The Foreign Service Journal, February 2013

24 FEBRUARY 2013 | THE FOREIGN SERVICE JOURNAL the money is well spent. In wartime Iraq and Afghani- stan, oversight largely devolved to the Offices of the Special Inspector Gen- eral for Afghanistan and for Iraq Reconstruction, respec- tively. But SIGAR and SIGIR could act only after things had irretrievably gone off the rails; they could not steer processes in the right direction before they went awry. For all these reasons, outsourcing at State and USAID turned into a self-perpetuating mechanism. Once institutions start to rely on it, they slowly lose in-house capacity, becoming increasingly dependent on continued use of contractors—even after experience reveals some things may properly belong squarely in-house. The tragic loss of four American lives in Benghazi last Sep- tember is in part the unsurprising price of pursuing diplomacy and development programs in dangerous locations. But it is also a call for the State Department to rethink the outsourcing trend in looking toward the future. Reform from Within Fortunately, that process has already begun. Soon after taking office in 2009, Secretary of State Hillary Rodham Clinton launched a sweeping strategic assessment of State and USAID’s missions: the Quadrennial Diplomacy and Development Review. Among the many issues it considered was the implica- tions of outsourcing: “Much of what used to be the exclusive work of government has been sourced to private actors, both for-profit and not-for- profit. As responsibilities mounted, obligations in front-line states expanded and staffing levels stagnated, State and USAID increasingly came to rely on outsourcing. Contracts with and grants to private entities often represent the default option to fill growing needs. And these contracts and grants themselves have become high-profile instruments of U.S. diplomacy and development.” Also in 2009, I published a book exploring the causes and consequences of the trend to contract out core diplomatic and development functions: One Nation under Contract: The Out- sourcing of American Power and the Future of Foreign Policy. (See the January 2010 issue of The Foreign Service Journal for a review.) That led to an invitation to participate in the QDDR process. It was an honor to accept, though proposing reforms from within is always a sensitive business, of course. Every suggested change potentially casts someone else’s past efforts in a negative light. The QDDR report, issued in December 2010, identified several areas where recalibration of current practices was indicated to balance the work force and improve oversight and accountability. As part of that effort, the report called on State to restore government capacity in mission-critical areas— i.e., to bring back in house functions that should never have been outsourced. However, the drafters refrained from offering a list of mission-critical functions that are best performed by government employees. The study did acknowledge that simply reversing outsourc- ing would not necessarily rectify these problems. Instead, USAID and State will continue to seek “the appropriate mix of direct-hire personnel and contractors so that the U.S. govern- ment is setting the priorities and making the key policy deci- sions.” Another key conclusion highlighted interagency coopera- tion as an important antidote to excessive reliance on contrac- tors: “The theme of interagency collaboration runs throughout all aspects of the QDDR. We will turn to the personnel of other agencies before turning to contractors.” Several recommendations focused on rebuilding USAID’s in-house development expertise, which had atrophied due to massive budget cutbacks and hiring freezes during the 1990s and 2000s. As a result, the agency was in danger of becoming a contract clearing house. Even before the QDDR’s public unveiling, in fact, USAID had begun to address those challenges through its USAID Forward initiative, billed as “an effort to make the agency more effective by changing the way we partner with others, embrac- ing a spirit of innovation and strengthening the results of our work, saving money and reducing the need for U.S. assistance over time.” The QDDR pledged that USAID would identify positions more appropriately performed by direct-hire personnel, and enhance and improve private security contractor oversight and accountability, since reliance on U.S.-based contractors and implementing partners tends to undercut efforts “to build local capacity so partner countries can sustain further prog- ress on their own.” Enshrining the goals of USAID Forward Once institutions start to rely on contractors, they slowly lose in-house capacity, creating a vicious cycle.