Foreign Assistance Reform Contracting Perspectives:

1. Foreign Assistance ReformContracting Perspectives: Smart Power/Smart Resources NCMA March Workshop - 2010 Mark J. Tremblay VP & Director Contract Operations Abt Associates Inc.

2. 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?

3. What is Foreign Assistance? “And so, to all the other peoples and governments who are watching today, from the grandest capitals to the small village where my father was born, know that America is a friend of each nation, and every man, woman and child who seeks a future of peace and dignity. And we are ready to lead once more…To the people of poor nations, we pledge to work alongside you to make your farms flourish and let clean waters flow; to nourish starved bodies and feed hungry minds.” President Obama, January 20, 2009 Inaugural Address & Introduction to FY 10 Foreign Affairs Budget

4. What is Foreign Assistance? • Is it Foreign Policy? YES • Charity/Moral Imperative? YES • Protect US Interests • Aid/Food/Health Care • 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

5. 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

6. Defense Diplomacy Development Diplomatic/Economic/Military Leadership Hard Power Soft Power + Smart Power =

7. 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

8. 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

9. The Competing Market Challenge • 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- Pentagon wins turf war with State over military aid -Foreign Policy 2/3/10

10. 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?

11. 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)

12. 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”

13. 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.”

14. 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? Contract Grant/Coop

15. Contractors Non-Profits And Then The Next Big Question Who Can Best Deliver What is Needed?

16. The Classic Pros and Cons Objective Non-Profits Contractors Mission Raising Capital Scalability Human Capital Accountability • Accountable to its purpose • Assistance or “Charity”? • Accountable to investors • Accountable to contract • Tolerating the social mission • Returns for Investing • Flexibility • Donor Funding- Quick • Funding Restrictions • Targeted plans for investment/growth • Positioned by immediate funding sources • Typically more funds to invest in training, recruitment, salaries • Mission vs. money • No equity stake/Limited resources • Contract deliverables • Incentives and disincentives built in agreement • Historically, lack of measures, reporting requirements, incentives in grants

17. 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

18. 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

19. 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

20. Thank You for Your Time Questions ?