International Food Assistance:

Local and Regional Procurement Can Enhance the Efficiency of U.S. Food Aid, but Challenges May Constrain Its Implementation

GAO-09-570: Published: May 29, 2009. Publicly Released: Jun 4, 2009.

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While the U.S. approach of providing in-kind food aid has assisted millions of hungry people for more than 50 years, in 2007 GAO reported limitations to its efficiency and effectiveness. To improve U.S. food assistance, Congress has authorized some funding for local and regional procurement (LRP)--donors' purchase of food aid in countries affected by food crises or in a country within the same region. Through analysis of agency documents, interviews with agency officials, experts, and practitioners, and fieldwork in four African countries, this requested report examines (1) LRP's impact on the efficiency of food aid delivery; (2) its impact on economies where food is procured; and (3) U.S. legal requirements that could affect agencies' use of LRP.

LRP offers donors a tool to reduce food aid costs and delivery time, but multiple challenges to ensuring cost-savings and timely delivery exist. GAO found that local procurement in sub-Saharan Africa cost about 34 percent less than similar in-kind food aid purchased and shipped from the United States to the same countries between 2001 and 2008. However, LRP does not always offer cost-savings potential. GAO found that LRP in Latin America is comparable in cost to U.S. in-kind food aid. According to World Food Program (WFP) data, from 2004 to 2008, in-kind international food aid delivery to 10 sub-Saharan African countries took an average of 147 days, while local procurement only took about 35 days and regional about 41 days. Donors face challenges with LRP, including (1) insufficient logistics capacity that can contribute to delays in delivery, (2) donor funding restrictions, and (3) weak legal systems that can limit buyers' ability to enforce contracts. Although LRP may have the added benefit of providing food that may be more culturally appropriate to recipients, evidence has yet to be systematically collected on LRP's adherence to quality standards and product specifications, which ensure food safety and nutritional content. LRP has the potential to make food more costly to consumers in areas where food is procured by increasing demand and driving up prices, but steps can be taken to reduce these risks. As GAO's review of WFP market analyses and interviews with WFP procurement officers confirmed, a lack of accurate market intelligence, such as production levels, makes it difficult to determine the extent to which LRP can be scaled up without causing adverse market impacts. Although LRP does have the potential to support local economies, for example by raising farmers' incomes, data to demonstrate that these benefits are sustainable in the long term are lacking. U.S. legal requirements to procure U.S.-grown agricultural commodities for food aid and to transport up to 75 percent of those commodities on U.S.-flag vessels may constrain agencies' use of LRP. Although Congress has appropriated funding for some LRP, agencies disagree on the applicability of certain cargo preference provisions to LRP food aid that may require ocean shipping. The 1987 interagency MOU that governs the administration of cargo preference requirements and could clarify areas of disagreement among the agencies is outdated and does not address the issues arising from LRP.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: As of March 2013, USAID and MARAD agreed that cargo preference applies to the transportation of commodities procured through local and regional procurement (LRP) funded through the International Disaster Assistance (IDA) account. Since a very small percentage of LRP cargoes require ocean transit - an insufficient quantity to induce a full vessel charter - the application of Cargo Preference to LRP transports has minimal cost impact on LRP program expenses, according to USAID. The agencies continue to have a dialogue regarding updating an MOU, the focus of which is the computation of reimbursements for in-kind food aid, not the application of Cargo Preference to the LRP program.

    Recommendation: To enhance the impact that LRP can have on the efficiency of food aid delivery and the economies of countries where food is purchased, the Administrator of the U.S. Agency for International Development and the Secretary of Agriculture should work with the Secretary of Transportation and relevant parties to expedite updating the memorandum of understanding (MOU) between U.S. food assistance agencies and the Department of Transportation, consistent with our 2007 recommendation, to minimize the cost impact of cargo preference regulations on food aid transportation expenditures and to resolve uncertainties associated with the application of cargo preference to regional procurement.

    Agency Affected: United States Agency for International Development

  2. Status: Closed - Implemented

    Comments: To respond to this recommendation, on September 21, 2009, USDA drafted implementation guidelines for its LRP pilot program that required applicants to provide an explanation of steps the applicant would take to gather market intelligence and ensure that LRP would not cause adverse economic effects on producers, consumers, and market systems. In addition, USDA supported a group of implementing partners that pooled their resources to form an LRP Learning Alliance with Cornell University. This group collaborated to develop a methodology for collecting reliable market information in order to verify that LRP would not have negative market impact, and to provide training for implementing partner staff about how to collect market information in a manner useful for evaluating the impact of LRP. In fiscal year 2010 and 2011, USDA funded 21 LRP pilot programs in 19 countries. In December 2012, USDA released a third-party final evaluation on the LRP pilot project, which had a section devoted to market analysis. This section noted that of the 20 pilot projects evaluated, LRP interventions were not found to have caused market impacts. The report also noted that "USDA can be confident that its [LRP] had negligible and fleeting impacts, if any, in procurement markets."

    Recommendation: To enhance the impact that LRP can have on the efficiency of food aid delivery and the economies of countries where food is purchased, the Administrator of the U.S. Agency for International Development and the Secretary of Agriculture should work with implementing partners to improve the reliability and utility of market intelligence in areas where the U.S.-funded LRP occurs, thereby ensuring that U.S.-funded LRP practices minimize adverse impacts and maximize potential benefits.

    Agency Affected: Department of Agriculture

  3. Status: Closed - Implemented

    Comments: In August 2009, USAID stated that as part of its new 2008/2009 funding for LRP, USAID's implementing partners were to monitor and report on specific market indicators specified in grants or cooperative agreements. In addition, USAID stated that the World Food Program (WFP), the major recipient of USAID's 2008-2009 LRP funding, already had in place an effective system to ensure that LRP did not disrupt local and regional markets. By April 2010, USAID launched the Emergency Food Security Program, which supports local and regional procurement, cash transfers, and food vouchers using International Disaster and Famine assistance Funds. Under this program, USAID requires implementing partners to complete detailed market analysis for proposed LRP interview to determine potential impacts. This market analysis includes a variety of information to ensure that programs are unlikely to do discernible economic harm, and may be based upon anticipated tonnage amounts procured as a percentage of tonnage produced and consumed in the location of origin and distribution, commodity price fluctuations in world and local markets, and other economic indicators. Implementing partners are also expected to monitor market impacts of their program and report any concerns to USAID.

    Recommendation: To enhance the impact that LRP can have on the efficiency of food aid delivery and the economies of countries where food is purchased, the Administrator of the U.S. Agency for International Development and the Secretary of Agriculture should work with implementing partners to improve the reliability and utility of market intelligence in areas where the U.S.-funded LRP occurs, thereby ensuring that U.S.-funded LRP practices minimize adverse impacts and maximize potential benefits.

    Agency Affected: United States Agency for International Development

  4. Status: Closed - Implemented

    Comments: In August 2009, USAID said it was drafting guidance for future LRP purchases that articulated requirements with regard to quality standards and product specifications, as well testing and reporting procedures to ensure adherence to those requirements. By April 2010, USAID launched the Emergency Food Security Program, which supports local and regional procurement, cash transfers, and food vouchers using International Disaster and Famine Assistance Funds. Under this program, USAID began requiring implementing partners to meet strict commodity quality standards, such as including commodity safety and quality assurance inspection results in their final reports. At the time, USAID did not systematically maintain these final reports in a single database, but planned to do so in a new system called the Food for Peace Management Information System. In December 2012, the Food for Peace Management Information System became available for implementing partners' use and all of USAID's fiscal year 2013 program reporting submissions, such as commodity quality reports on locally and regionally procured food aid, were made available.

    Recommendation: To enhance the impact that LRP can have on the efficiency of food aid delivery and the economies of countries where food is purchased, the Administrator of the U.S. Agency for International Development and the Secretary of Agriculture should systematically collect evidence on LRP's adherence to quality standards and product specifications to ensure food safety and nutritional content.

    Agency Affected: United States Agency for International Development

  5. Status: Closed - Implemented

    Comments: To respond to this recommendation, on September 21, 2009, USDA drafted implementation guidelines for its LRP pilot program that specified commodity safety and quality assurance requirements for all food aid purchased locally or regionally abroad. In fiscal year 2010 and 2011, USDA funded 21 LRP pilot programs in 19 countries. In fiscal year 2011, USDA hired an independent contractor to complete an evaluation of the pilot that included an analysis of the quality and safety of the commodities purchased with USDA LRP project funds. In December 2012, USDA released the evaluation that noted that participants in the pilot tracked quality standards and specifications of the commodities purchased for the program. Specifically, participants answered standardized questions and submitted relevant evidence to ensure systematic compliance with the quality and safety requirements of LRP agreements.

    Recommendation: To enhance the impact that LRP can have on the efficiency of food aid delivery and the economies of countries where food is purchased, the Administrator of the U.S. Agency for International Development and the Secretary of Agriculture should systematically collect evidence on LRP's adherence to quality standards and product specifications to ensure food safety and nutritional content.

    Agency Affected: Department of Agriculture

  6. Status: Closed - Not Implemented

    Comments: In February 2012, USDA stated that DOT's new regulations would resolve uncertainties associated with the application of cargo preference to locally or regionally procured foods. In July 2012, Congress amended the Cargo Preference Act of 1954 by repealing the additional 25 percent cargo preference requirement for food assistance (P.L. 112-141 section 100124). However, the amendment did not clarify how DOT will apply the law to locally or regionally procured foods. The agencies continue to have a dialogue regarding updating an MOU, the focus of which is the computation of reimbursements for in-kind food aid, not the application of Cargo Preference to the LRP program.

    Recommendation: To enhance the impact that LRP can have on the efficiency of food aid delivery and the economies of countries where food is purchased, the Administrator of the U.S. Agency for International Development and the Secretary of Agriculture should work with the Secretary of Transportation and relevant parties to expedite updating the memorandum of understanding (MOU) between U.S. food assistance agencies and the Department of Transportation, consistent with our 2007 recommendation, to minimize the cost impact of cargo preference regulations on food aid transportation expenditures and to resolve uncertainties associated with the application of cargo preference to regional procurement.

    Agency Affected: Department of Agriculture

 

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