Does US aid have a double standard for procurement?

Graduates from the U.S. Agency for International Development's Female Engineering Internship Program look at project design plans in Afghistan. USAID implementing partners have warned against awarding contracts based on lowest cost as this excludes firms that are able to provide better quality services and thus, results in disappointing project results. Photo by: USAID Afghanistan

Is the U.S. government pursuing a double standard at home and abroad when it comes to aid procurement?

Faced with a hostile budget environment, U.S. foreign aid agencies have sought creative ways to cut costs in the way they procure goods and services from U.S. businesses and NGOs — in particular, by awarding grants and contracts to bidders that offer the cheapest proposals.

But at the same time, the U.S. Trade and Development Agency is now involved in an effort to convince foreign governments to award contracts based on “best-value,” since low-cost contracts rarely go to U.S. firms whose proposed projects are typically more expensive than those from other competitors, mainly Chinese.

The U.S. Agency for International Development and others have moved to issue requests for proposals that award grants and contracts to those bidders who offer services at the lowest possible cost, provided those services meet a minimum level of acceptability — a designation known as “lowest price technically acceptable.”

Law360 reported last summer on the blowback from a U.S. government push to focus more on low-cost than “best-value” when it selects winning proposals from U.S. contracting firms.

“In the midst of an economic downturn and ongoing budget woes, the government seems more determined than ever to shave dollars off its procurement costs. And what better way to cut costs than to award contracts to the lowest priced technically acceptable offeror? The fact is that as LPTA procurements are used more frequently, they are likely to create more controversy,” said the article.

USTDA pushing for ‘best value’ abroad

USAID implementing partners have been warning that awarding contracts based on lowest cost excludes firms that are better suited to providing high quality services, and exposes the U.S. government to potentially disappointing project results.

That’s why USTDA launched last September a new push to convince developing country governments to do the opposite of what U.S. agencies are attempting at home: look at the overall “best-value” proposals offer, instead of focusing solely on their bottom-line costs. The Global Procurement Initiative “is designed to share best practices with public procurement officials in emerging economies in order to foster fair and transparent procurement systems that utilize best-value determinations and life-cycle cost analysis.”

The initiative reflects concerns from both developing countries and U.S. businesses, USTDA Director Leocadia Zak said on Monday during a panel discussion at the Center for Strategic and International Studies in Washington, D.C.

USTDA partners in developing countries have complained about the results of publicly procured infrastructure projects based on low-cost proposals, while U.S. businesses report they struggle to win publicly procured contracts in emerging markets, since they cannot compete with lower-cost alternatives.

“Reliance on cost as the determining factor for award [sic] often restricts market entry for U.S. firms by failing to take into account the high-quality equipment and comprehensive maintenance agreements provided by U.S. businesses,” according to USTDA’s description of the Global Procurement Initiative.

Zak said that USTDA and its partners are planning their next best-value training for procurement officers in Botswana, which will bring together private sector partners, academic institutions and the public sector.

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About the author

  • Igoe michael 1

    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.