Chemonics Int’l Scores Lion’s Share of $10.5B USAID Contract Suite—Competition Complains

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May 5, 2015; Devex

The text of this newswire has been altered from its initial form.

If you like scale, you must be happy with what’s going on at the U.S. Agency for International Development (USAID), but you might be in a shrinking minority of USAID acolytes. Last month, USAID gave its largest-ever contract to an employee-owned consulting firm, Chemonics International. If big numbers cause palpitations, take your meds now.

The Chemonics award was for $9.5 billion over the next eight years, an “indefinite delivery, indefinite quantity contract” that’s part of a package of awards that could be worth up to $10.5 billion in total. What could cost that much? The Chemonics award will be to lead “health supply chain programs,” which means directing and coordinating “the delivery and distribution of a range of global health communities used to prevent and treat illnesses, including HIV and AIDS, malaria, and tuberculosis.”

Prior to this award, Chemonics ranked third out of USAID’s top 40 vendors with $501.7 million in obligated amounts as of November 2014, behind only the World Bank ($2.1 billion) and the World Food Program ($1.5 billion). Given that the World Bank and World Food Program are very different kinds of “vendors” than Chemonics, it makes Chemonics pretty much USAID’s largest development contractor. But a supply chain award of this huge size was bound to get reactions, especially from the other development contractors that might have thought they should have gotten the award or, in one case, a group of contractors that used to handle this function.

Devex’s crack development aid reporter, Michael Igoe, reports that John Snow, Inc., also a huge USAID contractor (with $285.5 million in obligations, ranking seventh among USAID’s top 40), is protesting the Chemonics award. JSI actually used to be a leader of USAID’s health supply chain programs, and it isn’t happy.

“We think this was a wrong decision that could cost the taxpayers a great deal of money and perhaps put people’s lives at risk,” Joel Lamstein, co-founder and president of JSI, told Devex by email. Igoe adds that JSI has submitted a protest of the award to the Government Accountability Office. He says that GAO has up to 100 days to issue a decision on the protest, during which time activities on the Chemonics contract will be frozen.

The Boston-based JSI is explicitly a health-focused contractor, while Chemonics appears to have a much broader issue focus, including programs in agriculture, microfinance, governance, pension reform, economic development, and international trade, just to name a few of the organization’s interests. In recent months, Chemonics has been the subject of a number of critiques of U.S. humanitarian assistance in Haiti, including questions about its agriculture programs conducted in some sort of partnership with Monsanto and audits about its programs of assistance to schools, “urban beautification”, and environmental mitigation. As we noted last month, Chemonics also received some negative commentary in an HBO VICE episode. Negative reviews don’t seem to have slowed down Chemonics’ access to USAID money in Haiti and other countries, and now it has landed a record-setting USAID deal.

Like JSI in an earlier iteration of the supply chain contract, Chemonics is leading a team of organizations on this deal, including IBM, the Seattle-based Remote Medical International, and FHI360, the nonprofit USAID contractor that acquired much of the Academy for Educational Development when AED ran into a beehive’s worth of problems with its management of USAID contracts.

Chemonics is not new to the problem of complaints regarding government contract awards. For example, last year, Chemonics filed a protest itself of a USAID award to Development Alternatives Inc. (DAI), ranking eighth on the list of USAID’s top 40 vendors, which GAO denied in December. In the world of development contracting, some contractors will play rough with the competition and with the contracting agency too, perhaps because of the size of the contracts involved.

Given $10.5 billion at stake as part of the USAID global supply chain program, the GAO decision on the Chemonics team versus the JSI team may be precedential, especially with JSI’s charge that the designation of Chemonics could endanger people’s lives. If anyone is going to know how this plays out, it is going to be Igoe, and NPQ will be looking for Igoe’s reports in Devex.—Rick Cohen

Correction: An earlier version of this newswire put the amount of the Chemonics award at $10.5 billion. As clarified by Michael Igoe, that $10.5B reflects the entire suite of awards, of which Chemonics’ $9.5B award represents the largest part. NPQ regrets the misunderstanding.