USAID Iraq contract document: jmgarticle

USAID’S Iraq Procurement Contracts: Insider’s View BY JEFFREY MARBURG-GOODMAN The U.S. Agency for International Development There is a tremendous tension between this purposely (USAID) is known as the world leader among develop- deliberate and unhurried process and the occasional ment assistance and emergency relief agencies. Its far- emergency needs of a government agency. Sudden famine reaching programs, creative methodologies, and strong and killer viruses won’t wait six months for a government accountability requirements distinguish it from other agency to procure the resources to halt the effects of these bilateral and multilateral development agencies. Among natural disasters; the ordinary procurement process could other things, USAID’s programmatic partners (its private result in the loss of thousands of innocent lives. Similarly, sector contract and grant recipients) are held accountable a country’s destitution after war or organizational loot- by tough regulations and the agency’s historic on-the- ing—where the physical infrastructure has been destroyed ground field presence. and much of the population is suffering from contaminat- USAID’s rapid response to the situation in Iraq, ed water, lack of lighting, a health care system on the including award of the largest foreign assistance contracts verge of collapse, and a port so muddied that even food since the Marshall Plan,1 should be seen as firm valida- aid cannot cross its borders—such a country cannot tion of the U.S. government’s expertise and commitment endure a six-month procurement process in order to to reconstruction and development assistance. Instead, receive relief. Iraq, at war’s end, was such a country. USAID has met an onslaught of criticism as to its meth- USAID, in cooperation with an interagency committee, ods in competing and awarding the large Iraq reconstruc- began contingency planning for Iraq’s reconstruction in tion portfolio of contracts. That criticism must not go uncontested. late fall 2002. In January 2003, the central procurement process was set in motion. Because time was short, USAID Although the lack, thus far, of a single GAO or agency relied on one of two urgency-based regulatory exceptions protest by losing bidders offers some consolation, the to “full and open” competition.4 Although the vast majori- author, a career USAID procurement lawyer, remains dis- ty of USAID’s procurements employ fully competitive pro- turbed by a continuing drumbeat of mistaken information cedures, these “urgency” exceptions have been embedded disseminated by some in the media, Congress, and even in USAID regulations for almost two decades now. They procurement experts outside the government. The have been used prudently in situations such as relief efforts assaults on USAID’s procurement policies can be grouped in the aftermath of conflict in Bosnia and Afghanistan and into three categories, all centering on the use—and in response to natural disasters such as Hurricane Mitch in alleged misuse—of the U.S. government procurement Central America and Columbian earthquakes in South system. Let’s set the record straight for each of these. America. None of these exceptions merited significant criticism and no one raised an outcry as to the use of less Allegation Number One than fully competitive procedures. Notably, neither in “USAID decided to not fully compete these contracts, con- Bosnia nor in Afghanistan (nor in other similar interna- trary to law and regulation.” tional emergency efforts) were there the kinds of false alle- The U.S. Federal Acquisition Regulation (FAR) consti- gations that USAID has endured this year. tutes the most complex, yet most transparent, government purchasing code in the world. Still, the success it ensures for On January 13, 2003, the USAID acting administrator exercised, inter alia, the authority explicitly granted by fundamental fairness, transparency, and maximum competi- the AIDAR (the USAID supplement to the FAR) to tive benefit is normally achieved at considerable costs in waive normal contracting procedures, including formal time and staffing effort. It takes a minimum of six months— advertising requirements, by making a written determina- the norm is eight or more2—to carry out a full and open tion “that compliance with full and open competition competition for complex services or supplies, which includes procedures would impair foreign assistance objectives, time to draft the scope of work, advertise the agency’s needs, and would be inconsistent with the fulfillment of the for- collect and evaluate proposals, and award a contract based eign assistance program.”5 With the exception of one on a weighted combination of cost and technical considera- contract to generally provide USAID with immediately tions—all part of the FAR’s “best value” decision.3 needed personnel support for its work in Iraq6 (and another for agriculture-related services that is currently being contracted for on the basis of full and open compe- tition7), multiple firms were placed on a “short list” and invited to bid on the contracts. USAID career employees decided which firms were on the short list based on past performance and an estimate Jeffrey Marburg-Goodman is chief procurement counsel for the U.S. Agency for International Development where he has been a government civil servant since 1991. Previously, he was in private practice. Mr. Marburg-Goodman was a panel member on the program “Reconstruction of Iraq” at the ABA’s Annual Meeting in San Francis- co in August 2003. Number 1 • Volume 39 • Fall 2003 • American Bar Association • Procurement Lawyer • 10 “USAIDS Iraq Procurement Contracts: Insider’s View” by Jeffrey Marburg-Goodman, published in Procurement Lawyer, Volume 39, No.1, Fall 2003 © 2003 by the American Bar Association. Reproduced by permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. of the capacity of the firms to perform. Six companies competed aggressively for the large infrastructure contract ultimately awarded to Bechtel, a competitive range was set, and the agency conducted vigorous and prolonged negotiations with the two finalists. This was in no way a “rigged” or predetermined outcome, and the American taxpayer reaped substantial savings from a process in which the bidder with the highest technical rating also bid the lowest cost.8 Allegation Number Two “USAID went shopping in secret. It failed to advertise on the Web and selected a handful of contractors to bid on its Iraq procurements; clearly, politics played a role in the selections.” In the first place, it is worth noting that the U.S. pro- curement process itself provides for a good deal of silence as, by law, it is supposed to be conducted in substantial secrecy. This secrecy is mandated to preserve the integrity of the process. For example, the deliberations of the career professionals who evaluate bidders’ technical proposals are conducted in private, in order to avoid any undue influ- ence over them. Meanwhile, the same procurement laws that call for a good deal of secrecy during the process already require substantial after-award publication—publi- cation that was mandated by laws and regulations that appeared in the post-Watergate wave of “sunshine legisla- tion.” These public disclosures include the contract itself (minus certain contractor proprietary information), a debriefing process for losing bidders, and release, when required, of the contracting officer’s negotiation memoran- dum chronicling the complete evaluation process.9 USAID stands ready, as do all U.S. government agencies, to release its documents regarding decisions, as well as to open its processes even more fully to any appropriate review. Therefore, in accordance with law and regulation, the Iraqi reconstruction procurement process was commenced quietly. This was purposeful and policy-oriented: Given the fact the Bush administration was publicly stating that war could be avoided if Saddam Hussein took certain steps, it would have been inadvisable to advertise these reconstruction contracts in the usual manner. According- ly, we set up a process designed to elicit robust competi- tion, value for money, and timely aid in an environment that required silence as to these plans. Still, nothing in this process would allow the agency to avoid its post- award obligations to disclose its evaluation methodology; the rated strengths, deficiencies, and weaknesses of the competing contractors; and the resulting contract itself. A few additional facts can be shared here. First, more than 20 contractors with prior USAID experience were chosen based on merit and capacity. Secondly, many of these contractors were chosen because they currently hold contracts to do work for USAID—contracts award- ed under full and open competition. As to the other con- tractors that were solicited to bid on the Iraq procurements, all were chosen based on objective indicia of merit devised by nonpolitical career professionals only. Number 1 • Volume 39 • Fall 2003 • American Bar Association • Procurement Lawyer • 11 “USAIDS Iraq Procurement Contracts: Insider’s View” by Jeffrey Marburg-Goodman, published in Procurement Lawyer, Volume 39, No.1, Fall 2003 © 2003 by the American Bar Association. Reproduced by permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. Lastly, there is an unwritten but well-understood “fire- Conclusion wall” at USAID and other U.S. government agencies that separates career workers who participate in procure- ment evaluation decisions from political appointees, who, almost without exception, do not serve on technical pan- els or make contracting officer cost decisions, and have no say in that process whatsoever. The author can categorically state that this firewall was in place for all Iraq contract procurements. For exam- ple, the evaluation panel for the large infrastructure con- tract that was won by Bechtel consisted of five career professionals: two engineers, one physical scientist, one The procurement decisions made regarding the Iraq con- tracts were managed by USAID career professionals and, in hindsight, there is probably not a single internal policy decision we would have made differently. If some techni- cal errors were made under the time and staffing pressures of this extraordinary effort, they were relatively inconse- quential and entirely honest ones, committed in the exer- cise of the exuberant and humanitarian ideals that have guided USAID since its inception. PL regional planner, and a contracting officer. If career USAID public servants had smelled even a whiff of Endnotes “undue influence” by any outsider to the process or 1. The $680 million contract awarded to Bechtel National, Inc., thought that the integrity of our procurement procedures were compromised in any way, we would have loudly protested—alerting our agency administrator, our inspec- in April 2003 was the largest single direct contract awarded by USAID in its 42-year history and is thought to be the largest single nonmilitary foreign aid contract to be awarded since the Marshall tor general, and, perhaps, even the press. But that did not Plan that rebuilt Europe after World War II. Collectively, the ini- happen. And because the integrity of the process at USAID is fundamentally sound, it almost never does. tial Iraq contracts, now approaching $2 billion in value, comprise the largest single country foreign aid program since the Marshall Allegation Number Three Plan. At publication time, USAID was using full and open compe- tition to procure follow-on infrastructure services for Iraq valued at “USAID improperly excluded non-American firms from the $1.5 billion. list of contractors it invited to bid on the Iraq contracts.” USAID’s purchases of goods and services for our coun- try’s foreign assistance program are strongly tied to Ameri- 2. According to the “Customer Service Standards” of USAID’s Office of Procurement, 240 days—or eight months—is the stated target for awarding complex competitive contracts. can sources. The Foreign Assistance Act mandates that, as 3. Federal Acquisition Regulation [hereinafter “FAR”], 48 a rule, we not use contractors based in other advanced countries to carry out the U.S. foreign aid program, and C.F.R. § 15.101 (2003). 4. These are the FAR’s “unusual and compelling urgency” Congress has on many occasions announced its strong pref- erence that only American sources be used when taxpayer exception to full and open competition (FAR 6.302–2) and the much less well-known exception, unique to USAID and codified in dollars are at stake.10 Of course, this rule can result in infe- the agency’s supplemental acquisition regulation: “Full and open rior or more expensive goods or services being procured competition need not be obtained when it would impair or other- than would be the case if worldwide sources were solicited. wise have an adverse effect on programs conducted for the purposes Indeed, this policy directly contradicts the efforts by the of foreign aid, relief and rehabilitation.” Acquisition Regulation Bush administration—and subscribed to by most of Con- gress—to free up trade barriers, including a concerted effort [herinafter “AIDAR”], 48 C.F.R. § 706.302–70(a)(2) (2003). Additional provisions limit application to narrower, specified currently being undertaken by the U.S. trade representa- circumstances. tive to lessen national preferences when central govern- ments, including ours, make their procurement purchases.11 5. AIDAR, 48 C.F.R. § 706.302–70(b)(3)(ii) (2003). 6. This first Iraq contract, initially valued at about $7 million, Still, the USAID administrator has the power to waive was awarded on a sole source basis to International Resources these “buy American” requirements, especially when there is insufficient capacity or competition to be had Group in February 2003. The only sole source contract awarded by USAID in this series, it is worth less than one-half of 1 percent of from American sources alone.12 In the January 13 waiver all USAID Iraq contracts that will be awarded this year. referenced above, he did just that, waiving the U.S. source-only requirement to allow USAID’s procurement 7. The Iraq Agriculture contract is valued at $120 million. 8. USAID’s inspector general performed an exhaustive audit of this office, on a discretionary basis, to compete the Iraq con- tracts more broadly. Because it was determined that both procurement and in July 2003 found only minor flaws in the process; these findings were themselves contested by the agency. See the IG’s ample capacity and competition existed in the American report, available at http://www.usaid.gov/oig/iraq_reports.html. marketplace for the Iraq contract requirements, as well as to ensure the diplomatic necessity of proceeding quietly in this sensitive area, the decision was made to compete the initial prime awards only among American firms. 9. FAR, 48 C.F.R. § 15.506 (2003); FAR, 48 C.F.R. §§ 5.401–.402 (2003); Bid Protest Regulations, 4 C.F.R. § 21.3(d) (2003). 10. Foreign Assistance Act, 22 U.S.C. § 2354(a)(1) (2003). 11. See, e.g., “FTAA-Free Trade Area of the Americas: Draft Meanwhile, the subcontracting process, to take place Agreement,” ch. 3, art. III (Nov. 1, 2002), available at http://www. at a later, less sensitive time, could be opened up to worldwide sources, and the agency did just that. ustr.gov/regions/whemisphere/ftaa2002/tnc-w-133-05of12-eng.pdf. 12. Foreign Assistance Act of 1961, 22 U.S.C. § 2354(a)(1)(B) (2003). Number 1 • Volume 39 • Fall 2003 • American Bar Association • Procurement Lawyer • 12 “USAIDS Iraq Procurement Contracts: Insider’s View” by Jeffrey Marburg-Goodman, published in Procurement Lawyer, Volume 39, No.1, Fall 2003 © 2003 by the American Bar Association. Reproduced by permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.