Eastern Europe

AID's Indefinite Contracts Assist Privatization Efforts but Lack Adequate Oversight Gao ID: NSIAD-94-61 January 19, 1994

The Agency for International Development's (AID) indefinite quantity contracts have proven effective in responding to Eastern Europe's needs for technical assistance on privatization. Host government officials, although concerned about the contracting process and their lack of involvement in monitoring performance, have found the contractors' work to be generally satisfactory and have valued the advice and services received so far. Indefinite quantity contracts also appear to compare favorably with other donors' privatization programs in terms of their cost and responsiveness. Although GAO found no evidence that host governments played a role in AID's selection of the contracting mechanism and the three contractors, the host governments have been working closely with the contractors to develop project task proposals. These relationships raise questions about potential conflicts of interest. AID acknowledges these concerns but doubts that conflicts of interest exist because AID staff must review and approve all proposals. One significant area of weakness has been AID oversight of contractor performance. AID recognizes this shortcoming. The Washington office, however, has yet to take full advantage of AID's field staff to monitor contractor performance.

GAO found that: (1) AID IQC have been effective in providing technical assistance and responding to the privatization needs of eastern Europe; (2) although host governments believe the work of IQC contractors is satisfactory and the advice and services they receive are valuable, they have raised concerns regarding the contracting process including assistance delays, the lack of flexibility, and the lack of detailed implementation plans and project documentation to measure contract performance; (3) IQC projects compare favorably with other donors' privatization programs in terms of their cost and responsiveness; (4) although host governments' relationships with IQC contractors in developing project task proposals have raised concerns over potential conflicts of interest, AID believes that conflicts of interest do not exist because its staff must review and approve all proposals; (5) AID oversight of IQC contractor performance has been inadequate to ensure that tasks are completed satisfactorily and project objectives are being met; and (6) although a 1993 review of the privatization project showed that AID staff are not able to adequately oversee all IQC project activities, AID has not taken full advantage of its field staff to monitor IQC contractor performance.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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