Hired Gun Fight

Obama's aid chief takes on the development-industrial complex.

Rajiv Shah, President Barack Obama's U.S. Agency for International Development administrator, is waging a high-stakes battle to make U.S. foreign aid programs less dependent on American for-profit contractors. At the same time, he's aiming to roughly double the amount of assistance that flows directly to governments and local organizations in the developing world.

Shah's initiative reflects Obama's broader desire to clean up government contracting announced early in his term, as well as the thrust of a White House review of development policy and the State Department's first-ever Quadrennial Diplomacy and Development Review. Although Shah's plan hasn't gotten much public attention, it represents a seismic shift in how American foreign aid programs are conducted and will require both wrenching institutional change and a very tough political battle if it is to become a reality.

Given the degree to which USAID works with contractors, some of Shah's language has been delightfully undiplomatic. In a 2011 speech, he drew parallels between the agency's reliance on for-profit firms and Eisenhower's warnings about the emergence of a military-industrial complex. Saying that USAID was "no longer satisfied with writing big checks to big contractors and calling it development," Shah argued that development firms were more interested in keeping themselves in business than seeing countries graduate from the need for aid. "There is always another high-priced consultant that must take another flight to attend another conference or lead another training," he complained.

Shah's fiery rhetoric quickly set off alarm bells among USAID's many for-profit contractors, particularly since it came hot on the heels of the agency's December 2010 decision to suspend a huge non-profit, the Academy for Educational Development, or AED, from receiving new government contracts because of abuses in two of its Pakistan projects and what USAID argued was "serious corporate misconduct, mismanagement and a lack of internal controls." AED was one of USAID's larger partners, managing about $500 million annually in grants and contracts, and the suspension led AED to go belly up just month later in the spring of 2011. AED insiders complained bitterly that USAID overreacted; USAID insiders countered that AED would have survived had it not tried to downplay and conceal the problems when they were first discovered. Eventually, AED paid $5 million to the U.S. government in a Justice Department settlement for the Pakistan projects in question.

Top 10 USAID Contractors for FY 2011



Obligated Program Funds





Chemonics International, Inc.



Partnership for Supply Chain Management



John Snow, Inc.



Development Alternatives, Inc.



The Louis Berger Group, Inc.



ABT Associates Inc.



Management Sciences for Health



Research Triangle Institute



ARD, Inc.



Creative Associates International, Inc.


A bit of history is important in explaining why the Obama administration remains convinced that too much foreign aid flows through firms around the Beltway. Much of the current struggle has its roots in a bitter battle between the Clinton administration and Senator Jesse Helms during the mid-1990s, during which Helms and his allies attempted to abolish USAID and fold its functions into the State Department. USAID managed to fend off Helms, but ended up weathering steep cuts to its operating expenses, which forced it to dramatically reduce staff size through layoffs and attrition. Even when funding for foreign aid rebounded after Sept. 11, USAID was a shell of its former self, having lost much of its staff and expertise in key development areas like agriculture. A 2003 Government Accountability Office report captured the dilemma: "Since 1992, the number of USAID U.S. direct hire staff declined by 37 percent, but the number of countries with USAID programs almost doubled, and, over the last two years, program funding increased by more than 50 percent." In short, USAID had gone from being a development agency to being a large, poorly organized contracting agency. Incredible pressure to push money out the door in Afghanistan, Iraq, and Pakistan only exacerbated these trends.

Because USAID remains laden with bureaucratic restrictions, it also tends to rely on large umbrella contracts that favor a handful of well-connected Beltway firms. The 10 largest USAID contractors received more than $3.19 billion in 2011, and more than 27 percent of the agency's overall funding was directed to American for-profit firms last year. To put this in perspective, if the for-profit contractor Chemonics were a country, it would have been the third-largest recipient of USAID funding in the world in 2011, behind only Afghanistan and Haiti.


Thus Shah's push, under the rather benign title of "procurement reform," to channel more funds directly to institutions in the developing world: governments, entrepreneurs, educational institutions, and NGOs. The theory behind relying more on local institutions is simple and compelling: If the goal of development is to build sustainable local capacity and ownership, why not have countries play a larger role in helping help themselves? Not only is this good development policy in countries where proper management controls are in place, it also has the potential to save American taxpayers a great deal of money.

U.S. contractors, looking at losing large amounts of revenue, were not about to take this lying down. The Professional Services Council (PSC), an umbrella group of government contracting firms, quickly hired lobbyists to push back against procurement reform and helped establish the Coalition of International Development Companies, an advocacy coalition of 50 contractors touting the role of "America's most effective, efficient and innovative international development companies" in advancing the national interest. Perhaps it was a coincidence, but increased lobbying funded by the PSC directly preceded a sharply worded letter from the chairman of the House Committee on Oversight, Rep. Darrell Issa, to USAID questioning the wisdom of procurement reform. The letter hammered home one of the key arguments that contractors had been using against channeling more money directly to developing-country institutions: the threat of waste and corruption by foreigners.

That argument might be a little more persuasive if American for-profit contractors had not had their own problems in this regard. In 2010, Louis Berger Associates agreed to pay $69 million in penalties after the Justice Department found that it was intentionally overcharging taxpayers for its activities in Afghanistan. A 2009 Washington Post story revealed that managers at Chemonics encouraged employees in Afghanistan to deliberately downplay or ignore failing programs so as not to disrupt the flow of the grants.

The risk of waste, fraud, or abuse is a constant specter in American aid programs, but it should also be acknowledged that spending hundreds of millions of dollars on overhead for American firms is also a real cost, and doesn't always contribute a great deal to lasting development. To its credit, USAID seems to be taking a rigorous approach to ensure that proper systems are in place in countries where it is pushing out more money through local channels, and it has been conducting audits of public financial systems in those cases where it wants to work directly through foreign governments.

USAID's response to Issa highlighted a recent example from Senegal in its defense. In Senegal, the agency shifted from using American for-profit contactors to build schools and instead carried out the work through a partnership with the Senegalese government. Money for the schools was not disbursed until after a completed school was certified to have met agreed safety and quality standards. The cost difference was striking: It cost $425,000 per school through American contractors, but only $200,000 when built by the Senegalese government.

Things now stand at an uneasy crossroads. Contractors don't like Shah's new approach, but are nervous about too aggressively biting the hand that feeds them. USAID has committed to working with local institutions, but its spending totals in 2011 actually saw the proportion directed to American for-profits go up, not down. The agency has a huge amount of work to do if it still hopes to reach its target of 30 percent of its aid being channeled directly to governments and local organizations in the developing world by 2015. And Shah's aggressive push for a new paradigm will likely wither on the vine if the White House flips come November. For-profit contractors have always had their strongest allies on the Republican side of the fence.

TIM SLOAN/AFP/Getty Images


The End of the Political Solution

The Assads seized power by force. Wednesday's attack proves they will only be removed through force.

It's rare that Syrians -- at least, all but the most hopeless pro-regime ones -- rely on state media for a dose of good news. But Wednesday's confirmed killings of at least three key members of the regime's "crisis management cell" prove two things: first, that the revolution is now literally at Bashar al-Assad's doorstep, and second, that diplomats have officially been written out of the script on what to do about Syria.

Let's start with the first. The building targeted Wednesday was reportedly the National Security Compound in the Rawda district of Damascus, one of the most heavily fortified and wealthiest neighborhoods inside the capital.  Rebel officials told Britain's Daily Telegraph that there were two bombs -- one hidden in a flower arrangement and one in a chocolate box -- which had been smuggled into the meeting days earlier by FSA members working closely with the drivers and bodyguards of the crisis management cell.     

The victims confirmed by the Syrian regime so far are Assef Shawkat, the deputy defense minister and brother-in-law to Assad; Dawood Rajha, the defense minister; and Hasan Turkmani, a former defense minister who is widely considered to be the mastermind behind the regime's Inquisitorial torture network. (Interior Minister Mohammad Shaar was initially reported dead, though Syrian state media subsequently denied this.)

But don't mind the titles. They don't matter and never did, for the simple reason that influence in Syria is inextricable from one's filial connection to the House of Assad, which has always behaved more like Levantine Borgias or a modern-day organized crime syndicate than a classic authoritarian dictatorship. This is why Brigadier General Manaf Tlass's defection this month was so significant: His family was seen as the glue that bound the Sunni merchant class to the Alawite lordlings of Damascus, and so the abandonment was intended, and likely taken, as a personal slight. And it's why Shawkat's death is even more serious.

Shawkat, who has held many titles since he joined the army in the late 1970s, was tasked with overseeing all the intelligence directorates as well as some of its most historically sensitive "operations" including possibly orchestrating the 2005 assassination of former Lebanese Prime Minister Rafiq Hariri. Some members of the Assad regime blamed him for failing to protect Hezbollah heavy Imad Mugniyeh, who was killed under mysterious circumstances in a car bombing in Kafr Souseh, Damascus, in 2008. (Of course, Hezbollah chief Hassan Nasrallah isn't about to concede his ally's defeat just yet - he delivered a speech on the night of July 18 praising the slain Syrian officials as "comrades-in-arms on the path of the conflict.")


Liaising with Hezbollah was a crucial responsibility for Shawkat, which may be why his death was first announced on the hardline Shiite group's Al Manar television in Lebanon. Although he never got on well with Bashar's younger brother Maher al-Assad, who commands the Fourth Armored Division, he was in many ways Maher's mirror image in the mukhabarat: a feared and cunning architect of state repression who always had the president's ear. When Bashar inherited his father's role in 2000, an opposition poster joked that you could "vote for one president, get two more absolutely free" -- a reference to Maher and Assef.

So far, both an obscure Islamist rebel group, Liwa al-Islam, and the Free Syrian Army headquartered in Antakya, Turkey, have claimed responsibility for the attack. Was it a suicide bombing, possibly by Rajha's bodyguard, or a remotely detonated improved explosive device smuggled into the meeting room piecemeal? Who knows. But it is seems unthinkable that this attack could have been carried out without the close collaboration of regime insiders, which was the real point of it anyway. It wasn't designed to overthrow Assad in one go but to sow fear and paranoia within the remainder of his inner circle and put them on notice that they're next unless they defect. "If history has taught us anything," Michael Corleone said in The Godfather II, "it is that you can kill anyone." The only tactics a mafia understands are its own.

As for continued diplomacy, British Foreign Secretary William Hague condemned the bombing and U.N. envoy Kofi Annan asked the Security Council to delay a vote on a resolution calling for sanctions against Syria. He might have done so via carrier pigeon to underscore just how behind the times the international response is to this crisis. The United States, Britain, France one side, and Russia and China on the other, are in a pitched war of words over a country that exists only in their collective imagination, where a "political solution" is still thinkable and we're only one stray comma away from the Chapter VII resolution that will bring lasting peace and stability.

This is either supreme fantasy or deep cynicism underwriting what is in fact a consensus that no one has the desire or will to sort out Syria. Rebels I spoke with recently in Istanbul -- they were there to attend a bomb-making seminar -- told me that even if Assad were to renounce power, they'd fight on because the institutions of state terror, including the 27 torture dungeons recently anatomized by Human Rights Watch, would inevitably remain in place. No one abroad seems to want to listen to them. Maybe now they will.