Overreliance on US contractors impedes effective country development

International relief and development organization Oxfam America cautioned that America’s effectiveness to fight poverty around the world may be hampered by a heavy reliance on US contractors, which impedes growth in local capacity to address local needs and local problems.

In a new report “Capacity: Helping Countries Lead” released today as part of Oxfam America’s Ownership in Practice series, the organization outlined how the United States could better support capacity building by being more demand-driven, reducing its overreliance on US personnel and systems, and increasing its use of country systems.

“US foreign aid is too often driven more by our supply rather than in-country need,” said Gregory Adams, Director of Aid Effectiveness at Oxfam America. “So we end up giving poor people what we’ve got instead of what they actually want and need. This leads to missed opportunities, skewed accountability, and higher costs.”

The report highlights feedback from local governments, civil society, and US aid agencies in Afghanistan, Cambodia, Ethiopia, Liberia, Kenya, and Rwanda, which suggests that the United States is too often more supply-driven than demand-driven and relies too heavily on US personnel and systems rather than local ones in its efforts to help countries manage their own development.

“Effective capacity building starts with letting the people in those countries invest in their own human capital, organizations, and institutions,” said Adams. “Donors don’t do development, people develop themselves.  Donors cannot build local capacity; instead, we need to support the efforts of governments and people to build their own capacity.”

The report urges the US to reduce its reliance on US personnel and systems, because a number of reasons:

•    It’s costly. In Liberia, a US consultant costs the government of Liberia anywhere from 60 percent more to twice as much as a comparable consultant through other donors. In Ethiopia, health professionals note that 30 to 40 percent of aid for capacity building on HIV/AIDS stays with the US organizations that provide technical assistance.

•    It’s unsustainable. In Kenya, the US uses its own organizations to manage an indoor residual spraying program for malaria instead of working with the government. According to a health official, “You make it harder for [Kenyans] to do it for [ourselves] the next time. And with malaria control, annual spraying isn’t the only thing you do—it’s about monitoring as well.”

•    It confuses accountability. In Liberia, government officials note that contractors are responsive to their contracting arrangement with USAID or other US government agency, not to what local governments necessarily need. “Contractors have a huge incentive to deliver today, rather than building up systems for tomorrow—that’s what they’re going to be evaluated on.”

•    It’s inflexible. In Afghanistan, government officials see US consultants as “controlled by their contractors,” having little flexibility to change the scope of their work as new needs and opportunities emerge within ministries. In Cambodia, civil society organizations note how the long chain of command from USAID to contractors to subcontractors makes it nearly impossible to implement even small budgeting changes and thus destroys all creativity and flexibility that local organizations can have.

The report also urges use of country systems whenever possible. “Country systems” are the processes used by governments and citizens to actually lead the development process.  Examples include public financial management systems, procurement rules, and other systems that shape the effectiveness of investments in development and help the government provide services to their citizens.  By not relying on country systems, US foreign aid:

•    Often has more expensive procurement practices. In Kenya, while other donors use the procurement system set up through the Global Fund to Fight AIDS, Tuberculosis, and Malaria, the US uses its own procurement for HIV/AIDS test kits and antiretroviral drugs, which are about four times more expensive than the Global Fund.

•    Drains talent from the public sector. In Kenya, an official in the Ministry of Health noted that PEPFAR draws qualified staff away from the government by paying them three times as much as the typical government salary.

•    Has questionable sustainability. In Rwanda, despite some formidable contributions by USAID in improving the capacity of Rwandans to decentralize health care, even US implementers were concerned that the five-year project wasn’t enough to build the systems that will sustain these investments in the future.