Forward with USAID Procurement Reform?

November 16, 2012
Franck Wiebe is a visiting fellow at CGD. He is currently professor and faculty director of the new Master of International Development Policy program at the Georgetown Public Policy Institute (GPPI). President Obama isn't the only government official who promised to deliver change. Two years ago, USAID Administrator Rajiv Shah launched USAID Forward, a blueprint for reforming the way America’s largest foreign aid agency does business. Among the changes: Implementation and Procurement Reform (IPR) to triple USAID funding directly to and through developing country governments, businesses and NGOs by 2015. This could be a good thing – less expensive contracts in some cases may deliver good or even better results – but as USAID puts the new policies into practice, the agency’s leadership should keep an eye on  program quality, competition and capacity. I see three elements that could undermine IPR’s goals of better programs at lower costs:
  • First, IPR could be putting too much emphasis on the nationality of the contractor and not enough on the quality of the program. IPR needs to be driven by explicit program performance metrics, not just the implementer’s cost structure or address. In some cases, more expensive partners may deliver more value in terms of program impact.
  • Second, USAID’s goal of channeling 30 percent of funds through local organizations may compel USAID field staff to change deeply-ingrained practices, but the target appears arbitrary and inconsistent with the move towards more flexible and competitive arrangements (and more flexibility and competitive arrangements would be a good thing). Private American firms may not be happy to see more contracts go to non-US implementing partners, but they will have little basis for objecting if the contracting decisions are based explicitly on cost and value, rather than an arbitrary target.
  • Third, in many country contexts, local institutions may not have the capacity to assume significantly greater management and administration responsibilities. To address this gap, USAID is devoting significant resources to local capacity building programs. Unfortunately, such activities take away funds for programs that would deliver benefits to actual target populations (building capacity in institutions should always be seen as a means to some specific end, not an end in itself) and are notoriously problematic in delivering measurable, material results. IPR should enable USAID to enhance program effectiveness where local capacity exists - and this will happen if the reforms emphasize flexibility and competitiveness - but IPR should not lead USAID to use inefficient local channels or invest in local capacity building unless such investments are seen as a program cost and are scrutinized for cost-effectiveness.
USAID Forward should continue to move forward. The agency has achieved some notable early successes, and the IPR objectives remain reasonable. But two years in, USAID’s management team has an opportunity to take stock of progress and look for opportunities to revise the blueprint to make sure they’re getting better (and perhaps cheaper) development results, both of which will be under scrutiny in the budget battles ahead.


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