Save the Poor Beltway Bandits!

By William Easterly and Laura Freschi It is a rare day that we former Aid Watchers congratulate the US Agency for International Development on self-imposed changes that will actually help aid benefit the poor.

Today is not that day.

That day was February 6, when USAID changed its own rules to allow itself flexibility to buy more goods and services locally. Buying and contracting locally, rather than shipping goods from the US and contracting services through American companies, can be a cheaper and more efficient use of US aid dollars.  It can also help local economies thrive, and strengthen small businesses, local governments, and NGOs.

USAID plans to increase its funds spent through local actors to 30 percent by 2015, from 11 percent in 2011. Huzzah. This small but promising change means that hundreds of local nonprofits will no longer have to go through contractor middlemen. It means that where public financial management systems are strong and representative enough, more local governments can be helped with direct support rather than through experts employed by American contractors. It also means that the American companies (the so-called “Beltway Bandits”) that earn hundreds of millions of dollars in contracts each year from USAID stand to lose a little.

Naturally, these firms have accepted the prospect of this loss in revenue with equanimity, acknowledging that the reforms will improve outcomes for the proper beneficiaries of aid, and have set about adapting their business model to the new funding environment.

Haha, that was a joke. They’ve actually gone and hired a major Washington lobbying firm to kill the reforms in Congress.  Joining forces as the Professional Services Council and the public-facing Coalition of International Development Companies (from the website: “Did You Know…that funding through international development companies offers superior accountability and transparency?”) they have employed the Podesta Group, which, according to lobbying disclosure forms, has been hard at work “promoting the work of international development companies” in Congress at PSC’s behest.

And the Podesta Group has delivered: House Oversight and Government Reform Committee Chairman Darrell Issa (R-California) has told USAID he will seek to block these reforms, just in time for the markup of the international affairs budget beginning next week.

“This agency is no longer satisfied with writing big checks to big contractors and calling it development,” thundered USAID head Raj Shah in a speech in DC last year. The Beltway Bandits and their lobbyists only want him to take out the words “no longer” and then utter the remaining sentence.