The Foreign Service Journal, November 2004

Djila, which just happens to be run by Mudhar Shawkat, a top aide to Chalabi. One source in the Iraqi National Congress asked about the contract put the matter succinctly when he said, “Why not?” But we don’t have to go near- ly so far away to see some Washington nonprofit and for- profit companies ripping off international aid agencies every day of the week. While their methods are (sometimes) more subtle than those cited above, they are just as pervasive and lucrative. Here are some examples. Robbing Peter to Pay Paul When those “Requests for Proposals” from the feds come out and land in the hands of a company, they repre- sent both an opportunity and a cost. The opportunity, of course, is to get new funding to do a project, pay salaries, cover the overhead and perhaps make a small profit. But first, the proposal has to be researched and written which, depending on the complexity of the proposed project, can require considerable time and expense. The research, bud- geting, program design, possibly travel to the site, use of expert consultants in certain aspects of the work, and inter- action with the proposed players such as government min- istry officials in developing countries and local agency man- agers, all have to be carried out up front — with no guaran- tee of success. Hiring the people needed to carry out these activities could easily cost many tens of thousands of dollars. What to do? The answer all too often is simply to use people cur- rently on staff being paid for by another project already under contract. When a project manager drops an RFP on your desk and says, “We would like to know what you think of this,” it’s pretty hard to say you can’t help because you’re already working-full time on another project. Naturally, everybody knows you are busy, so the manag- er assures you that a brief meeting or a short memo will do the trick. But it doesn’t, because considerable amounts of staff time are generally needed to write the new proposal that will compete against the other submissions. So various people already working on current projects are deflected from the job for which they are being paid by the outside agency, like a development bank or USAID, to work on the new, as-yet-unfunded project. Specialized talent may be brought in and paid for. But, fundamentally, you use the staff you have to get the proposals written. Of course, we are talking about more than one simple proposal. As the RFPs flow from the international agencies, the company selects those projects it feels it can win. The inevitable consequence is that there are often more proposals than staff to write them. The result is a serious dilution of staff time, energy and effort, which is built into the overall process. Often staff is really pressed for time to work on the funded project precisely because they are responding to the RFPs. An alternative is to bring in a consultant to do the work but pay him off the project already under contract. Everyone is trapped. There is the employee who can’t say no. The majority of nonprofit organizations are not suf- ficiently capitalized to respond to RFPs, even on a selective basis. But if they don’t respond to the projected future pro- ject, what happens to their staff when the current one is completed? And even for-profit companies see their earn- ings diluted by all of their losing proposals, forcing them to continue scrambling for new contracts. So companies continue to rob Peter to pay Paul to stay in business. The Price Is Wrong One important factor in obtaining a project is price. If your bid can come in lower than your competition, you have a leg up in winning the contract. Some companies purpose- ly lower their bid below their own projected costs. When they run out of money to continue the project, they throw up their hands and say, “What can we do? We have acted in good faith, but some unexpected expenses arose in the course of our work. Other costs have escalated beyond the initial estimate. If we are to finish the project, we are going to have to renegotiate the financial terms.” These companies know that agencies are highly reluctant to change horses in midstream. Working with a new compa- ny which has to learn a complex project often requires more staff time and money from the funding agency. So what the international agency may save by changing suppliers is part- ly offset by their increased in-house costs. Furthermore, the new company obviously will not know the cast of characters with whom it will be dealing and may potentially make criti- cal mistakes. All these interpersonal and financial inertial forces push the agency toward agreeing to renegotiate the contract; after all, it is much easier and safer to stick with the devil you know than to try the one you don’t. While a supplier does not want to develop a reputation for “lowballing,” it is a useful device at certain times, espe- N O V E M B E R 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 55 But we don’t have to go nearly so far away to see some Washington nonprofit and for-profit companies ripping off international aid agencies every day of the week.