The Future Delivery Problem Facing US Foreign Assistance

We’ve previously looked at the sectoral and geographic impact of the proposed USAID award cuts. But for those who want to see US foreign assistance back on its feet, it is also worth looking at the impact on awardees—the firms, nonprofits, and international organizations that implement USAID projects. The cuts have shuttered a number of sub-grantees and will likely do the same to prime award recipients. They have further concentrated delivery amongst a few large contractors and set back efforts to localize assistance.

Thanks to a list of USAID award values by recipient created by Gillian Javetski which uses the same awards we analysed at the country and sector level, we can look at the extent of the cuts by awardee. The total number of awardees has fallen from 2,562 to 306. Unsurprisingly, that has been associated with a dramatic concentration in the value of awards amongst a few large suppliers. The graph below lines up awardees from largest to smallest based on their total award obligations, and presents the cumulative value of their awards as a percentage of the total value of all award obligations. The first, largest awardee in both cases is the World Bank (primarily linked to its channeling of resources to Ukraine): $29.5 billion in award obligations prior to the cut and $28.4 billion after them. Both prior to cuts and after them, the Global Fund, Chemonics, and the World Food Programme come second, third, and fourth. Prior to the cuts, these four organizations accounted for 52 percent of obligations; after the cuts they account for 81 percent. The top fifty awardees cumulatively accounted for 81 percent of award obligations before the cuts; now they account for 96 percent.

Figure 1. Cumulative value of USAID award values by recipient before and after award cuts

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Some major awardees have seen all of their contracts terminated. Of the 28 awardees with obligated awards worth $500 million or more prior to the cuts, five have seen all awards terminated (Gavi, Tetra Tech, International Finance Corporation, ARD, and RTI). A further six have seen a 90 percent plus reduction (DAI, WHO, Consortium for Elections, RTI International, Deloitte). Of the 90 awardees with obligated awards worth $100 million or more prior to the cuts, 35 have seen all awards terminated and a further 12 have seen a 90-percent-plus reduction—more than half of this group of largest USAID awardees have seen a 90 percent cut in obligated award value.

Figure 2. Percentage of awards cut to awardees previously awarded more than $500 million or $100 million of obligated funding from USAID

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To be clear, we don’t think the existing system of considerably working through US-based firms and nonprofits is the most effective way of delivering foreign assistance. Along with everyone from Samantha Power to Mark Green to the authors of Project 2025, we’d like to see a lot more US assistance financing local delivery. But these cuts will have achieved precisely the opposite. Awards to foreign companies and NGOs have an average size of about $170,000 compared to an average size of about $670,000 for awards to US companies and NGOs. That suggests what remains in the USAID award portfolio is a concentration not just amongst awardees, but a geographic concentration—toward US-based institutions.

Our estimates based on analyzing foreignassistance.gov suggests that those local non-government awardees have seen their share decline from about 8.6 to 6.7 percent of the total (see the table below: the share going to foreign governments, nearly all accounted for by Jordan, has done better because the Jordan aid was not cut). Given how scandalous members of the administration appeared to find the fact that only about ten percent of USAID awards went to prime awardees based in recipient countries, it is surely disappointing their “reform” efforts have further decreased that percentage.

Table 1. Value of USAID obligations in FY24 and FY25

These numbers are reflected in awards data collapsed to the USAID department level by Leigh Mitchell and then cleaned by us. The table below reports on the number and value of active and terminated contracts under management by USAID country, regional, and central offices. 38 out of 80 country offices have no contracts left, along with 2 out of 5 regional bureaus and 13 out of 18 central departments. 87 percent of contracts by obligated value have been cancelled at the country level compared to 37 percent at the HQ level. (The relatively strong performance of regional offices in terms of obligated value remaining is due solely to the fact that Ukraine support is run through the USAID bureau for Europe and Eurasia).

Table 2. USAID active and terminated contracts by USAID office/bureau type

The current awards system is a result of political compromises including an aversion to funding recipient governments, the limited number of USAID staff available to support recipient country contractors and grantees, and the immense complexities of managing US foreign assistance funds in the face of a thicket of counter-bureaucracy regulation and oversight. Cutting USAID active duty staff by approximately four fifths, closing down country offices and potentially closing down the Agency as a whole while trying to rebuild contracting capacity at State on the fly, and sacking thousands of contractors who were supporting program management will all demand greater use of a few very large contracts and awards to deliver services. The direction of travel can be seen by the fact that the average obligation size of terminated awards, at around $9 million, compares to retained awards, at around $78 million.

There are good reasons to have large awards—any contract to handle the global logistics of HIV drug delivery is going to be large to be efficient. And the cuts were particularly focused on programs run by USAID country offices, where we would expect awards to be smaller. But concentration is still a concern for the future, especially to the extent that it weakens efforts to increase country ownership.

And even without the proposed USAID shutdown, it would be increasingly hard to reverse course. The complete halt in payments between late January and early March followed by the payments process restarting at a rate insufficient to stop arrears climbing further has bankrupted suppliers that USAID still relies on to deliver services. The award cancellations will bankrupt more firms, and considerably reduce capacity to negotiate the complexities of USAID contracting amongst many firms that survive. Given the depth of many sectoral cuts—above ninety percent for education, conflict mitigation, family planning, maternal and child health, governance, political competition, private sector and infrastructure—contractor and grantee capacity to deliver foreign assistance projects in those areas will rapidly collapse. US foreign assistance will be considerably less effective as a result.