GAO-09-570, International Food Assistance: Local and Regional Procurement Can Enhance the Efficiency of U.S. Food Aid, but Challenges May Constrain Its Implementation


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Report to the Chairman, Subcommittee on Africa and Global Health, 
Committee on Foreign Affairs, House of Representatives: 

United States Government Accountability Office: 
GAO: 

May 2009: 

International Food Assistance: 

Local and Regional Procurement Can Enhance the Efficiency of U.S. Food 
Aid, but Challenges May Constrain Its Implementation: 

GAO-09-570: 

GAO Highlights: 

Highlights of GAO-09-570, a report to the Chairman, Subcommittee on 
Africa and Global Health, Committee on Foreign Affairs, House of 
Representatives. 

Why GAO Did This Study: 

While the U.S. approach of providing in-kind food aid has assisted 
millions of hungry people for more than 50 years, in 2007 GAO reported 
limitations to its efficiency and effectiveness. To improve U.S. food 
assistance, Congress has authorized some funding for local and regional 
procurement (LRP)—donors’ purchase of food aid in countries affected by 
food crises or in a country within the same region. Through analysis of 
agency documents, interviews with agency officials, experts, and 
practitioners, and fieldwork in four African countries, this requested 
report examines (1) LRP’s impact on the efficiency of food aid 
delivery; (2) its impact on economies where food is procured; and (3) 
U.S. legal requirements that could affect agencies’ use of LRP. 

What GAO Found: 

LRP offers donors a tool to reduce food aid costs and delivery time 
(see figure below), but multiple challenges to ensuring cost-savings 
and timely delivery exist. GAO found that local procurement in sub-
Saharan Africa cost about 34 percent less than similar in-kind food aid 
purchased and shipped from the United States to the same countries 
between 2001 and 2008. However, LRP does not always offer cost-savings 
potential. GAO found that LRP in Latin America is comparable in cost to 
U.S. in-kind food aid. According to World Food Program (WFP) data, from 
2004 to 2008, in-kind international food aid delivery to 10 sub-Saharan 
African countries took an average of 147 days, while local procurement 
only took about 35 days and regional about 41 days. Donors face 
challenges with LRP, including (1) insufficient logistics capacity that 
can contribute to delays in delivery, (2) donor funding restrictions, 
and (3) weak legal systems that can limit buyers’ ability to enforce 
contracts. Although LRP may have the added benefit of providing food 
that may be more culturally appropriate to recipients, evidence has yet 
to be systematically collected on LRP’s adherence to quality standards 
and product specifications, which ensure food safety and nutritional 
content. 

Figure: Comparison of Cost and Time in Food Aid Delivery: 

[Refer to PDF for image: horizontal bar graph] 

Average Cost Differential (percentage by which the cost of U.S. in-kind 
food aid differs from the cost of local procurement): 

Worldwide: 25% more; 
Sub-Saharan Africa: 34% more; 
Asia: 29% more; 
Latin America: 2% less. 

Average Delivery Time[A] for 10 Countries in Sub-Saharan Africa: 

In-kind donations (international): 
Time (in-kind donations): 147 days. 

Cash donations, International: 
Time (cash donations): 91 days; 
Time saved (cash donations): 56 days. 

Cash donations, Regional: 
Time (cash donations): 41 days; 
Time saved (cash donations): 106 days; 

Cash donations, Local: 
Time (cash donations): 35 days; 
Time saved (cash donations): 112 days. 

Source: GAO analysis of USAID and WFP data. 

[A] Time elapsed between the purchase order date and the date WFP takes 
possession of the food in the recipient country. Additional time is 
required for the food to reach intended beneficiaries. 

[End of figure] 

LRP has the potential to make food more costly to consumers in areas 
where food is procured by increasing demand and driving up prices, but 
steps can be taken to reduce these risks. As GAO’s review of WFP market 
analyses and interviews with WFP procurement officers confirmed, a lack 
of accurate market intelligence, such as production levels, makes it 
difficult to determine the extent to which LRP can be scaled up without 
causing adverse market impacts. Although LRP does have the potential to 
support local economies, for example by raising farmers’ incomes, data 
to demonstrate that these benefits are sustainable in the long term are 
lacking. 

U.S. legal requirements to procure U.S.-grown agricultural commodities 
for food aid and to transport up to 75 percent of those commodities on 
U.S.-flag vessels may constrain agencies’ use of LRP. Although Congress 
has appropriated funding for some LRP, agencies disagree on the 
applicability of certain cargo preference provisions to LRP food aid 
that may require ocean shipping. The 1987 interagency MOU that governs 
the administration of cargo preference requirements and could clarify 
areas of disagreement among the agencies is outdated and does not 
address the issues arising from LRP. 

What GAO Recommends: 

GAO recommends that the Administrator of USAID and the Secretary of 
Agriculture systematically collect evidence on LRP adherence to quality 
standards; work to improve the reliability of market intelligence; and 
work with the Secretary of Transportation to update the interagency 
memorandum of understanding (MOU) that governs cargo preference 
requirements. USAID concurred with GAO’s recommendations. USDA and WFP 
generally concurred but noted concerns about certain efficiency and 
market intelligence issues. DOT suggested further analysis of costs and 
delivery time, and noted that DOT implements its mandate through 
regulation, not the MOU. 

View [hyperlink, http://www.gao.gov/products/GAO-09-570] or key 
components. For more information, contact Thomas Melito at (202) 512-
9601 or melitot@gao.gov. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

Local and Regional Procurement of Food Can Reduce Costs and Improve 
Timeliness of Food Aid Delivery, but Many Challenges Remain: 

Local and Regional Procurement of Food Aid Has Potential for Adverse 
Market Impacts That Can Be Mitigated by Better Market Intelligence: 

Legal Requirements for U.S. Food Aid May Constrain U.S. Agencies' Use 
of Local and Regional Procurement: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Key Donor Initiatives That Support LRP: 

Appendix III: Delivery Time by Procurement Type in Ten Selected 
Countries: 

Appendix IV: Illustrative Example of U.S. In-kind Food Aid Compared 
With LRP: 

Appendix V: Results of Interviews with WFP Procurement Officers: 

Appendix VI: GAO Literature Review of Selected Studies on the Use of 
LRP: 

Appendix VII: Comments from the U.S. Agency for International 
Development: 

Appendix VIII: Comments from the U.S. Department of Agriculture: 

Appendix IX: Comments from the U.S. Department of Transportation: 

Appendix X: Comments from the World Food Program: 

Appendix XI: GAO Contact and Staff Acknowledgments: 

Related GAO Products: 

Tables: 

Table 1: Nine of the Top 10 Developing Countries for WFP Food 
Procurement also Received Food Aid in 2007: 

Table 2: Recipients of Food Aid Purchased from South Africa in 200818: 

Table 3: U.S. Agencies' Interpretations of Cargo Preference 
Requirements as They Pertain to Implementation of LRP: 

Table 4: WFP Contract Terms and USAID Cost Components Included in Cost 
Comparison: 

Table 5: Number of Matches in Cost Comparison: 

Table 6: Selected Studies on the Use of LRP: 

Figures: 

Figure 1: Food Aid as In-kind Commodities and through Cash Donations 
for Food Purchases, 1988 through 2007: 

Figure 2: WFP Local, Regional, and International Procurement of Food 
Aid, 2001 to 2008: 

Figure 3: WFP Procurement in Developed Countries Compared with 
Developing Countries, 2001 to 200813: 

Figure 4: Cost Comparison of WFP Local Procurement and U.S. In-kind 
Food Aid, by Region: 

Figure 5: WFP Procurement from South Africa, 2001-2008: 

Figure 6: Average of Median Delivery Times for 10 Recipient Countries 
in Sub-Saharan Africa, 2004 to 2008: 

Figure 7: Agricultural Commodity Value Chain Supported by LRP: 

Figure 8: Cost Difference between USAID and WFP Local Procurement in 
Sub-Saharan Africa: 

Figure 9: Selected Key Donor Initiatives That Support LRP, 2006 to 
2009: 

Figure 10: Median Delivery Times for Selected Recipient Countries in 
Sub-Saharan Africa, 2004 and 2008: 

Figure 11: An Illustrative Example of U.S. In-kind Food Aid Compared 
with LRP to Tajikistan: 

Figure 12: Factors Limiting LRP Efficiency and Actions That Improve and 
Ensure LRP Efficiency: 

Figure 13: Factors That Limit Positive Development Impacts of LRP and 
Actions to Improve or Strengthen Such Impacts: 

Abbreviations: 

AGRA: Alliance for a Green Revolution in Africa: 

CAADP: Comprehensive Africa Agriculture Development Program: 

CARE: Cooperative for Assistance and Relief Everywhere, Inc. 

CFB: Canadian Foodgrains Bank: 

CRS: Catholic Relief Services: 

CSB: corn soy blend: 

DDU: delivery duty unpaid: 

DFID: Department for International Development (United Kingdom): 

DOT: Department of Transportation: 

FAO: Food and Agriculture Organization: 

FEWS NET: Famine Early Warning Systems Network: 

FOB: free on board: 

G8: Group of Eight: 

GMO: genetically modified organisms: 

HACCP: Hazard Analysis and Critical Control Point: 

ICRC: International Committee of the Red Cross: 

IDP: internally displaced person: 

IEHA: Initiative to End Hunger in Africa: 

IFAD: International Fund for Agricultural Development: 

IFPRI: International Food Policy Research Institute: 

INTERFAIS: International Food Aid Information System: 

IPP: import parity price: 

ITSH: inland transportation, storage, and handling: 

KCCO: Kansas City Commodity Office (U.S. Department of Agriculture): 

LRP: local and regional purchase: 

MARAD: Maritime Administration (U.S. Department of Transportation): 

MCC: Millennium Challenge Corporation: 

MOU: memorandum of understanding: 

NEPAD: New Partnership for Africa's Development: 

NGO: nongovernmental organization: 

OFDA: Office of Foreign Disaster Assistance (U.S. Agency for 
International Development): 

P4P: Purchase for Progress: 

PEPFAR: President's Emergency Plan for AIDS Relief: 

PRM: Bureau of Population, Refugees, and Migration (U.S. Department of 
State): 

SAFEX: South African Futures Exchange: 

UN: United Nations: 

UNHCR: United Nations High Commissioner for Refugees: 

USAID: U.S. Agency for International Development: 

USDA: U.S. Department of Agriculture: 

WFP: World Food Program: 

WHO: World Health Organization: 

[End of section] 

United States Government Accountability Office:
Washington, DC 20548: 

May 29, 2009: 

The Honorable Donald M. Payne:
Chairman:
Subcommittee on Africa and Global Health:
Committee on Foreign Affairs:
House of Representatives: 

In an environment of increasing emergencies and growing global food 
insecurity,[Footnote 1] the United States and other donors face intense 
pressures to feed the world's expanding undernourished population. In 
September 2008, the United Nations (UN) Food and Agriculture 
Organization (FAO) reported that high food prices had resulted in the 
number of undernourished people reaching a record 963 million--1 of 
every 7 people in the world and 40 million more than the 923 million 
reported undernourished in 2007.[Footnote 2] Recently, the 
International Fund for Agricultural Development (IFAD) reported that 
global food insecurity could worsen, with some nutrition studies 
estimating that the number of food-insecure may rise by 16 million 
people for every percentage increase in the prices of staple goods. 
High food prices have sparked food protests, with riots reported in 
more than 50 countries from January 2007 to June 2008, including 12 
countries in sub-Saharan Africa.[Footnote 3] Moreover, piracy could 
endanger aid organizations' food supply pipelines to some of these 
countries. 

Local and regional procurement (LRP)--the purchase of food aid by 
donors in countries affected by disasters and food crises or in a 
different country within the same region--has increasingly become a key 
element in the multilateral food aid response over the past decade. 
[Footnote 4] Most bilateral donors of food aid have switched from 
commodity-based in-kind food aid to a cash-based food assistance 
program in recent years. According to some experts, providing cash 
rather than in-kind food commodities to implementing partners such as 
the UN World Food Program (WFP)--the largest multilateral purchaser and 
provider of food aid in the world[Footnote 5]--or to other aid 
organizations and nongovernmental organizations (NGO)[Footnote 6] can 
enable them to purchase food locally or regionally and deliver it to 
beneficiaries quickly and cost-effectively, while also providing 
development benefits to local communities where the food is purchased. 
[Footnote 7] However, other experts say that large cash purchases in 
some developing countries can have detrimental effects on local market 
conditions, and in such cases in-kind donations of commodities may be 
more beneficial. 

As the largest international food aid donor, contributing over half of 
all food aid supplies to alleviate hunger and support development, the 
United States plays an important role in responding to emergency food 
assistance needs and ensuring global food security. In 2008, the United 
States provided more than $2.8 billion in annual and supplemental 
funding for U.S. international food aid programs for more than 2.9 
million metric tons of food aid. The large majority of U.S. food 
assistance is for U.S.-grown commodities purchased competitively in the 
United States and shipped to recipient countries on U.S.-flag carriers. 
Although this approach has delivered vast amounts of food to hundreds 
of millions of undernourished people over the past 50 years, we 
previously reported significant limitations to its efficiency and 
effectiveness and recommended various improvements in areas such as 
transportation and monitoring.[Footnote 8] 

Congress has recently authorized limited funding for LRP. Its 2008 Farm 
Bill authorized the U.S. Department of Agriculture (USDA) to implement 
a 5-year, $60 million pilot LRP program for food aid.[Footnote 9] 
Subsequently in 2008, Congress appropriated $50 million in bridge fund 
supplemental funding to the U.S. Agency for International Development 
(USAID) for LRP in response to current emergencies, including the 
global food crisis.[Footnote 10] In 2009, Congress appropriated another 
$75 million for global food security, including LRP and distribution of 
food.[Footnote 11] 

In response to a request from the Chairman, House Subcommittee on 
Africa and Global Health, Committee on Foreign Affairs, we examined (1) 
the impact of LRP on the efficiency[Footnote 12] of food aid delivery, 
(2) the impact of LRP on economies where food is procured, and (3) U.S. 
legal requirements that could affect U.S. agencies' use of LRP. 

To address these objectives, we compared the cost of food through LRP 
with in-kind food aid from the United States by analyzing the per ton 
cost of similar commodities for the same recipient countries in the 
same quarter of a given year for WFP and USAID, respectively. We 
examined WFP data that compared the delivery time[Footnote 13] of LRP 
with in-kind food aid for 10 countries in sub-Saharan Africa for 2004 
through 2008. In addition, we reviewed selected economic literature on 
LRP and recent reports, studies, and papers issued by U.S. agencies, 
multilateral organizations, and bilateral donors. In four African 
countries that we selected for fieldwork--South Africa in southern 
Africa, Kenya and Uganda in East Africa, and Burkina Faso in West 
Africa[Footnote 14]--we met with WFP procurement officers and other WFP 
officials, U.S. mission staff, and host government, donor, and NGO 
representatives. We also visited various WFP and USAID project sites, 
as well as transportation and logistics facilities. In Washington, 
D.C., we interviewed officials from U.S. agencies, including USAID, 
USDA, State, Department of Transportation (DOT), and the Treasury; and 
the Millennium Challenge Corporation (MCC).[Footnote 15] In addition, 
we met with the Rome-based UN food and agriculture agencies--namely, 
FAO, WFP, and IFAD, as well as the U.S. Mission to the UN--and several 
bilateral donors' permanent representatives.[Footnote 16] In addition, 
we met with representatives of private foundations that actively fund 
agriculture and food security projects in sub-Saharan Africa. We also 
conducted semi-structured interviews with 11 WFP procurement officers 
based in Africa and Asia.[Footnote 17] Finally, we convened a 
roundtable of 10 experts and practitioners--including representatives 
from academia, research organizations, multilateral organizations, and 
NGOs--to further delineate, on the basis of our initial work, some key 
issues and challenges to the implementation of LRP. 

We conducted this performance audit from June 2008 to May 2009 in 
accordance with generally accepted government auditing standards. Those 
standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. (Appendix I provides a 
detailed discussion of our objectives, scope, and methodology.) 

Results in Brief: 

Donors can reduce food aid costs and delivery time through local and 
regional procurement (LRP), but they face challenges to ensuring cost 
savings and timely delivery. First, we found that WFP's local 
procurement in sub-Saharan Africa cost about 34 percent less than the 
cost of similar food aid that USAID purchased and shipped from the 
United States to the same countries between 2001 and 2008. However, LRP 
may not always offer cost-saving opportunities. For example, we found 
that the cost of LRP in Latin America was comparable to the cost of 
U.S. in-kind food aid. Second, WFP data show that between 2004 and 
2008, international in-kind food aid donations to 10 countries in sub- 
Saharan Africa took, on average, 147 days compared with about 35 and 41 
days for locally and regionally procured food. Despite these benefits, 
donors face challenges to ensuring cost-efficiency and timely delivery. 
These challenges include (1) a limited number of reliable suppliers, 
which could drive up procurement costs and time; (2) donor funding 
restrictions that may limit the flexibility of where and when to 
purchase; and (3) weak legal systems that could limit buyers' ability 
to enforce contracts. For example, a World Vision local procurement in 
Mozambique was delayed by more than 5 months because World Vision 
lacked accurate information on the supplier's inventory and the 
supplier was unable to procure enough food within the agreed-upon time 
frame. Upon delivery, World Vision found that many bags contained less 
food than the amount specified in the contract. Finally, LRP may have 
the added benefit of providing food aid that is more acceptable to 
recipients because it is more suited to local preferences. However, 
concerns persist about the quality of food procured in developing 
countries, and evidence on how LRP affects donors' ability to adhere to 
quality standards and product specifications has yet to be 
systematically collected. 

LRP has the potential to make food more costly to consumers in areas 
where food is procured by increasing demand and driving up prices, but 
steps are being taken to reduce these risks. LRP's potential impact on 
local economies is opposite to that of in-kind food aid, where local 
prices can be depressed due to large increases in supply. LRP's impact 
can depend on the scale of procurements, their implementation, and 
market conditions such as whether the market is sufficiently integrated 
with neighboring markets to absorb increased demand. Even though WFP is 
the largest purchaser of food assistance, WFP's local procurements tend 
to be smaller, on average, than its international procurements--298 
metric tons as compared with 671 metric tons per purchase order. WFP 
procurement officers stated that in most cases WFP's procurements have 
not affected local market prices, though there have been exceptions. In 
2006, for example, protracted food aid procurements after a good 
harvest in Ethiopia contributed to a price hike. The most significant 
challenge to avoiding potential adverse market impacts when conducting 
LRP is unreliable market intelligence. For example, in 2007, inaccurate 
information on production levels in Malawi led WFP to believe it was 
purchasing maize in a surplus market. Malawi faced food shortages a few 
months later. According to WFP officials, WFP has taken several actions 
to improve market intelligence, including monitoring world prices to 
determine when they fall below local prices, to decide when to switch 
from local to regional or international procurement. Even when market 
information is adequate, poorly functioning and unintegrated markets in 
sub-Saharan Africa and other developing countries still present 
challenges to expanding LRP while avoiding its potential adverse market 
impacts. For example, there is only one well-functioning commodity 
exchange in all of sub-Saharan Africa. Many of the factors that affect 
persistent food insecurity in sub-Saharan Africa and other developing 
countries are also detrimental to the implementation and potential 
expansion of LRP. These include lack of access to agricultural inputs 
and extension services, weak transportation infrastructures, and weak 
or conflicting host government policies. LRP does have the potential to 
support local economies by increasing demand for agricultural 
commodities and raising farmers' incomes, but little data exist to 
demonstrate that these benefits have occurred or are sustainable in the 
long term. In several of the countries we visited, we observed WFP LRP 
initiatives that might support local economies and connect LRP to other 
food security initiatives, but many of them are new and limited in 
scale. 

Certain legal requirements to procure U.S.-grown agricultural 
commodities for food aid and to transport those commodities on U.S.- 
flag vessels may constrain agencies' use of LRP. First, the Food for 
Peace Act, which authorizes Title II funding averaging $2 billion 
annually, supports in-kind food aid by specifying that funding under 
the Act can be used only to purchase U.S.-grown rather than foreign- 
grown commodities and thus cannot be used by U. S. agencies to 
implement an LRP program. However, since 2001, the U.S. government, 
through programs operating under a different authority--the Foreign 
Assistance Act--has provided a total of approximately $220 million to 
WFP for 1,265 LRP transactions. Furthermore, since July 2008, Congress 
has appropriated $50 million to USAID through the 2008 bridge 
supplemental and $75 million through the 2009 Omnibus appropriations 
that can be used for LRP, in addition to $75 million in International 
Disaster Assistance funding that the Administration has made available 
for LRP. Second, the Cargo Preference Act of 1954, as amended, requires 
up to 75 percent of the gross tonnage of all U.S.-funded food aid to be 
transported on U.S.-flag vessels. However, there is disagreement among 
USAID, USDA, and DOT, the agency that implements cargo preference 
requirements, on how to interpret and implement these requirements, 
such as which agency is responsible for determining the availability of 
U.S.-flag vessels. The memorandum of understanding (MOU) that sets 
forth the manner in which U.S. agencies coordinate the administration 
of cargo preference as applied to food aid was last updated in 1987 and 
does not specifically address these areas of ambiguity. The resulting 
lack of clarity could constrain agencies' ability to fully utilize the 
authorities to conduct LRP when responding to food emergencies. For 
example, USAID to date has used a legislative exemption from cargo 
preference requirements on only four occasions, due in part to the 
expectation of a regulatory response from DOT. Thus, the possibility 
that USAID may have to increase the use of U.S.-flag shipping above 
program thresholds, in order to remain within the tonnage requirements, 
may constrain the agency in the future. 

We are recommending that the Administrator of USAID and the Secretary 
of Agriculture (1) systematically collect evidence on LRP's adherence 
to quality standards and product specifications to ensure food safety 
and nutritional content; (2) work with implementing partners to improve 
the reliability and utility of market intelligence in areas where U.S.- 
funded LRP occurs, thereby ensuring that U.S.-funded LRP practices 
minimize potential adverse impacts and maximize potential benefits; and 
(3) work with the Secretary of Transportation to expedite updating the 
MOU between U.S. food assistance agencies and the Department of 
Transportation, consistent with our 2007 recommendation, to minimize 
the cost impact of cargo preference regulations on food aid 
transportation expenditures and to resolve uncertainties associated 
with the application of cargo preference to regional procurement. 

USAID, USDA, DOT, and WFP provided written comments on a draft of this 
report. We have reprinted these agencies' comments in appendixes VII, 
VIII, IX, and X, respectively, along with our responses. Additionally, 
USAID, DOT, State, and WFP provided technical comments on a draft of 
this report, which we have addressed or incorporated as appropriate. 
Treasury and MCC did not provide comments. 

USAID generally concurred with our recommendations. With regard to the 
first recommendation, however, USAID noted that it may be more 
efficient to include LRP's adherence to quality as part of U.S. 
agencies' ongoing efforts to collaborate to develop and implement 
systems to monitor quality assurance and product specification issues 
in all food purchases. The recommendation does not preclude such 
coordination among the agencies. 

USDA generally agreed with our report, noting that our comparisons of 
costs and delivery times were insightful. However, USDA observed that 
aggregating some of the products into commodity groups caused a loss of 
precision in our methodology. In conducting our overall analysis, we 
worked to ensure that we included the largest number of procurement 
transactions over the longest possible time period for which we had 
data, so some aggregation was required. 

DOT stated that it implements the cargo preference statute through 
regulation, not through an interagency MOU. Nevertheless, the 
regulations contain ambiguities that have previously required 
resolution through an MOU. This report describes new ambiguities that 
could arise when applying cargo preference in the context of regional 
procurement. We believe, as we recommend, that these ambiguities can be 
resolved by updating the MOU. 

WFP welcomed our timely examination of LRP as a tool to deliver 
effective and efficient food assistance. However, WFP stated it was 
perplexed that concerns persist about the quality of food procured in 
developing countries, given the lack of evidence showing that LRP 
introduces quality challenges that are not already challenges to 
internationally procured and donor-provided food aid. We note that 
quality is one issue that many WFP procurement officers and several 
other officials we interviewed have identified as a challenge for LRP. 
However, the lack of systematically collected data makes it difficult 
to objectively analyze how LRPs adhere to quality standards and product 
specifications. 

Background: 

Donors Provide Food Aid in Various Ways: 

Donors provide food aid primarily through procurements, vouchers, and 
contracts, most commonly working through international organizations, 
such as WFP,[Footnote 18] and NGOs. Procurements of food aid can be 
categorized geographically as: 

* International: Donor-financed purchases of food aid in world markets, 
which may include both developed and developing countries. For example, 
food purchased in Canada that is delivered to Uganda. 

* Regional: Donor-financed purchases of food aid in a different country 
in the same region. For example, food purchased in South Africa that is 
delivered to Uganda. 

* Local: Donor-financed purchases of food aid in countries affected by 
disasters and food crises. For example, food purchased in the southern 
part of Uganda that is delivered to the northern part of Uganda. 

Donors may also provide vouchers that allow recipients to purchase 
their own food in the local market.[Footnote 19] This option is usually 
used when food is available, but disaster-affected populations no 
longer have the income or livelihoods that would enable them to 
purchase food. WFP launched its first food voucher operation in Africa 
in February 2009, targeting 120,000 people who were suffering from the 
impact of high food prices in the urban areas of Ouagadougou in Burkina 
Faso. 

In addition, donors may contract with a commercial agent, such as a 
local trader, to purchase and deliver food aid. For example, in April 
2009, the Canadian Foodgrains Bank (CFB) contracted with Kenyan traders 
to purchase food from sources outside the country and used several NGOs 
to distribute the food.[Footnote 20]Donors Are Increasingly Providing 
International Food Assistance in Cash: 

As the volume of food aid in the form of in-kind commodities has 
declined, the volume of food aid purchased through cash donations has 
increased, as shown in figure 1. 

Figure 1: Food Aid as In-Kind Commodities and through Cash Donations 
for Food Purchases, 1988 through 2007 (in millions of tons): 

[Refer to PDF for image: two multiple line graphs] 

In-kind food aid: 

Year: 1988;
All in-kind food aid commodities: 13.2; 	
U.S. in-kind food aid commodities: 8.4; 
Food aid commodities purchased through cash donations: 1.3. 

Year: 1989; 
All in-kind food aid commodities: 10.6; 	
U.S. in-kind food aid commodities: 6.5; 
Food aid commodities purchased through cash donations: 1.0. 

Year: 1990; 
All in-kind food aid commodities: 12.0; 	
U.S. in-kind food aid commodities: 7.8; 
Food aid commodities purchased through cash donations: 1.2. 

Year: 1991; 
All in-kind food aid commodities: 11.3; 	
U.S. in-kind food aid commodities: 7.3; 
Food aid commodities purchased through cash donations: 1.5. 

Year: 1992; 
All in-kind food aid commodities: 13.3; 
U.S. in-kind food aid commodities: 7.5; 
Food aid commodities purchased through cash donations: 2.0. 

Year: 1993; 
All in-kind food aid commodities: 15.3; 
U.S. in-kind food aid commodities: 10.9; 
Food aid commodities purchased through cash donations: 2.1. 

Year: 1994; 
All in-kind food aid commodities: 11.0; 
U.S. in-kind food aid commodities: 7.1; 
Food aid commodities purchased through cash donations: 1.9. 

Year: 1995; 
All in-kind food aid commodities: 8.0; 
U.S. in-kind food aid commodities: 4.2; 
Food aid commodities purchased through cash donations: 2.2. 

Year: 1996; 
All in-kind food aid commodities: 5.6; 
U.S. in-kind food aid commodities: 3.2; 
Food aid commodities purchased through cash donations: 1.6. 

Year: 1997; 
All in-kind food aid commodities: 5.5; 
U.S. in-kind food aid commodities: 3.1; 
Food aid commodities purchased through cash donations: 1.8. 

Year: 1998; 
All in-kind food aid commodities: 6.7; 
U.S. in-kind food aid commodities: 4.0; 
Food aid commodities purchased through cash donations: 1.7; 

Year: 1999; 
All in-kind food aid commodities: 13.4; 
U.S. in-kind food aid commodities: 9.5; 
Food aid commodities purchased through cash donations: 1.6. 

Year: 2000; 
All in-kind food aid commodities: 9.4; 
U.S. in-kind food aid commodities: 6.9; 
Food aid commodities purchased through cash donations: 2.0. 

Year: 2001; 
All in-kind food aid commodities: 9.1; 
U.S. in-kind food aid commodities: 6.3; 
Food aid commodities purchased through cash donations: 1.9. 

Year: 2002; 
All in-kind food aid commodities: 7.9; 
U.S. in-kind food aid commodities: 5.9; 
Food aid commodities purchased through cash donations: 1.5. 

Year: 2003; 
All in-kind food aid commodities: 7.4; 
U.S. in-kind food aid commodities: 5.1; 
Food aid commodities purchased through cash donations: 2.9. 

Year: 2004; 
All in-kind food aid commodities: 4.9; 
U.S. in-kind food aid commodities: 3.9; 
Food aid commodities purchased through cash donations: 2.4. 

Year: 2005; 
All in-kind food aid commodities: 5.6; 
U.S. in-kind food aid commodities: 3.9; 
Food aid commodities purchased through cash donations: 2.7. 

Year: 2006; 
All in-kind food aid commodities: 4.4; 
U.S. in-kind food aid commodities: 3.5; 
Food aid commodities purchased through cash donations: 2.6. 

Year: 2007; 
All in-kind food aid commodities: 3.5; 
U.S. in-kind food aid commodities: 2.6; 
Food aid commodities purchased through cash donations: 2.5. 

Source: GAO analysis of International Food Aid Information System 
(INTERFAIS) data. 

[End of figure] 

With the exception of the United States, most major donors--including 
the European Union, the United Kingdom, and most recently Canada--now 
provide all of their food aid as cash that may be used for local and 
regional procurement (LRP) by WFP and NGOs. Previously, the European 
Union's food aid policies called for procuring food in the donor's 
domestic market. In 1996, however, the European Union essentially 
eliminated restrictions that tied procurement of food aid to European 
suppliers as it restructured its food aid and food security budgets to 
focus on improving food security. In 2005, Canada took similar actions, 
providing 50 percent of its food aid budget in cash available for LRP. 
In 2008, Canada opted to provide 100 percent of its food aid budget in 
cash. 

Many donors place conditions on their cash contributions to WFP, such 
as stating a preference for procurement of food in developing countries 
or for LRP. However, according to WFP, the availability of more 
flexible funding has significantly increased over the years, as donors 
have gradually shifted to providing food assistance as cash without 
tying such assistance to purchases from domestic food suppliers. 

[Side bar: Canada Has Adopted a Cash LRP Food Aid Policy: 

Like the United States, Canada has historically tied the procurement of 
food aid to its domestic suppliers. However, over the past few decades, 
Canada has shifted to providing food aid in cash, ranging from 15 
percent in 1975 to 50 percent in 2005 and 100 percent as of April 2008. 
Canada also announced in April 2008 that it would increase its annual 
food aid contributions to an amount equivalent to almost $208 million 
USD for fiscal year 2008. 

Canada’s stated rationale for switching to 100 percent cash funding for 
food aid (which in some cases can still be used to purchase Canadian 
agricultural commodities) was to provide more flexibility to its 
overall food security strategy, improve the efficiency of its food 
assistance, and contribute to the development of local and regional 
markets from which it purchases food aid. As one of the world’s largest 
food aid donors, Canada has provided an average of about $161 million 
(USD) to WFP, the Canadian Foodgrains Bank (CFB), and other NGOs 
annually over the last 4 years, with the vast majority of its 
contributions going to WFP. 

Canadian food aid programming is administered by the Canadian 
International Development Agency (CIDA). CIDA provides contributions to 
WFP and also provides 4 to 1 matching funding to CFB, up to $22.6 
million (USD) annually. CIDA’s guidance to WFP and CFB is to place an 
emphasis on purchasing from developing countries when it does not come 
at the expense of a timely and appropriate food aid intervention. 

Figure: Canadian Farmers Support Smallholder Farmers in Burkina Faso: 

[Refer to PDF for image: photograph] 

Canadian farmers provided smallholder farmers in Burkina Faso an 
interest-free loan with which they constructed a grain storage 
warehouse. 

Source: GAO. 

[End of figure] 

[End of sidebar] 

WFP's Use of LRP Has Increased, particularly in Developing Countries: 

In its strategic plan for 2008 through 2011, WFP identified use of LRP 
as one of its five main objectives. WFP's stated policy is to purchase 
food aid at the most advantageous price available, taking into account 
the cost of transportation and shipping, with a preference for using 
LRP in developing countries wherever possible. WFP cited two primary 
goals for funding LRP: (1) to increase the efficiency of food aid 
delivery, expediting assistance to save lives during food emergencies 
and humanitarian crises; and (2) to support development by stimulating 
agricultural production and raising farm incomes, particularly by 
targeting smallholder farm households.[Footnote 21] 

As shown in figure 2, WFP LRP has consistently exceeded international 
procurement of food aid, principally for emergencies, from 2001 to 
2008. 

Figure 2: WFP Local, Regional, and International Procurement of Food 
Aid, 2001 to 2008: 

[Refer to PDF for image: vertical bar graph] 

Year: 2001; 
Local: 404,451 metric tons; 
Regional: 679,129 metric tons; 
International: 395,554 metric tons. 

Year: 2002; 
Local: 379,188 metric tons; 
Regional: 657,114 metric tons; 
International: 477,398 metric tons. 

Year: 2003; 
Local: 493,954 metric tons; 
Regional: 1,235,940 metric tons; 
International: 937,570 metric tons. 

Year: 2004; 
Local: 808,587 metric tons; 
Regional: 1,032,630 metric tons; 
International: 1,716,420 metric tons. 

Year: 2005; 
Local: 950,218 metric tons; 
Regional: 705,800 metric tons; 
International: 870,634 metric tons. 

Year: 2006; 
Local: 964,788 metric tons; 
Regional: 394,085 metric tons; 
International: 656,515 metric tons. 

Year: 2007; 
Local: 867,259 metric tons; 
Regional: 651,298 metric tons; 
International: 561,294 metric tons. 

Year: 2008; 
Local: 856,128 metric tons; 
Regional: 890,458 metric tons; 
International: 1,078,080 metric tons. 

Source: GAO based on WFP data. 

[End of figure] 

WFP procurement in developing countries has been increasing, from $171 
million in 2001 to over $1 billion in 2008 (see figure 3). In 2008, WFP 
procured 78 percent of its food aid from developing countries and 22 
percent from developed countries. 

Figure 3: WFP Procurement in Developed Countries Compared with 
Developing Countries, 2001 to 2008: 

[Refer to PDF for image: vertical bar graph] 

Year: 2001; 
Developing countries: $171 million; 
Developed countries: $123.3 million; 

Year: 2002; 
Developing countries: $219.6 million; 
Developed countries: $87.7 million. 

Year: 2003; 
Developing countries: $442.9 million; 
Developed countries: $190.5 million. 

Year: 2004; 
Developing countries: $725.5 million; 
Developed countries: $325.9 million. 

Year: 2005; 
Developing countries: $527.3 million; 
Developed countries: $185.1 million. 

Year: 2006; 
Developing countries: $460.3 million; 
Developed countries: $140.7 million. 

Year: 2007; 
Developing countries: $612.4 million; 
Developed countries: $155.0 million. 

Year: 2008; 
Developing countries: $1092.9 million; 
Developed countries: $314.9 million. 

Source: GAO based on WFP data. 

[End of figure] 

Of the top 20 developing countries from which WFP procured food in 
2008, 16 were in Africa and Asia. As shown in table 1, in 2007, 9 of 
the top 10 developing countries (including 8 in Africa and Asia) from 
which WFP procured food also received food aid the same year. Africa 
received 54 percent of total international food aid provided, and Asia 
received 29 percent of total international food aid provided in 2007. 

Table 1: Nine of the Top 10 Developing Countries for WFP Food 
Procurement also Received Food Aid in 2007: 

Developing country: Uganda; 
WFP procurement: In U.S. dollars: $54,769,771; 
WFP procurement: In metric tons: 210,223; 
Food aid received (In metric tons): 278,403. 

Developing country: Ecuador; 
WFP procurement: In U.S. dollars: $51,137,045; 
WFP procurement: In metric tons: 42,255; 
Food aid received (In metric tons): 759. 

Developing country: Turkey; 
WFP procurement: In U.S. dollars: $44,515,965; 
WFP procurement: In metric tons: 99,719; 
Food aid received (In metric tons): 0. 

Developing country: Pakistan; WFP procurement: In U.S. dollars: 
36,399,122; 
WFP procurement: In metric tons: $131,485; 
Food aid received (In metric tons): 21,639. 

Developing country: Indonesia; 
WFP procurement: In U.S. dollars: v29,452,050; 
WFP procurement: In metric tons: 27,152; 
Food aid received (In metric tons): 43,413. 

Developing country: India; 
WFP procurement: In U.S. dollars: $28,188,917; 
WFP procurement: In metric tons: 111,613; 
Food aid received (In metric tons): 118,586. 

Developing country: Sudan; 
WFP procurement: In U.S. dollars: $24,771,678; 
WFP procurement: In metric tons: 93,935; 
Food aid received (In metric tons): 497,520. 

Developing country: Kenya; 
WFP procurement: In U.S. dollars: $24,404,307; 
WFP procurement: In metric tons: 82,013; 
Food aid received (In metric tons): 296,726. 

Developing country: Zambia; 
WFP procurement: In U.S. dollars: $21,412,392; 
WFP procurement: In metric tons: 95,282; 
Food aid received (In metric tons): 40,769. 

Developing country: Malawi; 
WFP procurement: In U.S. dollars: $20,619,635; 
WFP procurement: In metric tons: 90,549; 
Food aid received (In metric tons): 94,530. 

Source: GAO based on WFP and INTERFAIS data. 

Note: INTERFAIS data includes food aid from all sources, including WFP, 
multilateral organizations, and bilateral donors. 

[End of table] 

Donors Have Launched Various Initiatives That Support LRP: 

In an effort to address the global food crisis, donors have recently 
launched a number of initiatives, many of which specifically advance 
LRP of food aid (see appendix II). These donors include multilateral 
organizations such as the UN, WFP, and the World Bank, and bilateral 
donors such as the United States. For example, in September 2008, WFP 
formally launched the Purchase for Progress (P4P) program, a $76 
million pilot that is to be implemented in 21 countries, 15 of them in 
sub-Saharan Africa, in the next 5 years to improve the income of 
smallholder farmers and thereby increase their incentives for 
production. In July 2008, the Group of Eight (G8) [Footnote 22] issued 
a statement on global food security that called on donors to 
participate in making commitments to provide access to seed and 
fertilizers and help build up local agriculture by promoting local 
purchase of food aid. In April 2008, the World Bank's New Deal for 
Global Food Policy called for changes including a shift from 
traditional in-kind food assistance to cash, vouchers, development 
assistance for local markets, and purchase of food from local farmers 
to strengthen their communities. 

Local and Regional Procurement of Food Can Reduce Costs and Improve 
Timeliness of Food Aid Delivery, but Many Challenges Remain: 

Local and regional procurement (LRP) can offer donors a tool for 
reducing costs and shortening delivery time but faces multiple 
challenges. LRP can offer cost-saving opportunities over in-kind food 
aid from the United States if food is available in the recipient 
country or neighboring countries, and the cost of procuring locally or 
regionally is less than the cost of procuring and shipping from the 
United States. Additionally, LRP can save delivery time in emergency 
situations because it usually travels a shorter distance than in-kind 
food aid. Local procurement can also avoid delays that often occur when 
food crosses borders and has to go through permit and inspection 
processes. Despite these benefits, donors face challenges in making 
local and regional procurements, including insufficient logistics 
capacity that can contribute to delays in delivery, and weak legal 
systems that can limit buyers' ability to enforce. Besides the benefit 
of reducing costs and delivery time, locally and regionally procured 
food may have the added benefit of being more culturally acceptable to 
recipients. However, evidence on how LRP affects donors' ability to 
enforce food aid quality standards and product specifications has yet 
to be systematically collected. 

LRP Can Reduce Cost and Delivery Time: 

LRP Is Generally More Cost-Effective than In-kind Food Aid from the 
United States: 

We found that locally and regionally procured food costs considerably 
less than U.S. in-kind food aid for sub-Saharan Africa and Asia, though 
the costs are comparable for Latin America. We compared the cost per 
ton of eight similar commodities[Footnote 23] for the same recipient 
countries in the same quarter of a given year and found that the 
average cost of WFP's local procurements in sub-Saharan Africa and Asia 
was 34 percent and 29 percent lower, respectively, than the cost of 
food aid shipped from the United States (see figure 4).[Footnote 24] 
For example, in the fourth quarter of 2002, the average cost of locally 
purchased wheat in Ethiopia was approximately $194 per metric ton 
[Footnote 25] while the cost of U.S. wheat shipped to Ethiopia[Footnote 
26] in the same quarter was 38 percent higher, at approximately $312 
per metric ton.[Footnote 27] Additionally, about 95 percent of WFP 
local procurements in sub-Saharan Africa and 96 percent in Asia cost 
less than corresponding U.S. in-kind food aid. However, the location of 
procurements affects whether LRP offers any cost-saving potential and 
if so, by how much. While local procurement in sub-Saharan Africa and 
Asia cost much less than U.S. in-kind food aid, we found that in Latin 
America, the cost of WFP LRP was comparable to the cost of food aid 
shipped from the United States. The average cost of WFP local 
procurements in Latin America was 2 percent higher than that of U.S. 
food aid, and the number of WFP's transactions with a lower cost than 
U.S. food aid was close to the number of transactions with a higher 
cost. This difference is due in part to the fact that shipping from the 
United States to Latin America is usually less costly than shipping to 
Africa.[Footnote 28] 

Figure 4: Cost Comparison of WFP Local Procurement and U.S. In-kind 
Food Aid, by Region: 

[Refer to PDF for image: four pie-charts] 

Percentage of WFP transactions with costs less than USAID average 
costs: 
Overall: 86.1%; 
Sub-Saharan Africa: 94.8%; 
Asia: 95.5%; 
Latin America: 41.9%. 

Average cost differential (percentage by which the cost of U.S. in-kind 
food aid differs from the cost of local procurement): 
Overall: 25% more; 
Sub-Saharan Africa: 34% more; 
Asia: 29% more; 
Latin America: 2% less. 

Note: To ensure a fair cost comparison between WFP's local procurement 
and U.S. in-kind food aid with the data available, for WFP's LRP 
transactions, we included the transactions that have the contract term 
DDU and compared the costs to USAID's commodity, ocean shipping, and 
inland freight costs. For WFP's international transactions, we included 
the transaction with the contract term "free on board" (FOB) and 
compared the cost with USAID's commodity costs plus inland freight. 

Source: GAO analysis of USAID and WFP data. 

[End of figure] 

Local and regional procurement can offer donors the flexibility to take 
advantage of cost-saving opportunities, which exist when food is 
available locally or regionally and the costs of purchasing and 
transporting it are lower than the costs of purchasing and shipping it 
from donor countries. Donors can purchase food aid from surplus- 
producing areas within the affected country, or purchase at the 
subregional and regional levels to meet localized needs. For example, 
to meet the needs of Uganda's large internally displaced population in 
the north, WFP has been purchasing maize and beans from the surplus- 
producing areas that are in close proximity to the regions in need. In 
2007, Uganda was the largest source for WFP procurements in terms of 
tonnage. From 2001 to 2008, WFP purchased over 600,000 metric tons of 
maize and beans locally to meet needs in Uganda. Similarly, to meet 
needs in Zimbabwe in 2008, WFP purchased a large amount of food aid 
that year from nearby countries including Malawi; Zambia; Mozambique; 
and South Africa, a surplus-producing country. South Africa was the 
largest source for WFP procurement in 2008, amounting to more than $163 
million, and food from South Africa fed people in both nearby countries 
and internationally (see table 2). 

Table 2: Recipients of Food Aid Purchased from South Africa in 2008: 

Recipient country: Zimbabwe; 
Value (U.S. dollars): $38,645,093; 
Quantity (metric tons): 130,297. 

Recipient country: Somalia; 
Value (U.S. dollars): $34,135,821; 
Quantity (metric tons): 92,675. 

Recipient country: Kenya; 
Value (U.S. dollars): $17,155,164; 
Quantity (metric tons): 48,105. 

Recipient country: Democratic Republic of Congo; 
Value (U.S. dollars): $17,074,651; 
Quantity (metric tons): 47,221. 

Recipient country: Ethiopia; 
Value (U.S. dollars): $12,688,873; 
Quantity (metric tons): 29,578. 

Recipient country: Malawi; 
Value (U.S. dollars): $7,452,397; 
Quantity (metric tons): 26,304. 

Recipient country: To be determined[A]; 
Value (U.S. dollars): $4,490,738; 
Quantity (metric tons): 16,407. 

Recipient country: Guinea; 
Value (U.S. dollars): $3,060,040; 
Quantity (metric tons): 9,326. 

Recipient country: Central African Republic; 
Value (U.S. dollars): $2,962,624; 
Quantity (metric tons): 6,663. 

Recipient country: Chad; 
Value (U.S. dollars): $2,828,126; 
Quantity (metric tons): 6,376. 

Recipient country: Mozambique; 
Value (U.S. dollars): $2,724,826; 
Quantity (metric tons): 7,989. 

Recipient country: Uganda; 
Value (U.S. dollars): $2,367,539; 
Quantity (metric tons): 6,903. 

Recipient country: Burkina Faso; 
Value (U.S. dollars): $2,122,344; 
Quantity (metric tons): 4,378. 

Recipient country: Sri Lanka; 
Value (U.S. dollars): $1,699,854; 
Quantity (metric tons): 3,132. 

Recipient country: Côte d'Ivoire; 
Value (U.S. dollars): $1,470,682; 
Quantity (metric tons): 3,140. 

Recipient country: Burundi; 
Value (U.S. dollars): $1,279,835; 
Quantity (metric tons): 4,540. 

Recipient country: Niger; 
Value (U.S. dollars): $1,242,823; 
Quantity (metric tons): 3,044. 

Recipient country: Mali; 
Value (U.S. dollars): $1,227,125; 
Quantity (metric tons): 2,594. 

Recipient country: Cameroon; 
Value (U.S. dollars): $1,109,896; 
Quantity (metric tons): 2,315. 

Recipient country: Timor Leste; 
Value (U.S. dollars): $1,060,314; 
Quantity (metric tons): 2,080. 

Recipient country: Swaziland; 
Value (U.S. dollars): $1,016,575; 
Quantity (metric tons): 3,466. 

Recipient country: Benin; 
Value (U.S. dollars): $984,679; 
Quantity (metric tons): 2,967. 

Recipient country: Togo; 
Value (U.S. dollars): $909,684; 
Quantity (metric tons): 2,796. 

Recipient country: Ghana; 
Value (U.S. dollars): $774,417; 
Quantity (metric tons): 2,301. 

Recipient country: Senegal; 
Value (U.S. dollars): $688,753; 
Quantity (metric tons): 2,043. 

Recipient country: Madagascar; 
Value (U.S. dollars): $660,713; 
Quantity (metric tons): 1,811. 

Recipient country: Liberia; 
Value (U.S. dollars): $389,583; 
Quantity (metric tons): 854. 

Recipient country: Honduras; 
Value (U.S. dollars): $344,250; 
Quantity (metric tons): 810. 

Recipient country: Cambodia; 
Value (U.S. dollars): $298,332; 
Quantity (metric tons): 608. 

Recipient country: Haiti; 
Value (U.S. dollars): $205,282; 
Quantity (metric tons): 434. 

Recipient country: Djibouti; 
Value (U.S. dollars): $163,813; 
Quantity (metric tons): 326. 

Recipient country: Sierra Leone; 
Value (U.S. dollars): $105,028; 
Quantity (metric tons): 217. 

Recipient country: Namibia; 
Value (U.S. dollars): $101,356; 
Quantity (metric tons): 184. 

Recipient country: Tanzania; 
Value (U.S. dollars): $99,675; 
Quantity (metric tons): 225. 

Recipient country: São Tomé & Principe; 
Value (U.S. dollars): $69,061; 
Quantity (metric tons): 151. 

Recipient country: Philippines; 
Value (U.S. dollars): $52,538; 
Quantity (metric tons): 113. 

Recipient country: Angola; 
Value (U.S. dollars): $21,595; 
Quantity (metric tons): 65. 

Recipient country: Mauritania; 
Value (U.S. dollars): $20,340; 
Quantity (metric tons): 45. 

Recipient country: Lesotho; 
Value (U.S. dollars): $8,640; 
Quantity (metric tons): 16. 

Recipient country: Total; 
Value (U.S. dollars): $163,713,077; 
Quantity (metric tons): 472,492. 

Source: GAO analysis of WFP procurement data. 

[A] At the time of purchase, the recipient had not been identified. 

[End of table] 

To ensure cost-effectiveness, donors can use the import parity price 
[Footnote 29] to guide purchase decisions. For example, WFP compares 
the lowest price potential sellers submit through its tender process 
[Footnote 30] with the import parity price, which includes the costs of 
commodity plus shipping and handling, from various potential 
procurement sites. WFP procures locally or regionally if the costs of 
doing so are below the import parity price. Recently, for a LRP funded 
by USAID, Save the Children compared the cost of locally or regionally 
procured wheat flour, vegetable oil, and lentils to the cost of in-kind 
food aid from the United States. It found that although locally 
procured wheat flour in Tajikistan had a higher price than U.S. wheat, 
the cost of commodity plus shipping was lower. According to WFP, LRP's 
cost-effectiveness depends on many factors, such as the commodity, 
season, and exchange rates. For example, WFP often procures peas from 
Canada because of the availability and competitive pricing of these 
commodities in this market. In addition, a strong currency can hurt a 
country's competitiveness. According to WFP officials, increases in the 
value of the South African currency partly contributed to WFP's 
decision to decrease its purchases from South Africa in 2007 and then 
increase them in 2008 when the currency devalued. (figure 5 shows WFP 
procurement from South Africa from 2001 to 2008.) 

Figure 5: WFP Procurement from South Africa, 2001-2008: 

[Refer to PDF for image: multiple line graph] 

Source: GAO analysis of WFP data. 

[End of figure] 

LRP Can Significantly Shorten Delivery Times: 

According to WFP data, LRPs in sub-Saharan Africa generally have a 
shorter delivery time than food aid procured internationally. We 
compared the median delivery time for LRP to the median delivery time 
for food aid either procured or donated internationally for 10 sub- 
Saharan countries. We selected these countries because they had 
received both LRP and international food aid. We found that 
international in-kind donation took the longest, averaging 147 days 
(see figure 6). Local and regional procurements took on average 35 and 
41 days, shortening the delivery time from international donations by 
112 days and 106 days, respectively. For example, in Malawi, in-kind 
international donations took 4 months (167 days) while locally procured 
food aid took about 1 month (32 days). Similarly, the median delivery 
time for regionally procured food going to Zimbabwe was 48 days versus 
114 days for internationally procured food aid. (For the delivery times 
of the 10 selected sub-Saharan African countries, see appendix III.) 

Figure 6: Average of Median Delivery Times for 10 Recipient Countries 
in Sub-Saharan Africa, 2004 to 2008: 

[Refer to PDF for image: horizontal line graph] 

Worldwide: 25% more; 
Sub-Saharan Africa: 34% more; 
Asia: 29% more; 
Latin America: 2% less. 

Average Delivery Time[A] for 10 Countries in Sub-Saharan Africa: 

In-kind donations (international): 
Time (in-kind donations): 147 days. 

Cash donations, International: 
Time (cash donations): 91 days; 
Time saved (cash donations): 56 days. 

Cash donations, Regional: 
Time (cash donations): 41 days; 
Time saved (cash donations): 106 days; 

Cash donations, Local: 
Time (cash donations): 35 days; 
Time saved (cash donations): 112 days. 

Source: GAO analysis of USAID and WFP data. 

Notes: 

"Delivery time" refers to the number of days that elapsed from the 
purchase order date to the date WFP took possession of the food in the 
recipient country. Additional time is required for food to reach 
intended beneficiaries. 

Numbers reported in this figure are based on the median delivery time 
for food aid through various purchase modes: international in-kind 
donations and international, regional, and local purchases made from 
cash donations. 

[End of figure] 

Similarly, in a USAID-funded grant completed in April 2009, Save the 
Children was able to obtain wheat flour from Russia and Kazakhstan and 
transport it to Tajikistan within 2 months, while wheat flour from the 
United States took over 5 months to arrive in Tajikistan (see 
illustrative example in appendix IV, which also compares the cost of 
U.S. in-kind food aid with the cost of LRP). USAID sent the other two 
commodities--yellow peas and fortified soybean oil--from its 
prepositioning site in Jacintoport (Texas) and was able to shorten the 
delivery time.[Footnote 31] It took around the same number of days for 
the yellow peas from the U.S. prepositioning site as the lentils 
procured within the region to arrive. According to DOT, prepositioning 
offers significant time savings. DOT's analysis shows that sending U.S. 
prepositioned food could have reduced transit time in comparison to a 
regional purchase from South Africa that was delivered to Somalia. 
[Footnote 32] 

Locally and regionally procured food can take less time for delivery 
because it travels a shorter distance than internationally procured 
food and does not risk delays when crossing borders. Local procurement 
has the benefit of avoiding import processes, such as meeting recipient 
countries' sanitary and phytosanitary requirements,[Footnote 33] which 
can delay delivery. For example, if imported maize does not meet a 
country's moisture content requirement, delivery can be delayed. Some 
governments require imported food aid to go through additional testing 
and certification for genetically modified organisms (GMO). According 
to WFP officials in South Africa, these requirements can take an 
additional 2 to 3 weeks. 

Lack of Reliable Suppliers, Donor Funding Restrictions, and Other 
Factors Have Limited the Efficiency of LRP: 

Despite potential benefits, factors such as a lack of reliable 
suppliers, limited logistical capacity, weak legal systems, and donor 
funding restrictions have limited the efficiency of LRP, as explained 
below: 

* Lack of reliable suppliers. Of the 11 WFP procurement officers we 
interviewed, 9 identified finding reliable suppliers and preventing 
supplier default as a challenge to implementing LRP. A World Vision 
representative in South Africa stated that the organization was 
involved in a local procurement in Mozambique that took 5 months 
because the supplier did not have food in stock and had to find 
alternative sources to purchase enough to fulfill his contract. When 
food was finally delivered, World Vision found that many bags were 
short of the quantity specified in the contract. 

* Poor infrastructure and logistical capacity. Limited infrastructure 
and logistical capacity could delay delivery. For example, according to 
some WFP officials and private traders we met with, South Africa's rail 
system and ports are underinvested and have limited capacity to handle 
food aid during peak seasons. Food aid could wait up to 2 months for a 
warehouse at the port of Durban. According to DOT, increasing regional 
procurements from South Africa could lead to more congestion at the 
port of Durban. DOT believes that in-kind food aid from the United 
States or prepositioning sites could avoid the port congestion in South 
Africa by going directly to the port of entry nearest the destination. 
In addition, trade barriers in developing countries could also delay 
delivery of food procured regionally. 

* Weak legal systems. A weak legal system could limit buyers' ability 
to enforce contracts. WFP generally requires suppliers to purchase 
bonds, which they will lose if they do not fulfill their obligations 
under the contracts. However, this requirement is not always feasible 
to implement, especially when procuring from small suppliers. For 
example, WFP usually eliminates its bond requirements for its purchases 
from smallholder farmers. Experts pointed out that it is critical to 
build in the time and cost of adequate quality testing and control, 
particularly in an environment where there are weak legal requirements 
for the producers or the exporting countries. For example, WFP's 
procurement officer in Uganda told us that many of the smallholder 
farmers WFP purchases from had never seen a contract before, and WFP 
had to take actions to ensure that these purchases were delivered on 
time and met the quality specified in the applicable contracts. 

* Timing and restrictions on donor funding. Timing and other 
restrictions on donor funding limit the flexibility of implementing 
partners to decide when, where, and how to purchase food, according to 
WFP procurement officers. If donor funding is not available when there 
is surplus in the market and prices are low, WFP cannot take advantage 
of market opportunities. A procurement officer in Sudan, for example, 
stated that, in January 2009, he was expecting 100,000 to 200,000 
metric tons of high-quality commodities to be available on the market, 
but that he would only be able to purchase 20,000 metric tons due to 
the timing of donor funding. A WFP procurement officer in South Africa 
stated that, although he may be able to convince headquarters staff to 
let him use WFP's advanced financing facility to make a purchase, he 
may encounter problems if the anticipated donor funding does not come 
through with its commitment. With donor support, WFP has begun to test 
flexible financing mechanisms that are expected to facilitate LRP. 
These include the advance financing facility, a mechanism with which 
WFP finances a specific project to mobilize food based on specific 
forecasts of donor contributions to the project, and a forward purchase 
facility, a mechanism that allows WFP to take a market position at an 
optimal time without specific knowledge of where the purchased food 
will go or which donor's funding will underwrite the specific 
procurement action. Some officers also noted that some donors' 
preference for LRP may result in procuring locally or regionally when 
importing might be less expensive. 

LRP Can Provide More Culturally Appropriate Food, but Views on Quality 
Are Mixed: 

LRP Can Provide More Culturally Acceptable Food: 

Local and regional procurement can provide food that is more acceptable 
to the dietary needs and preferences of beneficiaries in recipient 
countries. People tend to be more familiar with food grown in 
neighboring regions than food from different continents. For example, 
people in many African countries prefer white maize, and Ethiopians who 
receive yellow maize as food aid from the United States might sell it 
in the cattle market as feed, according to a WFP procurement officer in 
Ethiopia. 

Views on Meeting Product Specifications and Quality Standards Are 
Mixed: 

[Side bar: Ensuring quality standards: 

Keeping food commodities free from mold and insect infestation can be 
challenging during the transit and in storage. Pictured below is a bag 
of food aid infested with insects. 

Figure: Photograph; refer to PDF for image] 

Source: GAO. 

[End of side bar] 

Experts and practitioners have mixed views on how LRP affects donors' 
ability to adhere to product specifications and quality standards--such 
as moisture content and the level of broken and foreign matter--which 
ensure food safety and nutritional content.[Footnote 34] However, 
donors have yet to systematically collect evidence that demonstrates 
whether food procured in different locations varies significantly in 
meeting product specifications and quality. Some experts contend that 
because locally and regionally procured food travels shorter distances 
and takes on average less time to arrive at its destination than 
internationally procured food aid, certain quality standards, such as 
moisture content, may be less critical.[Footnote 35] The longer grain 
has to travel, the more critical it is to control moisture content so 
that it does not become moldy and infested with insects. We have 
previously reported quality problems with U.S. food aid during long 
transit times.[Footnote 36] Regarding LRP food aid, 9 out of the 11 WFP 
procurement officers we interviewed for this review confirmed that 
quality was a challenge. They also noted, however, that some quality 
standards, which may often be difficult for suppliers in developing 
countries to meet, may not be very crucial to individual recipients. 
For example, due to the lack of modern processing facilities, rice from 
some developing countries may have a higher level of broken kernels, 
but some recipients may actually prefer such rice because it is better 
suited to cooking porridge, a common method of consumption.[Footnote 
37] However, concerns persist about the quality of food procured in 
developing countries. The U.S. Wheat Associates noted that the ability 
to ensure food quality and safety could be jeopardized when purchases 
occur where standards are less rigorous than those of U.S. suppliers to 
food aid programs. We learned of a few examples of locally or 
regionally procured food not meeting quality standards. For example, 
representatives from WFP and NGOs told us that they had received food 
that turned out to be of lower quality or quantity than what was 
specified in the contract. A WFP procurement officer in South Africa 
reported that WFP requires the plants that manufacture maize meal or 
corn soy blend (CSB) to meet internationally accepted production 
standards, such as Hazard Analysis and Critical Control Point (HACCP), 
and hires surveyors to take samples for testing and assess whether the 
facility meets those standards. However, these surveyors recently found 
that 13 out of 15 maize meal plants were not in compliance with the 
standards and provided a list of activities the plants should undertake 
in order to improve. In addition, some factors that affect the 
efficiency of LRP also affect the ability to meet quality standards and 
product specifications. For example, a weak legal system limits buyers' 
ability to enforce contracts, including imposing penalties when 
commodities delivered do not meet the specifications outlined in the 
contract. However, no evidence has been systematically collected on how 
LRP affects donors' ability to adhere to quality standards and product 
specifications. A WFP official told us he does not believe there is any 
significant difference among different procurement types in the level 
of post-delivery loss, which is one measure of quality issues. However, 
WFP has not analyzed whether the quality issues are more severe for 
food procured locally or regionally versus food procured 
internationally. 

Local and Regional Procurement of Food Aid Has Potential for Adverse 
Market Impacts That Can Be Mitigated by Better Market Intelligence: 

Local and regional procurement (LRP) has the potential to make food 
more costly to consumers in areas from which food is procured by 
increasing demand and driving up prices. While WFP has taken actions to 
help mitigate these impacts, such as coordinating with other 
implementing partners to gather market information, in some cases local 
purchases have adversely affected markets where the purchases were 
made. In particular, lack of reliable market intelligence--such as 
market prices, production levels, and trade patterns--makes it 
difficult to determine the extent to which LRP can be increased without 
causing adverse market impacts. Poorly functioning and unintegrated 
markets pose an additional challenge to avoiding adverse market impacts 
and expanding the use of LRP. Other challenges include lack of access 
to inputs and extension services, weak transportation infrastructure, 
and host government policies that inhibit food production. 

Local Purchases of Food Aid Have Adversely Affected Some Markets: 

LRP can make food more costly to consumers by increasing demand and 
driving up prices.[Footnote 38] Although most of the WFP procurement 
officers we interviewed stated that local procurements of food aid 
generally do not affect market prices, our review of the literature and 
interviews during fieldwork show that there have been instances where 
LRP contributed to price hikes and price volatility in markets from 
which food is procured. However, the size of each of WFP's local 
procurements tends to be small--on average about 298 metric tons, as 
compared with 671 metric tons for its international procurements. 
Additionally, WFP's local procurements do not make up a large portion 
of the market for a food commodity in many developing countries, which 
reduces the risk of disrupting local markets. WFP's local procurements 
of about 20,000 metric tons of maize in Burkina Faso in 2008, for 
example, amounted to less than 1 percent of a total market capacity of 
700,000 metric tons. However, local procurements have also contributed 
to price hikes. In 2003, for example, when food aid donors tried to 
take advantage of low prices following 2 years of good harvests in 
Ethiopia, their purchases contributed to a rise in prices. 
Additionally, in 2003, WFP's Uganda country office procured a large 
amount of locally grown maize from large traders based in Kampala in 
support of its operations in northern Uganda and in the Great Lakes 
region, particularly in Burundi. Due in part to this activity, maize 
prices in Kampala during this period were double those in Iganga (119 
kilometers away). However, because maize is not a staple food in 
Uganda, consumers' access to food may not have been adversely affected. 
[Footnote 39] WFP's large local procurements in Uganda from a small 
number of large traders may also have contributed to an increase in the 
market power of those large traders. 

While local procurements of food aid have adversely affected markets in 
several developing countries, particularly in sub-Saharan Africa, 
almost all of the WFP procurement officers we interviewed stated that 
they supported the idea of the United States increasing its funding for 
LRP. However, WFP procurement officers we spoke to, NGO officials in 
countries we visited, and other experts we met with agreed that 
increased use of LRP should be done incrementally and that significant 
challenges remain to expanding market capacity in many countries, 
particularly in sub-Saharan Africa. 

Unreliable Market Intelligence, Poorly Functioning and Unintegrated 
Markets, and Other Factors Pose Challenges to Increasing LRP without 
Causing Adverse Market Impacts: 

Unreliable Market Intelligence: 

The most significant challenge to avoiding potential adverse market 
impacts when conducting LRP is unreliable market intelligence. While 
WFP and other food aid providers rely on market intelligence[Footnote 
40] to understand market conditions, a number of WFP studies, NGO 
evaluations, and donor assessments show that some pre-purchase market 
analyses have been incomplete and inaccurate--contributing to 
unintended consequences such as price hikes and reduced access to food. 
A recent USDA study on LRP noted that the most cost-effective safeguard 
against causing harm to markets and consumers in areas where food is 
locally procured is through regular ongoing analysis using the 
information available in host government information systems. However, 
lack of reliable information on local markets has the potential to 
result in inaccurate assessments and inappropriate responses to 
situations requiring food aid.[Footnote 41] For example, in 2007, the 
government of Malawi decided to export 400,000 metric tons of maize to 
Zimbabwe.[Footnote 42] In the same year, WFP also procured 48,445 
metric tons of food aid from Malawi to support its operations in other 
countries. USAID Food for Peace, Famine Early Warning Systems Network 
(FEWS NET), and other private sector officials working in southern 
Africa told us that Malawi's decision to export to Zimbabwe and sell to 
WFP was based on inaccurate production estimates. A few months later, 
Malawi experienced higher food prices and food shortages. WFP has 
significantly increased its mandate and ability to collect and analyze 
local and regional market information in the last decade, but WFP 
analyses and procurement officers confirmed that WFP's market 
intelligence, while improved, is often inaccurate or incomplete. In 
many low-income countries, national market intelligence systems are 
weak and unreliable, and timely data are not always available, which 
may limit the effectiveness of WFP's market intelligence efforts, 
according to a WFP report.[Footnote 43] Other studies on LRP have also 
noted that market information for many countries is very difficult for 
WFP or NGOs to collect and rely on when making purchasing decisions. 
For example, a 2005 study commissioned by the United Kingdom's 
Department for International Development (DFID) of local procurement in 
Ethiopia noted that market information at the smallholder farmer level 
was non-existent and that there was no formal system for determining 
the domestic price of grain.[Footnote 44] 

In efforts to significantly reduce the risk of contributing to price 
hikes and long-term food price inflation WFP uses import parity 
pricing, solicits tenders for small amounts of food early in the 
harvest season, and works with other parties involved in international 
food assistance to plan food aid interventions. In addition to serving 
as a measure for cost-efficiency, comparing local prices with import 
parity prices helps those involved in local procurement to determine 
whether a local procurement will "do no harm" to local markets and 
consumers by not making local procurements when local prices are higher 
than international prices. However, as a USDA study on LRP has noted, 
this standard may be constrained in cases where local prices for 
commodities are so much lower than import parity prices that it would 
require substantial price increases to reach the import parity 
threshold. WFP also tries to mitigate potential adverse market impacts 
by issuing tenders for small amounts of food early in the harvest 
season. Then, combined with available market intelligence, WFP 
determines whether its purchases have contributed to price hikes before 
putting out larger tenders. In addition to these tactics, WFP country 
offices work with other parties involved in food aid, such as donors, 
host government agencies, and NGOs, to coordinate efforts and share 
market information. For example, several WFP country offices in eastern 
and southern Africa created a country-by-country spreadsheet in the 
summer of 2008 to stay current on developments related to rapidly 
escalating food prices, such as government-imposed export bans. 

Poorly Functioning and Unintegrated Markets: 

Even when market information is adequate, poorly functioning and 
unintegrated markets in sub-Saharan Africa and other developing 
countries still present challenges to expanding LRP while avoiding its 
potential adverse market impacts, according to food aid evaluations, 
experts convened for our roundtable, and fieldwork. Unintegrated 
markets are characterized by a lack of price transmission among 
markets. Additionally, there is difficulty in tracking informal cross- 
border trade and a lack of functioning commodity exchanges. When 
markets are not well-integrated, either within countries or regionally, 
large purchases of food by WFP, other food aid organizations, or donors 
can cause localized price hikes. For example, WFP officials in Burkina 
Faso noted that the government's purchases for its strategic food 
reserve have correlated with price spikes. Because the markets for 
agricultural commodities in sub-Saharan Africa, in particular, are not 
always clearly defined and do not always account for natural geographic 
and ethnic boundaries, significant informal cross-border trading that 
does not heed international and regional trade agreements can occur. 
For example, approximately 30 to 50 percent of Uganda's marketable 
surplus for maize is traded informally, often on bicycles across the 
borders to Kenya or Rwanda, according to WFP, USAID, and foreign 
government officials, and others we interviewed during fieldwork in 
Uganda. Additionally, WFP's Uganda country office staff stated that it 
is difficult to effectively plan food aid interventions involving LRP 
in the neighboring Democratic Republic of the Congo due to lack of 
information about informal cross-border trading and volatile market 
conditions. The market effects of such trading can be difficult to 
track and create additional constraints to understanding and avoiding 
adverse price impacts when conducting LRP. Finally, in all of sub- 
Saharan Africa there is only one well-functioning agricultural 
commodity exchange, the South African Futures Exchange (SAFEX). Several 
countries are developing warehouse receipt systems that would allow 
farmers access to credit, but the countries face challenges such as 
farmers' lack of awareness about marketing structures and banks' 
reluctance to provide credit to farmers. 

[Side bar: Commodity Exchange and Warehouse Receipt Systems: 

[Figure: Two photographs; refer to PDF for image] 

This commodity exchange and warehouse receipt system opened its doors 
in Uganda in 2008. Farmers use it to dry, store, and market their grain 
and get access to credit. 

[End of figure] 

Source: GAO. 

[End of side bar] 

Factors That Contribute to Persistent Food Insecurity: 

Many of the factors that affect persistent food insecurity in sub- 
Saharan Africa and other developing countries are also challenges to 
the implementation and potential expansion of LRP. These factors 
include lack of access to inputs and extension services by farmers, 
weak transportation infrastructures, and weak or conflicting host 
government policies. 

* As we reported in 2008, smallholder farmers in developing countries, 
particularly in sub-Saharan Africa, have limited access to modern 
inputs and agricultural extension services such as enhanced seeds, 
fertilizer, and tractors. During our fieldwork, representatives from 
several farmer groups and associations told us they had experienced 
similar problems. In Burkina Faso, one farmer group in a food-deficit 
area had stopped growing maize for lack of fertilizer and seed and had 
started planting more cotton because it could receive government 
subsidies for that crop. 

* Weak transportation infrastructure in many developing countries makes 
it difficult for smallholder farmers to move their crops to market and 
for local markets to integrate regionally and nationally. The World 
Bank has reported that less than half of the rural population in sub- 
Saharan Africa lives near an all-season road. 

* Policies of host governments are not always favorable to supporting 
agricultural development, although the Comprehensive Africa Agriculture 
Development Program (CAADP) aims to address the lack of agriculture 
development in sub-Saharan Africa by focusing on budget prioritization 
and policy restructuring.[Footnote 45] USAID's Initiative to End Hunger 
in Africa (IEHA)[Footnote 46] supports CAADP's efforts by coordinating 
with other donors to provide technical and policy support for 
agricultural and market development. 

These factors, combined with unreliable market intelligence and poorly 
functioning and unintegrated markets, continue to represent significant 
challenges to increasing LRP in many developing countries, particularly 
in sub-Saharan Africa. 

[Side bar: Farmer Groups in Burkina Faso: 

[Figure: refer to PDF for image; two photographs] 

Government seed and fertilizer subsidies provided an incentive for 
these farmers to grow cotton instead of food. 

Source GAO. 

[End of figure] 

[End of side bar] 

LRP Has the Potential to Indirectly Support the Development of Local 
Economies by Increasing Demand for Agricultural Commodities and Raising 
Farmers' Incomes: 

While the primary purpose of LRP is to provide food assistance in 
humanitarian emergencies in a timely and efficient manner, a potential 
secondary benefit is contributing to the development of the local 
economies from which food is purchased. This can be accomplished by 
increasing the demand for agricultural commodities, thereby increasing 
support for all levels of the commodity value chain, which includes 
individuals, businesses, and organizations involved in their respective 
agriculture production and marketing industries such as large traders, 
intermediate traders or middlemen, smallholder farmers, input 
suppliers, and processors. Figure 7 illustrates the agricultural 
commodity value chain supported by LRP. 

Figure 7: Agricultural Commodity Value Chain Supported by LRP: 

[Refer to PDF for image: illustration] 

Aid organizations: 
* Food commodities and services provided by value chain parties: 
- to beneficiaries; 
- from Large traders; 
- from Quality superintendents and laboratories; 
* Value created by WFP P4P to smallholder farms; 
* Value created by LRP: development, money, job creation, and demand 
to: 
- Large traders; 
- Quality superintendents and laboratories; 
* Food commodities purchased through WFP P4P from smallholder farms. 

Large traders: 
* Food commodities and services provided by value chain parties: 
- to Aid organizations; 
- from Processors and dryers; 
- from Intermediate traders; 
* Value created by LRP: development, money, job creation, and demand: 
- to Intermediate traders; 
- to Processors and dryers; 
- from Aid organizations. 

Intermediate traders: 
* Food commodities and services provided by value chain parties: 
- to Large traders; 
- from Smallholder farms; 
* Value created by LRP: development, money, job creation, and demand: 
- to smallholder farms; 
- from Large traders. 

Smallholder farms: 
* Value created by WFP P4P from Aid organizations; 
* Food commodities purchased through WFP P4P by Aid Organizations; 
* Food commodities and services provided by value chain parties: 
- to Intermediate traders; 
- from Input suppliers (fertilizer, seeds, tools); 
* Value created by LRP: development, money, job creation, and demand: 
- to Input suppliers (fertilizer, seeds, tools). 

Source: GAO analysis and photos. 

[End of figure] 

The development benefits to local economies are secondary because in 
almost all cases WFP and NGO purchases are not large enough or reliable 
enough to sustain increased demand over time. Only recently has WFP 
acknowledged that LRP can contribute to local development. In several 
of the countries we visited, we observed WFP LRP initiatives under way 
that might support local economies in the long term and connect LRP to 
other food security initiatives. However, many of them are new and 
limited in scale. For example, in February 2009, WFP began a cash 
voucher program in Burkina Faso that will target beneficiaries in two 
major cities, Ouagadougou and Bobo Dioulasso, by providing them with 
vouchers that are redeemable for food commodities. In September 2008, 
WFP launched its P4P program, which had the goal of benefiting 
smallholder farmers directly by purchasing food from them. However, WFP 
officials recognize that these procurements will only amount to a small 
percentage of its total local procurements. With initial funding to 
manage and administer P4P from the Bill & Melinda Gates and Howard G. 
Buffett Foundations, pilot programs have been approved in 21 countries. 
[Footnote 47] 

[Side bar: Cash Vouchers: 

[Figures: refer to PDF for image: photograph and illustration] 

A store owner in Ouagadougou, Burkina Faso, stands in front of the shop 
she operates. It accepts vouchers from community members participating 
in a cash for food voucher program supported by Catholic Relief 
Services. Below, a sample voucher slip recipients use to purchase food. 

Source: GAO. 

[End of figure] 

[End of side bar] 

Legal Requirements for U.S. Food Aid May Constrain U.S. Agencies' Use 
of Local and Regional Procurement: 

Certain legal requirements to procure U.S.-grown agricultural 
commodities for food aid and to transport up to 75 percent of them on 
U.S.-flag vessels may constrain agencies' use of local and regional 
procurement (LRP). First, the Food for Peace Act supports in-kind food 
aid by specifying that funding under the Act can be used only to 
purchase U.S.-grown rather than foreign-grown agricultural commodities 
[Footnote 48] and thus cannot be used for LRP. Since 2002, 
appropriations for Title II of the Food for Peace Act have averaged $2 
billion annually, none of which can be used to purchase foreign-grown 
food. However, from 2001 to 2008, through programs funded under a 
different authority, the Foreign Assistance Act, the U.S. government 
has provided approximately $220 million in total cash contributions to 
WFP that were used to purchase foreign-grown commodities. In addition, 
since July 2008, Congress has appropriated $50 million to USAID that 
can be used for LRP in addition to $75 million that the Administration 
allocated for LRP in International Disaster Assistance funding; and the 
2009 Omnibus Appropriations Act provided another $75 million in 
development assistance funding to USAID for global food security, 
including LRP and distribution of food. Second, the Cargo Preference 
Act of 1954, as amended, which is enforced by the DOT, requires up to 
75 percent of the gross tonnage of all U.S.-funded food aid to be 
transported on U.S.-flag vessels. There is disagreement among USAID, 
USDA, and DOT on how to interpret and implement certain requirements of 
cargo preference, such as the agency responsible for determining 
availability of U.S.-flag vessels.[Footnote 49] If these requirements 
remain ambiguous, U.S. agencies' use of LRP could be constrained. 

Legal Requirement to Purchase U.S.-Grown Food Limits Funding for 
Foreign-Grown Food: 

While most funding for U.S. food aid cannot be used to purchase foreign-
grown food, a limited amount of funding has been used to support LRP. 
Programs under the Food for Peace Act,[Footnote 50] have been the main 
vehicles of U.S. international food aid. However, funding under the Act 
is restricted to the purchase of U.S.-grown agricultural commodities. 
Title II of the Food for Peace Act, administered by USAID, is the 
largest U.S. international food aid program providing humanitarian 
donations to respond to emergency food needs or to be used in 
development projects. Since 2002, appropriations for Title II have 
averaged $2 billion annually, none of which can be used to purchase 
foreign-grown food, as envisioned by LRP. However, a limited amount of 
U.S. funding has been authorized through the 2008 Farm Bill, the 
Foreign Assistance Act, 2008/2009 bridge supplemental, and the 2009 
Omnibus Appropriations. 

First, the 2008 Farm Bill established a 5-year, $60 million LRP pilot 
program, administered by USDA, to respond to emergencies and chronic 
food aid needs around the world. The pilot requires a study of LRP 
experiences,[Footnote 51] field-based projects, evaluations of field- 
based projects by independent parties, and a USDA report submitted to 
Congress by 2012. USDA is currently establishing guidelines for 
proposals to conduct field-based LRP projects and estimates completion 
of the guidelines by the end of summer 2009. 

Second, the Foreign Assistance Act authorizes USAID and State to 
provide cash contributions to WFP and implementing partners to purchase 
foreign-grown commodities for specific program goals. From 2001 to 
2008, the U.S. government, through programs operating under the Foreign 
Assistance Act, has provided approximately $220 million in total cash 
contributions to WFP for 1,265 LRP transactions. WFP received 
contributions from State's Bureau of Population, Refugees, and 
Migration (PRM); USAID Office of Foreign Disaster Assistance (OFDA); 
and USAID country missions; among other programs. State officials 
stated that LRP can be used to fill gaps in refugee and internally 
displaced persons (IDP) feeding operations caused by lack of donor 
support; inflows of new refugees and IDPs; inability of donors to 
deliver food to an area quickly, or more recently, rising costs of 
commodities and transportation. Similarly, officials from USAID agreed 
that LRP offers an opportunity to respond to food security crises and 
increase the total amount of food aid the United States can provide by 
filling gaps in country before food shipped from the United States 
arrives. 

Third, since July 2008, Congress has appropriated $125 million to USAID 
that can be used for LRP. USAID received $50 million in fiscal year 
2008 supplemental appropriations[Footnote 52] to respond to the global 
food price crises with LRP, among other activities. Another $75 million 
in development assistance funding was made available to USAID through 
the 2009 Omnibus Appropriations Act for global food security, including 
LRP and distribution of food.[Footnote 53] For fiscal year 2009, the 
Administration made available for LRP $75 million in International 
Disaster Assistance funding. To implement LRP programs with increased 
authority, USAID/OFDA issued guidelines for LRP proposals in October 
2008 specifying that organizations applying for funding must (1) 
demonstrate an urgent need for food aid; (2) relate to the factors 
associated with the emergency to the global food price crisis or to a 
declared disaster; or (3) provide compelling evidence that the use of 
local procurement will save lives, reduce suffering, and/or serve more 
people than by using international procurement of Title II food aid. 
[Footnote 54] By April 2009, USAID/OFDA had programmed $63 million in 
direct cash contributions to WFP and implementing partners to purchase 
foreign-grown commodities for vulnerable populations in Ethiopia, 
Kenya, Kyrgyzstan, Nepal, Pakistan, Somalia, Tajikistan, and Zimbabwe. 
Monitoring and evaluation plans for tracking program implementation, 
results, and outcomes are required with all awards. 

Uncertainty Regarding Cargo Preference Could Constrain Agencies' 
Implementation of LRP: 

Because the leading U.S. food assistance agencies and DOT disagree on 
how to implement the Cargo Preference Act, their use of LRP could be 
constrained. The Cargo Preference Act, as amended, requires that up to 
75 percent of the gross tonnage of agricultural foreign assistance 
cargo be transported on U.S.-flag vessels.[Footnote 55] DOT issues and 
administers regulations necessary to enforce cargo preference. Among 
other things, the department has the authority to require the 
transportation on U.S.-flag vessels of cargo shipments not otherwise 
subject to cargo preference (hereafter referred to as "make-up 
requirements") when it determines that an agency has failed to 
sufficiently utilize U.S.-flag vessels. In some cases, however, USAID 
and USDA officials disagree with DOT on interpretations of cargo 
preference requirements including (1) the agency responsible for 
determining availability of U.S.-flag vessels; (2) make-up requirements 
when U.S.-flag vessels are unavailable or when an agency waives cargo 
preference requirements during emergencies, also referred to as 
"notwithstanding authority;"[Footnote 56] (3) applicability of cargo 
preference requirements to public international organizations; and (4) 
methodology used for cost reimbursements. 

Agency Officials Have Different Interpretations of Cargo Preference 
Requirements: 

Table 3 summarizes differences in agency officials' interpretations of 
cargo preference requirements. 

Table 3: U.S. Agencies' Interpretations of Cargo Preference 
Requirements as They Pertain to Implementation of LRP: 

Requirements: 1. Agency responsible for determining availability of 
U.S.-flag vessels; 
Agency interpretations: DOT: DOT is the sole determining agency for 
U.S.-flag vessel availability; 
Agency interpretations: USAID: USAID is the determining agency for U.S.-
flag vessel availability based on USAID program needs. However, USAID 
seeks DOT concurrence; 
Agency interpretations: USDA: USDA is the determining agency for U.S.-
flag vessel availability based on USDA program needs. DOT is not 
permitted to provide input into a determination of programmatic need. 

Requirements: 2. Make-up requirements when U.S.-flag vessels are 
unavailable or an agency uses notwithstanding authority; 
Agency interpretations: DOT: Tonnage shipped on foreign-flag vessels 
when U.S.-flag vessels are unavailable or under USAID's notwithstanding 
authority is counted toward the maximum tonnage allowed on foreign-flag 
vessels. Any foreign-flag tonnage exceeding the 25 percent maximum 
must be made up;  
Agency interpretations: USAID: When U.S.-flag vessels are unavailable 
or when USAID uses notwithstanding authority, tonnage shipped on 
foreign-flag vessels should not be counted toward the 50 percent 
maximum tonnage allowed; 
Agency interpretations: USDA: Tonnage shipped on foreign-flag vessels 
is counted toward the maximum tonnage allowed on foreign-flag vessels. 
USDA does not have notwithstanding authority since it does not implement 
emergency programs. 

Requirements: 3. Applicability of cargo preference requirements to 
public international organizations; 
Agency interpretations: DOT: The grants to international organizations 
are governed by regulations and guidance issued by DOT; 
Agency interpretations: USAID: Cargo preference regulations apply when 
the authority for LRP is Food for Peace. However, the regulations do 
not apply when LRP is carried out under authority of the Foreign 
Assistance Act; 
Agency interpretations: USDA: Cargo preference applies to international 
organizations. 

Requirements: 4. Reimbursement methodology; 
Agency interpretations: DOT: DOT reimburses food aid agencies for a 
portion of the ocean freight and transportation costs that exceed 20 
percent of total program costs; 
Agency interpretations: USAID: DOT reimbursement methodology is not 
specified for all possible scenarios; 
Agency interpretations: USDA: DOT reimbursement methodology is not 
specified for all possible scenarios. 

Source: DOT, USAID, and USDA. 

[End of table] 

The differences in agency interpretations of cargo preference are 
discussed below. 

1. Agency responsible for determining availability of U.S.-flag 
vessels: Officials from USAID, USDA, and DOT stated that their 
respective agencies have independent authority to determine U.S.-flag 
vessels are not available. According to USAID officials, the agency 
determines U.S.-flag nonavailability based on its USAID program needs 
but seeks prior concurrence from DOT's Maritime Administration 
(MARAD).[Footnote 57] According to USDA officials, USDA determines the 
availability of U.S.-flag vessels based on programmatic needs, and DOT 
determines what constitutes a fair and reasonable shipping rate. Agency 
officials and industry experts noted that the availability of U.S.-flag 
vessels in areas such as Africa's eastern coast is limited. DOT noted 
that a U.S.-flag vessel could ship food from one African port to 
another if the ship happened to be in the region conducting military 
operations or other business. However, most carriers do not currently 
provide regular regional service. U.S. officials in Kenya and South 
Africa confirmed this lack of regular service along Africa's eastern 
coast. A shipping agent in South Africa stated that she was aware of 
two U.S.-flag vessels that frequent the port of Durban. Representatives 
of a coalition of U.S.-flag carriers indicated that U.S.-flag vessels 
could provide additional service in the region in the future but their 
decision to relocate vessels depends on the regularity of regional 
shipments. According to a 2008 report regarding efforts to improve 
procurement planning,[Footnote 58] USAID and USDA compete with DOD and 
other exporters for space aboard the relatively few U.S.-flag vessels, 
some of which are ill-suited for the carriage of food-grade 
commodities. Moreover, of the three participating liner service 
container carriers utilizing U.S.-flag vessels, only one services 
Africa, where 54 percent of international food aid was delivered in 
2007, according to INTERFAIS data. 

2. Make up requirements when U.S.-flag vessels are unavailable or an 
agency uses "notwithstanding" authority: Agencies disagree as to 
whether shipments made on foreign vessels, because U.S.-flag vessels 
were not available or because an agency waives cargo preference 
requirements utilizing authority to conduct a program notwithstanding 
any other provision of law,[Footnote 59] should count toward the 
maximum tonnage allowed on foreign-flag vessels. DOT has stated that it 
should,[Footnote 60] and any tonnage shipped on foreign-flag vessels 
that exceeds the 25 percent maximum tonnage should be made up the 
following year. However, USAID has the authority to implement emergency 
programs, including international disaster assistance, notwithstanding 
any other provision of law. With this authority, USAID has waived cargo 
preference requirements to ensure food aid delivery during emergencies. 
In those cases, it believes the tonnage shipped on foreign-flag vessels 
should not be counted toward the maximum foreign-flag tonnage allowed 
under cargo preference. DOT officials believe otherwise. Since 2005, 
USAID has used notwithstanding authority to override cargo preference 
four times, two of which were in 2005 when there were extreme price 
disparities between U.S.-flag and foreign-flag offers to transport 
emergency food aid to Kenya and Somalia.[Footnote 61] 

3. Applicability of cargo preference requirements to public 
international organizations: Agencies also disagree on whether grants 
made to international organizations, such as WFP, must incorporate 
cargo preference requirements. According to DOT officials, if public 
international organizations use U.S. funding to purchase food and that 
food requires ocean shipping, U.S.-flag vessels should be given cargo 
preference. For example, in 2006, DOT notified the USAID West-Bank/Gaza 
mission that it had not conformed to the legal mandate in a U.S.-funded 
grant with WFP to purchase 16,000 metric tons of wheat flour for 
shipment to Tel Aviv. However, according to the USAID policy manual, 
[Footnote 62] public international organizations are allowed to abide 
by their own procurement rules.[Footnote 63] Therefore, international 
organizations that receive cash contributions for regional procurement 
of food are not required to ship on U.S.-flag vessels. 

4. Reimbursement methodology: DOT is required to reimburse food aid 
agencies for a portion of the ocean freight and transportation costs 
that exceed 20 percent of their total program costs. However, agencies 
disagree on whether reimbursement levels are sufficient to cover the 
additional costs incurred by transporting the food on U.S.-flag 
vessels. According to USDA officials, DOT has been reluctant to 
reimburse USDA for any excess costs beyond 20 percent freight costs and 
has not gone on the record about reimbursement for USDA's LRP pilot 
field-based projects. According to USAID, areas of ambiguity regarding 
reimbursements include: 

* costs of ocean freight and transportation on U.S.-flag vessels that 
exceed 20 percent of program costs, 

* transportation from overseas food warehouses to final destinations, 

* foreign inland transport costs, and: 

* costs of ocean freight and transportation on U.S.-flag vessels when 
there is no foreign-flag vessel available for cost comparison.[Footnote 
64] 

Lack of Clarity on Cargo Preference Requirements Could Constrain LRP: 

With a lack of clarity on how to interpret cargo preference 
regulations, agencies' ability to utilize LRP to respond to emergencies 
may be constrained. For example, as of October 2008, DOT has the 
authority to require the transportation on U.S.-flag vessels of cargo 
shipments not otherwise subject to cargo preference when it determines 
that an agency has failed to sufficiently utilize U.S.-flag vessels. 
[Footnote 65] DOT has not yet issued regulations governing how it will 
implement this new authority and USAID faces uncertainty regarding 
whether increased use of LRP will trigger imposition of make-up 
requirements. 

Cargo preference could also constrain USAID's and USDA's LRP pilot 
programs if U.S.-flag vessels are unavailable. USAID officials 
indicated that given the limited volume of regional shipments relative 
to regular Title II shipments, the agency would probably not be able to 
meet the U.S.-flag compliance threshold if even one shipment could not 
be transported on a U.S.-flag vessel. According to a USDA official, 
countries chosen for its LRP pilot field-based projects will likely 
receive food shipments only once in a fiscal year. If U.S.-flag vessels 
are unavailable for service at that time, it is unclear how USDA will 
make up tonnage by country and program the following year since, 
according to officials, the pilot is of limited duration. In addition, 
USDA will not cut other country program budgets in order to make up 
tonnage by country for its LRP program. 

Finally, the lack of clarity when USAID waives cargo preference through 
notwithstanding authority could constrain its ability to fully utilize 
the authority when responding to emergencies that require regional 
shipment of food in anticipation of potential sanctions by DOT. To 
date, USAID has used notwithstanding authority to waive cargo 
preference requirements on only four occasions, in part due to the 
uncertainty of a regulatory response from DOT. The $200 million that 
USAID has for LRP is available to be expended notwithstanding any other 
provision of law. According to USAID officials, the agency has not used 
its authority to waive cargo preference requirements for any of the LRP 
transactions funded through May 2009. 

The MOU that outlines the manner in which USAID, USDA, and DOT 
coordinate the administration of cargo preference requirements was last 
updated in 1987 and does not reflect modern transportation practices or 
the areas of ambiguity related to LRP. In our 2007 review of U.S. food 
aid,[Footnote 66] we found that cargo preference can increase delivery 
costs and time frames, with program impacts dependent on the 
sufficiency of DOT reimbursements. Therefore, we recommended that 
USAID, USDA, and DOT seek to minimize the cost impact of cargo 
preference regulations by updating implementation and reimbursement 
methodologies of cargo preference as it applies to U.S. food aid. Since 
2007, USAID and USDA have proposed a working group with DOT to 
renegotiate the MOU. To date, however, there have been few meetings and 
no agreement has been reached between the agencies. 

Conclusions: 

The timely provision of food aid is of critical importance in 
responding to humanitarian emergencies and food crises. In 2007 and 
2008, the number of chronically hungry people in the world grew by 115 
million, despite an international commitment to halve the number of 
hungry people by 2015. While the United States has primarily provided 
in-kind food aid for over 50 years, it has been exploring expanded use 
of LRP. This tool has the potential to better meet the needs of hungry 
people by providing food aid in both a more timely and less costly 
manner. To fully realize this potential, however, challenges to its 
effective implementation must be addressed. 

Concerns about the quality of LRP food aid persist, but aid 
organizations still do not systematically collect evidence on LRP's 
adherence to quality standards and product specifications that would 
ensure food safety and nutritional content. Furthermore, experts and 
practitioners caution that scaling up LRP in recipient countries should 
be done gradually to ensure that the potential benefits of LRP are 
maximized while any potential adverse impacts are minimized or avoided. 
While accurate and reliable market data would help ensure that U.S. 
agencies and implementing partners make optimal decisions with regard 
to when, where, and how to procure food locally or regionally, such 
data are not yet available. Finally, the implementation of LRP may be 
constrained by U.S. agencies' disagreement on a number of requirements 
associated with cargo preference, thus elevating the importance of an 
updated interagency MOU that resolves existing ambiguities. 

Recommendations for Executive Action: 

To enhance the impact that LRP can have on the efficiency of food aid 
delivery and the economies of countries where food is purchased, we 
recommend that the Administrator of the U.S. Agency for International 
Development and the Secretary of Agriculture take the following three 
actions: 

* systematically collect evidence on LRP's adherence to quality 
standards and product specifications to ensure food safety and 
nutritional content; 

* work with implementing partners to improve the reliability and 
utility of market intelligence in areas where the U.S.-funded LRP 
occurs, thereby ensuring that U.S.-funded LRP practices minimize 
adverse impacts and maximize potential benefits; and: 

* work with the Secretary of Transportation and relevant parties to 
expedite updating the MOU between U.S. food assistance agencies and the 
Department of Transportation, consistent with our 2007 recommendation, 
to minimize the cost impact of cargo preference regulations on food aid 
transportation expenditures and to resolve uncertainties associated 
with the application of cargo preference to regional procurement. 

Agency Comments and Our Evaluation: 

DOT, USAID, USDA, and WFP provided written comments on a draft of this 
report. We have reprinted these agencies' comments in appendixes VII, 
VIII, IX, and X, respectively, along with our responses. Additionally, 
USAID, DOT, State, and WFP provided technical comments on a draft of 
our report, which we have addressed or incorporated as appropriate. 
Treasury and MCC did not provide comments. 

USAID generally concurred with our recommendations. With regard to the 
first recommendation, however, USAID noted that it may be more 
efficient for us to recommend that all food aid organizations 
collaborate in the development and implementation of systems to monitor 
quality assurance and product specification issues in all food 
purchases, including LRP. The recommendation does not preclude such 
coordination among the agencies. We recognize USAID's and USDA's 
efforts to date to implement our 2007 recommendation to develop a 
coordinated interagency mechanism to update food aid specifications and 
products to improve food quality and nutritional standards. Including 
actions to systematically collect evidence on LRP's adherence to 
quality will make these efforts more efficient. With regard to the 
third recommendation, USAID commented that MARAD's position on the 
applicability of the 75 percent threshold to USAID-funded LRP, rather 
than the 50 percent threshold, is devoid of legal merit. In providing 
information on agencies' interpretations of cargo preference 
requirements as they pertain to LRP, we sought to identify areas where 
agencies disagree on the applicability and interpretation of these 
requirements. We did not attempt to adjudicate the differences in 
interpretation among the agencies involved. However, in technical 
comments to a draft of this report, DOT changed its position regarding 
thresholds and now concurs with USAID'S interpretation, thus 
eliminating this issue as an area of ambiguity. 

USDA generally agreed with our report, noting that our comparisons of 
costs and delivery times were insightful. However, USDA observed that 
aggregating some of the commodities such as vegetable oil and beans 
could cause a loss of precision in our methodology. To obtain an 
overall picture of costs, we worked to ensure that we had the largest 
number of observations, over the longest possible time period, so some 
aggregation was required. USDA also stated that our report does not 
specify how differences in quality or specifications were handled. We 
recognize that the price of different commodities in the same category 
may vary depending on quality or specifications. However, we noted 
WFP's assertion that its commodities meet both the importing and 
exporting countries' standards, and there is no systematic evidence 
that U.S. commodities differ in quality compared to LRP commodities. 
Nonetheless, we recognize that there may be differences in the quality 
of certain commodities, and we note such differences in our 
illustrative example of LRP for Tajikistan. In addition, both USDA and 
DOT noted that we did not compare delivery times for LRP and in-kind 
food aid from prepositioning sites. Although we did not differentiate 
prepositioned commodities in our cost comparison, we included them in 
our data analysis and note that prepositioned commodities were a very 
small part of U.S. food aid during the time period we examined. 

DOT stated that additional analysis may be warranted before concluding 
that LRP offers a tool to reduce costs and shorten delivery time. 
Although further analysis of LRP practices would be useful, our 
analysis demonstrated consistent results across 8 years of data. For 
example, local procurement in sub-Saharan Africa cost about 34 percent 
less than USAID commodities procured at around the same time and 
delivered to the same country. DOT also stated that it implements the 
cargo preference statute through regulation, not through an interagency 
MOU. While this is true, the regulations contain ambiguities that have 
previously required resolution through an MOU. Our report describes new 
ambiguities that could arise in applying cargo preference in the 
context of regional procurement. We believe that these ambiguities can 
be resolved by updating the MOU. Further, there is no requirement that 
establishing regulation precede a MOU nor does a MOU preclude the 
issuance of new regulation. The updated MOU, establishing consensus 
among the relevant agencies, could be reflected in any future 
regulation that DOT may draft and get finalized through the rule-making 
process. 

WFP welcomed our timely examination of LRP as one of numerous tools to 
deliver effective and efficient food assistance to those in greatest 
need. However, WFP stated it was perplexed that concerns persist about 
the quality of food procured in developing countries, given the lack of 
evidence showing that LRP introduces quality challenges that are not 
already challenges to internationally procured and donor-provided food 
aid. We note that quality is one issue that many WFP procurement 
officers and several other officials we interviewed identified as a 
challenge for LRP. However, the lack of systematically collected data 
makes it difficult to objectively analyze how LRPs adhere to quality 
standards and product specifications. Our first recommendation 
addresses this issue. In addition, WFP offered some qualifications to 
our discussion of the impact of LRP on economies where food is 
procured, noting the lack of systematic evidence to suggest that 
current LRP practices adversely impact host markets. In this report, we 
explain several efforts that WFP and others have taken to significantly 
improve the availability and reliability of market intelligence in 
developing countries. Nonetheless, WFP, NGOs, U.S. agencies, host 
governments, and experts convened for our roundtable stated that the 
most significant challenge to avoiding potential adverse markets 
impacts when conducting LRP is unreliable market intelligence. 
Therefore, we are recommending improving the reliability and utility of 
market intelligence. 

As agreed with your office, unless you publicly announce the contents 
of this report earlier, we plan no further distribution until 30 days 
from the report date. We are sending copies of this report to 
interested Members of Congress, the Administrator of USAID, and the 
Secretaries of Agriculture, State, Transportation, and the Treasury. In 
addition, this report will be available at no charge on the GAO Web 
site at [hyperlink, http://www.gao.gov]. 

If you or your staffs have any questions about this report, please 
contact me at (202) 512-9601 or melitot@gao.gov. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. GAO staff who made major contributions to 
this report are listed in appendix XI. 

Sincerely yours, 

Signed by: 

Thomas Melito Director, International Affairs and Trade: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

Our objectives were to determine (1) the impact of local and regional 
procurement (LRP) on the efficiency of food aid delivery, (2) the 
impact of LRP on economies where food is procured, and (3) U.S. legal 
requirements that could affect U.S. agencies' use of LRP. 

We selected four countries for fieldwork based on geographic region, 
WFP procurement data, and the presence of WFP procurement officers in- 
country. We selected countries in sub-Saharan Africa, excluding 
countries with current conflict, because these regions within Africa 
have high prevalence rates of undernourishment. While this selection is 
not representative in any statistical sense, it ensured that we had 
variation in the key factors we considered. We do not generalize the 
results of our fieldwork beyond that selection, using fieldwork 
primarily to provide illustrative examples. 

To understand the experiences of other donors with local and regional 
food procurement and corroborate information gathered in our literature 
review, we conducted semi-structured interviews with 11 principal WFP 
procurement officers in Africa and Asia. We focused on Africa and Asia 
because that is where the majority of food procurement abroad takes 
place. The 11 we interviewed represented all the principal WFP 
procurement officers that were in place in Asia and Africa at the time 
we conducted our fieldwork. We asked each procurement officer a series 
of open-ended questions on the factors impacting and actions that could 
be taken to improve: cost, delivery time, quality, market impact, and 
development. To ensure that the questions were clear and unambiguous, 
did not place an undue burden on respondents, and that respondents had 
the necessary information and time to answer the questions, we 
conducted pre-tests with WFP procurement officers in Sudan and 
Thailand. To determine which factors and actions were mentioned most 
frequently, we coded the officer's responses to the questions. One 
analyst developed and applied the codes to the interviews and another 
analyst reviewed both the codes and their application. Based on that 
coding, we report data on the number of officers that mentioned each 
factor and action. The views we report are limited to WFP procurement 
officers in Africa and Asia and may not represent WFP procurement 
officers in other regions. 

In addition, we reviewed economic literature on LRP practices and 
recent reports, studies, and papers issued by U.S. agencies, 
multilateral organizations, and bilateral donors. These sources were 
chosen because they represent a wide cross section of the discussion on 
LRP and are written by the leading authorities and institutions working 
in the field. 

In the four African countries that we selected for fieldwork--Kenya and 
Uganda in East Africa, South Africa in southern Africa, and Burkina 
Faso in West Africa--we met with U.S. Agency for International 
Development (USAID) and other U.S. officials; World Food Program (WFP) 
country office staff; and representatives of nongovernmental 
organizations (NGO), smallholder farmer groups, and commodity 
exchanges. We also visited several sites where food aid may be locally 
purchased and where food aid is delivered. 

In Washington, D.C., we interviewed officials from U.S. agencies, 
including USAID; USDA; the Departments of State, Transportation (DOT), 
and the Treasury; and the Millennium Challenge Corporation (MCC). We 
also met with the International Food Policy Research Institute (IFPRI) 
and the World Bank. In New York, we met with the Rockefeller 
Foundation, the Alliance for a Green Revolution in Africa (AGRA), and 
Columbia University. In Rome, we met with FAO, WFP, and the 
International Fund for Agricultural Development (IFAD). We also met 
with the U.S. Mission to the UN (USUN) in Rome and several bilateral 
donors' permanent representatives to the Rome-based UN food and 
agriculture agencies. In addition, in Washington, D.C., we convened a 
roundtable of 10 experts and practitioners--including representatives 
from academia, research organizations, multilateral organizations, 
NGOs, and others--to further delineate, based on our initial work, some 
of key issues and challenges to the implementation of LRP. 

To examine the impact of LRP on the efficiency of food aid delivery, we 
focused on the cost, delivery time, and quality. To evaluate LRP cost 
efficiency, we compared WFP LRP costs and with USAID's. WFP's costs are 
based on WFP's procurement data from 2001 to 2008 and USAID's costs are 
based on USAID's Line 17 reports from fiscal year 2001 to 2008. 
[Footnote 67] We did not evaluate the impact of prepositioning on U.S. 
food aid costs, although we did not exclude the commodities shipped 
from prepositioning sites, albeit small in value relative to overall 
U.S. food aid for the time period we examined. WFP's procurement data 
include information on the commodities purchased, the date of the 
purchase, the origin of the commodities, the recipient of the food aid, 
the contract terms, and the purchase prices. To assess the reliability 
of the data, we (1) reviewed existing documentation related to the data 
sources and (2) interviewed WFP and USAID officials familiar with the 
data sources. Accordingly, we determined that the data were 
sufficiently reliable for the purposes of this report. Since WFP's 
procurements are under different contract terms, the purchase prices 
include different costs. For example, most of WFP's international 
procurements are under the term free on board (FOB), which normally 
does not include ocean shipping and handling. USAID's data include the 
costs for commodities and ocean shipping and inland transportation, 
storage, and handling (ITSH). To make the costs comparable, we included 
different USAID cost components depending on the contract terms of the 
corresponding WFP purchase. See table 4 for details of the 
corresponding WFP contract terms and USAID cost components. 

Table 4: WFP Contract Terms and USAID Cost Components Included in Cost 
Comparison: 

Local: 
WFP terms included in GAO analysis: Delivery duty unpaid (DDU); 
Corresponding cost components in USAID data: Commodity cost, ocean 
freight, inland freight; 
Corresponding cost components in USAID data with ocean freight 
reimbursement: Commodity cost, 65-75% of ocean freight and inland 
freight. 

Regional: 
WFP terms included in GAO analysis: DDU; 
Corresponding cost components in USAID data: Commodity cost, ocean 
freight, inland freight; 
Corresponding cost components in USAID data with ocean freight 
reimbursement: Commodity cost, 65-75% of ocean freight and inland 
freight. 

International: 
WFP terms included in GAO analysis: FOB; 
Corresponding cost components in USAID data: Commodity cost, inland 
freight; 
Corresponding cost components in USAID data with ocean freight 
reimbursement: Commodity cost, 65-75% of inland freight. 

Source: GAO. 

[End of table] 

For each WFP purchase, we searched for a "match" in USAID's data. A 
match is defined as a purchase transaction of a similar commodity, in 
the same quarter of the same year, for the same recipient country. The 
commodity groups we selected are beans, corn soy blend (CSB), maize, 
maize meal, rice, sorghum/millet, vegetable oil, and wheat, which 
represent the majority of food aid for both WFP and USAID. We 
aggregated the more detailed commodities in USAID's data. For example, 
we aggregated many types of beans (red beans, kidney beans, black 
beans, pinto beans, and other beans) into the bean commodity group. We 
compared the WFP's per metric ton cost with its match of USAID's cost. 
See table 5 for the number of matches in our analysis, which occurred 
for 8 commodities out of approximately 37,000 transactions from 2001 to 
2008. 

Table 5: Number of Matches in Cost Comparison: 

Local: 
Worldwide: 1,197; 
Sub-Saharan Africa: 843; 
Latin America: 198; 
Asia: 156. 

Regional: 
Worldwide: 672; 
Sub-Saharan Africa: 389; 
Latin America: 40; 
Asia: 243. 

International: 
Worldwide: 1,580; 
Sub-Saharan Africa: 1,319; 
Latin America: 178; Asia: 83. 

Source: GAO based on WFP and USAID data. 

[End of table] 

We compared the costs by region (sub-Saharan Africa, Asia, and Latin 
America) and by procurement type (local, regional, and international). 
To account for DOT cargo preference reimbursements, we reduced USAID 
ocean freight costs from 25 to 35 percent and found that it did not 
change our results significantly. Based on previous GAO work, we 
consider 25 percent to be a reasonable value to account for cargo 
reimbursements over the 8-year period. We analyzed the percentage of 
WFP transactions that had lower costs than USAID's and the cost 
differential. See figure 8 below for a histogram of cost differential 
comparison. 

Figure 8: Cost Difference between USAID and WFP Local Procurement in 
Sub-Saharan Africa: 

[Refer to PDF for image: vertical bar graph] 

WFP is more expensive: 

Percentage price differentiation between WFP and USAID: -70; 
Frequency (number of transactions): 1. 

Percentage price differentiation between WFP and USAID: -65; 
Frequency (number of transactions): 0. 

Percentage price differentiation between WFP and USAID: -60; 
Frequency (number of transactions): 0. 

Percentage price differentiation between WFP and USAID: -55; 
Frequency (number of transactions): 0. 

Percentage price differentiation between WFP and USAID: -50; 
Frequency (number of transactions): 1. 

Percentage price differentiation between WFP and USAID: -45; 
Frequency (number of transactions): 1. 

Percentage price differentiation between WFP and USAID: -40; 
Frequency (number of transactions): 0. 

Percentage price differentiation between WFP and USAID: -35; 
Frequency (number of transactions): 7. 

Percentage price differentiation between WFP and USAID: -30; 
Frequency (number of transactions): 0. 

Percentage price differentiation between WFP and USAID: -25; 
Frequency (number of transactions): 9. 

Percentage price differentiation between WFP and USAID: -20; 
Frequency (number of transactions): 2. 

Percentage price differentiation between WFP and USAID: -15; 
Frequency (number of transactions): 4. 

Percentage price differentiation between WFP and USAID: -10; 
Frequency (number of transactions): 2. 

Percentage price differentiation between WFP and USAID: -5; 
Frequency (number of transactions): 6. 

Percentage price differentiation between WFP and USAID: 0; 
Frequency (number of transactions): 12. 

USAUD is more expensive: 

Percentage price differentiation between WFP and USAID: 5; 
Frequency (number of transactions): 17. 

Percentage price differentiation between WFP and USAID: 10; 
Frequency (number of transactions): 10. 

Percentage price differentiation between WFP and USAID: 15; 
Frequency (number of transactions): 36. 

Percentage price differentiation between WFP and USAID: 20; 
Frequency (number of transactions): 20. 

Percentage price differentiation between WFP and USAID: 25; 
Frequency (number of transactions): 35. 

Percentage price differentiation between WFP and USAID: 30; 
Frequency (number of transactions): 81. 

Percentage price differentiation between WFP and USAID: 35; 
Frequency (number of transactions): 114. 

Percentage price differentiation between WFP and USAID: 40; 
Frequency (number of transactions): 88. 

Percentage price differentiation between WFP and USAID: 45; 
Frequency (number of transactions): 101. 

Percentage price differentiation between WFP and USAID: 50; 
Frequency (number of transactions): 78. 

Percentage price differentiation between WFP and USAID: 55; 
Frequency (number of transactions): 39. 

Percentage price differentiation between WFP and USAID: 60; 
Frequency (number of transactions): 54. 

Percentage price differentiation between WFP and USAID: 65; 
Frequency (number of transactions): 37. 

Percentage price differentiation between WFP and USAID: 70; 
Frequency (number of transactions): 42. 

Percentage price differentiation between WFP and USAID: 75; 
Frequency (number of transactions): 26. 

Percentage price differentiation between WFP and USAID: 80; 
Frequency (number of transactions): 20. 

Note: The difference ranges between -71% (USAID was 71 percent lower in 
per ton cost than WFP) and 78 percent (USAID was 78 percent higher in 
per ton cost than WFP). The chart shows that most of WFP transactions 
have a lower cost (to the right of zero) than USAID. 

[End of figure] 

The cost differences between U.S. food aid and LRP of similar food 
products, around the same time frame, and for the same countries we 
identified represent potential cost-saving opportunities. However, many 
factors can reduce or even eliminate the amount of savings, including 
whether food is available in the local and regional markets, and how 
much additional purchases in these markets will drive up prices. We 
discussed this methodology at the expert roundtable we conducted, and 
the experts indicated that our methodology was sufficient in 
controlling for various factors that may influence costs to make the 
costs comparable. 

To evaluate the impact of LRP on delivery time, we relied on interviews 
with WFP officials and representatives from various organizations we 
met with during fieldwork in the four countries we visited. In 
addition, WFP generated delivery time for 10 countries in sub-Saharan 
Africa that we selected by procurement type. The countries that we 
selected had received food aid purchased or donated internationally, as 
well as through LRP. Our analysis of the aggregate delivery time 
consisted of the average of the median delivery times for each of the 
10 countries across the four procurement types. To evaluate the impact 
of LRP on the quality, we interviewed U.S. agency officials, WFP 
officials, and NGO representatives. We reviewed assessments of WFP 
local and regional procurement. We discussed with WFP the methodology 
it used in order to generate the delivery time and the limitations of 
the methodology. We determined the data are sufficiently reliable for 
our purposes. We chose to use WFP data because they included a 
substantial amount of both international and local and regional 
procurements. We did not compare WFP's delivery time to U.S. in-kind 
delivery time. We also did not evaluate the impact of prepositioning on 
U.S. food aid delivery time. 

To examine the impact of LRP on the economies of countries where food 
is procured, we relied on the responses of WFP procurement officers to 
our semi-structured interview questions; our economic literature review 
of LRP practices, reports, studies, and papers' and our interviews with 
WFP, U.S. government, NGO, World Bank, and private-sector officials in 
Washington, D.C.; Rome; and the countries we visited for fieldwork in 
sub-Saharan Africa. We also discussed our preliminary findings on the 
potential market risks, market intelligence, and development benefits 
associated with LRP at our expert roundtable and received validation 
and further input. 

To examine U.S. legal restrictions that could affect U.S. agencies' use 
of LRP, we reviewed U.S. programs authorized in the 2008 Farm Bill, the 
Food for Peace Act of 1961, the Foreign Assistance Act, and the 1954 
Cargo Preference Act, as amended, and appropriations for fiscal years 
2002 to 2008. To better understand agency interpretations of 
applicability of cargo preference, we collected information from USAID, 
USDA, and DOT officials with regard to U.S.-flag vessel availability, 
compliance thresholds, notwithstanding authority, and application to 
international organizations. 

The information on foreign law in this report does not reflect our 
independent legal analysis but is based on interviews and secondary 
sources. 

We conducted this performance audit from June 2008 to May 2009 in 
accordance with generally accepted government auditing standards. Those 
standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. 

[End of section] 

Appendix II: Key Donor Initiatives That Support LRP: 

The following is a summary of some of the key donor food security 
initiatives in recent years, many of which support LRP. (See figure 9.) 

Figure 9: Selected Key Donor Initiatives That Support LRP, 2006 to 
2009: 

[Refer to PDF for image: four photographs and a table] 

March 2009: 
* As part of the Omnibus Appropriations Act, Congress appropriated $75 
million to enhance global food security, including local or regional 
purchase and distribution of food. 

January 2009: 
* At the Summit on the Global Agenda held in Davos, Switzerland, the 
World Economic Forum Council on Food Security called for integrating 
local communities and smallholder farmers into larger food production 
and distribution. 
* High-Level Meeting on Food Security for All held in Madrid, Spain. 

December 2008: 
* Millennium Challenge Corporation (MCC) and the World Food Program 
sign a Memorandum of Understanding establishing MCC-funded agricultural 
supply-chain investments and WFP-funded Purchase for Progress (P4P) 
initiative as possible areas of collaboration. 

* World Bank set up a $2 billion Crisis Response Fast Track Facility, 
building on the Global Food Crisis Response Program, to provide rapid 
financing for social safety nets, in the world’s poorest countries. 

September 2008: 
* UN High-level Event on the Millennium Development Goals estimated 
generating $1.6 billion to bolster food security. 
* WFP formally launched its P4P program, a $76 million pilot that in up 
to 21 countries over the next 5 years to enhance smallholder and low-
income farmers’ access to markets 

July 2008: 
* The G8 Statement on Global Food Security called on donors to 
participate in making commitments to meet remaining immediate 
humanitarian needs, provide access to seeds and fertilizers, and look 
for opportunities to build up local agriculture by promoting local 
purchase of food aid. 
* UN High-Level Task Force on the Global Food Security Crisis issued 
its Comprehensive Framework for Action highlighting the need for and 
the benefits of local and regional purchases in farming communities. 

June 2008: 
* Congress appropriated $150 million in supplemented funding for local 
procurement in response to emergencies, including the global food price 
crisis. 
* In the 2008 Rome Declaration, 181 heads of state committed to use all 
means to alleviate the suffering caused by the food crisis, stimulate 
food production and to increase investment in agriculture, and address 
obstacles to food access. 

May 2008: 
* Congress passed the Farm Bill, authorizing USDA to develop and 
implement a 5-year, $60 million local and regional procurement pilot 
program. 
* World Bank Global Food Crisis Response Program, a $1.2 billion rapid 
financing facility to address immediate needs, is established in 
addition to taking measures to boost its support for agriculture and 
food to $6 billion in 2009, up from $4 billion; launched risk 
management tools; and provided crop insurance to protect poor countries 
and smallholder farmers. 

April 2008: 
* UN Task Force on the Global Food Security Crisis is established under 
the chairmanship of the Secretary-General. 
* World Bank announced plans to boost overall support for agriculture 
and food from $4 billion to $6 billion in 2009 as well as the as 
creation of a new $1.2 billion Global Food Crisis Response Program to 
address immediate needs in countries most affected by the food crises, 
including support for food rations purchased locally. 

December 2007: 
* FAO Initiative on Soaring Food Prices is launched to respond to the 
urgent needs of the most vulnerable people confronted with high food 
prices. 

2006: 
* U.S. Administration requested the authority to allow up to 25 percent 
of P.L. 480 Title II funds to be used for local and regional purchase 
in order to improve the timeliness, flexibility, and effective use of 
food aid for those threatened by food security crises. 

Source: GAO. 

[End of figure] 

[End of section] 

Appendix III: Delivery Time by Procurement Type in Ten Selected 
Countries: 

To evaluate the impact of local and regional procurement on delivery 
time, we relied on lead time data provided by WFP for 10 countries in 
sub-Saharan Africa that we selected, all of which had received locally 
and regionally procured food aid and food aid donated internationally. 
The delivery time (also referred to as "lead time") reflects the number 
of days elapsed between the date of the purchase order and the date WFP 
took possession of the food in the recipient country. The data cover 
the period from 2004 to 2008. 

As shown in figure 10, international in-kind donations took the longest 
time, averaging 147 days. Local and regional purchases took on average 
35 and 41 days, shortening the lead time from international donations 
by 112 days and 106 days, respectively. 

Figure 10: Median Delivery Times for Selected Recipient Countries in 
Sub-Saharan Africa, 2004 to 2008: 

[Refer to PDF for image: ten horizontal bar graphs] 

Burkina Faso: 

International in-kind donations[A]: 151 days; 
International cash donations, time: 85 days; 
International cash donations, time saved: 66 days; 
Regional cash donations[A], time: 61 days; 
Regional cash donations[A], time saved: 90 days; 
Local cash donations, time: 25 days; 
Local cash donations, time saved: 126 days. 

Democratic Republic of Congo: 
International in-kind donations[A]: 168 days; 
International cash donations, time: 97 days; 
International cash donations, time saved: 71 days; 
Regional cash donations[A], time: 43 days; 
Regional cash donations[A], time saved: 125 days; 
Local cash donations, time: 50 days; 
Local cash donations, time saved: 118 days. 

Kenya: 

International in-kind donations[A]: 158 days; 
International cash donations, time: 85 days; 
International cash donations, time saved: 73 days; 
Regional cash donations[A], time: 1 day; 
Regional cash donations[A], time saved: 157 days; 
Local cash donations, time: 16 days; 
Local cash donations, time saved: 142 days. 

Malawi: 

International in-kind donations[A]: 167 days; 
International cash donations, time: 97 days; 
International cash donations, time saved: 70 days; 
Regional cash donations[A], time: 26 days; 
Regional cash donations[A], time saved: 141 days; 
Local cash donations, time: 32 days; 
Local cash donations, time saved: 135 days. 

Mali: 

International in-kind donations[A]: 132 days; 
International cash donations, time: 89 days; 
International cash donations, time saved: 43 days; 
Regional cash donations[A], time: 52 days; 
Regional cash donations[A], time saved: 78 days; 
Local cash donations, time: 33 days; 
Local cash donations, time saved: 99 days. 

Sudan: 

International in-kind donations[A]: 101 days; 
International cash donations, time: 81 days; 
International cash donations, time saved: 20 days; 
Regional cash donations[A], time: 19 days; 
Regional cash donations[A], time saved: 82 days; 
Local cash donations, time: 35 days; 
Local cash donations, time saved: 66 days. 

Tanzania: 

International in-kind donations[A]: 152 days; 
International cash donations, time: 84 days; 
International cash donations, time saved: 68 days; 
Regional cash donations[A], time: 64 days; 
Regional cash donations[A], time saved: 88 days; 
Local cash donations, time: 55 days; 
Local cash donations, time saved: 97 days. 

Uganda: 

International in-kind donations[A]: 159 days; 
International cash donations, time: 87 days; 
International cash donations, time saved: 72 days; 
Regional cash donations[A], time: 49 days; 
Regional cash donations[A], time saved: 110 days; 
Local cash donations, time: 27 days; 
Local cash donations, time saved: 132 days. 

Zambia: 

International in-kind donations[A]: 137 days; 
International cash donations, time: 86 days; 
International cash donations, time saved: 51 days; 
Regional cash donations[A], time: 44 days; 
Regional cash donations[A], time saved: 93 days; 
Local cash donations, time: 35 days; 
Local cash donations, time saved: 102 days. 

Zimbabwe: 

International in-kind donations[A]: 143 days; 
International cash donations, time: 114 days; 
International cash donations, time saved: 29 days; 
Regional cash donations[A], time: 48 days; 
Regional cash donations[A], time saved: 95 days; 
Local cash donations, time: 40 days; 
Local cash donations, time saved: 103 days. 

Source: GAO analysis of WFP data. 

Note: Data reported in this figure are based on the median lead times 
for food aid through various procurement modes: international in-kind 
donations and international, regional, and local procurement made from 
cash donations. 

[A] All categories represent at least 20 purchases, except for these 
numbers. 

[End of figure] 

[End of section] 

Appendix IV: Illustrative Example of U.S. In-kind Food Aid Compared 
with LRP: 

Figure 11: An Illustrative Example of U.S. In-kind Food Aid Compared 
with LRP to Tajikistan: 

[Refer to PDF for image: four photographs, one map, additional data] 

The photographs depict transport, unloading and distribution of in-kind 
food aid. 

The map depicts the following: 

Departure, transfer, or destination locations: 
Kansas and Oklahoma, USA (transfer); 
Jacintoport, Texas, USA, (departure); 
Russia (departure, regional); 
Kazakhstan (departure, local); 
Bremerhaven, Germany (transfer, from USA); 
Qurghonteppa (Kurgan Tube), Tajikistan (destination). 

U.S. in-kind food aid sea transport takes place from Jacintoport to 
Bremerhaven. 

U.S. in-kind food aid rail transport takes place from Bremerhaven to 
Qurghonteppa. 

Commodity[A] (cost per metric ton): U.S. In-kind[B}; 
Wheat flour: $877; 
Vegetable oil (fortified): $2,220; 
Yellow peas: $1,043. 

Commodity[A] (cost per metric ton): LRP; 
Wheat flour: $528; 
Vegetable oil (unfortified): $1,916; 
Lentils: $980. 

Key dates[C]: 

Issue call forward or announce tender[D]: U.S. In-kind[B}; 
Wheat flour: October-November 2008; 
Vegetable oil (fortified): October-November 2008; 
Yellow peas: October-November 2008. 

Issue call forward or announce tender[D]: LRP; 
Wheat flour: late October 2008; 
Vegetable oil (unfortified): late October 2008; 
Lentils: late October 2008. 

Transport commodities: U.S. In-kind[B}; 
Wheat flour: late February 2009; 
Vegetable oil (fortified): late December 2008; 
Yellow peas: January 2009. 

Transport commodities: LRP; 
Wheat flour: early December 2008; 
Vegetable oil (unfortified): late December 2008; 
Lentils: mid-December 2008. 

Arrive in Tajikistan: In-kind[B}; 
Wheat flour: late April 2009; 
Vegetable oil (fortified): late February 2009; 
Yellow peas: early February 2009. 

Arrive in Tajikistan: LRP; 
Wheat flour: late December 2008; 
Vegetable oil (unfortified): early February 2009; 
Lentils: early February 2009. 

Sources: Save the Children (data and photos); Map Resource (map). 

[A] Commodities may not be identical. For example, the protein level 
for U.S. wheat flour may be different from the wheat flour from 
Kazakhstan. Soybean vegetable oil from the United States is fortified, 
while cotton seed oil from Russia is not fortified. Yellow peas were 
provided from the United States, and lentils were provided from Russia. 

[B] Yellow peas and fortified vegetable oil were from the U.S. 
prepositioning site in Jacintoport, Texas, which allowed the 
commodities to be shipped more quickly. 

[C] U.S. in-kind food aid was a USAID Single-Year Assistance Program 
funded through Title II of the Food for Peace Act. LRP was funded 
through USAID's 2008 supplemental appropriations. 

[D] For U.S. in-kind food aid, we used the date the call forward was 
issued. For LRP, we used the date a tender was announced, which was 
then followed by the issuance of a purchase contract. 

Note: USAID intends to issue updated guidance stipulating that LRP 
funding be used to purchase commodities whose source and origin are 
from developing countries. 

[End of figure] 

[End of section] 

Appendix V: Results of Interviews with WFP Procurement Officers: 

To identify factors that could limit the efficiency of LRP, steps WFP 
has taken to improve the efficiency of LRP, and factors that limit or 
strengthen the positive development impacts of LRP, we conducted semi- 
structured interviews with 11 WFP procurement officers in Africa and 
Asia. 

Figure 12 lists the factors that WFP procurement officers reported 
limit the efficiency of LRP and steps they identified could improve and 
ensure the efficiency of LRP. 

Figure 12: Factors Limiting LRP Efficiency and Actions That Improve and 
Ensure LRP Efficiency: 

[Refer to PDF for image: two horizontal bar graphs] 

Factors That Limit LRP Efficiency: 

Food quality problems or variations: 
Number of WFP procurement officers reporting: 9. 

Supplier problems: 
Number of WFP procurement officers reporting: 9. 

Infrastructure limitations: 
Number of WFP procurement officers reporting: 8. 

Timing and restrictions on donor funding: 
Number of WFP procurement officers reporting: 7. 

Constraints in WFP purchase process and other restrictions: 
Number of WFP procurement officers reporting: 5. 

Lack of security and conflict: 
Number of WFP procurement officers reporting: 5. 

Underdeveloped agricultural markets: 
Number of WFP procurement officers reporting: 5. 

Government trade restrictions and lack of capacity: 
Number of WFP procurement officers reporting: 3. 

High or volatile world food prices: 
Number of WFP procurement officers reporting: 3. 

Insufficient market information: 
Number of WFP procurement officers reporting: 3. 

Limited WFP resources for quality assurance: 
Number of WFP procurement officers reporting: 3. 

Costs and availability of land transport: 
Number of WFP procurement officers reporting: 2. 

Actions That Improve and Ensure LRP Efficiency: 

Advanced financing and new contract methods: 
Number of WFP procurement officers reporting: 8. 

Quality assurance processes: 
Number of WFP procurement officers reporting: 8. 

Supplier outreach and capacity building: 
Number of WFP procurement officers reporting: 8. 

Improved market intelligence and technology: 
Number of WFP procurement officers reporting: 7. 

Use of penalties for supplier default: 
Number of WFP procurement officers reporting: 6. 

Consider local food preferences: 
Number of WFP procurement officers reporting: 5. 

Coordination with government and donors: 
Number of WFP procurement officers reporting: 5. 

Strengthen agricultural infrastructure: 
Number of WFP procurement officers reporting: 4. 

Improve price information for suppliers: 
Number of WFP procurement officers reporting: 3. 

Prescreen suppliers and monitor delivery: 
Number of WFP procurement officers reporting: 3. 

Streamlined processes during emergencies: 
Number of WFP procurement officers reporting: 3. 

Source: GAO. 

Note: The category of underdeveloped agricultural markets includes 
factors such as farmers' lack of access to inputs and storage. 

[End of figure] 

Strengthening agricultural infrastructure includes actions such as 
provision of raw materials or establishing bagging and processing 
facilities. 

Figure 13 lists factors that limit the positive development impacts LRP 
could have and actions to improve or strengthen such impacts. The WFP 
procurement officers discussed topics, some of which we had identified 
as factors affecting food security in a previous report,[Footnote 68] 
namely, agricultural productivity, rural development, and governance, 
as shown below. Officers also discussed specific characteristics of WFP 
business practices. 

* Agricultural productivity. Several officers reported that small 
farmers' lack of access to inputs and markets or the underdeveloped 
nature of agricultural markets more generally limits their ability to 
create positive development impacts with LRP. Up to seven officers 
suggested actions to improve agricultural productivity. For example, 
the Thailand officer suggested actions to support small farmers in Laos 
by providing training on the corn soy production process. The Pakistan 
officer suggested strengthening agricultural markets by establishing 
seed nurseries. 

* Rural development. Two officers indicated that poor rural 
development, such as inadequate land holdings or inadequate access to 
information in remote areas, limits their ability to create positive 
development impacts with LRP. However, eight officers suggested actions 
to strengthen rural development through, for example, providing 
equipment to dry grain or educating communities on food fortification. 

* Governance. Several officers noted that due to the relatively small 
size of LRPs, particularly those conducted through WFP's P4P program, 
their ability to result in positive development impacts are limited and 
ultimately depends on whether local governments also have sound 
agricultural policies in place that support LRP. 

* WFP business practices. Four officers mentioned that imperfect market 
impact information is a challenge to creating positive development 
impacts with LRP. Four officers discussed the importance of market 
impact monitoring. Two officers also suggested changes to WFP business 
practices, such as merging LRP with the P4P program. 

Figure 13: Factors That Limit Positive Development Impacts of LRP and 
Actions to Improve or Strengthen Such Impacts: 

[Refer to PDF for image: horizontal bar graph] 

Agricultural productivity: 

Underdeveloped agricultural markets (limiting factor): 
Number of procurement officers reporting: 2. 

Farmers lack access to inputs and markets (limiting factor): 
Number of procurement officers reporting: 4. 

Develop and improve agricultural markets (action): 
Number of procurement officers reporting: 7. 

Support small-holder farmers (action): 
Number of procurement officers reporting: 6. 

Rural development: 

Inadequate rural development (limiting factor): 
Number of procurement officers reporting: 2. 

Strengthen rural communities and economies (action): 
Number of procurement officers reporting: 8. 

Governance: 

Supportive agricultural policies required (limiting factor): 
Number of procurement officers reporting: 4. 

Improve coordination and governance (action): 
Number of procurement officers reporting: 6. 

WFP business process: 

Market impact information is imperfect (limiting factor): 
Number of procurement officers reporting: 4. 

Change WFP program restrictions (action): 
Number of procurement officers reporting: 2. 

WFP market impact monitoring (action): 
Number of procurement officers reporting: 2. 

[End of figure] 

[End of section] 

Appendix VI: GAO Literature Review of Selected Studies on the Use of 
LRP: 

This appendix summarizes selected studies on LRP, including several 
analytical studies conducted by WFP to assess its use of LRP in sub- 
Saharan Africa (see table 6). The studies describe the types of markets 
and the trading environment in which LRP is conducted, as well as the 
impact of LRP on local markets and the extent to which those markets 
are integrated; the studies also provide an estimate of savings 
achieved through LRP. The first study in the table presents the types 
of questions that should be addressed when undertaking LRP. The 
remaining studies can be reviewed with these questions in mind. 

Table 6: Selected Studies on the Use of LRP: 

Study: A Market Analysis and Decision Tree Tool for Response Analysis: 
Cash, Local Purchase and/or Imported Food Aid? Daniel G. Maxwell, Erin 
C. Lentz, and Christopher B. Barrett, Cooperative for Assistance and 
Relief Everywhere (CARE), May 2007; 
Findings: 
* The report proposes a number of questions that should be asked when 
making decisions about LRP; 

Limitations: 
* What kind of supply response will the LRP market have? 
* Can traders supply the demand without price increases on the local 
market? 
* Is the market integrated with other supply markets so traders have 
incentive to import additional food into the market? 
* What is the local price relative to the import parity price (IPP)? 
Should both of these prices include all costs?; Do local traders behave 
competitively? Can traders exercise market power by raising prices so 
as to extract most of the gains from transfers? 
* What is the likelihood of supply disruptions or delays due to breach 
of contract, insufficient storage capacity, supplier inability to 
deliver on contract terms, government interference (such as export bans 
and currency controls), and logistical bottleneck? 

Study: Food Procurement in Developing Countries, World Food Program, 
Executive Board, First Regular Session, Feb. 2006, Rome; 
Findings: 
* Report summarizes other WFP studies on LRP in Bolivia, Burkina Faso, 
Ethiopia, Nepal, South Africa, Uganda, and Congo; 
* Limitations: 
* The vast majority of WFP operations is in response to emergencies and 
has wide fluctuations in needs; 
* WFP's food purchasing tends to be irregular and unpredictable, which 
seriously limits its ability to contribute to market development; 
* WFP has not had success in procuring directly from farmers and farmer 
groups. The case studies indicate that supporting farmers and farmer 
groups has mixed results and may lead to higher prices paid, higher 
administrative costs, more contracts, and greater risk of default; 
* In many low-income countries, national market intelligence systems 
are weak, and reliable and timely data are not available; 
* Often, it is not the cost of the food, but the management costs 
associated with local procurement in surplus-producing regions where 
there is little or no market infrastructure that is prohibitive; 
* These management costs include monitoring and supporting the 
completion of contracts, the costs and risks of contract default, and 
risk of inadequate food quality. 

Study: World Food Program Local and Regional Food Procurement-An 
Analytical Review (Ethiopian Case Study), Final Report. Addis Ababa: 
June 2005; 
Year: 2001-2004; 
Country: Ethiopia; 
Commodity: Corn and wheat; 
Findings: 
* In 2003 there would have been a cost savings of $78 per ton on 
locally purchased wheat and corn; 
* Based on analysis in 1996-2004, 60-70 percent of the markets are 
integrated; 
* Producers receive 75 percent of retail price in Addis Ababa, leaving 
a 25 percent retail margin; 
Limitations: 
* Ethiopia's grain marketing system is constrained by lack of access to 
financial resources, inadequate infrastructures, poor roads, inadequate 
access to market information, storage facilities, lack of standards and 
grades, high transfer costs, and nonfulfillment of delivery options; 
* Traders deal with small annual volume and do not hold grain in 
storage for seasonal arbitrage; 
* Delivery of the product is a real challenge, particularly ensuring 
the quality of the product delivered. Rejection of delivery for failure 
to fulfill quality standards is frequent; 
* Since traders do not keep stocks on hand, contract default is a 
problem when traders are unable to procure the proper amount or quality 
at the expected price; 
* Default occurs if traders get a better offer; there are problems with 
traders not honoring their commitments; 
* Transport shortages and tariff increases hinder timely delivery. 

Study: Local and Regional Food Procurement in Uganda an Analytical 
Review, A study report prepared for the Economic Analysis and 
Development Policy Unit in the Strategy, Policy and Program Support 
Division of the World Food Program, Serunkuuma and Associates Consult, 
June 2005; 
Year: 2001-2004; 
Country: Uganda; 
Commodity: Corn and beans; 
Findings: 
* In 2003, WFP spent $12 million less on corn and beans purchased from 
Uganda than if it had imported these commodities; 
* While imports from the United States and South Africa may cost less 
at port, added inland transportation costs made them more expensive 
than LRP. LRP delivered food to beneficiaries in 3 months while 
international procurement delivery took an average of 6 months; 
* Locally, in 2003, 7 of 8 markets in Uganda appeared integrated. 
Regionally, Uganda markets were integrated with Tanzania markets but 
not with Kenya markets; 
Limitations: 
* WFP contracts require higher quality than locally traded corn--high 
moisture content and is subject to rot; 
* Poor post-harvest practices, storage facilities, and equipment such 
as dryers and shellers affect quality of final product leading to high 
post-harvest losses and increased costs to clean the grain; 
* Intensification of local purchase contributed to reduction in corn 
exports.; Supplies still come from a small number of companies or 
farmer groups, suggesting high concentration and potential for 
monopolistic behavior; 
* Lack of sufficient storage capacity and access to bank loans without 
WFP contracts are constraints to smaller traders. High cost of 
borrowing and unavailability of long-term finance are additional 
constraints; 
* Many traders enter into contracts with WFP before they have stock, 
putting them at a higher risk for contract default. This also adds 
pressure on markets because large quantities are purchased in a short 
period of time, which may lead to drastic price changes. 

Study: Food Aid Procurement in South Africa: an Analytical Review of 
WFP Activities; Nick Vink, Thulasizwe Mkhabela, Ferdie Meyer, and 
Johann Kirsten; April 2005; 
Year: 2001-2004; 
Country: South Africa; 
Commodity: Corn; 
Findings: 
* In June 2003, farmers received 53 percent of the retail value of corn 
meal; 
* During the period of analysis, WFP's unit price for maize was above 
South Africa's average prices; 
* This difference in price may be due to the transportation 
differential, contract delivery terms, and the exchange rate; 
* Traders charge a $5-$10 risk premium to account for the time that 
elapses from submitting a tender to receiving an award; 
Limitations: 
* While WFP has been active in buying corn in the South African market, 
WFP purchases represent a very small portion of the market--1/5 to 3/4 
of a percentage point of the gross value of South African agricultural 
production; 
* South Africa has a functioning futures commodity market called the 
South African Futures exchange (SAFEX), which was established after 
deregulation when the corn board was abolished; 
* Purchase prices are determined by comparing SAFEX prices to the IPP, 
which is the representative price for purchases on the world market. 

Study: Democratic Republic of Congo Food Procurement Assessment Mission 
Euateur, Katanga, Orientale, North Kivu and South Kivu Provinces; World 
Food Program; May 2007; 
Years: 2001-2006; 
Country: Democratic Republic of Congo; 
Commodity: Corn and pulses; 
Findings: 
* There is no continuity in WFP purchases; quantities vary 
significantly from year to year; 
Limitations: 
* There are zones of food insecurity alongside zones considered food-
secure; 
* Factors hampering production and purchases include the following: 
- Lack of permanent market buyers; 
- Lack of storage, drying, cleaning, milling, and bagging facilities; 
- Poor road and rail infrastructure; 
- Lack of access to seeds and fertilizers; 
- Excessive official and unofficial (illegal) duties and taxes; 
- Lack of substantial storage or stocks available; 
- Limited facilities for cleaning, drying, and milling; 
- Disruptions to the trading system, which are often/mainly political, 
such as war; and; 
- Quality problems, including moisture content, infestation, and losses 
due to poor storage. 

Study: Impact of WFP's Local and Regional Food Purchases (A Study Case 
on Burkina Faso) Final Report Submitted by Institut de Sahel Comite' 
Permanent Inter-Etats de Lutte Contre La Secheresse dans le Sahel, 
Mali; 
Year: 2002-2005; 
Country: Burkina Faso; 
Commodity: Corn, corn meal, sorghum, and cowpea; 
Findings: 
* In 2004, prices paid for corn by WFP were lower than the IPP in 6 of 
7 LRP operations; 
* The price differential ranged from 43 to 72 percent of prices paid by 
WFP; 
* During the period it took an average of 34 days between the 
invitation for tender and the signing and implementation of the 
contract; 
* Suppliers stated that there were delays in WFP payments; 
* WFP purchases did not change the level of integration between 
markets; 
* Market participants indicated that WFP purchases resulted in price 
increases of between 5 to 10 percent; 
* Many organizations intervene in local markets unexpectedly and 
without prior consultation, simultaneously purchasing large quantities. 
Such activity contributes to price increases and should be harmonized; 
Limitations: 
* WFP contracts were concentrated to a limited number of suppliers. 
There were 15 suppliers, and 3 of them received more than half the 
payments made; 
* Other organizations enter the market with food aid purchases, 
contributing to price increases. Donors should coordinate. 

Study: Local and Regional Food Aid Procurement: An Assessment of 
Experience in Africa and Elements of Good Donor Practice, David 
Tschirley, and Anne Marie Del Castillo, Michigan State University 
International Development Working Paper No. 91, 2007; 
Year: 2001-2005; 
Country: Kenya, Uganda, Zambia and Mozambique; 
Commodity: Corn and corn/soy blend; 
Findings: 
* The report cites an analysis by Clay, Riley, and Urey to compare 
estimated costs of food aid from the United States with LRP in three 
countries; 
* LRP was 66 percent less expensive than in-kind donations for all 
commodities. LRP cost 61 percent less for corn and 52 percent less for 
corn soy blend; 
* Local purchase saved the United States nearly $68 million; 
* These savings would allow 75 percent more food aid to be provided; 
* Compared local prices to import parity prices, 2001-2005; 
* The results were mixed. WFP paid a 10 percent premium in Kenya from 
2001 to 2005, an 18 percent premium in Uganda from 2001 to 2004, and 
the local market price from 2000 to 2005. In Zambia, WFP paid the local 
price over the period. Some evidence shows that LRP contributed to 
price surges in Uganda in 2003 and Niger and Ethiopia in 2005 to 2006; 
Limitations: 
* Contract default is a major risk of LRP; 
* Limited pool of qualified traders with certified financial capacity, 
access to physical infrastructure, and trading experience; 
* Most sales remain concentrated in a very small number of trading 
companies and larger farmers; 
* WFP instituted a program of direct procurement from small farmers. 
Assessments suggest that this approach is expensive, time-consuming, 
and unreliable, and has little developmental impact; 
* Food quality is a risk of LRP. In Kenya, at least two documented 
cases of aflatoxin poisoning from infected corn resulted in dozens of 
deaths. 

Study: The United States' International Food Assistance Programs: 
Issues and Options for the 2007 Farm Bill, Christopher B. Barrett, 
February 2007; 
Year: 2007; 
Country: United States; 
Commodity: Not applicable; general discussion of U.S. food aid; 
Findings: 
* On average, LRP is 66 percent cheaper across all commodities than 
direct purchase; 
* 36 percent of U.S. food aid shipments to Ethiopia, Kenya, and 
Tanzania from 1998 to 2002 cost less than comparable local market 
purchases; 
* The study mentions timeliness of LRP versus direct shipment; 
Limitations: 
* Local and regional purchases are not always simple, available, or 
effective everywhere; 
* Some markets are too thin to absorb a significant increase in 
commercial food demand without driving up prices; 
* Quality control, transport capacity, and trader market power limit 
donors' procurement options; 
* Even taking freight and administrative costs into account, it is 
sometimes cheaper to import food aid from the United States; 
* Legislative restrictions on food aid program result in added costs, 
delayed deliveries, and reduced cultural appropriateness of 
commodities; 
* These costs are attributable to restrictions placed on food aid with 
respect to shipping, bagging, and processing; 
* These restrictions include the tying of food aid to domestic 
procurement of commodities, minimum volumes, minimum nonemergency 
volumes, value-added minimum, bagging minimum, cargo preference, 
restrictions on use of ports, monetization requirements, and overhead 
reimbursement for operational agencies. 

Study: The Development Effectiveness of Food Aid: Does Tying Matter? 
Organization for Economic Cooperation and Development, 2006; 
Year: 2002-2003; 
Country: Various donating and recipient countries; 
Commodity: Wheat, corn, cornsoy blend, vegetable oil, and rice; 
Findings: 
* Analysis of food aid transactions by a representative group of 16 
donors and 15 selected recipient countries; 
* The study looked at resource transfer efficiency (RTE) by comparing 
the cost of direct aid transfers with the hypothetical cost of an 
alternative commercial transaction (ACT); 
* The actual cost of direct transfers was on average 50 percent more 
than local food purchases and 33 percent more than food procured in 
third countries. The range of difference in costs varies widely among 
donors, commodities, mode of transport and destinations-- from 10 
percent below to 55 percent higher than the cost of alternative 
commercial imports; 
* While LRP generally cost the least, its cost-effectiveness varied 
widely. LRP in Africa--Ethiopia, Malawi, Zambia, and Kenya--appeared to 
cost the least. LRP in India, Jordan and Mauritania cost more than LRP 
in Africa. The highest costs for LPR were in Haiti; 
Limitations: 
* The ACT equates to the import parity price (IPP); therefore, local 
purchase would not be efficient if the overall cost exceeded the IPP; 
* Therefore it would be expected that LRP costs would be less than IPP 
or most cost-efficient; 
* LRP is the least-cost alternative; 
For purpose of study treated all direct transfers of food aid as de 
facto "tied"; 
* Comparison includes international transport costs to the same 
destination, overland transport cost to the point of border entry for 
land locked countries; 
* Comparison does not include internal transport from port or borders 
to point of distribution, handling, and/or internal storage; 
* Calculations do not account for transaction costs of organizing and 
importing food products. 

Source: GAO based on literature review. 

[End of table] 

[End of section] 

Appendix VII: Comments from the U.S. Agency for International 
Development: 

Note: GAO comments supplementing those in the report text appear at the 
end of this appendix. 

USAID: From The American People: 
U.S. Agency for International Development: 
1300 Pennsylvania Avenue, NW: 
Washington, DC 20523: 
[hyperlink, http://www.usaid.gov] 

May 15, 2009: 

Mr. Thomas Melito: 
Director: 
International Affairs and Trade: 
U.S. Government Accountability Office: 
Washington, DC 20548: 

Dear Mr. Melito: 

I am pleased to provide the formal response of the U.S. Agency for 
International Development (USAID) to the GAO draft report 
"International Food Assistance: Local and Regional Procurement Can 
Enhance the Efficiency of U.S. Food Aid but Challenges May Constrain 
Its Implementation" (GAO-09-570) (May 2009). 

The enclosed USAID comments are provided for incorporation with this 
letter as an appendix to the final report. 

Thank you for the opportunity to respond to the GAO final report and 
for the courtesies extended by your staff in the conduct of this audit 
review. 

Sincerely, 

Signed by: 

Drew W. Luten
Acting Assistant Administrator Bureau for Management 

Enclosure: a/s: 

[End of letter] 

USAID Comments On GAO Draft Report 09-570: 

USAID international food assistance programs have proven increasingly 
responsive to global efforts at reducing food insecurity and targeting 
those most in need. By responding to assessment and situational 
information, focusing on reducing risk and vulnerability, targeting the 
poorest of the poor and better integrating individual programs into 
larger-often international-efforts, USAID aims to improve the 
effectiveness of food aid to help reach global targets for reducing 
hunger, malnutrition and poverty. 

As noted by the GAO, in FY 2008, prices of major food commodities 
increased significantly worldwide, pushing an estimated 40 million more 
people into hunger, according to the United Nations Food and 
Agriculture Organization. Each day, over 963 million people do not have 
enough to eat-more than the populations of the United States, Canada 
and the European Union combined. 

Vulnerable populations will continue to be affected by natural 
disasters, adverse climate changes and civil strife. The global 
economic downturn imposes additional constraints that could exacerbate 
the severity of emergencies and further strain the capacity to respond 
to them. 

In this regard, the GAO report on local and regional procurement (LRP) 
is very valuable as USAID continues to seek ways to enhance the tools 
at its disposal to ensure greater effectiveness and efficiency to 
deliver appropriate and timely food assistance to vulnerable 
populations in need around the world. 

Especially over the past 12 months, the ability to procure food aid 
commodities locally and regionally has offered USAID an exceptional 
opportunity to meet humanitarian needs in an efficient and timely 
fashion; fill pipeline gaps prior to the arrival of food shipped from 
the United States; and increase the total amount of life-saving food 
aid U.S. assistance resources can provide in response to the current 
food security crisis. 

For example, when an emergency suddenly occurs with little notice (such 
as a natural disaster or outbreak of fighting), when food deliveries 
are unexpectedly interrupted, or when a cease-fire allows rapid access 
to populations in need, LRP can provide the speed and flexibility 
needed to deliver food aid as quickly as possible, without the months 
needed to ship in-kind food aid from the United States. 

As noted by the GAO, LRP has stretched the food aid dollar because food 
purchased locally and regionally is often less expensive than 
commodities procured and shipped from the United States. In addition to 
its value as a tool for rapid humanitarian response, LRP also has the 
potential to strengthen and expand commercial markets, stimulate local 
and regional food production, and ultimately reduce emergency food aid 
requirements. 

It is important to recognize, however, that LRP, despite its advantages 
in some situations, is not a viable choice in every food aid situation. 
Procurement of sufficient amounts of food is not always possible in the 
country or region where aid is needed without negatively affecting 
local markets. Export bans and non-trade barriers-including internal 
transport control posts, customs clearance procedures and import and 
technical regulations-continue to impede trade in some regions.
Another important consideration is that the bulk of USAID's food aid 
resources today are directed to ongoing emergencies, such as Darfur and 
Somalia, rather than sudden and unexpected crises such as earthquakes 
and tsunamis. For USAID, the optimal humanitarian pipeline is one that 
delivers a seamless flow of aid and is well-calibrated to match 
beneficiaries' needs. This is achieved through meticulous planning and 
a sound understanding of the nature of the needs on the ground. Yet LRP 
can serve as an important bridge, quickly providing sufficient food 
supplies to address emergency food aid needs until U.S. in-kind food 
aid arrives. 

In-kind food aid and other tools at our disposal-including pre-
positioning commodities near the countries where they are most likely 
to be needed, and early warning systems-continue to be important 
elements in USAID's emergency response capabilities. 

Pre-positioning: 

USAID is expanding its pre-positioning capabilities as part of its 
efforts to be as flexible as possible in emergency food aid responses. 
Pre-positioning has enabled USAID to reduce food aid delivery time by 
several months, reducing human suffering and ultimately saving lives. 
This has proven essential in USAID's reliable delivery of lifesaving 
assistance to millions in Sudan, Ethiopia and Somalia, for example. 
USAID is building on its successful practice of pre-positioning 
commodities by instituting a new management approach that allows it to 
use a variety of locations as circumstances warrant, without committing 
long-term to specific locations to store commodities. 

For pre-positioning to work, however, a robust budget for in-kind food 
aid is required. Unless sufficient funds are regularly available to 
respond to emergencies and restock pre-positioned supplies, all 
commodities that are pre-positioned are quickly used, leaving strategic 
warehouses empty. 

Food Aid Quality: 

USAID concurs that efforts need to increase to jointly develop and 
implement a system for monitoring and reporting commodity adherence to 
quality standards and production specifications in all commodity 
purchases, including recommended approaches to quality assurance in the 
context of LRP and potential in-country fortification activities. 

In order to be able to collect evidence on LRP adherence to quality 
standards and product specifications, there should be a defined, funded 
process for this type of monitoring. WFP is working on the framework 
for such a system. USAID and USDA are also working on a framework for 
such a system focused on domestic food aid manufacturing and 
processing. 

As part of this process, USAID recently awarded a contract to Tufts 
University's School of Nutrition to examine the nutritional needs of 
food aid beneficiary populations and the commodities currently 
available to meet those needs in the context of total available food 
resources, including LRP. The study will include a scientific review of 
current enrichment and fortification technologies, a review of methods 
for delivery of micronutrients and an active consultative process that 
involves industry, academic and operational experts and ultimately 
produces recommendations as to how to most cost-effectively meet the 
nutritional needs of beneficiary populations with food aid commodities, 
including through LRP. 

This study may lead to revisions in commodity specifications and 
recommendations for approaches to product monitoring and quality 
assurance throughout the supply chain, from procurement through 
programming. Both USDA and WFP are participating in that review, along 
with representatives of the Food Aid Consultative Group (FACG), and 
experts in nutrition, quality assurance, food technology and policy. 

USAID and USDA have begun a process of tracking quality issues through 
a quality feedback loop developed by the FACG Commodity Working Group. 
This will need to be incorporated into a database that will be able to 
provide information on food aid processors' and manufacturers' 
adherence to product specifications and quality standards. 

Considering that all of these processes are currently ongoing, it may 
be more efficient for GAO to recommend that all food aid organizations 
collaborate as much as possible in the development and implementation 
of systems to monitor and follow up on quality assurance and product 
specification/reformulation issues in all food aid purchases, including 
local and regional purchase. [See comment 1] 

Market Impacts and Intelligence: 

USAID concurs that current and reliable market intelligence, along with 
coordination among donors, WFP and other LRP stakeholders, is 
critically important to ensure that increased LRP strengthens local and 
regional markets and does not distort or cause price increases for low-
income consumers. 

USAID is working closely with LRP implementing partners to monitor 
local and regional food prices for any indication of destabilization 
linked to local purchases. Other factors that are or will be tracked 
are volumes of food procured, costs and time invested, beneficiaries 
reached and impact on specific markets. The specific indicators that 
partners are responsible to monitor and report on are included in USAID 
grants or cooperative agreements under which LRP resources are 
provided, and are subject to continuous review and updating. 

Moreover, WFP, a major recipient of USAID LRP funds in FY 2008-2009, 
has an effective system to ensure that LRP is not only a cost-effective 
alternative, but also does not disrupt local and regional markets. This 
system includes structural analyses of many key market impact elements, 
including main crops; agro-ecological zones; levels of production; 
agricultural seasons; latest food balance sheets; size, location and 
importance of food markets; principal exports and imports; major 
barriers to the free flow of food; and inter-regional trading and 
transport patterns. Market intelligence is also gathered on the 
expected harvest; the quality of food likely to be available; 
significant food purchases, including those made by local institutions; 
commercial exports; estimates of stocks held by traders; potential 
disruptions to transport networks; and expected flows of food within a 
region. USAID plans to build upon this system. 

USAID is exploring the use of futures markets to hedge against price 
risks and increase the cost-efficiency of LRP in developing countries. 
In South Africa, for example, maize prices for future contracts and 
options are generated on the futures exchange, SAFEX. This exchange 
allows buyers to bargain with sellers for cheaper prices on contracts 
to be fulfilled at a future date. Many African countries have nascent 
commodity markets, including Ethiopia, Zambia, Malawi and Uganda, and 
channeling LRP transactions through these emerging markets could be 
instrumental in ensuring transparency in the LRP activity as well as 
increasing the visibility and credibility of the commodity market. 

USAID plans to conduct an evaluation to review the delivery of FY 2008-
2009 local and regional procurement of food aid. This evaluation will 
review constraints, timeliness, quality, market impact and cost 
effectiveness regarding LRP activities undertaken in FY 2008-2009. 

USAID recognizes the potential for LRP to improve markets for 
smallholder farmers, especially in Africa, and in FY 2008 allocated $30 
million in development assistance funds to facilitate access to markets 
and enhance smallholder farmers' capacity to benefit from LRP. USAID is 
providing funding to build the capacity required to alleviate the 
policy and infrastructure constraints preventing small farmers from 
accessing markets; promote a transition from subsistence to market-
oriented agricultural production; and broaden the geographic and 
demographic coverage of LRP actions in key countries, including Africa. 

Improved local and regional trade, increased income and investment in 
rural areas, and strengthened linkages among producers, traders, 
processors and consumers of food staples will reduce vulnerability and 
encourage markets to respond to shocks in lieu of food aid, including 
LRP. These advances will encourage local and regional stakeholders to 
reinforce the need and accountability for pro-trade policies and 
regulation-a critical element in reducing vulnerability and making 
increasing global demand work for farmers, especially those in Africa. 

In FY 2009, USAID is also supporting with $20 million the WFP "Purchase 
for Progress" program. The key objectives of the "Purchase for 
Progress" program are to increase the income of smallholder farmers by 
sustainably increasing their access to and participation in commercial 
markets; and to transform WFP food purchase programs so that they 
better support sustainable production and address the root causes of 
hunger. 

MARAD and Cargo Preference: 

Although USAID appreciates the report's recognition of the difference 
of opinion about the applicability of the 75 percent threshold to USAID-
funded LRP rather than the 50 percent threshold, USAID does not believe 
that the report goes far enough. It is USAID's view that MARAD's 
position is devoid of legal merit. As such, we believe that the report 
should unambiguously indicate this rather than taking the neutral 
stance that it does. [See comment 2] 

The Cargo Preference Act of 1954 (Section 901(b)(1)) requires that at 
least 50 percent of the gross tonnage of certain equipment, materials 
and commodities be transported on privately owned U.S.-flag commercial 
vessels. Nevertheless, Section 901 b, "Shipment Requirements for 
Certain Exports Sponsored by Department of Agriculture," emphasis 
added, requires an additional 25 percent of the gross tonnage of 
certain agricultural commodities or products thereof be transported on 
U.S.-flag commercial vessels. This is the basis for the 75 percent 
threshold applicable to the shipment of commodities under the Food for 
Peace Act. However, Section 901b(b) provides that "[t]his section shall 
apply to any export activity of the Commodity Credit Corporation or the 
Secretary of Agriculture...." Emphasis added. Because LRP will be 
carried out by USAID with Foreign Operations Appropriations Act 
funding, and has no connection to CCC or the Secretary of Agriculture 
activities, the plain language of the statute makes clear that the 
additional 25 percent found in section 901b does not apply to USAID-
funded LRP. Furthermore, even if the program in question were carried 
out by or for CCC or the Secretary of Agriculture, USAID is of the view 
that the statutory language would preclude its applicability to LRP 
because 901b applies only to "any export activity." LRP, by definition, 
does not constitute an export activity. Commodities are purchased 
locally or regionally, they are not exported from the United States. 

In light of the forgoing, although USAID supports updating the MOU, 
there is no need to address ocean freight differential and 20 percent 
excess freight for purposes of LRP in the MOU. Specifically, at the 50 
percent threshold, there would be no reimbursement of excess freight 
costs under USAID's LRP programs. [See comment 3] 

The report also states that MARAD has authority to require the 
transportation of U.S.-flag vessels of cargo shipments not otherwise 
subject to cargo preference when it determines that an agency has 
failed to sufficiently utilize U.S.-flag vessels. As MARAD has not yet 
issued regulations to implement this new authority, USAID cannot 
comment until proper vetting takes place on the new regulations. 

Finally, regarding vessel type, USAID does not believe there is 
disagreement between USAID and MARAD regarding vessel type. The 
November 8, 2002, MARAD policy document defines a "dry cargo liner." 
[See comment 4] 

[Text box: A service will be designated as liner service if the service 
is advertised to the public as ocean freight service of packaged goods 
by regularly scheduled common carriers, or vessels that follow specific 
routes to a range of ports on a trade route in U.S. foreign trade. 
Specific port call may be added or dropped according to cargo 
availability or other competitive factors. It is not necessary to the 
designation of liner service for the carrier to have called any 
particular port on the trade route with any particular vessel. Nor does 
it matter to the designation of liner service whether the 
transportation contract is in the form of bookings notes or by voyage 
or time charter. End text box] 

This loose definition of vessel type allows for flexibility and healthy 
competition among U.S.-flag carriers who can, if need be, trade in both 
parcel and bulk grain shipments. This definition is good for the 
program. 

Summary: 

Last year's high food price crisis demonstrated the need to have the 
flexibility to respond to food aid needs with the right tools to suit 
each situation. Especially over the past 12 months, LRP has 
demonstrated that commodities can, in some cases, be delivered faster 
and at a lower cost. This ultimately means that vulnerable people in 
emergency situations may be helped more rapidly and more people may 
receive help. LRP and other innovative and flexible tools, such as pre-
positioning, strategic and early warning planning, as well as in-kind 
food aid, should be included in a full range of response options and 
used when conditions deem that it would contribute to the most 
efficient and effective response. 

The following are GAO's comments on the U.S. Agency for International 
Development letter dated May 15, 2009. 

GAO comments: 

1. Our recommendation to systematically collect evidence on LRP's 
adherence to quality standards and product specifications does not 
preclude such collaboration as part of efforts, consistent with our 
2007 recommendation, to develop a coordinated interagency mechanism to 
update food aid specifications and products to improve food quality and 
nutritional standards. We agree with USAID that including actions to 
collect evidence on LRP's adherence to quality will make ongoing 
efforts to improve food quality more efficient. 

2. In providing information on agencies' interpretations of cargo 
preference requirements as they pertain to LRP, we sought to identify 
areas of ambiguity where agencies disagree on the applicability of 
these requirements. We did not attempt to adjudicate the differences in 
interpretation among the agencies involved. However, in technical 
comments to a draft of this report, DOT changed its position regarding 
thresholds and now concurs with USAID's interpretation, thus 
eliminating this issue as an area of ambiguity. This is reflected in 
the final report. 

3. See comment 2. 

4. We modified text to reflect USAID'S agreement with DOT's definition 
of vessel type. 

[End of section] 

Appendix VIII: Comments from the U.S. Department of Agriculture: 

Note: GAO comments supplementing those in the report text appear at the 
end of this appendix. 

United States Department of Agriculture: 
Farm and Foreign Agricultural Services: 
Foreign Agricultural Service: 
1400 Independence Ave, SW: 
Stop 1060: 
Washington, DC 20250-60: 

May 15, 2009: 

Mr. Thomas Melito: 
Director, International Affairs and Trade: 
United States Government Accountability Office: 
441 G Street, N.W. 
Washington, D.C. 20548: 

Dear Mr. Melito: 

The U.S. Department of Agriculture (USDA) appreciates the opportunity 
to provide a substantive response to the Government Accountability 
Office (GAO) draft report on international food assistance titled 
"Local and Regional Procurement Can Enhance the Efficiency of U.S. Food 
Aid but Challenges May Constrain Its Implementation" (GAO-09-570). The 
following comments are based on a draft that was provided to USDA by 
GAO on Friday, May 1, 2009. 

USDA agrees that local and regional procurement is an important tool 
that, when used appropriately, at the right time and under the right 
conditions, can reduce commodity and transportation costs, and shorten 
delivery times. The timing of food aid deliveries is especially 
critical to the success of life-saving emergency food aid programs. 
Moreover, the potential cost-savings afforded by local and regional 
procurement can enable food aid donors to purchase larger volumes of 
commodities where available and assist greater numbers of people with 
the same level of resources. In addition to meeting immediate food aid 
needs, a well-targeted local and regional procurement program with a 
reliable source of funding can have a developmental impact in the 
countries in which the commodities are sourced. 

Local and regional procurement, in-kind food aid, and prepositioning 
facilities provide the U.S. Government with a valuable array of tools 
to fight global food insecurity. Each of these tools has its strengths 
and weaknesses, but the U.S. Government needs access to all of them in 
order to respond to a variety of food security threats. 

USDA notes the results of the analysis in the report that show 
insightful comparisons of costs and delivery times, as well as the 
challenges of matching like transactions. The results may provide an 
estimate of cost differences, but USDA believes that precision is lost 
by aggregating some of the commodity groups, including vegetable oil 
and beans. The report does not specify how differences in quality or 
specifications were handled, and comparing the costs of different 
qualities of the food products would affect the calculated cost 
differences. USDA also notes that GAO did not report on any comparison 
between delivery times for locally and regionally procured aid and 
prepositioned, in-kind food aid. [See comment 1] 

Commodity Quality Standards: 

USDA recognizes the importance of having enforceable commodity quality 
standards and product specifications in local and regional procurement. 
The authorizing law requires that USDA and grant recipients ensure that 
locally and regionally procured bulk and processed commodities are fit 
for human consumption and meet the specifications, as well as the 
nutritional, quality, and labeling standards of the importing country 
(i.e., the recipient country). USDA plans to require grant recipients 
to enter into written contracts with commodity suppliers. These 
contracts will state the minimally acceptable commodity quality 
standards and specifications that must be met. USDA plans to require 
the grant recipients to report on the quality, specifications, and 
purchase process of all local and regional procurements. The nature of 
each response will determine where and from whom commodities are 
sourced. 

During an emergency operation, implementing partners are likely to 
procure commodities in the regional market from mid to large-scale 
commercial wholesalers. Such entities can easily supply a large volume 
of high-quality commodities in a timely manner, enabling implementing 
partners to get food to beneficiaries as fast as possible. By contrast, 
when carrying out an agricultural development program, implementing 
partners may target local purchases to small-holder farmers, farmer 
cooperatives, or other small-scale suppliers. Commodities that are 
purchased locally from a variety of small suppliers will not 
necessarily be of identical quality or have the same specifications as 
those that are purchased regionally from mid to large-scale commercial 
wholesalers. However, this does not automatically mean that they are 
not fit for human consumption or that they are of lesser nutritional 
value. For example, the moisture content of whole grain such as wheat 
that has been purchased from small-holder farmers or farmer 
cooperatives in most instances will be higher than the moisture content 
of wheat that has been purchased on the commercial market. This is 
because small-holder farmers lack proper drying and warehousing 
facilities. In such cases, implementing partners will have to take care 
to ensure that the moisture content still meets the specifications of 
the recipient country, and that the grain has been adequately tested 
for infestation, excess foreign matter, and the presence of molds and 
fungi. 

Food aid agencies make purchases from small-holder farmers and farmer 
cooperatives in order to address developmental concerns such as endemic 
poverty and chronic food insecurity. The primary goal of purchasing 
from such producers is to boost their income in the short-term and 
reduce food insecurity while improving their ability to meet commercial 
quality standards and product specifications in the long-term. 

To date, there is no evidence that any food aid program beneficiaries 
have ever received locally and/or regionally purchased commodities that 
were unsafe or unfit for human consumption. [See comment 2] 

Cargo Preference: 

USDA agrees that greater clarity on how to interpret cargo preference 
regulations would be helpful. USDA recognizes the importance of the 
cargo preference Memorandum of Understanding (MOU) and is eager to work 
with United States Agency for International Development (USAID) and the 
U.S. Maritime Administration (MARAD) to update this agreement. USDA is 
in frequent communication with USAID and MARAD on a variety of policy 
and operational issues, and hopes that similar discussions can take 
place soon with respect to the MOU. 

USDA also agrees that 75 percent of all CCC-funded commodities for USDA 
food aid programs must be shipped on U.S.-flag vessels, and that a 
portion of the transportation costs that are in excess of 20 percent of 
the total program costs are subject to reimbursement by MARAD. However, 
it needs to be clarified whether or not USDA will receive reimbursement 
for excess freight costs for regionally procured commodities that are 
shipped on U.S.-flag vessels under the local and regional food aid 
procurement pilot program. USDA believes that such costs are subject to 
reimbursement by MARAD. 

USDA believes that for programs administered under USDA, USDA is the 
determining agency for U.S.-flag vessel availability. USDA will confer 
with MARAD prior to making such a determination. This determination is 
made on the basis of USDA programmatic needs. Contrary to the GAO's 
interpretation, USDA would like to clarify that MARAD is the 
determining agency of what constitutes a fair and reasonable rate. [See 
comment 3] 

USDA recognizes that it will face challenges when booking ocean freight 
under this program due to the likelihood that U.S.-flag carriers will 
not always be available. However, USDA will work with MARAD to ensure 
that grant recipients comply with cargo preference requirements to the 
greatest extent possible. It should be noted that USDA food aid 
programs have been fully compliant with cargo preference requirements 
for a number of years, and USDA will endeavor to the best of its 
ability to continue to meet cargo preference requirements. 

Reliability of Market Intelligence: 

Local and regional procurement is an important tool that has the 
potential to improve the timeliness and effectiveness of USDA food 
security programs, but it also is a tool that must be used in the 
appropriate place and at the appropriate time. USDA shares GAO's 
concern that poorly targeted local and regional purchases have the 
potential to lead to price spikes and shortages of staple foods in 
source countries, just as poorly targeted distributions of in-kind food 
aid have the potential to depress prices and negatively impact domestic 
production in recipient countries. USDA agrees that the best way to 
mitigate these potential adverse effects is through improved market 
intelligence. 

In a recent USDA study titled "The Use of Local and Regional 
Procurement in Meeting the Food Needs of Those Affected by Disasters 
and Food Crises", USDA recommended several timely and reliable sources 
that food aid donors and implementing agencies could reference when 
gathering information about commodity prices, average estimates of 
production, and local and regional trading patterns. Among those are 
reports from the USAID Famine Early Warning System Network, World Food 
Program (WFP) Vulnerability Assessment Mission (VAM) reports, joint 
WFP/Food and Agriculture Organization of the United Nations Crop and 
Food Supply Assessment Mission reports, and WFP and Private Voluntary 
Organization (PVO) emergency needs assessment reports. 

As noted by GAO, the USDA study also recommended that food aid donors 
and implementing partners closely coordinate with host-country 
governments and utilize data from host-country government information 
systems wherever possible. Local and regional procurement presents an 
opportunity for donors and implementing partners to collaborate more 
closely with one another and with host-country governments to build 
their capacity to effectively monitor the food security situation in 
recipient countries. 

Improving host-country government capacity to gather market 
intelligence and to undertake ongoing analyses of the food security 
situation is a cost-effective way to improve existing early warning 
systems and avoid causing harm to markets and low-income consumers in 
areas where food is locally procured. As greater numbers of host-
country governments begin to implement or expand their own social 
welfare programs, this strategy also will ensure that WFP and PVOs do 
not find themselves in competition with host-country governments for 
the same limited supply of surplus commodities. In fact, USDA strongly 
believes that coordination among all stakeholders is critical to 
avoiding harm to low-income consumers and fragile market systems. 

USDA recognizes the challenges and risks of working in areas without 
solid market intelligence, but the USDA study found no widespread 
evidence of adverse impacts from local and regional procurement. On the 
contrary, it appeared that the majority of food aid agencies have begun 
to put additional safeguards in place to avoid causing harm. WFP has 
been working to build a more robust monitoring and information system 
with funding from other donors, and it is also increasing its number of 
staff in the field. PVOs, which traditionally have received less 
funding for local and regional procurement, are developing procurement 
plans and increasing the number of staff with the experience to engage 
in local and regional procurement. [See comment 4] 

For its part, USDA will take appropriate steps to ensure that grant 
recipients under the local and regional procurement pilot program 
adhere to the "Do No Harm" principles outlined in the Farm Bill 
legislation, including ensuring that USDA-funded local and regional 
procurements: 

* Do not increase the price of food for low-income consumers,
* Do not disrupt global agricultural commodity markets,
* Do not disrupt normal patterns of commercial trade, and
* Do not harm farmers in the recipient country or in a neighboring 
country in the region. 

USDA also will require that grant recipients demonstrate their capacity 
to conduct local and regional procurements, as well as their capacity 
to engage in ongoing monitoring and reporting of standard indicators, 
including pre-purchase and post-purchase prices, prior to receiving 
funding. 

At this time there are few publications available on the lessons 
learned from local and regional procurement, and even fewer 
quantitative analyses of its impact. During the final year of the local 
and regional procurement pilot program, USDA will hire an experienced 
contractor to conduct an independent evaluation of the program in order 
to gain a clearer picture of how local and regional procurement can be 
used in combination with other interventions to more effectively 
address global food insecurity. 

Sincerely, 

Signed by: 

Michael V. Michener: 
Administrator: 
Foreign Agricultural Service: 

The following are GAO's comments on the U.S. Department of 
Agriculture's letter dated May 15, 2009. 

GAO comments: 

1. To obtain an overall picture of costs, we worked to ensure that we 
had the largest number of procurement transactions, over the longest 
possible time period for which we had data so some aggregation was 
required. We acknowledge the variations in the cost differentials in 
figure 4 that provides the range of differences between USAID and WFP 
local procurement in sub-Saharan Africa. Our analysis demonstrated 
consistent results across 8 years of data. For example, 95 percent of 
local purchases in sub-Saharan Africa cost less than USAID commodities 
to the same country procured at around the same time. We did not 
differentiate the prepositioned commodities in the cost comparison, but 
they were included in our data. However, they represented a small part 
of U.S. food aid during the period of time that we examined. 

2. The issue of quality is one that many WFP procurement officers and 
others we interviewed identified as a challenge for LRP. However, the 
lack of systematically collected data makes it difficult to objectively 
analyze how LRPs adhere to quality standards and product specifications 
and whether LRP differs in quality from U.S. commodities. Our first 
recommendation addresses the issue of quality, which would also include 
improving nutritional standards. 

3. We added information to clarify MARAD's role as the determining 
agency of "fair and reasonable rates" but note that DOT interprets its 
role as the sole agency responsible for determining U.S.-flag 
availability. 

4. While we recognize that there is no widespread evidence of LRP 
causing adverse impacts in markets, we believe that there is a 
preponderance of information to show that in many developing countries 
there is a lack of reliable market information. Widespread evidence of 
any impacts, adverse or otherwise, will not become available in many 
countries until market intelligence systems are made more reliable and 
widely used. Therefore, it is important to focus on the potential risk 
for adverse impacts on markets in areas where LRP is practiced. 

[End of section] 

Appendix IX: Comments from the U.S. Department of Transportation: 

Note: GAO comments supplementing those in the report text appear at the 
end of this appendix. 

U.S. Department of Transportation: 
Office of the Secretary of Transportation: 
Assistant Secretary For Administration:	
1200 New Jersey Avenue, SE: 
Washington, DC 20590: 

Mr. Thomas Melito: 
Director, International Affairs and Trade: 
U.S. Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20458: 

Dear Mr. Melito: 

The Government Accountability Office (GAO) draft report provides useful 
information on the concept, now being pilot tested, of Local and 
Regional Purchases (LRP) for food aid programs. Based on its analysis, 
the GAO draft report concludes that LRP offers a tool to reduce costs 
and shorten delivery time. In light of factors described below, there 
is reason to believe that additional analysis may be warranted before 
reaching that conclusion. [See comment 1] 

The food aid and cargo preference statutes of 1954 were envisioned by 
the Congress to offer a win-win-win approach to addressing hunger in 
the world. First, the laws were intended to provide food to hungry 
people throughout the world in need of assistance, and to help develop 
their economies. Second, the laws were structured to support U.S. 
farmers, millers and associated American workers. Finally, the laws 
provided a means to sustain the American shipping industry, which is 
vital to the nation's defense, by requiring the use of U.S.-flag 
carriers for the preponderance of food aid shipments. Support of the 
U.S. fleet was structured in a way that reimbursed the food programs to 
ensure that efforts in support of the American shipping industry do not 
come at the cost of feeding the hungry. 

While there are certainly opportunities to improve the functioning of 
this carefully balanced approach to feeding the world's hungry, LRP's 
potential to serve this function warrants careful scrutiny based on a 
full analysis of all variables. 

Evaluation of LRP Should Consider Additional Factors: 

The GAO draft report's evaluation of LRP's merits offers little source 
of comparison to alternatives such as prepositioning of goods, and 
dismisses other potential constraints citing lack of data. The previous 
GAO report on food aid,[Footnote 69] explicitly recommended improving 
efficiency in terms of its amount, timeliness, and quality by cost-
benefit analysis of overseas pre-position warehouses and we fully 
supported the recommendation. However, the current GAO draft report 
does not consider the cost and time benefits from the previously 
recommended expansion of pre-position warehouses in comparison to LRP. 
While the GAO draft report compares the benefits of LRP against in-kind 
food aid with transportation from the U.S., there is no analysis or 
comparison to the pre-positioning of food aid overseas. [See comment 1] 

Other important variables are also not fully considered. The GAO draft 
report's analysis externalizes or otherwise does not quantitatively 
consider key factors citing lack of data. This includes factors such as 
availability of adequate production, transportation, food quality, 
sales and legal infrastructure in potential LRP source nations. While 
these factors are identified in the GAO draft report, they are not 
factored into the GAO draft report's overall conclusion that LRP offers 
cost and time savings compared to alternatives. For example, with 
regard to adequate production, the GAO draft report cites Ethiopia as a 
cost advantageous provider of food aid during the fourth quarter of 
2002. During the same time period Ethiopia was also suffering a massive 
humanitarian crisis due to drought and crop failure, and was appealing 
for additional food aid. It is unclear how Ethiopia could have been 
both a cost advantageous source of LRP food aid and simultaneously, a 
major recipient of food aid, particularly during this period. 

Transit Time Comparison Should Offer Additional Details: 

A key element of the GAO draft report's analysis regarding transit time 
could be improved by providing additional detail. The GAO draft report 
found that on average World Food Program (WFP) data show that between 
2004 and 2008, international in-kind food aid donations to the 10 
countries in sub-Saharan Africa, required 147 days of lead time 
compared to about 35 days and 41 days for locally and regionally 
procured food. DOT analyzed specific data for ocean borne transit times 
for the 10 Sub-Saharan countries identified in the GAO draft report. 
Based on analysis of transit times from the U.S. gulf port of Houston, 
where the domestic pre-position food aid warehouse is located to each 
foreign port of entry, we found average ocean transit was just 24.5 
days or a little over 3 weeks. The longest transit was 31.6 days and 
the shortest transit was 9.42 days. These transit times do not include 
loading time which would add an average of 3 days. Based on the 
information provided in the draft report, we are unable to determine 
the source of the significant additional lead time required in the 
draft report's estimate of 147 days compared to the transit times shown 
above. It would be useful for the draft report to clearly identify the 
breakdown of elements included in its estimate and the proportion of 
time required for each. [See comment 2] 

The Maritime Administration performed a time and cost benefit analysis 
for pre-positioning food aid as compared to an actual regional purchase 
that took place in the third quarter of 2008. This analysis 
demonstrates that pre-positioning U.S. sourced food aid yielded shorter 
transit times and lower cost when compared to regional or hemispheric 
procured agricultural commodities. Specifically the analysis indicated 
that utilizing preposition food aid could have resulted in a 52 percent 
decrease in ocean transit time and a 42 percent cost savings compared 
to the actual LRP results. The details of our analysis are included 
with the specific and technical comments that accompany this letter. 

Improving Interagency Coordination: 

DOT is concerned by the divergence of statutory interpretation of the 
Cargo Preference requirements conveyed in Table 3 of the GAO draft 
report. While it is clear that each agency views these requirements 
through the lens of its own statutory mandate, be that feeding the 
world's hungry, securing markets for America's farmers, or perpetuating 
the existence of a U.S. merchant marine, it is necessary for each to 
work together effectively in recognition of these complementary 
mandates. By statutory direction, DOT implemented its mandate through 
regulation, not through an interagency memorandum of understanding 
(MOU), as described in the GAO draft report. The MOU discussed in the 
draft report merely describes the process for reimbursement of any 
ocean freight differential. We have long recommended that the 
regulations would benefit from updating and revision and we stand ready 
to work with all shippers and carriers of government-impelled cargoes 
to accomplish that objective. [See comment 3] 

We appreciate the opportunity to offer comments on the draft report. 
Please contact Martin Gertel, Director of Audit Relations, on 202-366-
5145 with any questions. 

Sincerely, 

Signed by: 

Linda J. Washington: 

The following are GAO's comments on the U.S. Department of 
Transportation's letter received May 22, 2009. 

GAO comments: 

1. Although further analysis of LRP practices would be useful, we 
believe that the results of our analysis demonstrate consistent results 
over 8 years of data, with 95 percent of local purchases in sub-Saharan 
Africa costing less than USAID commodities to the same country around 
the same time. Although we did not differentiate prepositioned 
commodities in our cost comparison, they were included in our data 
analysis. However, it is important to note that prepositioned 
commodities were a very small part of U.S. food aid during this time 
period. Nonetheless, we recognize that prepositioning can affect 
delivery time, which was the case in the Tajikistan example where 
prepositioned food from Jacintoport shortened delivery time. 
Additionally, DOT questioned an illustrative example we used in this 
report on potential cost savings in purchasing wheat in Ethiopia 
because it believed the country had severe shortage in 2002. Although 
there may be limited capacity for local procurement, disasters are 
often localized, and there may be surplus regions within the country or 
in nearby countries. This is precisely a rationale for LRP. In fact, 
WFP purchased 74,000 metric tons of wheat in Ethiopia locally in the 
last quarter of 2002, and the average price was lower than wheat 
procured from the United States. 

2. Ocean shipping is one of the many stages in food aid procurement and 
delivery. While DOT found that the ocean transit time from a 
prepositioning site averaged only 24.5 days, trans-Atlantic shipping, 
which account for majority of U.S. food aid to sub-Saharan Africa takes 
longer. Therefore, the ocean transit time DOT provided in its letter 
does not represent the typical U.S. food aid delivery time. In 
addition, other stages of food procurement and delivery add time to the 
entire process. In order to do a fair comparison of delivery time among 
various procurement types and to ensure comparability in the 
procurement and delivery stages, we identified countries that had 
received significant amount of LRP and international food aid from the 
WFP. Although the breakdown of the different elements in the delivery 
time might be useful (which we could not do from the data provided to 
us by WFP), it does not change our finding that LRP to these countries 
took less time than international food aid. 

3. Although DOT does implement cargo preference statutes through 
regulation, the regulations often contain ambiguities that have 
required resolution through a MOU. Our report describes new ambiguities 
that could arise in applying cargo preference in the context of 
regional procurement. We believe that these ambiguities need to be 
resolved--and can be resolved--by updating the MOU. Further, there is 
no requirement that establishing regulation precede an MOU nor does a 
MOU preclude the issuance of new regulation. The updated MOU, 
establishing consensus among the relevant agencies, could be reflected 
in any future regulation that DOT may draft and get finalized through 
the rule-making process. 

[End of section] 

Appendix X: Comments from the World Food Program: 

Note: GAO comments supplementing those in the report text appear at the 
end of this appendix. 

World Food Programme: 
Deputy Executive Director & Chief Operating Officer: 
Via Cesare Giulio Viola, 68170: 
00148 Rome: 
Italy: 

Phone: +39-06 6513.2401: 
Fax: +39-08 6513.3062: 
Internet: [hyperlink, http://www.wfp.org] 

15 May 2009: 

Mr. Thomas Melito: 
Director, International Affairs and Trade: 
United States Government Accountability Office: 
441 G Street NW: 
Washington D.C. 20548: 

Dear Mr Melito, 

The flexibility to undertake local or regional food procurement (LRP) 
is a potent tool that, when used appropriately, can maximize the impact 
of effective, efficient food assistance. WFP welcomes the GAO's timely 
and thoughtful exploration of this key issue in international food aid. 

It is perplexing though to read that "concerns persist about the 
quality of food procured in developing countries." There is no body of 
evidence showing that LRP introduces quality challenges that are not 
already challenges to internationally procured and donor provided food 
aid (such as those associated with US food aid cited in the report GAO-
07-560). Moreover, WFP quality control measures are designed to ensure 
appropriate quality standards irrespective of the procurement modality. 
[See comment 1] For all our food purchases (local, regional, or 
international), WFP specifications meet and usually exceed both the 
country of origin specifications and Codex Alimentarius 
recommendations. All food purchased by WFP is inspected by globally 
respected inspection companies prior to shipment and distribution. In 
the case of more sensitive processed foods, samples are taken for lab 
testing as well. Food is also examined upon arrival at destination and 
at various points along the supply chain. If at any point food is found 
not to conform to standard, WFP initiates additional rigorous sampling 
exercises following the Codex CAC/GL 50-2004 guidelines with an 
Acceptable Quality Limit at a medium to higher inspection level. The 
product is analyzed in pre-identified reference labs and subsequent 
actions taken are then based on scientific evidence. 

WFP also regularly inspects food processors to ensure that they comply 
with Good Manufacturing Practices and Hazard Analysis Critical Control 
Points. As the report notes, our surveyors have found plants that did 
not comply with the standards. We have suspended engagements with 
plants that failed to comply with major requirements and restored 
activity only after all issues were resolved. Rather than raising 
concerns about LRP, these considerations strengthen confidence that WFP 
control measures already in operation do detect and respond 
appropriately to quality lapses regardless of where food is procured. 

There is a similar tension between hypothetical lapses and operational 
realities in the market impact sections in the report. Despite presumed 
"potential" for LRP, if practiced carelessly, to adversely affect host 
markets, there is no systematic evidence to suggest that current LRP 
practices actually are careless or actually do adversely impact host 
markets let alone generate difficulties for consumers in host markets. 
[See comment 2] 

One tool used by WFP to help decide whether any given local purchase 
transaction will have adverse market impact is import parity price 
comparisons. The cost of import parity can help indicate in many local 
markets whether commercial stocks are reducing in country and demand is 
pushing over supply, due to, for instance, an impending drought. Noting 
WFP's practice of import parity pricing, the report argues that WFP's 
use of import parity "is based on the assumption that markets are well 
integrated and that the country imports food". This is not in fact the 
case. WFP does not use an import price in country as the basis for 
calculating import parity. Instead, WFP compares costs of local 
procurement against FOB prices drawn from multiple tenders and 
integrates these prices with transport costs to the destination. Thus 
our use of import parity pricing as a tool to help guide LRP decisions 
is not premised on an assumption of integrated markets and national 
imports but instead reflects real costs to deliver food to specific 
locations in country even when markets are not integrated. [See comment 
3] 

More generally, although WFP is a large buyer of humanitarian food aid, 
WFP tends to buy small proportions of total production in the markets 
where we procure food - often less than one percent. Regardless of 
whether it is a government, a commercial trader, or a humanitarian 
organization that is procuring food, "potential" no doubt exists for 
transactions to exert price pressures. However, on the modest scale at 
which WFP operates compared to total market activity in the markets 
where we operate, it is hard to substantiate arguments that it is a 
humanitarian food purchase that is responsible for any given price 
increase. And it is difficult indeed to link any short term localized 
price effect of a small scale commodity purchase to any general 
negative impact on consumers in that market. [See comment 4] 

The above qualifications notwithstanding, WFP would again like to thank 
the GAO for broaching this important topic. We are facing a world where 
thousands of people die of hunger related causes each and every day. 
For nearly a billion hungry people around the world, there is no single 
solution. We must deploy all the resources and techniques we can 
muster. Local and regional procurement of food aid is not a panacea. It 
is one of numerous tools that we need in the toolkit to deliver 
effective efficient food assistance to those in greatest need. 

Thank you for taking on this important report. 

Yours sincerely, 

Signed by: 

Amir Mahmoud Abdulla: 

The following are GAO's comments on the World Food Program's letter 
dated May 15, 2009. 

GAO comments: 

1. The issue of quality is one area that many WFP procurement officers 
we spoke with mentioned as a challenge in local and regional 
procurement. In addition, quality is an area of concern expressed by 
organizations such as the U.S. Wheat Associates. However, the lack of 
systematically collected data makes it difficult to objectively analyze 
how LRPs adhere to quality standards and product specifications. Our 
first recommendation addresses this issue. 

2. In our report, we explain several of the efforts that WFP and others 
have taken to significantly improve the availability and reliability of 
market intelligence in developing countries. Yet, as WFP's own 
documents state, in many low-income countries national market 
intelligence systems are weak and unreliable, and timely data are not 
always available, which may limit the effectiveness of WFP's market 
intelligence efforts. 

3. We modified text, adding language in the report to explain that the 
use of import parity prices to determine when to switch from local 
procurement to regional or international procurement may be 
constrained. Specifically, in some countries, commodity prices may be 
so much lower than import parity prices that it would take substantial 
price increases to reach the import parity price threshold. 

4. We recognize that WFP's market position in many countries is very 
small (less than 1 percent in Burkina Faso, for example) and we state 
that in the report, noting that this limits the effects that LRP can 
have on prices. Also, recognizing that it is difficult to demonstrate 
an absolutely causal relationship between a discrete WFP local purchase 
and a discrete price increase, we note that LRP, when combined with 
other market interventions, unreliable market intelligence, poorly 
functioning and unintegrated markets, and other factors, has the 
potential to cause price hikes and reduce consumers' access to food. 
Therefore, we recommend improving the reliability and utility of market 
intelligence in order to guard against the risks associated with a lack 
of reliable market information. 

[End of section] 

Appendix XI: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Thomas Melito (202) 512-9601 or melitot@gao.gov: 

Staff Acknowledgments: 

In addition to the person named above, Phillip Thomas (Assistant 
Director), Sada Aksartova, Kathryn Bernet, Carol Bray, Ming Chen, 
Debbie Chung, Lynn Cothern, Martin De Alteriis, Mark Dowling, Etana 
Finkler, Katrina Greaves, Kendall Helm, Joy Labez, Andrea Miller, Julia 
A. Roberts, Jerry Sandau, and David Schneider made key contributions to 
this report. 

[End of section] 

Related GAO Products: 

International Food Security: Insufficient Efforts by Host Governments 
and Donors Threaten Progress to Halve Hunger in Sub-Saharan Africa by 
2015. [hyperlink, http://www.gao.gov/products/GAO-08-680]. Washington, 
D.C.: May 29, 2008. 

Foreign Assistance: Various Challenges Limit the Efficiency and 
Effectiveness of U.S. Food Aid. [hyperlink, 
http://www.gao.gov/products/GAO-07-905T]. Washington, D.C.: May 24, 
2007. 

Foreign Assistance: Various Challenges Impede the Efficiency and 
Effectiveness of U.S. Food Aid. [hyperlink, 
http://www.gao.gov/products/GAO-07-560]. Washington, D.C.: Apr. 13, 
2007. 

Foreign Assistance: U.S. Agencies Face Challenges to Improving the 
Efficiency and Effectiveness of Food Aid. [hyperlink, 
http://www.gao.gov/products/GAO-07-616T]. Washington, D.C.: Mar. 21, 
2007. 

Darfur Crisis: Progress in Aid and Peace Monitoring Threatened by 
Ongoing Violence and Operational Challenges. [hyperlink, 
http://www.gao.gov/products/GAO-07-9]. Washington, D.C.: Nov. 9, 2006. 

Foreign Assistance: Lack of Strategic Focus and Obstacles to 
Agricultural Recovery Threaten Afghanistan's Stability. [hyperlink, 
http://www.gao.gov/products/GAO-03-607]. Washington, D.C.: June 30, 
2003. 

Foreign Assistance: Sustained Efforts Needed to Help Southern Africa 
Recover from Food Crisis. [hyperlink, 
http://www.gao.gov/products/GAO-03-644]. Washington, D.C.: June 25, 
2003. 

Food Aid: Experience of U.S. Programs Suggest Opportunities for 
Improvement. [hyperlink, http://www.gao.gov/products/GAO-02-801T]. 
Washington, D.C.: June 4, 2002. 

Foreign Assistance: Global Food for Education Initiative Faces 
Challenges for Successful Implementation. [hyperlink, 
http://www.gao.gov/products/GAO-02-328]. Washington, D.C.: Feb. 28, 
2002. 

Foreign Assistance: U.S. Food Aid Program to Russia Had Weak Internal 
Controls. [hyperlink, 
http://www.gao.gov/products/GAO/NSIAD/AIMD-00-329]. Washington, D.C.: 
Sept. 29, 2000. 

Foreign Assistance: U.S. Bilateral Food Assistance to North Korea Had 
Mixed Results. [hyperlink, 
http://www.gao.gov/products/GAO/NSIAD-00-175]. Washington, D.C.: June 
15, 2000. 

Foreign Assistance: Donation of U.S. Planting Seed to Russia in 1999 
Had Weaknesses. [hyperlink, 
http://www.gao.gov/products/GAO/NSIAD-00-91]. Washington, D.C.: Mar. 9, 
2000. 

Foreign Assistance: North Korea Restricts Food Aid Monitoring. 
[hyperlink, http://www.gao.gov/products/GAO/NSIAD-00-35]. Washington, 
D.C.: Oct. 8, 1999. 

Food Security: Factors That Could Affect Progress toward Meeting World 
Food Summit Goals. [hyperlink, 
http://www.gao.gov/products/GAO/NSIAD-99-15]. Washington, D.C.: Mar. 
22, 1999. 

Food Security: Preparations for the 1996 World Food Summit. [hyperlink, 
http://www.gao.gov/products/GAO/NSIAD-97-44]. Washington, D.C.: Nov. 7, 
1996. 

[End of section] 

Footnotes: 

[1] Food insecurity is the lack of access of all people at all times to 
sufficient, nutritionally adequate, and safe food, without undue risk 
of losing such access. The Food and Agriculture Organization (FAO) of 
the United Nations defines the elements of food security to include (1) 
food availability, (2) access, and (3) utilization. 

[2] GAO, International Food Security: Insufficient Efforts by Host 
Governments and Donors Threaten Progress to Halve Hunger in Sub-Saharan 
Africa by 2015, [hyperlink, http://www.gao.gov/products/GAO-08-680] 
(Washington, D.C.: May 29, 2008). In this report, we cited FAO 
estimates that indicate that sub-Saharan Africa is the region with the 
highest prevalence of food insecurity; one out of every three people 
there are considered undernourished. 

[3] The 12 countries reported by the International Food Policy Research 
Institute (IFPRI) are Burkina Faso, Cameroon, Côte d'Ivoire, Guinea, 
Ethiopia, Kenya, Mauritania, Mozambique, Madagascar, Niger, Senegal, 
and South Africa. 

[4] For the purposes of this report, we use the terms "procurement" and 
"purchase" interchangeably. 

[5] WFP is the food aid arm of UN. It accepts donations generally from 
developed countries and distributes them to developing countries that 
are in need of food assistance. In 2007, from its headquarters in Rome, 
WFP operated about 200 active projects in 80 countries and managed 
about $2.7 billion in voluntary donor contributions. 

[6] These include humanitarian organizations such as Catholic Relief 
Services (CRS); Cooperative for Assistance and Relief Everywhere, Inc. 
(CARE); Mercy Corps; and Save the Children. 

[7] See also Organization for Economic Cooperation and Development 
(OECD), The Development Effectiveness of Food Aid: Does Tying Matter? 
(Paris, France: 2006). In this report, OECD estimated that the cost of 
in-kind food aid was on average approximately 50 percent more than 
local food purchases and 33 percent more costly than procurement of 
food locally or from third countries. 

[8] GAO, Foreign Assistance: Various Challenges Impede the Efficiency 
and Effectiveness of U.S. Food Aid, [hyperlink, 
http://www.gao.gov/products/GAO-07-560] (Washington, D.C.: Apr. 13, 
2007). Since this report was issued, the three agencies to which our 
recommendations were addressed--the U.S. Agency for International 
Development (USAID), U.S. Department of Agriculture (USDA), and 
Department of Transportation (DOT)--have taken actions to begin 
implementing some of our recommendations to enhance the efficiency and 
effectiveness of U.S. food aid by improving logistical planning, 
transportation contracting, and monitoring, among other actions. 
However, the cost impact of these actions has yet to be systematically 
assessed and would not be maximized until all of our recommendations 
are fully implemented. 

[9] Pub. L. 110-246, Food, Conservation, and Energy Act of 2008, sec. 
3206. 

[10] Pub. L. 110-252, Supplemental Appropriations Act, 2008. 
Additionally, for fiscal year 2009, the Administration allocated up to 
$75 million in International Disaster Account funding for USAID LRP 
activities. 

[11] Pub. L. 111-8, Omnibus Appropriations Act, 2009, Div. H. 

[12] We define "efficiency" as the extent to which a program is 
acquiring, protecting, and using its resources in the most productive 
manner in terms of cost, delivery time, and appropriateness of food 
aid. 

[13] In this report, we use the term "delivery time" to refer to the 
number of days that elapses from the purchase order date to the date 
WFP takes possession of the food in the recipient country (also 
referred to as "lead time"). Additional time is required for the food 
to reach intended beneficiaries. 

[14] The selection of these countries was based on representation of 
three regions in Africa having differing experiences with LRP, the 
presence of a WFP procurement officer in-country, and other factors. 

[15] MCC is a government corporation that Congress established in 
January 2004 to administer the Millennium Challenge Account (MCA). 
MCC's mission is to provide development assistance that reduces extreme 
poverty through economic growth and strengthens good governance, 
economic freedom, and investments in people. Some of this assistance 
helps support food security and LRP activities in developing countries. 

[16] These included representatives from the missions of Australia, 
Belgium, Canada, Italy, and the United Kingdom. 

[17] The WFP procurement officers we interviewed were based in Burkina 
Faso, Ethiopia, Kenya, South Africa, Sudan, Tanzania, and Uganda in 
Africa and Bangladesh, India, Pakistan, and Thailand in Asia. 

[18] Additional organizations include the United Nations Office of the 
High Commissioner for Refugees (UNHCR) and the International Committee 
of the Red Cross (ICRC). 

[19] According to State officials, international organizations have 
provided various alternative forms of food aid, including cash 
vouchers, for many years. While UNHCR utilizes NGOs as implementing 
partners, ICRC either distributes food assistance itself or through 
local national Red Cross/Red Crescent societies. 

[20] In this situation, the Canadian Foodgrains Bank (CFB) was 
concerned about putting additional price pressure on Kenyan-produced 
maize and the quality of local maize available on the market. 

[21] According to the World Bank's 2008 World Development Report, the 
vast majority of farmers in developing countries are smallholders, with 
an estimated 85 percent of them farming less than 2 hectares. 

[22] Members of the G8 are Canada, the European Commission, France, 
Germany, Italy, Japan, Russia, the United Kingdom, and the United 
States. 

[23] The eight commodities were beans, corn soy blend (CSB), maize, 
maize meal, rice, sorghum/millet, vegetable oil, and wheat, which 
represent the majority of food aid that WFP and USAID provided. 

[24] The cost comparison demonstrates the difference in cost of 
delivering similar food products in a similar time frame to the same 
countries. It does not suggest that if the United States had purchased 
the same amount of food through LRP, it would have cost the same 
because additional demand in the market could have driven up the prices 
and there might not have been enough food available for purchase. 
However, LRP could have offered the United States the flexibility to 
explore other potential cost-saving opportunities in the region. 

[25] The cost reflects the "delivery duty unpaid" (DDU) price, a term 
of sale that refers to the sellers fulfilling their obligation to 
deliver when they deliver the goods to the designated place in the 
country of importation. The seller has to bear the costs and risks 
involved in delivering the goods (excluding duties, taxes, and other 
import charges). The buyer assumes the costs and risks of carrying out 
customs formalities and pays any additional costs to bear any risks 
caused by failure to clear the goods in time. 

[26] To make the costs comparable to WFP's DDU price, we included 
USAID's commodity, ocean shipping, and inland freight costs. 

[27] One of USAID's shipments to Ethiopia in the fourth quarter of 2002 
cost $1.035 million for purchasing and transporting 2,200 metric tons 
of wheat. If it were able to pay the same price as local procurement, 
USAID could have purchased 3,139 more tons of wheat, enough to feed 
about 63,000 people for 4 months. We assume a ratio of 12.51 kilograms 
per person per month. Although this is a static analysis, it is useful 
for illustrative purposes. We recognize that the amount of supply may 
not be available in the market, or such scale purchase could drive up 
prices, which could reduce the cost savings. Additionally, the price of 
wheat in Ethiopia fluctuated during the time period we considered, 
which would have affected cost-savings. 

[28] To identify the commodities and locations for which LRPs are more 
cost-effective than in-kind food aid, further analysis would be 
required. 

[29] For any locally available commodity, the import parity price is 
the cost of purchasing the same commodity from a regional or 
international market. 

[30] A tender process is a method WFP uses in procurement. In issuing a 
tender, WFP invites pre-qualified suppliers to provide the price they 
can offer WFP for a particular purchase through a competitive bidding 
process. The tender invitation calls for specific quality standards, 
delivery terms, packaging, and markings. WFP then compares the bids and 
awards the contract to the suppliers selected. 

[31] In addition to the U.S. prepositioning site in Jacintoport 
(Texas), USAID operates an overseas prepositioning site in the Port of 
Djibouti (Djibouti). The 2008 Farm Bill authorized USAID to expand its 
use of prepositioning, increasing funding for it from $2 million to $10 
million. Pub. L. 110-246, sec. 3017. 

[32] The $20.1 million regional purchase was funded by a USAID grant to 
WFP in August 2008. 

[33] Sanitary and phytosanitary requirements refer to measures taken to 
protect against risks linked to food safety, animal health and plant 
protection, establishment and spread of pests, or to prevent or limit 
damage. 

[34] According to WFP, commodities distributed to WFP's recipients are 
of good quality, are safe for human consumption, and meet required 
specifications. WFP uses international or national specifications of 
producing countries and in some cases importing countries. A product 
specification is a written description of a commodity, and it includes 
the specific requirements that a vendor must follow to meet WFP's 
contract for delivering commodities. For a list of quality standards 
and product specifications, see [hyperlink, 
http://foodquality.wfp.org/FoodSpecifications/tabid/56/Default.aspx]. 
FAO and the World Health Organization (WHO) also administer the Codex 
Alimentarius, a set of internationally accepted food standards, 
guidelines, and codes of practice established to protect the health of 
consumers. 

[35] Moisture content is a critical factor in grain quality. Moisture 
in grain interacts with the temperature and relative humidity in grain 
storage centers and during shipping. Too much moisture can spur mold 
growth, increase insect activity, and cause other quality losses. 
Requiring that moisture content remain below a certain level is one way 
to ensure that food does not spoil during transit and in storage. Host 
governments may have established standards for moisture content. 

[36] [hyperlink, http://www.gao.gov/products/GAO-07-560]. 

[37] The breakage level may be an issue for the host government of the 
recipient country. For example, the Department of State noted that a 
procurement of 6,025 metric tons of rice funded by PRM was rejected by 
the host government due to the high level of breakage. 

[38] Transoceanic shipments of in-kind food aid, if not carefully 
targeted, can have the opposite but also detrimental market impact of 
depressing market prices by rapidly increasing the supply of food in 
markets. 

[39] It is also important to consider cross price elasticity of demand 
and supply on consumers. For example, if the price of maize increased 
and people switched to cassava (a root plant that provide an essential 
part of the diet of more than half a billion people), the prices of 
cassava may increase in response to the additional demand. In addition, 
if farmer profits from maize increased because of LRP, producers could 
respond by switching land from the production of cassava to maize. This 
would result in a reduction in the supply of cassava, further 
increasing its price. 

[40] Other food aid programs such as the targeted distribution of 
transoceanic shipments of in-kind food aid and monetization of food aid 
in local markets to generate cash for development programs also rely on 
market intelligence. For example, programs that use transoceanic 
shipments of in-kind food aid are required under law to perform Bellmon 
analyses that are required to determine the adequacy of storage 
facilities in recipient countries and whether the importation and 
monetization of food aid will negatively affect domestic production. 

[41] USAID has efforts under way to improve its system for producing 
Bellmon analyses, and efforts by FEWS NET, private companies, and host 
government agencies to gather market information and provide analysis 
are also important to improving the quality of market intelligence. 

[42] Not all of it was ultimately delivered. 

[43] Food Procurement in Developing Countries, World Food Program, 
Executive Board First Regular Session (Rome: February 2006). 

[44] Walker, David J. and Tiago Wandschneider, Local Food Aid 
Procurement in Ethiopia, Natural Resources Institute for the UK 
Department for International Development (Kent: September 2005). 

[45] CAADP is an initiative to improve agricultural and rural 
development and food security in Africa and has been endorsed by all 
African heads of state. Member states committed to spending 10 percent 
of each country's national budget on agricultural development. The 
program is comprised of four pillars, namely, land and water use, 
market access, food supply and hunger, and agricultural research and 
technical assistance. 

[46] IEHA was launched in 2002 as a multi-year effort designed to help 
increase agricultural income and fulfill the UN's Millennium 
Development Goal of cutting the number of hungry people in Africa in 
half by 2015. 

[47] WFP's P4P pilot countries include 15 in sub-Saharan Africa-- 
Burkina Faso, Democratic Republic of Congo, Ethiopia, Ghana, Kenya, 
Liberia, Malawi, Mali, Mozambique, Rwanda, Sierra Leone, Sudan, 
Tanzania, Uganda, and Zambia. USAID recently approved WFP's $20 million 
proposal for P4P. 

[48] See 7 U.S.C. 1732(2) for a definition of "agricultural commodity." 

[49] The MOU that outlines the manner in which USAID, USDA, and DOT 
cooperate in certain areas of the administration of cargo preference 
requirements was last updated in 1987. 

[50] The 2008 Farm Bill changed the title of the underlying legislation 
from the Agricultural Trade Development and Assistance Act of 1954, 
also known as P.L. 480, to the Food for Peace Act. 

[51] Pub. L. 110-234, sec. 3206, called upon the Secretary of 
Agriculture to initiate a study of prior LRP for food aid programs 
conducted by other donor countries, NGOs, and the WFP. On January 15, 
2009, USDA's Foreign Agriculture Service, Office of Capacity Building 
and Development published The Use of Local and Regional Procurement in 
Meeting the Food Needs of Those Affected by Disasters and Food Crises. 

[52] Pub. L. 110-252. The $125 million in supplemental funding included 
up to $95 million for emergency needs and up to $30 million to make LRP 
work for farmers. 

[53] Pub. L. 111-8, Div. H. 

[54] According to USAID officials, the agency intends to issue updated 
guidance stipulating that LRP funding be used to purchase commodities 
whose source and origin are from developing countries. 

[55] The Food Security Act of 1985 increased the percent tonnage of all 
U.S.-funded cargo that requires transport on U.S.-flag vessels from 50 
percent, as designated in the Cargo Preference Act of 1954, to 75 
percent for shipments of certain agricultural foreign assistance cargo, 
including commodities purchased under the authority of the Food For 
Peace Act (but not, generally, for commodities purchased under 
authority of the Foreign Assistance Act), and mandated that DOT 
reimburse the shipper agencies for the cost associated with the 
increased use of U.S.-flag vessels. 

[56] Section 491 of the Foreign Assistance Act authorizes international 
disaster assistance to be carried out notwithstanding any other 
provision of law. 

[57] As required by 46 CFR 381.5 "Fix American-Flag First." 

[58] USAID and USDA, Report Regarding Efforts to Improve Procurement 
Planning, submitted to Congress on January 21, 2009. 

[59] This authority can be derived from a program's authorizing statute 
(e.g., sec. 491 of the Foreign Assistance Act authorizing international 
disaster assistance programs) or can be tied to a specific 
appropriation (e.g., Pub. L. 110-252 provides notwithstanding authority 
for supplemental development assistance funds). 

[60] Because the agencies have not systematically tracked LRP 
transactions, DOT has not, thus far, sought to impose this requirement. 

[61] According to DOT officials, invoking this authority caused transit 
time to increase. 

[62] ADS 315.3.2.b. See also ADS 308. 

[63] DOT officials stated that cargo preference statutes are clear that 
government-impelled cargoes shall be transported on U.S.-flag vessels, 
noting that policy manuals and regulations are subservient to statutes. 

[64] DOT calculates the U.S. cost differential based on the actual 
foreign-flag vessel bids that were received. If a foreign-flag vessel 
does not provide a bid, DOT provides no reimbursement. Since no 
reimbursement is made, DOT does not estimate costs for foreign-flag 
shipments. 

[65] Pub. L. 110-417, section 3511. 

[66] [hyperlink, http://www.gao.gov/products/GAO-07-560]. 

[67] Line 17 reports are USAID's mechanism for commodity reporting at 
the individual country level. The USAID Office of Food for Peace uses 
these reports to account for commodities in metric tonnage and dollars. 

[68] GAO, International Food Assistance: Insufficient Efforts by Host 
Governments and Donors Threaten Progress to Halve Hunger in Sub-Saharan 
Africa by 2015 (Washington, D.C.: May 29, 2008). 

[69] "Foreign Assistance: Various Challenges Impede the Efficiency and 
Effectiveness of U.S. Food Aid" report, [hyperlink, 
http://www.gao.gov/products/GAO-07-560], April 2007. 

[End of section] 

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