Trends in USAID Discretionary Spending

An old colleague of mine wrote to me on Saturday with a suggestion related to my last blog post The Truth About Development Contractors. The suggestion was to include some data and analysis on what has actually happened in terms of USAID spending patterns since Shah’s statement about contractors in early 2011. It is a bit of a diversion from my original plan but I thought it was a good point so I put this short piece together. Also, I would like to give a quick thanks to everyone that wrote to me with encouragement about this new blog series. There has been a lot more interest so far in this one compared to the first series I did a few years ago … its confirmed for me that I’m on the right track.  On to the data. 

Initially I spent some time searching for something on the internet about USAID’s spending trends that was already prepackaged; i.e something that I could quickly summarize and provide a link to. I was surprised to find that there isn’t really anything out there that does an effective job. At least I couldn’t find anything and I literally searched for a couple of hours and came up empty. While there are a lot of articles, professional commentary, and things like speeches, etc... I couldn't find any existing work that breaks out all the numbers clearly, over the entire timeframe, and contextualizes the impact of budget and spending patterns on USAID contractors. 

Eventually I just decided to do the analysis myself. Here’s what I learned. 

1. The website US Government Spending is amazing. While I am sure the data isn’t perfect (data is never perfect) I was literally blown away by the breadth and depth of information that any ordinary person can access these days about how the Government spends money. I think the website is a huge and important step in the direction more transparency & accountability. 

2. I have an amazing wife. Despite the fact that she’s now 38 weeks pregnant she gave me a free pass this weekend to literally geek out for two straight days with over 200 megabytes of raw data that I was able to download on all of USAID’s contracts and grants that have been funded the past five years. Thank You!

3. USAID spending patterns have definitely evolved. The situation now confronting both USAID and its contractors isn’t pretty, as you’ll see in the exhibit below. 

I put together the chart below to illustrate at a high level what has happened the past five years. 

There are a lot of things that have been going on inside USAID - and across the Government - the past five years that contribute to the patterns outlined above. i.e. its not just the position on contractors that has changed. I’d love to go into all of the things going on in depth but for the purpose of this blog series about development contractors I need to stay on point! 

So here’s the main point I want to make. While the overall level of funding that USAID gets each year has gone down since Shah’s statement, the amount of that funding that goes to contractors each year has dropped much more sharply. The data suggest that the dramatic drop experienced by contractors is not just because USAID’s funding has gone down but is also attributable to some fairly sizable growth on the NGO/Grantee side of the industry.

I am not saying that the changes are good or bad, or that they are right or wrong, although I’m sure my own views will be clear when this blog series is finished. My only goal at this point is to point out that some real change in USAID’s funding patterns has in fact taken place. 

Something structural in the system has changed and I find that to be remarkable. I have been advising public sector clients for 20 years now … long enough now to appreciate how hard it is to change anything systemic. There are literally hundreds of quotes out there that have been captured and preserved over the years to help remind us of the overwhelming likelihood that efforts to innovate, especially in the public sector, will get stymied by the status quo. I think Machiavelli was first, and I think his quote still probably sums it up best:

It ought to be remembered that there is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things. The innovator has as enemies all those who have done well under the old conditions, and only lukewarm defenders in those who may do well under the new.

I have always admired Rajiv Shah’s willingness to take on the establishment in order to make things work better. The data I pulled together this weekend proves that he was more than just willing, he was also successful. For that reason alone I hope he sticks around!

- DS

Now with this little diversion out of the way I’ll get back to the plan.  Next up … 1. Every Organization is Different