Local: Donor-financed purchases of food aid in countries affected by  disasters and food crises. 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. 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. According to WFP officials in  South Africa, these requirements can take an additional 2 to 3 weeks. Timing and restrictions on donor funding. 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. 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. 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). While the United States has primarily provided in-kind food aid for over 50  years, it has been exploring expanded use of LRP. To fully realize this  potential, however, challenges to its effective implementation must be  addressed. 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. The recommendation does not preclude such coordination among  the agencies. DOT stated that additional analysis may be warranted before concluding  that LRP offers a tool to reduce costs and shorten delivery time. 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. 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. 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. Governance. Contract default is a major risk of LRP. 1.
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, 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. 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.