Summary

This testimony discusses how local and regional procurement (LRP) can provide opportunities to enhance U.S. food aid, though challenges can constrain its implementation. This hearing is of particular importance given today's environment of increasing emergencies and growing global food insecurity, in which 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. LRP has increasingly become a key element in the multilateral food aid response over the past decade. 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. 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. 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.

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 for the same recipient countries in the same quarter of a given year and found that the average cost of World Food Program's (WFP) 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. 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 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. 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. 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. 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. Of the 11 WFP procurement officers we interviewed, 9 identified finding reliable suppliers and preventing supplier default as a challenge to implementing LRP. In addition, 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. Furthermore, 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. Local and regional procurement can provide food that is more acceptable to the dietary needs and preferences of beneficiaries in recipient countries. 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. However, donors have yet to systematically collect evidence that demonstrates whether food procured in different locations varies significantly in meeting product specifications and quality.