Foreign Assistance:

AID Can Improve Its Management and Oversight of Host Country Contracts

NSIAD-91-108: Published: May 29, 1991. Publicly Released: May 29, 1991.

Additional Materials:

Contact:

Joseph E. Kelley
(202) 512-4128
contact@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

Pursuant to a congressional request, GAO reviewed the Agency for International Development's (AID) policies and procedures for host country contracting for technical assistance services, construction services, and commodities at AID missions in Bangladesh, Egypt, Jordan, and Pakistan, focusing on: (1) whether project officers overseeing individual contracts supported the use of host country contracting; (2) whether AID assessed each host country agency's contracting capabilities prior to using a host country contract; (3) how AID determined whether the expected benefits of host country contracting were being achieved; and (4) whether AID monitoring and oversight of host country contracts was effective.

GAO found that: (1) project officers noted that the host country contracts regarding level of competition, price, and quality they managed compared favorably with AID direct contracts, but the contract process for host country contracts was significantly slower than for direct contracts; (2) project officers noted that host country contracts were generally more suitable for the procurement of construction services than AID direct contracts, since host country agencies were in a better position to obtain work permits and authorizations from local government agencies, and more likely to receive favorable judgments in local courts involving contractor or subcontractor noncompliance; (3) AID conducted a capability assessment for only 1 of the 103 host country contracts at the project design phase and for only one-fourth of all contracts after the project design phase; (4) the Egypt and Pakistan missions' capability assessments were superficial and included few specifics on the host agency's capability to award contracts, review invoices, and audit contractor records; (5) AID failed to measure or assess the achievement of principal expected benefits of host country contracting; (6) although senior missions officials discounted institution building and reduced administrative burden benefits of host country contracting, acknowledging only the increased sense of project ownership, project officers stated that all three benefits were achieved; and (7) each mission extensively monitored the contracting process, disbursed contract funds, and assumed responsibility for conducting contract audits, but failed to provide appropriate audit coverage.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In April 1992, AID issued a General Notice to all AID staff announcing the agency's Audit Management and Resolution Program. The General Notice provides an overview of AID's audit process and establishes clear areas of responsibility for initiating and tracking required audits. In October 1992, AID issued three Contract Information Bulletins covering the audit process for U.S. contractors, preaward audits and surveys, and indirect cost rates.

    Recommendation: The Administrator, AID, should issue specific guidance on the cognizant audit process for U.S. contractors and encourage missions to use this process for all three types of contract audits.

    Agency Affected: United States Agency for International Development

  2. Status: Closed - Implemented

    Comments: In March 1993, AID issued a General Notice to all AID staff that audit requirements for host country contracts should be considered in procurement planning and in the preparation of Project Agreements and Project Implementation Letters. These revisions will be incorporated in AID handbook guidance later this year. Until then, the General Notice has the same authority as agency handbook guidance.

    Recommendation: The Administrator, AID, should require detailed plans for audit in project papers.

    Agency Affected: United States Agency for International Development

  3. Status: Closed - Implemented

    Comments: Audit requirements for host country contracts have been incorporated in AID handbook guidance.

    Recommendation: The Administrator, AID, should develop specific audit requirements for host country contracts, such as the need to periodically audit cost-reimbursable contracts or to include cost audits as part of close-outs when appropriate.

    Agency Affected: United States Agency for International Development

  4. Status: Closed - Implemented

    Comments: AID no longer considers institution building as a good reason for using host country contracts and has deleted references to it in handbooks. There are no plans to evaluate other benefits.

    Recommendation: The Administrator, AID, should determine whether institution building and other expected benefits of host country contracting have been achieved on specific contracts and use the results of such evaluations to help guide future contracting decisions.

    Agency Affected: United States Agency for International Development

  5. Status: Closed - Implemented

    Comments: Since May 1992, procurement certification reviews conducted by AID/Washington have included a review of capability assessments. In May 1993, AID's Procurement Executive formallyl directed that procurement certification reviews must include an assessment of the adequacy of capability assessments.

    Recommendation: The Administrator, AID, should ensure that missions fully comply with recently issued AID guidance on conducting capability assessments.

    Agency Affected: United States Agency for International Development

  6. Status: Closed - Implemented

    Comments: In April 1992, AID issued a General Notice announcing the agency's Audit Management and Resolution Program, which covers all of AID's procurement and assistance instruments. This program assignes responsibility for both initiating and tracking required audits. The system is fully operational and quarterly audit tracking reports are being issued.

    Recommendation: The Administrator, AID, should establish a unified system for requesting, tracking, and coordinating host country contract audits.

    Agency Affected: United States Agency for International Development

 

Explore the full database of GAO's Open Recommendations »

Sep 28, 2016

Sep 27, 2016

Sep 22, 2016

Sep 20, 2016

Sep 7, 2016

Aug 31, 2016

Aug 25, 2016

Aug 15, 2016

Looking for more? Browse all our products here