GAO Report Suggests that USAID Remains "More of a Contracting Agency Than an Operational Agency"

November 21, 2011

“But I think it’s fair to say that USAID, our premier aid agency, has been decimated. You know, it has half the staff it used to have. It’s turned into more of a contracting agency than an operational agency with the ability to deliver.” – Hillary Clinton, Senate Confirmation Hearing as Nominee for Secretary of State

This is the first part of a series of posts analyzing USAID’s increasing reliance on contractors and how this has affected efforts to provide greater oversight, implement procurement reform and improve the efficacy of U.S. aid.

The United States Agency for International Development (USAID) has changed drastically over the past 20 years. Beginning in the early ‘90s and continuing through the 2000s, USAID saw its reliance on contractors increase drastically. From 1990 to 2008 USAID experienced a 40 percent decline in staff, from 3500 to 2200. Over the same period, funds under their responsibility skyrocketed. The American Academy for Diplomacy noted in a 2008 report that, “[i]mplementation of programs has shifted from Agency employees to contractors and grantees and USAID lacks the technical management capacity to provide effective oversight and management.” The Academy also noted that “USAID employs only five engineers worldwide, despite a growing number of activities in that sector.” However it was not just NGOs that benefited from the increased use of contracts and grants; the for-profit development industry has gained as well. From fiscal year 1996 to fiscal year 2005, “the share of funds awarded to for-profit contractors rose from 33 percent to 58 percent.” These companies, generally based in the greater Washington, DC area, have taken a leading role in U.S. foreign aid.  In a 2008 Senate hearing on USAID, Senator Patrick Leahy stated (PDF):

USAID’s professional staff is a shadow of what it once was. We routinely hear that the reason USAID has become a check writing agency for a handful of big Washington contractors and NGOs is because you don’t have the staff to manage a larger number of smaller contracts and grants.

Sometimes these big contractors do a good job, although they charge an arm and a leg to do it. Other times they waste piles of money and accomplish next to nothing, although they are masters at writing glowing reports about what a good job they did.

Meanwhile, the small not-for-profit organizations are shut out of the process. This is bad not only for U.S. taxpayers but also for the countries that need our help.

With the election of Barack Obama and a change in the leadership of the State Department and USAID, this situation was supposed to change. Incoming USAID director Rajiv Shah announced the USAID Forward project, which aims to “change the way the Agency does business.” Additionally, in 2008 Congress appropriated funding for the Development Leadership Initiative that aimed to double USAID’s Foreign Service workforce by 2012, overturning the previous decades of declining staff. However both the USAID Forward program and the Development Leadership Initiative have not led to drastic changes on the ground as of yet, and potential funding cuts from Congress will only exacerbate the slow pace of reform.

Staffing Problems Lead to Delays in Reconstruction Efforts in Haiti

Trenton Daniel of the Associated Press reported last Thursday on a new Government Accountability Office (GAO) report on USAID’s efforts in Haiti. The report analyzed USAID and State Department infrastructure projects in Haiti, finding that out of $412 million that has been allocated, just $3 million or 0.8 percent has been spent. The GAO report blamed much of the delay in spending on problems with staffing. Daniel reports:

The report noted that 10 of the 17 U.S. government employees in Haiti left just after the quake, and there was no mechanism to quickly replace them or expand staff numbers. Remaining staff members were forced to take on duties outside their areas of expertise while it took months to fill the vacancies, the GAO said.

USAID does not expect to have all of their Foreign Service officers assigned to Haiti until February 2012, over two years after the earthquake. The lack of engineers employed by USAID mentioned earlier was also a limiting factor. The GAO report notes that:

USAID was unable to reassign U.S. direct-hire engineers from other missions around the world because USAID has few engineers worldwide, according to mission officials.

For example, the mission’s chief engineer, who is responsible for overseeing construction activities in the energy sector, arrived in April 2011, and an engineer overseeing the construction of health facilities arrived in May 2011.

The report also placed blame on the fact that, as the AP reports, “there was only one U.S. officer in Haiti authorized to award contracts of more than $3 million.” Yet while this may have delayed infrastructure contracts, it didn’t prevent a few for-profit development firms from securing large contracts for work in Haiti.

Next: “Procurement Reform – Moving Forward?”. Find out who has been receiving USAID contracts in Haiti and how efforts to increase oversight and accountability are progressing under the USAID Forward Initiative.

Update: This post has been edited slightly for clarity.

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