Contracting for Development: The Role of For-Profit Contractors in U.S. Foreign Development Assistance

Latin American Politics and Society, Winter 2001 by Bland, Gary

Berrios, Ruben. Contracting for Development: The Role of For-Profit Contractors in U.S. Foreign Development Assistance. Westport: Praeger, 2000. Tables, figures, appendixes, bibliography, index, 160 pp.; hardcover $55.

Since 1993, the U.S. Agency for International Development (USAID) has been a guinea pig of sorts for the Clinton administration's campaign, led by former vice president Al Gore, to reinvent government. USAID was one of the first agencies to be restructured under the initiative. The objective was to get USAID to be more efficient, operate more like a business, and demonstrate measurable results with the resources it is annually appropriated by Congress. The centerpiece of the plan was to increase the agency's level and effectiveness of "contracting out" development programs and activities. Rather than use U.S. government personnel, USAID would rely more heavily on private firms to do the business of development in the developing world.

Five years later, the pertinent question is, what is the result of USAID's reinvention? Ruben Berrios, in this book, has sought to find the answer. He investigates the reoriented USAID contracting process-the various types of contracts-which he views, with considerable skepticism, as a gradual privatization of government functions. The core issue for Berrios is whether USAID's new mission promotes successful development in developing countries or is really a means provides employment and income for profitmaking private firms in the United States.

Berrios is quite firm in concluding that the latter is true. The restructuring effort has had a negligible impact, he argues, because USAID uses its assistance to advance U.S. business interests at the expense of humanitarian needs and sustainable development. Privatization has increasingly commercialized the U.S. government aid program. "USAID no longer does development projects," Berrios explains (p. 128), and "the use of contractors to channel foreign aid is an arrangement that benefits mainly private firms awarded contracts" (p. 129). Contracts do not include sufficient incentives for cost savings or performance. The effort to award contracts on the basis of past performance has failed as well, Berrios adds, because established insiders have an edge in securing the most lucrative contracts.

Berrios reaches these conclusions through an extensive investigation of the academic and technical literature, interviews, and his obvious knowledge of the contracting process, including a thorough understanding of a daunting level of detail. He addresses a wide range of contracting issues that are central to the development work of USAID today. Indeed, in many ways, this book serves as a compilation of the results of past studies coupled with additional investigation of the advantages and disadvantages of particular contract procedures. One chapter attempts to dispel a number of the myths surrounding the provision of U.S. foreign assistance.

Much of this volume, however, is likely to perplex or discourage anyone who lacks at least some contracting or USAID experience. An entire chapter, for example, is devoted to methods of awarding and types of contracts. The author does manage to discuss notable issues with a good degree of clarity. He makes several important observations about the nature of USAID work with private contractors. One is the poor state of the procurement process, which is severely hampering the agency's work; Berrios rightly calls for a streamlining.

A few important weaknesses of the study also emerge. Berrios reveals early on his ideological bias. He seems to believe that private sector delivery of foreign aid is inherently bad, apparently because selfinterest and profit are inimical to development. We never really find out, however, why this is necessarily the case. One would expect much more comparative discussion on how the agency operates today versus how it operated-with no greater effectiveness, if one believes the many critics-before privatization. As a USAID fellow (funded through a private contract) who has worked with the staff of many private contractors, moreover, this writer believes that contractors' staff members are as committed to the progress of developing countries as USAID personnel (and, as Berrios points out, many of them are former USAID personnel).

Berrios emphasizes that the market for USAID work has oligopolistic characteristics; a few large firms dominate it. Having participated in the contract review process on a number of occasions, I agree. It is patently clear that smaller, less experienced firms face tremendous barriers. Accounting procedures, contracting rules, meeting other regulatory requirements-all mandated by federal laws and regulations-as well as the complexity of the work and the proposals required to bid on it almost invariably push the small, inexperienced firms to the sidelines or to subcontracting status. USAID officers are required to adhere to the existing contracting rules. They make efforts, often unsuccessful, to bring in new firms, but it is the nature of the system more than USAID practice that drives this reality. Berrios is less than appreciative of this.