21 May 2012

Bloomberg Bows to "Beltway Bandits"

Earlier this month, Bill Easterly and Laura Freschi of the Aid Watchers NYU DRI blog highlight the efforts of the Professional Services Council to overturn a USAID decision to increase spending through local contracts from 11% to 30%. This means USAID can spur local economies by supporting businesses in the countries of work. Further, it cuts out the middlemen position currently occupied by domestic contractors working internationally.

Easterly and Freschi explain:
Joining forces as the Professional Services Council and the public-facing Coalition of International Development Companies (from the website: “Did You Know…that funding through international development companies offers superior accountability and transparency?”) they have employed the Podesta Group, which, according tolobbying disclosure forms, has been hard at work “promoting the work of international development companies” in Congress at PSC’s behest. 
And the Podesta Group has delivered: House Oversight and Government Reform Committee Chairman Darrell Issa (R-California) has told USAID he will seek to block these reforms, just in time for the markup of the international affairs budget beginning next week.
Oxfam published an open letter to the US Congress in support of the announced change.
We know that as members of Congress you want to “follow the money” to protect taxpayer dollars. So do we. However, USAID’s overreliance on contractors often makes it more difficult for us to follow the money. Ultimately, our governments need to be held accountable by our own people—as you are held accountable by your own taxpayers. Bypassing local organizations and governments defeats the purpose of aid, which is to help countries help themselves. 
USAID is working to break this cycle. We hope you will support its efforts to invest modest sums—less than one third of USAID’s total investments—through local watchdogs, businesses, and governments in developing countries. More than anyone else, we know the costs of corruption, and we want to work directly with the US government to end it. Please join us and support USAID’s efforts to invest in our future.
The story got a little bit of play and twitter with the usual hand-wringing by yours truly and others. Now Bloomberg is on the beat with the story. The title, Doubling direct foreign aid could bite U.S. vendors, leaves little question the slant of the reporting.

Key parts (emphasis added):
Rajiv Shah, the agency’s administrator, says boosting direct investment in developing countries will save money and strengthen foreign institutions. “We became far too reliant on contractors,’’ he said in a March 7 speech. 
The agency wants to work with local entrepreneurs and developing countries’ governments “instead of costlier Western consultants and contractors,’’ Shah said. 
Shah’s remarks are “tarnishing the image of an entire sector,’’ said Alan Chvotkin, executive vice president of the Professional Services Council, an Arlington-based group that represents contractors. 
Pressure to meet the 30 percent direct-assistance goal may force the agency to provide funding to foreign groups “when the capability and infrastructure isn’t there,’’ Chvotkin said.
(snip)
The agency’s push to spend more money directly with groups and governments in developing countries won’t necessarily reduce U.S. contractors’ awards, said Donald Steinberg, USAID’s deputy administrator. USAID may instead choose to cut grants to U.S.-based nonprofit groups or lower contributions to international organizations, he said in a phone interview.
For someone who knows little about international development, the Bloomberg report reads as if the US is making cuts rather than a policy change. Unfortunately, the incentives are set for the lobby to maintain the contracts for its clients. When personal contracts are put ahead of achieving development goals the need for change is never more self-evident.

There are some reasons to be concerned by the changes in policy. Chovtkin points towards to infrastructure challenges that may hamper the work of local contractors. No doubt he is right, but it does not mean that USAID contracts have to jump to 30% immediately. The goal is to reach the 30% target by 2015. As we learned from the MDGs, goals are aspirational and set a benchmark to achieve, but are not always met on time.

The contractors can take the role of mentor for civil society organizations by partnering to ensure that all of the standards for implementation and data collection are met. By framing the issue as a loss of US contracts, as done by the Bloomberg piece, the opportunity to usher in an era of local contractors may be lost.

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For those of you who want to support Oxfam and others who are voicing their support for USAID changing its procurement procedures, go here to see the campaign and how to contact your respective congressional representative.

Update: The final two paragraphs were added to add at 11:50 AM EST to further clarify the overall post.

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