Foreign Assistance ReformContracting Perspectives:

Smart Power/Smart Resources

NCMA March Workshop - 2010

Mark J. TremblayVP & Director

Contract Operations Abt Associates Inc.

NCMA March Workshop

Expectations Today

– At the end of this session, you will gain a better understanding of the foreign assistance world:

• What is foreign assistance?

• Who is involved?

• Why is reform needed?

• What procurement approach delivers best results?

NCMA March Workshop

What is Foreign Assistance?

““And so, to all the other peoples and And so, to all the other peoples and governments who are watching today, from the governments who are watching today, from the grandest capitals to the small village where my grandest capitals to the small village where my father was born, know that America is a friend father was born, know that America is a friend of each nation, and every man, woman and of each nation, and every man, woman and child who seeks a future of peace and dignity. child who seeks a future of peace and dignity. And we are ready to lead once more…To the And we are ready to lead once more…To the people of poor nations, we pledge to work people of poor nations, we pledge to work alongside you to make your farms flourish and alongside you to make your farms flourish and let clean waters flow; to nourish starved bodies let clean waters flow; to nourish starved bodies and feed hungry minds.”and feed hungry minds.”

President Obama, January 20, 2009Inaugural Address & Introduction to FY 10 Foreign Affairs Budget

NCMA March Workshop

What is Foreign Assistance?

• Charity/Moral Imperative? YES • Is it Foreign Policy? YES

• Liberal View-Multiple goals

– Stable democracies

– Free trade & rule of law

– Spread “values” not just might

• Conservative View

– Strong defense is the main tool of statecraft

• Aid/Food/Health Care • Protect US Interests

NCMA March Workshop

The First Big Question

• Are Foreign Assistance & National Security Interests mutually exclusive concepts?

• Traditional thinking viewed them separately

• Current thinking has them fully linked- Assistance is vital to our National Security

– Win the hearts and minds through:

• Better health care, education, training, assistance

• Ending poverty and education are key to greater stability for a peaceful, stable, prosperous world ( and US!)

– But…Sometimes force is still needed to protect our security

• Find the right combination for each situation

NCMA March Workshop

Diplomatic/Economic/Military Leadership

Defense Diplomacy Development

+

=

NCMA March Workshop

Using all the Tools

“We must use.. the full range of tools at our disposal- diplomatic, economic, military, political, legal and cultural- picking the right tool, or combination of tools, for each situation”

Secretary of State Clinton

“Strengthen our common security by investing in our common humanity”

President Obama

NCMA March Workshop

Political vs. Developmental Interests

Congress- Current approach needs MAJOR reform¹

– Host Country needs and US interests differ

– Field driven vs. Washington driven

– Pressure to achieve short term results limits building capacity

– Budgeting process makes long term planning/accountability for results difficult

– Political and Developmental objectives differ:

• Strategic – concentrate aid where US security is at stake

• Moral- concentrate aid where the need is greatest

______________________________

¹ Source: House/Senate foreign affairs Discussion Paper #1 Development Assistance Reforms 10-6-09

NCMA March Workshop

• US Government has 50 separate units in aid planning and delivery

– From narcotics to PEPFAR to MCC to Defense

– DOD alone accounts for 1/5th of US official development assistance (according to State Dept)

– A lot of money is spent on Foreign Assistance:

• FY 10 International Affairs (150) Budget (req.) $53.9B²

• US donations to developing world $26.0B3

• DOD FY 10 Foreign Assistance & Security $14.0B4

• The “other” 47 buyers ????

• State wants overall control- others say No

_______________________________2. State Department 150 Budget - FY 10- President's Budget request is 55.2B

3. US Donations- Brookings Institute: Brainerd, Lael and Unger, Noam 2008/2009 Top 10 Global Economic Challenges

4. DOD role in Security and Foreign Assistance, Abbott, Stephen, Analysis Magazine-

The Competing Market Challenge

NCMA March Workshop

So How Does this Affect Contracting?

• The Political vs. Development Debate sets the priorities

• The priorities set the budget decisions

• The budget decisions determine what the 50 buyers buy

• The 50 buyers decide the procurement approaches

– Long term (sustainability) vs. short term (band-aid)

– Contracts or Grants? (Acquisition or Assistance)

– Contractors or Non-profits?

NCMA March Workshop

Contracts or Grants?

• Federal Grant and Cooperative Agreement Act of 1977

»31 USC 6301-6308

• Passed to address perceived misuse of grants as a way to bypass procurement/competition rules

• Established uniform, Government- wide criteria for determining the appropriate legal instrument

– Acquisition ( Procurement Contracts)

– Assistance (Grants and Cooperative Agreements)

NCMA March Workshop

ξ 6303 - Using Procurement Contracts

“An executive agency shall use a procurement contract as the legal instrument reflecting a relationship between the United States Government and a State, a local government, or other recipient when—

– (1) 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; or

– (2) the agency decides in a specific instance that the use of a procurement contract is appropriate”

NCMA March Workshop

ξ 6304 - Using Grant Agreements

“An executive agency shall use a grant agreement as the legal instrument … when—

– (1) the principal purpose of the relationship is to transfer a thing of value to the State or local government or other recipient to carry out a public purpose of support or stimulation authorized by a law of the United States instead of acquiring (by purchase, lease or barter) property or services for the direct benefit or use of the United States Government; and

(2) substantial involvement is not expected between the executive agency and the State, local government, or other recipient when carrying out the activity contemplated in the agreement.”

NCMA March Workshop

The Next Big Question

• If Foreign Assistance is an integral part of Foreign Policy which is directly tied to our National Security interests….

– Is it a Direct Benefit to the US Government?

– Or is it a transfer of a thing of Value to carry out a public purpose of support or stimulation authorized by a law?

NCMA March Workshop

And Then The Next Big Question

Contractors Non-Profits

Who Can Best Deliver What is Needed?

NCMA March Workshop

Objective Non-Profits Contractors

Mission

Raising Capital

Scalability

Human Capital

Accountability

• Accountable to its purpose• Assistance or “Charity”?

• Contract deliverables• Incentives and disincentives

built in agreement

• Donor Funding- Quick• Funding Restrictions

• Positioned by immediate funding sources

• Mission vs. money• No equity stake/Limited

resources

• Historically, lack of measures, reporting requirements, incentives in grants

• Targeted plans for investment/growth

• Returns for Investing• Flexibility

• Typically more funds to invest in training, recruitment, salaries

• Accountable to investors• Accountable to contract• Tolerating the social mission

The Classic Pros and Cons

NCMA March Workshop

Contracting Considerations

• Can Fixed Price Work?

– Haiti- Assess damage, provide triage equipment and medical services

– Iraq- Assess state of National Health Systems

– Aren’t grants sort of Fixed Price?

• Contract Type alone should not be viewed as the critical element to get desired results

– Need flexibility to adapt to changing environment

– Need to identify real and measurable results

NCMA March Workshop

What works- Performance Based Outcomes

• Whether grant or contract- both instruments should contain desired results that are:

– Attainable & Measurable

• Ex: Reduce incidence of Malaria in Country X by Y % through focused indoor residual spraying of 10,000 homes in jungle region.

– Accountable ( financial and technical)

• Monthly financial progress reports ( mini-EVMS?)

• Milestone Deliverables defined

– Incentives (and Disincentives) tied to achievement

NCMA March Workshop

The Final Question- Which one is Better?

• Each approach and model has a value and purpose

– Immediate impact based on short term need?- Non-profit

• Get help there quick

• Quick streams of funding from donors

• Don’t beat them up- grants/coops have less regs.

– Longer term investment, impact, training, sustainability objectives- Contractor

• Provides capital investment, flexibility to make lasting impact, training and exit strategy for locals to someday take over

• Accountability, metrics & incentives on progress

NCMA March Workshop

Thank You for Your Time

Questions ?