As the Millennium Challenge Account–Mongolia Water Compact approaches its end on March 31, 2026, it stands out as a rare achievement in large-scale infrastructure. The compact faced significant odds, yet delivered on time and within budget—while also adhering to standards of transparency, accountability, and quality.

The Water Compact represents one of the largest infrastructure investments in modern Mongolian history—and one of the most urgently needed. For a capital city where water demand is expected to soon outpace supply, the Compact offers a critical lifeline for the future of Ulaanbaatar.

Foreign technical experts and independent oversight teams, both foreign and local, played a central role in ensuring the Compact followed international standards at every stage—from design and procurement to construction and final commissioning.

Both foreign contractors and local authorities commented on how everyone part of the compact helped reinforce transparency, fairness, and accountability while providing rigorous quality control and technical assurance throughout the implementation process.

The Compact itself is a $462 million partnership—one of the largest investments—between the Government of Mongolia and the United States development agency, the Millennium Challenge Corporation. The USA contributed $350 million, while Mongolia committed $111.76 million.

The Compact includes three main components: an advanced water purification plant drawing on groundwater deposits near Biokombinat, Shuvuun, Mongolia’s first large-scale wastewater recycling plant, and a long-term sustainability program designed to build the institutional capacity needed to operate both facilities long after the Compact closes. Yet the Compact almost failed to reach this point.

Last year, the Mongolia Compact was at risk of being terminated just a year before its completion when the Trump administration put a freeze on certain foreign aid programs as part of its “America First” policy. Beginning in May 2025, most Millennium Challenge Corporation compacts worldwide were paused, and recently, a few were terminated. But Mongolia's Water Compact emerged as a notable exception.

Michael J. Petti, a vice president at Tetra Tech, a US engineering firm overseeing the Compact’s construction as Program Management Consultant (PMC), arrived in Ulaanbaatar expecting to help close it down.

“I came here initially to assist with the closeout, because we believed the Compact was going to be terminated—like many others,” Petti said.

"I was impressed by the Compact, but more by the team's dedication and professionalism,"

“But as the US government completed its global review and assessment of Compacts around the world, the Mongolia Compact remained as one they [the administration] chose to keep—probably because of how close it was to completion.”

Petti said the decision reflected the value of the infrastructure—and the people behind it. "I was impressed by the Compact, but more by the team's dedication and professionalism," he said.

The need for the investment has long been clear. While Mongolia is not globally considered a water-scarce country, studies by the World Bank show the challenge lies in availability rather than overall supply. Water resources are often not located where demand is highest or available in the right condition. That imbalance is particularly evident in Ulaanbaatar, home to over half of the population in the country. 

Delivering the Compact required navigating two major crises that might have ended it. Construction began in 2021 during the height of the COVID-19 pandemic, when borders were closed and global supply chains were severely disrupted. The Compact later faced uncertainty again when the foreign aid freeze was announced.

Luis Baires, the Compact’s Fiscal Agent Manager, USA, from Cardno Emerging Markets, said those challenges made the final outcome even more significant.

“These five years will end this month,” he said, “but there has been an enormous amount of work to reach this moment—especially with the pandemic, global conflicts, and disruptions to supply chains.” 

A key element in keeping the Compact moving was the independent oversight structure, which ensured procurement and financial management followed strict international rules.

Giorgi Tvalavadze, Procurement Agent Manager representing Charles Kendall & Partners, UK, oversaw roughly 270 contracts and coordinated contractors from 19 countries during the Compact.

All procurement decisions were accepted without formal challenge—a rare outcome for a compact of this scale.

There is a lot of human potential here That has been a decisive factor in delivering a Compact that is successful...

“I have experience working in many different countries,” Tvalavadze said. “Mongolians are perhaps the most motivated and very well-educated people I have worked with, and they have a strong sense of responsibility.”

Baires also agrees that the local team’s capability played a decisive role.

“There is a lot of human potential here,” he said. “That has been a decisive factor in delivering a Compact that is successful after five years of hard work.”

With foreign teams preparing to depart, responsibility for operating the new facilities will soon shift fully to the Mongolian side.

Odkhuu Natsag, head of the Engineering Policy Department at the Water Supply and Sewerage Authority (USUG), said local engineers began training early in the Compact, starting with theoretical instruction and moving to hands-on experience inside the facilities in 2024.

“Being physically present and working hands-on brings out the spirit of wanting to do things,” he said. Most of the engineers who will operate the facilities are young—a deliberate strategy to build long-term institutional capacity. “It will be a difficult undertaking, as we haven’t worked on such a facility before,” Odkhuu said. “But we are ready. We know there will be challenges, but we have taken many precautions to mitigate those risks.”

Looking back on the Compact’s journey through a pandemic, global supply disruptions, and a near cancellation, he pointed to one factor that kept it on track.

“They had very good management,” he said. “Without good managers, things can stall easily.”

As the projects close and the system begins operation, the Compact stands as a rare example of how strong international partnership, transparent governance, and rigorous quality oversight can deliver complex infrastructure—even under extraordinary circumstances.

Published Date:2026-03-19