USAID’s largest-ever foreign assistance package doubles down on colonial aid

USAID is on the verge of allocating $17 billion in contracts for global health. This will be the agency’s largest-ever commitment to an aid program that nearly everyone agrees is broken. Rather than continuing with this colonial model of aid, we need to press pause on the current contract designs, reissue new calls for proposals and seize the opportunity for real reform that spends money smarter.

USAID’s “Next Generation Global Health Supply Chain” contracts could hasten many countries’ transition from a relationship with the United States defined by aid to one built on mutually-beneficial trade. The laudable goal is to help low- and middle-income countries access essential health commodities like HIV tests and malaria medications. But as currently written, the contracts threaten local markets by displacing businesses that are already operating effectively.

Travel to any country in Africa, Asia or Latin America and you’ll find dozens of companies transforming global supply chains and increasing access to health care for hundreds of millions of people. For example, mPharma, owner of Africa’s largest pharmacy network, is rapidly increasing access across the continent to health care professionals and life-saving medications, including in remote communities.

These are the kinds of companies USAID Administrator Samantha Power was talking about more than a year ago when she described a “new vision” for global development focused on getting more resources to organizations in a position to drive better, cheaper and more sustainable impact. They’re also the kinds of firms the U.S. Development Finance Corporation invests in. But USAID’s Next Generation contracts don’t leverage any of these kinds of innovative companies that can deliver on Power’s mission.

Instead, they are anti-competitive deals for the dozen or so government contractors that have won most of the agency’s business since the 1960s. One contract to provide in-country logistics services actually directs firms to budget just 25 percent of the total contract value for any in-country supply chain providers; the winning government contractor can take the rest.

Another technology-focused contract restricts eligibility to apply to pre-approved government vendors, precluding the world’s best tech firms from even submitting a bid. 

No next-generation company could ever compete directly for a dollar of any of these “Next Generation” awards. Nor should they count on a subcontract, either. Seventy-three percent of firms that have tried to work with USAID’s largest contractors report that big aid contractors routinely cut them out of promised work, a pervasive problem that Power has acknowledged but the agency has not addressed.

USAID says its “overarching” objective is to “help countries become self-reliant, thus ending the need for foreign assistance.” But these Next Generation awards will instead perpetuate dependence on foreign aid by putting contractors in the position of running other countries’ health supply chains.

This $17 billion project is a continuation of a $10.5 billion one before that, which was a $2.5 billion one before that. Billions of dollars in a string of awards dating back to the 1960s have been used to pay salaries, overhead and rent for office parks in Virginia and Maryland rather than making an impact in the countries where it is intended. That makes it hard to call this “foreign” assistance.

Worse, the vast majority of this $17 billion taxpayer-funded project will pay contractors to perform activities instead of deliver results. A 2019 USAID inspector general report chastised the agency for paying contractors in full even when they failed to deliver results — yet USAID has designed these Next Generation awards to do it again.

If Power really wants to reform foreign assistance (and I believe she does), she must get in the weeds. Procurement, with its mind-numbing jargon, jaw-droppingly expensive systems requirements and years-long payment schedule, prohibits innovation. It’s where ambitious reform goes to die.

African nations in particular are understandably frustrated with our track record, including our shortsighted response to the pandemic. Sen. Chris Coons (D-Del.) told Power last year that countries abstaining or voting against us on UN resolutions is meant as a wake-up call about “our failure, our lack of delivery on vaccines [and] humanitarian relief.” He added, “I am convinced that many African countries would still prefer to be close partners with the United States, but they view us as unreliable. We have a moment where we could make that right.”

Rather than perpetuate another decade of broken development, these contracts are our chance to transform aid, encourage innovation and help low- and middle-income countries work toward economic independence. These contracts could be streamlined and structured to boost markets rather than gutting them with anti-competitive funds.

Last month, during the U.S.-Africa Summit, President Biden outlined “a forward-looking foundation for a 21st century partnership between Africa and the United States.” Let’s be that partner.

Walter Kerr is executive director of Unlock Aid, a global coalition of innovators focused on reforming aid agencies.