed.

He explained that the target IDP project implementation rate of $35 million per year for the next four years had been derived by realistically spreading the backlog of $48 million of un-programmed and un-implemented IDP funds over four years while also staying current in implementing the $23 million in IDF grants that is available each year until the end of the funding under the Amended Compact in 2023.

Mr Westerfield also noted that, in addition to the $80 million portfolio of pending and new IDP projects, the FSM governments are also currently implementing a significant program of infrastructure projects for Airport Improvement Projects funded by the US Federal Aviation Authority, as well as projects funded by the Asian Development Bank under the Basic Social Services Grant and the Omnibus Loan to FSM for improvement of state utility infrastructure.

He told the President that this volume of infrastructure work poses serious challenges for implementation capacity within FSM. Local firms can only handle a portion of the work while the availability and cost of overseas engineering services and contractors is more difficult because of the increased contract work in Guam associated with the US military relocation there and similar IDP and CIP work on-going in the Marshall Islands and Palau.

Mr Westerfield confirmed to President Mori that under the terms of the Amended Compact and the IDP grant requirements, projects funded under the IDP must meet applicable international standards. As a consequence they were sometimes more expensive and difficult to design and construct than previous projects that did not have to meet these standards. However, the higher standards help to ensure that projects are designed and built with sufficient sturdiness, functionality and safety to meet the needs of the future.

President Mori urged the PMU to look more broadly for engineering services and contractors, including to Australia, New Zealand, the South Pacific, Philippines and Asia, in order to ensure that the infrastructure program is not further delayed and competitive prices are achieved.

The President also asked the PMU management to pay attention to local contracting capacity for large projects and to ensure that large foreign contractors comply with the requirement that at least 25 percent of the work be sub-contracted to local firms. Mr Westerfield advised the President that the PMU is looking into options to enable local contractors to meet the bond requirements that contractors must post for projects in excess of $3 million.

President Mori reminded the PMU team that his Administration places very high priority on the full and effective implementation of the Amended Compact. This includes efficient and full implementation of the IDP grants just as much as the utilization of the operating budget sector support grants also available under the Amended Compact.

President Mori said he expected that the PMU could be transferred back to the appropriate line Department once the backlog of projects has been cleared. To that end he urged the PMU to work toward successfully implementing at least $35 million of projects in 2008 and to seek to complete $50 million of project work in 2009.

The President also reminded the PMU team that the successful and full implementation of the IDP is very important to future users and beneficiaries especially as most of these facilities would be for education and health purposes. He pointed out too that implementation of the IDP was also important for the local, State and FSM economy, through the opportunities opened to local suppliers, contractors and employees and the expenditures and revenues generated in the community.

In light of the high public importance and visibility of the Compact IDP, President Mori requested the PMU to regularly disseminate public information on the status of the IDP implementation and to provide timely notification of opportunities for local suppliers and contractors.