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S. HRG. 108–561 USAID CONTRACTING POLICIES HEARING BEFORE THE SUBCOMMITTEE ON INTERNATIONAL ECONOMIC POLICY, EXPORT AND TRADE PROMOTION OF THE COMMITTEE ON FOREIGN RELATIONS UNITED STATES SENATE ONE HUNDRED EIGHTH CONGRESS SECOND SESSION FEBRUARY 25, 2004 Printed for the use of the Committee on Foreign Relations ( Available via the World Wide Web: http://www.access.gpo.gov/congress/senate U.S. GOVERNMENT PRINTING OFFICE 95–264 PDF WASHINGTON : 2004 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001 VerDate 11-MAY-2000 13:09 Aug 19, 2004 Jkt 000000 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 95264 SFORELA1 PsN: SFORELA1 COMMITTEE ON FOREIGN RELATIONS RICHARD G. LUGAR, Indiana, Chairman CHUCK HAGEL, Nebraska JOSEPH R. BIDEN, JR., Delaware LINCOLN CHAFEE, Rhode Island PAUL S. SARBANES, Maryland GEORGE ALLEN, Virginia CHRISTOPHER J. DODD, Connecticut SAM BROWNBACK, Kansas JOHN F. KERRY, Massachusetts MICHAEL B. ENZI, Wyoming RUSSELL D. FEINGOLD, Wisconsin GEORGE V. VOINOVICH, Ohio BARBARA BOXER, California LAMAR ALEXANDER, Tennessee BILL NELSON, Florida NORM COLEMAN, Minnesota JOHN D. ROCKEFELLER IV, West Virginia JOHN E. SUNUNU, New Hampshire JON S. CORZINE, New Jersey KENNETH A. MYERS, JR., Staff Director ANTONY J. BLINKEN, Democratic Staff Director SUBCOMMITTEE ON INTERNATIONAL ECONOMIC POLICY, EXPORT AND TRADE PROMOTION CHUCK HAGEL, Nebraska, Chairman LINCOLN CHAFEE, Rhode Island PAUL S. SARBANES, Maryland MICHAEL B. ENZI, Wyoming JOHN D. ROCKEFELLER IV, West Virginia LAMAR ALEXANDER, Tennessee JON S. CORZINE, New Jersey NORM COLEMAN, Minnesota CHRISTOPHER J. DODD, Connecticut (II) VerDate 11-MAY-2000 13:09 Aug 19, 2004 Jkt 000000 PO 00000 Frm 00002 Fmt 5904 Sfmt 5904 95264 SFORELA1 PsN: SFORELA1 CONTENTS Page Barton, Mr. Frederick D., co-director of Post Conflict Reconstruction Pro- grams, Center for Strategic and International Studies, Washington, DC ...... 32 Prepared statement .......................................................................................... 35 Responses to additional questions for the record from Senator Lugar ........ 56 Beans, Mr. Timothy, Director, Office of Procurement, U.S. Agency for Inter- national Development, Washington, DC ............................................................ 7 Prepared statement .......................................................................................... 9 Responses to additional questions for the record from Senator Lugar ........ 55 Responses to additional questions for the record from Senator Hagel ........ 58 Response to an additional question for the record from Senator Sarbanes . 60 Burman, Dr. Allan V., President, Jefferson Solutions, division of the Jefferson Consulting Group, LLC, Washington, DC .......................................................... 37 Prepared statement .......................................................................................... 40 Hagel, Hon. Chuck, U.S. Senator from Nebraska, opening statement ............... 1 Mosley, Hon. Everett L., Inspector General, U.S. Agency for International Development, Washington, DC ........................................................................... 2 Prepared statement .......................................................................................... 5 Responses to additional questions for the record from Senator Lugar ........ 53 Responses to additional questions for the record from Senator Hagel ........ 58 Stevenson, Mr. Marcus L., director of Grants and Contracts, The Urban Institute, Washington, DC .................................................................................. 44 Prepared statement .......................................................................................... 48 Responses to additional questions for the record from Senator Lugar ........ 57 (III) VerDate 11-MAY-2000 13:09 Aug 19, 2004 Jkt 000000 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 95264 SFORELA1 PsN: SFORELA1 VerDate 11-MAY-2000 13:09 Aug 19, 2004 Jkt 000000 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 95264 SFORELA1 PsN: SFORELA1 USAID CONTRACTING POLICIES WEDNESDAY, FEBRUARY 25, 2004 U.S. SENATE, SUBCOMMITTEE ON INTERNATIONAL ECONOMIC POLICY, EXPORT AND TRADE PROMOTION, COMMITTEE ON FOREIGN RELATIONS, Washington, DC. The subcommittee met, pursuant to notice, at 3:38 p.m. in room SD–419, Dirksen Senate Office Building, Hon. Chuck Hagel (chair- man of the subcommittee), presiding. Present: Senator Hagel. OPENING STATEMENT OF SENATOR CHUCK HAGEL Senator HAGEL. Good afternoon. This hearing of the Senate For- eign Relations Subcommittee on International Economic Policy, Ex- port and Trade Promotion will examine USAID contracting policies, focusing in particular on USAID contracting policies toward Af- ghanistan and Iraq. American reconstruction efforts in Afghanistan and Iraq are crit- ical to successful political transitions in both countries. Since 2001, USAID has been allocated approximately $1 billion for reconstruc- tion assistance in Afghanistan. Although the majority of the more than $20 billion in reconstruction assistance appropriated for Iraq is under the control of the Department of Defense and the Coalition Provisional Authority, USAID has so far awarded 11 reconstruction contracts in Iraq worth $3.3 billion. The primary reconstruction project in Afghanistan has been the Kabul-Kandahar highway. In December 2003, the Louis Berger Group, a leading American engineering and construction firm and the USAID contractor for this project, completed phase I of the re- construction of the highway. In the spring and summer of this year, additional layers of asphalt will be laid. The cost of phase I of this project was $190 million; the total cost of the completed highway is projected to be $270 million. According to the November 2003 report issued by USAID Inspector General Mosley’s office re- garding progress of the Kabul-Kandahar highway, and according to Mr. Mosley’s written testimony today, who we will hear from later, the Louis Berger Group did not adequately update USAID on changes in its implementation plan and schedule during phase I of the project. I would welcome testimony from both USAID witnesses regarding the schedule and plan for implementation of phase II of the highway’s construction. Because of the urgency of the situation in Iraq, in the spring of 2003, USAID issued solicitations and awarded nine contracts for (1) VerDate 11-MAY-2000 13:09 Aug 19, 2004 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 95264 SFORELA1 PsN: SFORELA1 2 reconstruction in Iraq, bypassing the full and open competition process which normally governs USAID contracting. While limited competition rules, as they are known, may have had certain bene- fits given the crisis in Iraq, the contracting process has also raised questions about oversight and accountability of our Iraq reconstruc- tion programs. USAID contracting policies in Iraq, Afghanistan, and throughout the world should reflect the best practices and values of American foreign policy and business. Our policies should encourage trans- parency and accountability, and empower the peoples of the recipi- ent countries by developing and expanding their private sectors and providing local jobs. Some of the problems and challenges in the USAID contracting and procurement process may be linked to management and staff- ing decisions over the past decade. An August 2003 GAO report noted that USAID has evolved from an Agency in which U.S. di- rect-hire staff directly implemented development projects to one in which U.S. direct-hire staff oversee the activities of contractors and grantees. Between 1992 and 2002, USAID direct-hire staff declined by 37 percent overall and 42 percent overseas, during a decade when USAID program funding increased by more than 50 percent. USAID staff deployed abroad to oversee these major foreign assist- ance and reconstruction projects may not have the contracting and procurement expertise required for proper oversight and account- ability. USAID’s contracting policies do not exist in a vacuum. They can- not be separated from USAID’s overall policies and procedures for foreign assistance. USAID contracting policies also cannot be con- sidered in isolation of overall U.S. policy objectives in Iraq, Afghan- istan, or elsewhere in the world. I welcome and look forward to the testimony of today’s witnesses. The first panel will include the Honorable Everett L. Mosley, USAID Inspector General and Mr. Timothy Beans, USAID’s Direc- tor of Procurement. The second panel includes Mr. Frederick Bar- ton, co-director of Post Conflict Reconstruction Programs at the Center for Strategic and International Studies; Dr. Allan Burman, president of Jefferson Solutions; and Mr. Marcus Stevenson, direc- tor of Grants and Contracts at the Urban Institute. Gentlemen, we are all grateful for your testimony and your time today and your availability and we appreciate very much your com- ing forward with that testimony and look forward to an opportunity to exchange views during a question and answer period. With that, Mr. Mosley, if you would begin, we would appreciate it. STATEMENT OF HON. EVERETT L. MOSLEY, INSPECTOR GEN- ERAL, UNITED STATES AGENCY FOR INTERNATIONAL DE- VELOPMENT Mr. MOSLEY. Mr. Chairman, other committee members, and com- mittee staff, thank you for the opportunity to provide my testimony today on the USAID contracting practices. As you have requested,