U.S. Agency for International Development Administrator Rajiv Shah. Photo by: USAID / CC BY-NC

The U.S. Agency for International Development’s plan to funnel more aid directly through organizations in the developing world has come under fire lately by lawmakers and U.S. companies. The Coalition of International Development Companies, which represents 55 U.S. firms, issued the following statement in response to a July 18 article in Foreign Policy magazine titled ”Hired Gun Fight,” written by John Norris:

  We have long shared with USAID and others in the development ecosystem a deep belief in the transformative power of development assistance and the unique role USAID plays in the world. We also agree with USAID and the Congress that we must constantly be evaluating and evolving development assistance modalities to ensure we are optimizing scarce resources and addressing the needs and priorities of recipient nations and communities in a manner consistent with the U.S. government’s — and the American people’s — desired outcomes. Through USAID Forward, USAID has challenged all of us as development partners to do better and do more, with less. This is a challenge we readily accept. We have serious concerns, however, about certain aspects of procurement reform as currently expressed.

Smart development policy and practice should leverage the best that America has to offer, whether it comes from nonprofit organizations, large companies, small businesses (which comprise the majority of our membership), universities, think tanks, or the government. The best talent and ideas reside in all of these places, often times working together. It’s not about who, it’s about how well.

We believe decisions about America’s development strategy should be based on facts, not anecdotes, assumptions, or myths. We believe policymakers and other influencers benefit from an evidence-based dialogue. In that light, we believe the debate over who should implement more of our foreign aid programs should focus on what type of implementation instrument and what type of funding vehicle will be most effective for a given program, and that will guide decision makers toward appropriate implementers.

We unequivocally support the concept of strong country ownership. USAID’s intention to “[s]trengthen partner country capacity to improve aid effectiveness and sustainability by increasing use of reliable partner country systems and institutions to provide support to partner countries” is also laudable and important. Our experience, however, shows that strengthening partner country capacity requires robust, long-term USAID investments in governance training, financial management, and program and staff capacity building. Absent such assistance, direct transfers of assistance dollars to local organizations have not always been successful. Moreover, the limited number of inclusive local institutions that facilitate participatory, society-wide ownership of these institutions and reflect community priorities calls into question the sustainability of these resource transfers. These questions and related risks should be addressed by USAID, Congress, and the entire development community before moving large amounts of U.S. tax dollars directly to local institutions.     

Shifting one-third of U.S. taxpayer funded assistance directly to foreign governments and local organizations raises the question as to where sufficient “reliable partner country systems and institutions” exist to make effective and transparent use of these funds. Neither USAID nor any other donor has yet found reliable means to assure that corruption and non-inclusive institutions do not simply reinforce the power and privilege of elites — at the expense of the poor and disenfranchised — in countries that are not yet governing equitably. This is where all of USAID’s implementing partners play a vital role, ensuring that foreign aid reaches the target beneficiaries while being well managed.

This raises a fundamental question: What other measures will USAID institute to ensure that U.S. laws, regulations and standards for the use, management, and oversight of U.S. tax dollars will at least be equal to those applied to all U.S. implementers working internationally? We believe these issues should be addressed.

The article, ironically, proves our point. He writes that our concerns about waste and fraud “might be more persuasive if for-profit contractors had not had their own problems in this regard.” The fact is, Congress and American public know about such incidents because the system worked! Implementers — whether for-profit or non-profit, large or small — are accountable under law and regulation. They are audited regularly and investigated when the situation warrants; when they make mistakes, they pay it back, or worse. Sending tax dollars directly to host government or local NGOs eliminates the ability of inspectors general or other government watchdogs to hold implementers accountable.

Nor is the ongoing debate about “big contracts to big firms,” as the article suggests. In its efforts to provide more aid dollars directly to host country organizations, USAID has effectively and significantly been reducing its demands for technical assistance and support from U.S. small businesses. The negative effects of USAID Forward on maintaining the contribution and innovation of U.S. small businesses in international development is an important issue that should be examined carefully by USAID, Congress, and USAID’s business partners, small and large.

Norris concludes that USAID “has a huge amount of work to do if it still hopes to reach its target of 30 percent of its aid being channeled directly to governments and local organizations in the developing world by 2015.” He’s right – but not for the reasons he lays out. As envisioned, USAID’s approach assumes that more localization will necessarily result in better localization. This is an assumption that needs to be tested and evidence gathered to evaluate the many ways the capacity of partner governments and local actors is built and sustained — without creating or increasing unnecessary risks to our scarce aid dollars.

International development companies, NGOs, and more and more members of Congress share the view that we need a more robust policy dialogue with USAID, to examine carefully and thoughtfully about how U.S. foreign assistance dollars can help build the lasting capacity of foreign governments, and local NGOs and businesses. We are all committed to helping others around the world, and to advancing America’s security, values, and prosperity. How we can best do that together, and make better use of foreign aid dollars, is the story we hope to read next.

The above statement was co-authored by M. Charito Kruvant, the president and CEO of Creative Associates who also chairs the CIDC executive committee, as well as CIDC executive committee members Betsy Bassan, president and CEO of Panagora Group, Richard Dreiman, president and CEO of Chemonics International, Asif Shaikh, president and CEO of the International Resources Group, Indira Ahluwalia, founder and president of Development and Training Services, Jim Boomgard, president and CEO of DAI, and Stan Soloway, president and CEO of the Professional Services Council. The full statement — including an introductory paragraph not included above — can be found here.

The views in this opinion piece do not necessarily reflect Devex's editorial views.

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