The tension between MCC oversight and country ownership is also evident in the area of procurement, which is both the foundation of effective and timely implementation and the area most prone to corruption in foreign assistance projects. Getting the balance right between managing effective implementation and managing risk of diverted funds is tricky.[16] On the one hand, efficient and transparent completion of contracts and acquisitions under credible national or international procurement is the key to timely disbursements. MCC needs contracts to release funding and often there are conditions precedent for disbursements in the compact related to procurement. On the other hand, donor agencies like the MCC must ensure that the procurement standards they use are credible and that their oversight processes are sufficient to guard against the potential for corruption or diversion. The question in El Salvador, and perhaps in several other MCC-eligible countries, is whether the national procurement laws and oversight processes are credible enough to rely on so as not to add unnecessary transaction costs to implementation and perhaps even strengthen the systems under MCC guidance.
While the compact stipulates the establishment of both procurement and fiscal agents, countries can rely on ministries or other entities to fulfill these requirements. In El Salvador, Fomilenio´s Finance Director acts as Fiscal Agent, while procurement agent services are contracted out to an international firm. The latter undertakes all procurement based on MCC Program Procurement Guidelines, a requirement imposed by MCC in spite of the Salvadoran government’s original proposal to allow ministries to conduct procurement themselves via the Institutional Acquisitions Units in each ministry, and in accordance with National Procurement Law (LACAP is the Spanish acronym). This legislation, signed in January 2006 (almost a year prior to the signing of the MCC compact), was part of an effort to strengthen the governmental procurement and contracting systems to meet international standards. Despite the training designed by the Technical Secretariat of the President that was conducted in all government ministries to ensure the correct application of the new law and systems for increasing transparency and efficiency, the MCC has required its own set of procurement guidelines beyond LACAP. While this decision was taken as a result of a due diligence review by the MCC, there is no published evidence of why this aspect of the El Salvador proposal was not accepted or why the measures implemented in accordance with LACAP were found to be insufficient. It remains unclear as to whether MCC is advising the government of El Salvador on measures that would address LACAP’s deficiencies discovered during the due diligence review as well as bring them closer to meeting MCC’s institutional standards. The MCC has procurement guidelines that are applied to all compact countries regardless of a country’s established procedures in order to maintain a high level of fiduciary oversight. This is not unreasonable given demands on other U.S. foreign aid programs by Congress. However, the question is: should the MCC should push the innovative potential it was given at its creation to implement a differentiated procurement system that allows greater flexibility to countries with strong fiduciary systems while reducing, though obviously not ceding, MCC oversight requirements? The set of MCC-specific procedures adds an additional layer of administration, reporting, and training which has caused delays and is perceived as unnecessary by some Fomilenio officials in light of the nationally-implemented LACAP legislation.
Next Section: Findings
16. This issue was also highlighted by the MCA Monitor previously in "Lessons from Lessons from Seven Countries: Reflections on the Millennium Challenge Account"