Contractors celebrate US Supreme Court's 'choice of instrument' decision

The Authority of Law statue by James Earle Frasier in front the U.S. Supreme Court building in Washington, D.C. Photo by: Mark Fischer / CC BY-SA

The U.S. Supreme Court might have just weighed in on federal procurement reform — by choosing to do nothing.

A trade group for U.S. aid contractors believes a recent high court decision not to review a lower court’s ruling has ramifications for the U.S. Agency for International Development “choice of instrument” decisions when the agency issues procurement opportunities to contractors and nongovernmental organizations.

The crux of the issue is a complaint raised by U.S. foreign aid contractors that USAID inappropriately uses grants when it should use contracts — and vice versa — and that the agency’s reasons for choosing one over the other in many cases can be difficult to discern.

The Federal Grant and Cooperative Agreement Act of 1977 directs agencies to use a contract when the purpose of the instrument is to procure goods and services for the U.S. government. Agencies should opt for a grant when their aim is to support an organization’s ongoing mission.

But some groups, namely, those with a stake in the issue, feel USAID has blurred the lines, and they think the Supreme Court’s decision not to review a lower court’s ruling against the Department for Housing and Urban Development backs up their argument.

That decision, from the U.S. Court of Appeals for the Federal Circuit, included the following: “[A]n executive agency shall use a procurement contract as the legal instrument … when … the principal purpose of the instrument is to acquire (by purchase, lease, or barter) property or services for the direct benefit or use of the United States government.”

While the case pertains to a dispute between HUD and its contractors, the Professional Services Council, a group that advocates for government contractors, believes it has implications for all U.S. government agencies and their partners.

“Whether at HUD, HHS’s National Institutes, USAID, or any other agency that uses a mix of contracts and grants, the courts have reaffirmed that there is one clear standard in the law that must be applied,” Alan Chvotkin, PSC’s executive vice president and counsel, said in a press release.

USAID’s choice of instrument is a frequent point of contention between the agency and its implementing partners, and one that arises nearly every time procurement officials and USAID contractors find themselves in the same room.

The issue is complicated by another challenge: reducing the amount of time it takes for USAID to issue any award. For years, USAID’s procurement administrative lead times have hovered in excess of 500 days, a situation implementing partners say costs them money and diminishes program impact.

Even while PSC argues that the agency should do what it can to be more efficient and reduce its procurement administrative lead times, contractors’ advocates maintain that bending the choice of instrument rules is not the way for USAID to do that.

“We’re aware that USAID in particular is very conscious of the lead time it takes and the differences in the lead times [between contracts and grants],” Chvotkin told Devex, adding that  “the agency is starting to work aggressively to reduce the lead time of both.”

But Chvotkin’s reading of the Supreme Court’s decision remains firm. The courts, he told Devex, “have held that lead time is not a criteria for determining when to use a contract or a grant.”

USAID’s federal acquisition regulations already reflect the letter of the law when it comes to the choice of instrument, Chvotkin noted. The challenge is getting the agency to implement according to its own standards, he said.

USAID was unable to provide comment in time for publication of this story.

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About the author

  • Michael Igoe

    Michael Igoe is a Senior Reporter with Devex, based in Washington, D.C. He covers U.S. foreign aid, global health, climate change, and development finance. Prior to joining Devex, Michael researched water management and climate change adaptation in post-Soviet Central Asia, where he also wrote for EurasiaNet. Michael earned his bachelor's degree from Bowdoin College, where he majored in Russian, and his master’s degree from the University of Montana, where he studied international conservation and development.