A year after the beginning of Operation Enduring Freedom, USAID tasked Louis Berger Group (LBG) to build Afghan infrastructure from scratch. The job was easy: to build roads, health clinics, schools, etc. in a landmine, Taliban, drug mafia infested country. No thanks to them for paving the cross country, Kabul-Kandahar highway and making it available to traffic, eleven months after the work started at the beginning of 2003. This project which reduced 24 hours drive (donkey ride) to 6 hours of smooth road trip and many other projects were a waste tax payer???s money. Yes, the displaced NGO???s could???ve done this in continuation of landmarking achievements. And because we haven???t seen it on TV, we can say that tribal chiefs haven???t been involved in any of these projects.
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Beltway Bandits
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Neither side has convincing data to prove that private firms are more (or less) efficient; what is clear is that private firms now dominate recent investigation headlines. Consider Afghanistan. In 2004, the then Afghan Finance Minister Ashraf Ghani was so flustered by the poor performance of BearingPoint consultants that he he asked a number of them to leave the country. Then in 2005, a congressional report found that of 286 schools scheduled to be built in Afghanistan by the Louis Berger Group for USAID, only eight were built by the end of the year; only 15 of 253 health clinics the company promised were completed over the same time period. Having failed to persuade USAID to use more effective contractors (both BearingPoint and Louis Berger have since had Afghan contracts renewed), Ghani moved to London, where he is working to devise a new aid model. The upshot: private contractors are better suited to build infrastructure like roads and bridges because of their size and technical expertise; they're at their worst when tasked with smaller, local operations like schools and health clinics, which require the time and patience to build local trust.
Yet even the bigger, technical projects assigned to private contractors face criticism, since USAID lacks the manpower to oversee how their money is spent. "[USAID] has been told to do more with less, and there's a point when that doesn't work," says Barclay. The number of USAID staff overseeing contracts has dropped nearly fivefold over the past decade. Today there are 109 USAID staff managing upwards of $8.9 billion in aid funds, about $81 million per staff member. Without the staff to monitor a growing pool of funds, USAID often punts oversight responsibilities over to the contractors themselves. Contractors then pull in regionally based subcontractors and nonprofits to implement work requiring local knowledge.
The result? Only a fraction of the original aid money reaches local economies. According to Ghani and Clare Lockhart, the lawyer on Afghanistan's Bonn Agreement, contracts in Afghanistan have passed through as many as five layers of American contractors, each charging a substantial fee, before money hits the ground; a school costing USAID $250,000, for example, would be built by an Afghan contractor for $35,000 to $50,000. Some NGOs claim they avoid those losses by moving offices abroad and contracting directly with locals, cutting out expensive expats entirely. ActionAid recently moved its central office from London to South Africa for this reason. So far, no one is talking about Johannesburg bandits.
© 2007
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