Out of every $100 of U.S. contracts now paid out to rebuild Haiti, Haitian firms have successfully won $1.60, The Associated Press has found in a review of contracts since the earthquake on Jan. 12. And the largest initial U.S. contractors hired fewer Haitians than planned.
Discouraging news from an AP article out this week. The article tells the story of one 40-year old Haitian construction supply business. Despite playing by the rules and working to establish a reputable business, owner Patrick Brun says he hasn’t won any US government contracts:
“You can imagine that if we can't win the contracts ourselves, we become totally dependent on foreign companies and nonprofits, and there is not much hope in that," he said. "We may not have the extended capacity of a U.S. company, but we are respectable. We keep good books and records, we have foreign suppliers, we have good credit, we pay our taxes and our customs dues.
The piece also quotes Clare Lockhart, of the Institute for State Effectiveness, whom we’ve featured on this blog. Drawing on her experience of missteps in Afghanistan, she argues that contracting with local firms is a vital step in reconstruction:
"You can't just provide manual jobs. You need to contract with companies so that the middle tier managers and owners of companies have a stake in the legal system and rule of law, and ultimately a stake in the success of their political system and their economy," she says.
So why is so little US funding going into the local economy to help build the capacity of local, Haitian businesses, while the overwhelming majority ends up with foreign firms? Dealing with known contractors theoretically lets USAID act quickly and avoid corruption, as the article points out. But also to blame are outdated procurement practices that fail to encourage USAID to engage local firms.
USAID’s plan for procurement reform, included as part of its ongoing reform effort “USAID Forward” as well as the whole QDDR fanfare, does acknowledge that in order to “strengthen local civil society and private sector capacity,” it will need to actually contract with more than a handful of local NGOs and businesses. The specific targets USAID has set for itself are not cited in those publicly available documents, but an internal USAID document sent to Aid Watch shows how far the agency has to go:
By FY 2015, USAID will increase its direct grants to local nonprofit organizations from 2.46% to 6% of its program funds and will increase the number of partners from 424 to 1000. By FY 2015, USAID will increase its direct contracts to local private businesses from 0.83% of its program funds to 4% and will increase the number of partners from 322 to 600.
Now, hopefully USAID’s laborious procurement reform process will end up benefitting deserving businesses like Patrick Brun’s, waiting in the wings in Haiti.