USAID Reviews Role of For-Profit Contractors
Earlier this year the US Agency for International Development (USAID) began an internal review of its longstanding practice of using for-profit consulting firms that sub-contract to non-profit organizations working with USAID (thereby skirting the regulation that does not allow for-profit contractors). USAID awards about $4 billion every year in federal grants and contracts.
This review should be part of a larger assessment of the use of contractors (for and non-profit) by USAID in implementing development assistance projects. The over-reliance on contractors has become somewhat of a bureaucratic self-fulfilling prophesy as the staff size has been dramatically reduced over the decades. The Modernizing Foreign Assistance Network submitted a paper to the Obama-Biden Transition that said:
USAID lacks the staff resources to carry out its mandate and functions, leading recent administrations to circumvent the agency when faced with a new opportunity or challenge. AID lacks both the numbers and technical skills required to function in its prior role as a premier development agency. Restoring this capability is constrained by a failure within the U.S. government to acknowledge that the ability to maximize the impact of U.S. assistance is directly related to the capability to manage those resources, the absence of a vision and strategic plan for human resources, and inadequate capacity to hire and train staff. Staffing inadequacies too often are dealt with through contract “workarounds” that are inefficient and costly, and can create a “them vs. us” mentality in the workforce. The number of employees at USAID has dropped from 4,300 in 1975, to 3,600 in 1985, to 3,000 in 1995. As of September 2007, USAID was staffed with 2,417 direct hire staff…While staffing levels have declined, program responsibility has increased from approximately $8 billion in 1995 to approximately $13 billion in 2007 (in 2005 dollars). USAID has set a target of a contracting officer managing a range of $10-14 million per year, but the current level is at an average of $57 million.
Using contractors to implement programs in key areas like democracy and governance programs send the wrong message to other nations about our commitment to long-term development. It is more expensive than hiring and training a permanent professional staff at USAID (in the long run) and results in key assistance programs held hostage to the US Government procurement system (ie, a contractor wins a multi-million dollar award to enhance democracy in a developing country in three years).
Secretary Clinton has now begun a ”Quadrennial Diplomacy and Development Review” meant to clarify the roles of State and USAID – and the links between hard and soft power. In addition, Rep. Howard Berman (D-CA) is seeking to reform how USAID decides on priorities and how it distributes its money in the process. Unless and until the role of contractors is reduced and is balanced against an increased capacity of USAID staff to carry out this work, none of the above reforms will make a difference.