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OPINION:
As President-elect Donald Trump prepares to take office on Jan. 20, his administration has an opportunity to overhaul the U.S. Agency for International Development, one of the most important tools of American smart power.
For decades, the agency, known as USAID, has been hamstrung by a procurement model that prioritizes paperwork over results, leaving America less effective and competitive in global development in the face of increasing competition, especially with China and Russia. Fixing this broken system would not only enhance the effectiveness and efficiency of America’s more than $44 billion in foreign aid but also bolster the incoming Trump administration’s promise to put America first.
USAID’s reliance on cost-plus-fixed-fee, or CPFF, contracts — which reimburse implementers for costs regardless of whether they meet project goals — has turned foreign aid into an unnecessarily burdensome bureaucratic exercise. This model provides incentive for compliance over creativity, hinders partnerships with local actors and wastes taxpayer money on programs with little measurable impact.
Meanwhile, rivals such as China use their foreign assistance to expand their influence across Africa, Asia and Latin America. Through Belt and Road and other initiatives, China offers seemingly quick, no-strings-attached infrastructure investments. While these deals often come with long-term costs and hidden strings, they have successfully positioned Beijing as a go-to partner for developing nations.
Mr. Trump can respond by directing USAID to adopt a fixed-price procurement model, tying payments to clear results rather than expenses. This shift would revolutionize how the U.S. delivers aid, giving providers incentive to deliver outcomes, not just effort.
Fixed-price procurement has proved to increase results by up to 130% compared with CPFF. It would also diversify USAID’s partner base by reducing administrative barriers for small businesses and local organizations, making U.S. foreign aid nimbler and more effective. It will drive administrative efficiency by focusing staff on defining and managing outcomes vs. receipts, which disrupts, discomforts and dislodges entrenched bureaucrats and implementers.
It also creates the ability to create the kind of integrated, easy-to-understand packages that China offers while providing the opportunity for greater conditionality, meaning that the U.S. can monitor a country’s development alongside its diplomatic and security alignment with U.S. foreign policy. This is already happening in other parts of the U.S. government.
One powerful example is the Millennium Challenge Corp., which requires country partners to fulfill preconditions before accessing its grants and, for the last seven years, has been institutionalizing results-based financing models to further condition new finance on the achievement of predefined and rigorously measured results.
Reforming how USAID produces products and services fits squarely into this kind of results-driven financing. It builds on the groundbreaking reforms brought on by the BUILD Act passed during the first Trump administration, which created the U.S. International Finance Corp., significantly improving and consolidating authorities and financing instruments.
Achieving this, however, will require more than just a policy directive. USAID staff will need new systems, incentives, accountability and training to adopt fixed-price contracts, a road map we have laid out in a recent policy memo selected and published by the Federation of American Scientists.
As our memo goes on to describe, overseers in Congress and the Office of Management and Budget will need to hold USAID accountable for achieving the president’s priorities abroad, and Congress will need added convincing to fend off resistance from legacy contractors and grantees.
The payoff, however, is enormous: A USAID that delivers real results strengthens U.S. alliances and counters the growing influence of China and Russia in developing nations, all while putting America first. Moreover, the administration should also link its payments for the additional $16 billion the U.S. government annually contributes to multilateral and international organizations such as the World Health Organization, the U.N. and the World Food Program to achieving American priorities.
As the Trump administration sets its sights on “America First” policies, fixing foreign aid should be a top priority. Strategic development isn’t just charity — it’s an investment in U.S. economic growth and global leadership. The incoming administration has already shown an appetite for disrupting entrenched bureaucracies, from trade to domestic regulation.
Reforming USAID fits squarely into this agenda. The administration can deliver better value for American taxpayers by streamlining aid delivery while extending the nation’s strategic influence abroad.
• Richard J. Crespin is the CEO of CollaborateUp, an elite consulting firm accelerating collaboration among companies. nonprofits and governments when they tackle the world’s toughest challenges and a senior associate at the Center for Strategic & International Studies. Avnish Gungadurdoss is the CEO and co-founder of Instiglio, a Global South nonprofit that advises and assists governments and the largest aid agencies around the world in implementing institutional transformations that drive greater effectiveness and impact.
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