1. (b) Total direct procurement of commodities and commodity related services by government agencies on behalf of foreign interests. 1 Based on authorizations issued to procure. $37,500 9,000 43, 195, 112 20, 380 199,215 29,362,420 13,500 8, 197, 540 15,000 $150,000 25, 006, 360 106,770 7,091 46,000,000 13,000 1,591, 013 8,882, 907 1,389, 520 11,500 3, 000, 000 60,000 14,473, 992 29,011,400 34, 300,000 215, 911, 170 134, 992, 153 *Based on actual expenditures and includes procurement performed by GSA for AID administrative purposes. The following figures reflected procurement of services for foreign interests by AID/W and AID missions: 1. (c) Data covering the small business share of procurement effected by other governments agencies on our behalf for administration purposes and for foreign interests are not available to A.I.D. For procurement undertaken by AID/W itself, as reported to GSA on SF-37 reports, the small business share is as follows: Fiscal year 1968-- First half fiscal year 1969__. (46.4 percent) $12, 585, 048 (14.4 percent) –. 3,675, 513 1. (d), (e) The specific procedures followed by government agencies procuring on behalf of A.I.D. to encourage small business participation are not known to us. Each agency is subject to the provisions of the Federal Procurement Regulations, however, which contain appropriate provisions for the protection and participation of small business. 1. (f) It is A.I.D. policy that procurement be conducted through borrower/ grantee facilities whenever it is practicable to do so. This is reflected in the A.I.D. Manual Order which states that "A.I.D. is seeking to raise the level of competence in procurement and trade practices in cooperating countries" and that "the borrower/grantee or its agent should therefore undertake the procurement to the maximum extent feasible." Direct purchases on behalf of foreign interests are made by A.I.D. and other U.S. Government agencies in the following situations: 1. When it is judged that adequate competence does not exist to effect expeditious procurement under currently applicable policies, regulations and standards. 2. When procurement involves specialized, sophisticated or complex equipment for which the borrower/grantee lacks technical background. 3. When the procurement covers certain agricultural commodities, (e.g. seeds), commodities for Public Safety activities, designated malaria eradication insecticides and equipment, and commodities for family planning programs. 4. When program operations can be expedited or economies achieved by using procurement channels under contract or otherwise available to A.I.D. (Examples include ordering books or magazines under an A.I.D. contract arrangement, the procurement of motion pictures and film strips from U.S. Government sources, and the purchase from GSA of Stores Stock and Schedule commodities.) 5. When the commodities to be procured are U.S. Government stockpile commodities or U.S. owned domestic or foreign "excess property" items. 6. When the procurement involves barter arrangement financing. 1. (g) Data covering the value of procurement by commodity classification or grouping, which is performed by government agencies on our behalf, are not maintained separately. The commodity classification breakdown for procurement effected through government agencies is included in the A.I.D. total procurement statistics which are being furnished in response to 2. (c). 2. (a) (b) (c) Total expenditures for the procurement of commodities financed with A.I.D. funds during Fiscal Year 1968 amounted to approximately $1,161 million, of which 98 percent was from the U.S. The following table gives the breakdown by groups of commodities: Total expenditures for commodities during the first six months of Fiscal Year 1969 were as follows (preliminary): A more detailed commodity breakdown within the major commodity classifications shown above is contained in our Operations Report for Fiscal Year 1968 on pages 76 through 79, a copy of which is attached. We would be glad to furnish additional copies of the report. Similar details for Fiscal Year 1969 will not be available until after the end of the year. 2. (d) The procedures which are followed or monitored by A.I.D. for A.I.D.financed procurement of commodities (not associated with capital projects) are outlined below under the headings enumerated in the Subcommittee's request for additional information. Determination related to negotiated versus advertised procurements The bulk of A.I.D.-financed procurement is performed by private foreign commercial importers and is, therefore, on a negotiated rather than a formal competitive bid basis. This follows the practice normally used in the U.S. by private importers. As an exception to this general rule, A.I.D. requires formal competitive bidding for railway ties, sleepers, and various types of fertilizers. Foreign government procurement, on the other hand, is normally subject to formal competitive bid procedures, much like those followed by U.S. Government agencies, Loans or grants made by A.I.D. exclusively for foreign government procurement require formal competitive bidding. Solicitation and evaluation of bids and quotations; nonresponsive bids and irresponsible low bidders Unless publication is specifically waived for one of the reasons covered under "Waivers of Notification" which follows, A.I.D. requires advertising for all A.I.D.-financed procurement in excess of $5,000. This is accomplished through publication in the A.I.D. Small Business Circulars and Procurement Information Bulletins, and provides U.S. business firms with an opportunity to present their bids or quotations to the prospective foreign purchasers. In the case of negotiated procurement by private foreign importers, A.I.D. requires that good commercial practice be followed, and places responsibility on the foreign government for seeing that their importers pay no more than the lowest available competitive price. Though A.I.D. does not (except in Viet-Nam) exercise before-the-fact surveillance over the evaluation of quotations and awards, it does conduct a post audit of the prices paid, and reserves the right to require the importer to furnish an abstract of all offers and quotations received, and a justification for the award. A.I.D. also requires that the supplier obtain A.I.D. approval of the eligibility of his shipment prior to his being paid. In the case of formal competitive procurement, A.I.D. requires that the award be made to the low responsive and responsible bidder unless another bid is demonstrably more advantageous because of any nonprice factors set forth in the invitation as being subject to consideration in the bid evaluation. An AID/W or an A.I.D. mission representative normally participates in these evaluations. In addition to verifying that bidders are not on the A.I.D. debarred or suspended bidders list, it is customary for formal invitations to require a performance bond to guard against awards to irresponsible bidders. A.I.D. requires that an abstract of all bids be received in Washington within 20 days of the contract award and, if the lowest bid is not accepted, a justification for the award. As in the case of negotiated procurement, the supplier must obtain A.I.D. approval of the eligibility of his shipment prior to his being paid. Waivers of notification A.I.D. recognizes that, in some cases, the standard advertising requirement would not only serve no useful purpose but would, if enforced, also lead potential suppliers to believe there were sales opportunities where, in fact, none existed. A.I.D. has, therefore, provided for the waiver of its normal notification and advertising requirement in the following situations. In each case, the waiver must be supported by documentary justification and approved by A.I.D. 1. "Sole agency" waivers Procurement under special supplier-importer relationships which contractually require the foreign importer to buy from a single named supplier. Typical is a foreign importer who is a distributor/dealer of a U.S. manufacturer, and who is buying for resale in the cooperating country. 2. Proprietary waivers Procurement where A.I.D. determines that purchase of a commodity by reference to a particular specification, trade name or designation is necessary in order to assure interchangeability or standardization of equipment, or because of special design requirements. 3. Emergency waivers Procurement necessary to meet urgent delivery requirements to avoid a serious delay in project completion or in a plant's production, and which could not be accomplished within the established time limitations by undergoing the delays incident to advertising. The procedures which A.I.D. follows or monitors for the procurement of services, equipment and materials required for A.I.D.-financed Capital Projects are set forth in the A.I.D. Capital Projects Guidelines. Separate guidelines have been issued for Engineering and other Professional Services; Construction Services; and Equipment and Materials. A copy of each is enclosed. Although covered in more detail in the guidelines, the procedures which A.I.D. follows or monitors are summarized below for convenience. Engineering and other professional services A.I.D. requires publication in the Commerce Business Daily of proposed procurement of such services in excess of $25,000, giving all interested firms an opportunity to submit technical proposals. In addition, A.I.D. requires prior approval by A.I.D. of the published synopsis, the contractor to whom the borrower proposes to make the award, and the contract which it is proposed that A.I.D. finance. Construction services A.I.D. requires publication in the Commerce Business Daily of proposed procurement of such services in excess of $25,000, giving all interested firms an an Invitation for Bid and to submit a bid. In addition, A.I.D. requires prior approval by A.I.D. of the published synopsis, the Invitation for Bid, the contractor to whom the borrower proposed to make the award, and the contract which it is proposed that A.I.D. finance. Equipment and materials A.I.D. requires publication in both the Commerce Business Daily and the A.I.D. Small Business Circulars of proposed procurement of major items. Such procurement is purchased on a formal bid basis and follows prior approval by A.I.D. of the Invitation for Bid, the contractor to whom the borrower proposes to make the award, and the contract which it is proposed that A.I.D. finance. For nonmajor items of equipment, A.I.D. requires the publication of proposed procurement in excess of $5,000 in its Small Business Circulars. 2. (e) A.I.D. rules and regulations designed to encourage and protect U.S. small business participation are set forth in detail in Dr. Hannah's statement for presentation to the Subcommittee on May 15, copies of which were furnished to the Subcommittee on May 2. Mr. CORMAN. Mr. Kunze? Mr. KUNZE. I think it is important, Mr. Chairman, that the committee do understand our procurement procedures. They are distinctly different from other Government procuring agencies and I think in context with our procurement procedures, we can reach better understanding of what we can do. The Agency for International Development is essentially a financing institution, similar to the Export-Import Bank. It engages in comparatively few direct procurements itself. It is not a procurement agency in the sense that the Department of Defense or the General Services Administration are procurement agencies. The financing provided by AID to the underdeveloped countries may be in the form of either loans or grants. These funds are made available direct to the governments of the less-developed countries. The funds so provided are tied to authorizations issued by AID for the procurement of commodities, or services and supplies required for specific projects, which have been approved by AID. The procurement authorizations issued by AID to other governments specify the country or countries from which purchases must be made and the goods must originate, and contain other restrictions and conditions such as the period during which purchases must be made, the pricing criteria which must be met and the nationality of the vessels on which the goods must be carried. Each loan or grant contains a list of the commodities which are eligible for AID financing. When AID makes funds available to another government for commodity imports, that government issues import licenses or similar au thorizations to individual importers or to governmental agencies for the purchase of commodities covered by the AID procurement authorizations. It is important to note that foreign importers must pay the full local currency equivalent of their dollar purchases. Thus, the majority of the purchases which AID finances is made by private foreign importers or foreign government agencies dealing directly with American exporters. It is the importers or the governments who determine the specific commodities they will import, within the limitations of the procurement authorizations issued by AID. The procurement is accomplished through regular commercial channels and under normal trade practices. AID does not participate in the selection of the contractor, does not participate in the contract negotiations and is not a direct party to the contract. Although the evaluation of offers and the responsibility for making the decision as to how and to whom the award will be made is that of the cooperating country or its importers, AID screens each shipment for commodity eligibility prior to payment to the exporter, and conducts postaudits for prices charged. In the event that an award is made in a manner which AID feels was improper or in violation of an AID regulation, the Agency would obtain a refund from the foreign government. As previously pointed out, the Office of Small Business, AID, is charged by legislation to inform U.S. firms, as far in advance as possible, of proposed purchases with AID funds. To notify U.S. suppliers of opportunities to furnish commodities financed under the foreign assistance program, AID requires that the foreign government or private importers, before placing any order or agreeing to place any order for more than $5,000, give the Office of Small Business a description of the commodities desired, stated in terms of U.S. standards. This description is published in the AID Small Business Circular requesting formal competitive bids (usually in the case of procurement by a Government agency), or informal quotations (usually in the case of procurement by a private importer). The circular is distributed to all interested subscribers without charge. The foreign importer or the foreign government agency may not accept any offer or place any order until after 45 days have elapsed from the time that the procurement information described above reaches the Office of Small Business. If upon examination of the "Small Business Circular," the potential supplier finds a request for bids or quotations for commodities he can supply, he will send an offer or bid to the buyer designated in the advertisement, in sufficient time to insure receipt by the importer before the due date stated in the circular. After the deadline date for receiving bids or quotations, the importer will proceed in a normal commercial manner. That is, he will evaluate the offers received for price and other pertinent factors and buy the product which he is convinced will be most suitable for his purpose. In other words, this trade is developed in exactly the same way as foreign trade financed with private funds. Sales made under AID financing are normally paid for by an irrevocable letter of credit issued against AID funds, payable by an American bank. |