Is There a Foreign Aid Industrial Complex?

by Thomas Dichter

In the development aid field the idea of “working ourselves out of job” goes back to the founding of the Peace Corps in 1961. It was never acted upon and the phrase itself receded into the background for decades. Yet it is reflected in the Obama administration’s goal of making development aid so effective that it will no longer be necessary — not just a slogan, it is policy. Likewise the international development community, since at least 2005, in its many forums and high level compendia of goals (the MDGs, and now the SDGs) has embraced the analog of working ourselves out of a job in its commitment to “country ownership” — “they” the developing countries, not “us” the aid givers, are the ones who should own, direct (and increasingly co-fund) “their” development. As former USAID administrator J.Brian Atwood put it 23 years ago:

“It is their country, not ours. It is their community, not ours. We can advise, we can assist, and we can choose not to assist, but the decisions about development priorities and policies must be reached by that society at large, not by us. It is they who bear the risk; they must make the commitment. Providers of development assistance — whether a well-meaning private voluntary group inadvertently imposing an inappropriate cultural style, or whether a panel of prestigious international experts prescribing policy changes from a vantage point far removed from the particular political and social environment — fail if we forget that it is their country, not ours.”

“Country ownership,” “working ourselves out of a job,” these are sound notions. But when? Not any time soon, it would seem. Simply, it is not in the interest of the development industry (ca. $130 billion per annum) to act forcefully on these commitments. Money, channeled through a rising number of players (both for profit and non), and equally important, jobs — good ones at that — are at stake. In what follows, by following the money, the jobs, and the pipeline for new aid jobs, it should become clear that a self-serving aid-industrial complex now exists. And within that complex an underlying culture of mistrust and co-dependency has evolved that obviates against any real change in the near future.

I. The jobs

On a recent day, Devex.com, an on-line resource for openings in the development aid field, listed 2,281 job openings. A full 10% of these were for directors or leaders of development projects (water and sanitation projects, HIV-AIDs projects, microfinance projects and many others), most of them contracted by bilateral agencies like USAID to private organizations, both non-profit and for-profit. Some of these non-profits are almost household names, like Save the Children USA or CARE. And some USAID contract or grant recipients are large for-profits like Chemonics, Checci and Co, or Development Alternatives Inc. (these form part of a cohort referred to as the “beltway bandits.”) Most of the rest of the job listings were for positions under these contracts — accountants, compliance specialists, training consultants, irrigation specialists, project evaluators, and the like. And while some of the positions were aimed at local people (specifying “only Somalis,” or “only Ugandans”) the project leaders (variously called Chiefs of Party [COP], Team Leaders, or Program Directors or Managers) and their immediate staff continue to be positions calling for “northerners” or 3rd country nationals (e.g., a Filipino might be recruited to work as a Chief of Party in Mozambique). Most such positions are limited to the life of the project (LOP) which is typically 30 to 60 months, and because these expatriate staff are deemed to be working under “hardship” conditions (Maputo, Dakar, Dhaka or Dar es Salaam are of course not like Atlanta, New York or Minneapolis) they receive significant salaries and perks.

Can local people do these jobs? Can Tanzanians, Senegalese, Mozambicans or Bangladeshis run development projects in their own countries? Forty years ago it could credibly be argued that a shortage of skilled local people made it necessary to recruit outsiders to take on such positions. Today things are different. My research over the last five years in a dozen developing countries on three continents, talking with hundreds of local organizations and leaders, makes it clear that capable human resources exist pretty much everywhere. But if that is so why do so many such jobs continue to go to Northerners or 3rd country nationals, and why does such a large proportion of the American development aid budget go to U.S. firms? FHI360, a North Carolina based international NGO (INGO) in 2014 had a budget of $650 million dollars, 75% of which came from USAID contracts and grants. Its CEO made in the $500,000 per year range, as do the CEOs of CARE (whose annual budget in 2014 was $517m) and Save the Children (whose annual budget in 2013 was $654m) and World Vision, the largest INGO in the world with a recent budget of just under $1 billion. Even CARE, one of the INGOs that (like World Vision) relies heavily on individual donors, received 25% of its income from US Government grants and contracts.

And whereas staff jobs in development were underpaid decades ago, today’s aid salaries are competitive. In the 1960s and 1970s large and small U.S. NGOs working in developing countries were quintessential do-gooder organizations, often founded by idealistic individuals who felt called to help others. The founder of one such NGO (for which I worked in the 1980s) insisted that new employees take 10% less than their previous job, and he himself had a salary well below market rates even for the then underpaid development field. Today that organization has grown from $7m annually to $70m annually and the average salary for its top 11 officers (all from the North) in 2013 was $291,000, while its CEO topped $400,000.

The scale of employment in the development industry is not easy to determine, but a rough sampling suggests that it is substantial. In 2013 USAID had 9,421 staff counting all 29 employee categories. Forty four percent of these people were local personnel in the USAID posts in the developing countries themselves, but that still leaves over 4,000 staff who are Americans, at least half of whom are in Washington, DC. World Vision, Save the Children, CARE and scores of other INGOs employ thousands of people each. In the U.S. alone, employment in the development aid sector (U.S. Government agencies with development aid programs, such as USAID, the Dept. of Agriculture, the Peace Corps, and the for-profit and non-profit international contractors, which include many universities that hire people for specific overseas aid projects or designate part of their faculty’s time to such projects) is easily in the mid six figures. If one adds the agency and INGO staffs in the UK, the four Scandinavian countries, the Netherlands, Germany, France, and the other 18 aid giving countries that form the Development Assistance Committee of the OECD, a figure of millions of non local jobs is reasonable.

II. The pipeline for development jobs

A key segment of the development industrial complex is academia, both those academic institutions that participate in aid contracts and those that prepare people for work in development. Looking at the latter alone suggests the promise of a long future role for “our” professionals in development work.

In the 1950s and 60s international development was neither a career nor a profession and academia provided no preparation for one. There were schools of international affairs for people preparing for diplomatic careers or to be area studies specialists (hence Middle East, China, or Latin America “hands.”) The people who worked in the early aid programs (USAID was founded in 1961) came to that work with degrees in engineering, economics, agriculture, soil science, epidemiology, public health, etc. Today the Association of Professional Schools of International Affairs lists 41 U.S. institutions that offer degrees in subjects directly related to careers in development. Twenty-six of these offer graduate degrees. They include programs like those of Johns Hopkins’ School for Advanced International Studies, the Heller School at Brandeis University, the Fletcher School at Tufts, the Kennedy School at Harvard, Princeton’s Woodrow Wilson school, the School for International Service at American University, and Columbia’s School for International and Public Affairs. In addition to their degrees in diplomacy or area studies these 26 schools offer 54 different Masters degrees in development — degrees such as:

Harvard’s Masters in International Development, Duke’s MA in International Development Policy, Denver’s Korbel School MA in International development with concentrations in Conflict Resolution, International Administration, or Peace Corps Programs. American University offers MAs in International Peace and Conflict Resolution, Natural Resources and Sustainable Development, and Development Management. The Heller School at Brandeis offers an MA in Non-profit Management, International Health Policy and Management, and Sustainable International Development, while Georgetown University’s Master of Global Human Development, promises: ”The goal of the Master’s of Global Human Development is to prepare students — through coursework, extra-curricular activity and a practical field work experience — to understand the challenges of development and provide them with the tools and experience to address those challenges as successful professionals.”

Besides full degree programs, many offer executive study programs and certificates, such as the Monterey Institute’s Development Project Management Institute’s three-week certificate program, which just in week #1 promises that:

“Participants learn how to design and assess projects that foster sustainable development through tool mastery. Simulations and case study exercises help participants become familiar with the approach to project development that is widely used in bilateral and multinational organizations including USAID, the World Bank and UNDP.”

While it is impossible to estimate the precise number of students involved in all of these programs since many are in dual programs, and some will seek careers in law or diplomacy or business, it is safe to say that a couple of thousand Americans graduate each year aim for a career in development aid. Needless to say many of these programs are profitable for the universities that house them. It is clearly not in their interest, therefore, to suggest to students that a long career in development aid running out to 2050 and beyond ought not to be counted on.

III. The money

As of August 2014, 554 US NGOs were registered with USAID, making them eligible for grants or contracts. These 554 organizations muster about $23 billion dollars in private support and $3.3 billion from the US Government (USG). The percentage of their annual budget that comes from US Government sources varies considerably, but there is a clear interest among many, especially the prominent ones, in getting and keeping a financial relationship with the USG.

Consider Global Communities (formerly called the Cooperative Housing Foundation) which is engaged in many types of overseas aid programs. In FY 2012 it received over 91% of its $166.6 million budget from the USG. For Save the Children USA with $617.4m in annual expense, the figure is 27%; for CARE, with $585.5m in annual expenditure, the figure is 15.5%. For Management Sciences for Health, with $292.28m in annual budget it is 83.5 %; for Catholic Relief Services with $732.4m in annual expenditure it is 53%.

When these non-profits engage in a contract or a grant with the USG they negotiate an indirect cost (overhead) figure. This permits the firm or INGO to charge part of the salary of its CEO, its finance people, and others to the project; as well as part of its rent, vehicle expenses, and other administrative costs, including the personnel who are there to ensure that the overhead percentage is applied.

Simply put the care and feeding of a large number of organizations, both non and for-profit, depend on a business-as-usual relationship with the USG that keeps them doing development work, with little incentive to become lean and efficient, much less move towards “country ownership.” Ordinary bureaucratic waste and inefficiency in present arrangements are advantageous to these organizations. To use just a minor example, in a firm that does half a billion dollars worth of business with the USG each year, there are scores of personnel whose time is charged to routine reporting — people who need to write a 7 page quarterly project report on a quarter during which there was very little to report, but who are trained to make it seem like much went on, and in this USAID or other agencies are complicit. A short report of two sentences would not be well received by USAID, perhaps in part because the people whose job it is to read and file these reports would have less to do if reports were succinct.

USAID’s top 40 vendors as of November 2014 did $9.866 billion dollars worth of business with the agency. Forty-five percent of that amount went to multilateral agencies such as the World Bank and UNICEF. Of the rest, $5.155 billion went to just 30 US firms of which 11 are for-profit, such as the Fortune 500 company AECOM, or Chemonics, or ABT Associates. Among the non-profits in that list are Catholic Relief Services ($206.37 m in USAID work), Save the Children USA ($125.95m) and Mercy Corps ($198.78m). The difference between a for-profit and a non-profit in these cases is largely technical — in terms of the way these firms compete for work with the USG the differences blur. Mergers, spin-offs, and fairly complex intertwining directorships seem to be increasingly common. For example, IRG Ltd. one of the top 40 USAID vendors, is now part of Engility Corporation, and Management Systems International, a for-profit, is part of Coffey International, an Australian consulting firm that works in geo-sciences, oil and gas, and engineering as well as project management. (In turn Coffey International was recently acquired by the US firm Tetra Tech.) FHI 360, a non-profit that as such did $351.3m worth of USAID business in 2013–14 has a separate arm called FHI Development 360 LLC, which did $84.6m worth of USG business. The J.H. PIEGO Corp. did $218.46m in USAID business — it is affiliated with Johns Hopkins University which as such did $100.12 million in USAID business. John Snow International, a for-profit, did $285.5m worth of USAID work as of November 2014, and it has an affiliated non-profit arm, the JSI Research and Training Institute, which under that name did $103.9m in USAID business (the president of both happens also to be the president of a separate non-profit that also does significant business with USAID). Supply Chain Management, another of the top 40 vendors, is a non-profit established in 2005 by John Snow International and Management Sciences for Health. It runs a consortium of both non and for-profits including Booz Allen Hamilton, Crown Agents and Northrup Grumman.

In short development aid has evolved into, and blurred with, big business. Thirty-five years ago only a handful of these vendors existed and most of the non-profits relied on individual charity, members’ contributions or church and corporate donations. Given today’s development aid industry, with its intertwining, hybrid structures, it is only a small stretch to see a resemblance to the military industrial complex — government and the private sector in complex arrangements with thousands of jobs at stake and where competition for contracts and regular courting of government agencies go together. The NGO I worked for some 30 years ago then had its office in New England. By the 1990s in a quest for growth and influence, it and others had moved to Washington, DC to be closer to the money.

The rhetoric about country ownership notwithstanding, the momentum to continue business as usual is strong. An indication of how far into the future the use of US contractors and Northern personnel is likely can also be seen in the roughly two decade old mechanism called the Indefinite Quantity Contract (IQC) and its sister, the risibly named Indefinite Delivery Indefinite Quantity Contract (IDIQ). These mechanisms, originally intended to outsource, and thus simplify the process of procuring engineering or maintenance services for the USG, have become increasingly used in development work. These contracts tend to have a five year performance period and once awarded, the prime contract holders do not need to re-bid subsequent work during this period. A perusal of a number of IDIQs issued by USAID in the last two years shows an array of “usual suspects” (the top vendors) receiving these contracts and a use of these mechanisms for everything from water projects to youth empowerment to institutional capacity development. The recent USAID Youth Power (YP) IDIQ for example involves six prime contractors (among them DAI and FHI360, Global Communities) and 73 sub contractors, 95% of which are U.S. based. The sub-prime players list also reads like the usual suspects (among them are CRS, Population Services Int’l, Land-O’Lakes Inc., Brandeis University, the National 4-H Council, CARE USA, Winrock International, McKinsey and Co., World Education, Management Systems International, Management Sciences for Health, and the Institute for Reproductive Health Georgetown). This “cross-sectoral youth development project,” is set to run into 2020.

Another 5 year IDIQ released for competition in March 2015 in the amount of $1 billion aims “to improve health outcomes through the provision of sustainable water, sanitation and hygiene” and to “manage water in agriculture sustainably and productively to enhance food security.“

A $600 million IDIQ award from early 2013 (called HICDpro) which will run through October 2018 is set up “to provide access to capacity development services to strengthen the ability of national and sub-national governments, private sector entities, NGOs and other civil society organizations to implement programs effectively and to achieve their strategic objectives with diminishing reliance over time on external technical assistance and financial support.” Over 50 US based contractors and sub-contractors will split this $600m pie, and in every case these firms will take a hefty percentage of the money for their overhead, and for travel by staff to “supervise,” “monitor,” and “evaluate” projects in scores of developing countries.

While this last example contains the language of diminishing dependence on aid, its thrust seems really for “us” to provide capacity to “them,” work that in my experience is either not necessary, not useful, or both. As I will elaborate below, the (untested) assumption behind such a program is that “they” — the developing countries — do not have the requisite capacity to undertake development work. But whose development work? For, contrary to the spirit of country ownership, what this IDIQ intends to strengthen is the capacity to do things that we think need doing, and in ways that we believe are the right ways, since in almost all cases the programs to be implemented more effectively are our programs.

Even though there are many in the aid industry who believe in country ownership and working ourselves out of a job, as the above data show real movement towards these ideals is bogged down by the stakes on our side, and as I discuss below, a culture of mistrust and co-dependency.

IV. The underlying culture of mistrust and co-dependency

Threaded through the aid industrial complex is an implicit lack of trust in “their” institutions, organizations and people. In the last 3 decades public demand for greater accountability in foreign aid has increased and a natural bureaucratic response has been to impose more and more rules on aid recipients — to ensure that the money is spent the way it was intended. These rules (in the case of USAID) run to thousands of pages and thousands of specialists who live in the weeds of compliance are employed to enforce them. Their role is to tell a government or an NGO what can and cannot be charged to a project, or that the pace of project progress is slower than the initial plan, or that the interim “deliverables” have not been met on time, or that the quarterly report has not checked Box 29b, and so on. The complexity and number of these rules almost guarantees that only fairly large American (or “Northern” firms) will have the resources to master them. Consider this job description posted on DEVEX for the Chief of Party (COP) of a Save the Children Project called SCOPE:

“The Chief of Party will be responsible for technical leadership, administrative oversight, and overall coordination of SCOPE. S/he will serve as principle institutional liaison with USAID and key stakeholders. S/he will manage staff and ensure SCOPE meets stated goals and reporting requirements, as well as ensure the quality, timeliness, and efficiency of all products and activities generated under SCOPE. S/he will ensure sound grant implementation and management by sub-grantees and project staff and the timely submission of all technical and financial deliverables to USAID. The Chief of Party will lead the program’s annual work planning process, detailing resource deployment estimates (personnel, equipment, and budget) necessary to achieve proposed milestones and targets. S/he will supervise the project office and key personnel. S/he will oversee the hiring process of local personnel and the identification and selection of appropriate short- and long-term technical assistance. The Chief of Party will ensure that efficient systems to support all aspects of the program are in place and support the effective use of program resources in compliance with USAID regulations and Save the Children policies….”

The bureaucratization of development aid has not only got in the way of a common sense approach to its complexities (an approach based on flexibility, a recognition of unintended consequences, the possibility that one might make mistakes and change course, reflect upon and apply lessons learned, etc.) but it has also made local organizations and governments shy away from a leadership role in USAID funded projects — the hassle is too great, as I heard frequently from those I interviewed.

Besides their fear of being overwhelmed by the pile of rules, local players with long experience in development aid have become part of a co-dependent relationship. They have got so used to “us” running things that they are often privately unsure that they can do the work themselves, and we have become so used to them seeming to need us that we continue to be quite sure that they really do. In addition, because of our need to have quick results (the term “quick wins” is used surprisingly often) and their own insecurity, we are usually ready to jump in do things for them when it appears “they” are not moving fast enough to meet our schedule. In one project I came across — aimed at improving the delivery of technical advice to farmers, the USAID officer in charge got in the habit of supplying fuel vouchers to the local extension agents so they could get out to the farmers on schedule, since their own ministry was short on resources. He recognized that this was not a sustainable solution, but, he said: “A lot of what we do with our national partners is find ways to work around their weaknesses, and that’s no help, but still we have to meet our targets.”

And those “targets” are part of the growing predilection to divide up development aid into bite size projects. This makes it easy for aid agencies to quantify the “deliverables” (number of people attending a training, number of latrines installed, number of improved breed dairy cows given to farmers, etc). Short (3 to 5 year) projects fit with the needs of the aid industry since they can be planned, “implemented” and measured tightly. But it is this very tightness that works against development and indeed country ownership, since it avoids the necessary messiness of the real world, and especially the need to move aside and let others make mistakes and learn in their own time and their own way. Indeed, “projectization” a negative term widely used in developing countries, has made it hard for local organizations who do get USAID subcontracts to evolve and become even more capable. USAID invests in them as agents — they are paid to deliver, not to become better as organizations or institutions.

Given the stakes in money and jobs, given the academic pipeline that continues to feed new people into those jobs, given the co-dependent habits that have evolved, and the mythology of limited local capacity, it seems highly unlikely that the aid industrial complex will voluntarily work itself out of a job and promote country ownership any time soon. It is more likely that the aid industrial complex will be eventually marginalized by a combination of other players (e.g., China in Africa), growing resentment and awareness of the co-dependency that the aid system has engendered, and the rise of new voices in developing countries (the beginnings of which can now be heard) that quite politely tell us off.