The Foreign Service Journal, April 2004

strategy. We need to have people in the field for the long term. The overseas presence is what makes [USAID] effective.” When the dust of the downsiz- ing settled, the agency didn’t know what it had left. Even now, USAID has yet to conduct a full-scale assessment of its work force’s skills and it has only begun to identify the expertise it needs to acquire to be effective in the future. But it is obvious that the brain drain was traumatic. Many of the most expe- rienced Foreign Service officers left. In some cases, as the GAO report noted, inexpe- rienced and untrained officers were given assignments abroad that they were ill-prepared to handle. Downsizing’s Domino Effect According to the GAO, the USAID workforce is not geared for its current contract oversight mission. Staff training was hit hard in the budget cuts. USAID employees, many of them among the foremost experts in various development specialties, were denied train- ing in how to oversee contracts. “When the budget is cut, you cut out what you can cut off and still maintain vital functions,” says Brown. “So they cut staff train- ing.” In 2004, Natsios requested and Congress granted $10 million for staff instruction. The agency has requested another $10 million for next year. “We have made train- ing and investing in training a very high priority, and a lot of that is going to training our contracting officers in how to perform contract oversight,” Marshall says. Even so, the lack of funding for so many years is still having reper- cussions. In Iraq, for example, the agency had to take steps to outsource even the oversight of the contracts it has let. The agency hired the Army Corps of Engineers to help it oversee the largest contract — the $600 million con- struction deal awarded to San Francisco-based Bechtel Corp. And last June, USAID hired Washington-based Management Systems International to help oversee the remaining contracts. Not surprisingly, the severe budget cutting of staff and training undermined efforts during the 1990s to increase efficiency and effectiveness by revamping USAID contracting pro- cesses. In 1993, USAID was named a “reinvention laboratory” by Vice President Gore’s National Per- formance Review. “Procurement reform was considered one of the cornerstones of the reform effort within the agency,” Clarion Uni- versity Professor Ruben Berrios writes in his 2000 book, Contracting for Development. As Berrios ex- plains, Atwood set up a pilot project in 1994 to implement performance- based contracting. The plan was to move away from the “cost-plus- fixed-fee” deals that had become the norm at the agency. In a cost-plus-fixed-fee deal, the government and the contractor negotiate a profit margin, while the government pays for all costs associated with the pro- ject. When costs run high, the government just keeps paying. Under the new plan, the agency would grade contractors on their performance (poor performers would be ineligible for future deals). By 1995 a system had been developed to help agency contracting offi- cers do the grading. But today, nearly 10 years later, most of the agency’s contracts continue to be cost-plus-fixed-fee deals. Evaluating contracts well, it turns out, takes the kind of time and effort that few USAID officers have. Agency reviews have been spotty, says Alan Chvot- kin, a senior vice president with the Arlington, Va.- based Professional Services Council, a trade group that represents USAID contractors. “Some contract- ing officers are better at it, and more timely,” provid- ing detailed narratives explaining their review. Others, he says, just go through the motions. The failure to complete the overhaul of the con- tracting process has had a cost of its own. Natsios acknowledges the problem that USAID is seen by many “as sort of a closed society.” The perception is that “only a few big businesses do business with us” — a perception that, rightly or wrongly, grew to an uproar over USAID contracting in Iraq and Afghanistan. Even earlier, Berrios found that most contracts go to a couple dozen large firms, mostly based in the Washington, D.C., area. Overburdened contracting F O C U S A P R I L 2 0 0 4 / F O R E I G N S E R V I C E J O U R N A L 37 USAID employees, many of them among the foremost experts in various development specialties, were denied training in how to oversee contracts.