Haitian Would-Be Contractors Miss Out on Aid
In a Port-au-Prince warehouse loaded with tarps, plywood, corrugated roofing, nails and other building supplies, company owner Patrick Brun says he had hoped to get contracts from the billions of dollars in international aid promised to Haiti.
His 40-year-old company, Chabuma S.A., sells cement blocks, doors, sand bags and other materials for international companies. But what he wants is a more significant role in his country's recovery, which is why he says he keeps bidding — without success — for U.S. government contracts.
"You can imagine that if we can't win the contracts ourselves, we become totally dependent on foreign companies and nonprofits, and there is not much hope in that," he said. "We may not have the extended capacity of a U.S. company, but we are respectable. We keep good books and records, we have foreign suppliers, we have good credit, we pay our taxes and our customs dues."
Out of every $100 of U.S. contracts now paid out to rebuild Haiti, Haitian firms have successfully won $1.60, The Associated Press has found in a review of contracts since the earthquake on Jan. 12. And the largest initial U.S. contractors hired fewer Haitians than planned.
There are many reasons for the disparity. Among them, US AID is more familiar with some U.S. contractors and gave out some no-bid contracts out of urgency, and fears the corruption that is rife in Haiti. On the Haitian side, there is a limited understanding of U.S. government practices.
But using foreign aid to give local companies contracts is one of the most important aspects of reconstruction, says Clare Lockhart, chief executive officer of the Institute for State Effectiveness.
"You can't just provide manual jobs. You need to contract with companies so that the middle tier managers and owners of companies have a stake in the legal system and rule of law, and ultimately a stake in the success of their political system and their economy," she says.
Of the 1,583 U.S. contracts given so far in Haiti totaling $267 million, only 20 — worth $4.3 million — are going to Haitian-owned companies. And an audit this fall by US AID's Inspector General found that more than 70 percent of the funds given to the two largest U.S. contractors for a cash for work project in Haiti was spent on equipment and materials. As a result, just 8,000 Haitians a day were being hired by June, instead of the planned 25,000 a day, according to the IG.
The contractors, Development Alternatives Inc. of Bethesda, Maryland, and Chemonics International of Washington D.C., which received more than $31 million each in no-bid contracts, responded to AP in an email saying that together with several other contractors, they had employed 25,000 Haitians a day. Now, they said, 10 months after the earthquake, "priorities have evolved beyond a focus on temporary employment," a program that has paid Haitian workers $18 million in wages.
US AID says it is committed to increasing the amount of contracts going to Haitians.
"We already are engaging with Haitian communities to make them aware of how they can partner with us," said Janice Laurente, a spokeperson for US AID.
Economists say giving contracts to local businesses creates jobs, which help build the private sector. Also, most donors would rather see local businesses thrive than foreign companies profiting from a disaster.
Harvard Business School economist Eric Werker, who researches foreign aid, says the spillover effects go beyond the aid itself.
"Some are obvious, like salaries and profits that stay in the local economy, but there are also ways to increase capacity of local firms by giving them progressively larger contracts," says Werker.
But there are many hurdles to signing a contract with Haitians.
The first is a no-bid process: 25 percent of the contracts went directly to U.S. contractors without even giving Haitians a chance to bid on them, sometimes because the needs were so urgent there wasn't time to go through a formal bidding process. In addition, some government requests for local Haitian subcontractors and expertise are published only in English, limiting access for many Haitians who speak Creole.
Also, at times of catastrophe, it can be easier to use an established contractor with a strong record than a previously unknown local one. The Haitian economy was so decimated by the earthquake that it was hard at first even to get wood or tarps for shelters without importing them. Now, even though there are Haitian companies providing many products and services, the pattern of using foreign ones continues.
And finally, it's more complicated to contract directly in countries like Haiti, where corruption is rife. There has been price-gouging among some would-be Haitian contractors.
The unprecedented promise of $9 billion in aid, with the U.S. as a top giver, at first raised hope of rebuilding and even of a new and brighter future for the tragedy-prone island. But fewer than 10 percent of those funds have made it past the "promise" stage.
While Chemonics and DAI are the largest single recipients, the bulk of the funds have gone to beltway contractors as well: firms in Virginia received the most funds of any state, $45.3 million, followed closely by Maryland, $44.6 million. Another $31.7 million went to companies based in the District of Columbia.
The U.S. foreign aid contracts to Haiti since the earthquake have gone to an array of almost entirely U.S.-based goods and services, from bullet-proof vehicles ordered Nov. 18 by the Centers for Disease Control from a Miami-based firm to $24,000 in dental supplies for U.S. Navy medical providers in June from a Chesapeake, Virginia, firm. Yet bullet-proof vehicles and dental supplies are available from Haitian companies, according to the nonprofit Peace Dividend Trust.
"Frankly, it's a shame and a serious opportunity lost," says Edward Rees of the Peace Dividend Trust. His organization put together a business portal, offering everything from security services to catering, and is training Haitians on how to bid for contracts and grants. "No one is systematically tracking how many contracts have gone to Haitian companies."
The lack of local spending in Haiti is similar to that in most other countries receiving U.S. aid, although economist Werker said Haiti is likely at the low end of the spectrum. But Rees contrasts Haiti with Afghanistan, where — backed by Peace Dividend Trust — U.S. Army General David H. Petraeus ordered his commanders to "Hire Afghans first, buy Afghan products, and build Afghan capacity."
The results in Afghanistan are encouraging: A recent study found that 37 percent of $2 billion in annual international aid is now being used to buy locally-produced Afghan goods and services, up from 31 percent a few years ago.
The AP review focused on contracts from the U.S. government, which spent an immediate $1.1 billion in U.S. humanitarian assistance after the earthquake, and promised another $1.15 billion for reconstruction. In November, the first $120 million of the pledged reconstruction funds were tranferred to the World Bank-run Haiti Reconstruction Fund, according to the State Department.
In addition to government aid, more than $1 billion has come from nonprofit charities, most of which try to buy local, said Samuel A. Worthington, president of InterAction, the largest alliance of U.S.-based international nongovernmental organizations. He represents nonprofits managing about 90 percent of the U.S. donations that were directed to Haiti after the quake.
Worthington says there is no system to count how much has gone to Haitian-owned companies.
"There is a very strong bias to ensure as much local procurement as possible, and as much spending in the local economy," says Worthington. "Our bottom line is to serve as many people as possible and get the best price, to spread those dollars."