A modest uptick in competitive procurement

USAID Administrator Rajiv Shah. Photo by: USAID / CC BY-NC-SA

In March 2009, just weeks after taking office, U.S. President Barack Obama unveiled plans to reform federal contracting practices. The then-new president pledged to rein in no-bid contracts, which U.S. law permits only under limited circumstances, among a host of reforms aimed at saving taxpayers up to $40 billion a year. The administration then issued guidance directing departments and agencies across the federal government – including the U.S. Agency for International Development – to maximize competition in their contracting processes.

While the vast majority of USAID’s contract spending is already competitively awarded, in January 2011 Administrator Rajiv Shah acknowledged that “we can do better.” Earlier in the administration, USAID had been confronted with allegations that the agency was improperly handing out no-bid contracts in Afghanistan and Haiti.

In its 2011 report, the bipartisan Commission on Wartime Contracting concluded, “Despite a more mature contracting environment in Iraq and Afghanistan today, Defense, State, and USAID still do not consistently emphasize competitive contracting practices.” 

The commission also called upon the three agencies to set and meet annual increases in competitive procurement goals for its contracts in the two countries.

USAID has taken steps to scrutinize noncompetitive procurement at the agency. In 2010, USAID established the Board for Acquisition and Assistance Reform, or BAAR, to review any proposed award over $15 million in which the agency solicits a bid from only source. Shah has also announced that any noncompetitive grant or contract extensions or follow-on awards in excess of $5 million would require his personal expressed clearance. The threshold is $20 million for programming in critical priority countries including Iraq and Afghanistan.

“Partners need to achieve outcomes that they’ve committed to achieve in the times they’ve committed to achieve them. Otherwise, we will seek out those who can,” said Shah.

Over three years after Obama pledged to rein in noncompetitive procurement across the federal government, USAID can point to some signs of progress. In fiscal 2011, while total USAID contract spending did fall sharply from the year before, 80 percent of this spending was awarded on a competitive basis. This represented a gain of four percentage points above fiscal 2009 levels (see chart). Not since fiscal 2006 has the competitively awarded share of USAID contract spending been at or above 80 percent. According to USAID, the bulk of the noncompetitive contract spending has been due to a lack of multiple sources to satisfy agency requirements. 

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Elsewhere in the federal government, the administration’s drive for more competitive procurement has yielded mixed results. The departments of Defense and Homeland Security actually experienced a drop in competitive contracting levels between fiscal 2009 and fiscal 2011. On the other hand, at the State Department –  the agency that delivers the second highest levels of American foreign assistance behind USAID – the share of contract spending awarded on a competitive basis rose from 72 percent in fiscal 2009 to 75 percent in fiscal 2011.

USAID’s reform agenda USAID Forward may also foster a more competitive bidding environment. As previously reported by Devex, one of the objectives of USAID Forward is to broaden the agency’s partner base so as the initiative builds momentum, more local organizations and small businesses are poised to join the ranks of an already crowded field of implementers vying for direct awards from the agency.

About the author

  • Lorenzo Piccio

    Lorenzo is a former contributing analyst for Devex. Previously Devex's senior analyst for development finance in Manila.