At Least Do No Harm: The Negative Effects and Unforeseen Consequences of US Contracting Practices on the Afghan Local Community and its Influence on the Perception of US Forces and Americans
Greg Kleponis
Introduction
In the medical profession they abide by the edict, “Primum non nocere.” This Latin phrase simply means "first, do no harm." Another way to state it is that, "given an existing problem, it may be better not to do something, or even to do nothing, than to risk causing more harm than good." 1 It reminds the health care provider that they must consider the possible harm that any intervention might do. It is invoked when debating the use of an intervention that carries an obvious risk of harm but a less certain chance of benefit. This axiom might be applied to the entire idea of intervention in foreign countries already riddled with conflict. This paper takes a more precise look at one element of the overall intervention/stability effort in Afghanistan that many believe is having perversely, the opposite effect of that which it is intended- contracting. Contracting, projects and the monies associated with these projects, are intended ostensibly to provide infrastructure, educational, medical and other social “goods” that are meant to benefit the people of Afghanistan. The delivery of social goods, the idea goes, is that the provision of these otherwise absent goods is the development of a more stable and more harmonious society. The US money that flows into the country and hence into these projects (it is presumed) will help to lift the economy and better the lives of the local inhabitants where these projects are located. Sadly, the reality is that much of the time they do not. They are actually, in some cases, making the situation worse. They become either become “white elephants” that the local economy can never sustain and fall into ruin before long or the monies are siphoned off by local corrupt government officials or other non-governmental actors who are operating directly against the US and state government. In either case, the benefits to the local population are dubious. Those elements aside, this paper focuses on a particular and pernicious aspect of contracting in Afghanistan which by both lack of awareness, coupled with greed, come together to put local Afghan contractors in a permanent second position and “underclass” in the contracting realm and adversely affect entire communities which contributes to the ill-will many bear to the US in general.
How to Measure Success
About US efforts in Afghanistan, there are two elements that seem to capture collective attention, if not fixation, of both military and government leaders- troops and money. It seems that the conversation surrounds the how many and the how much instead of the how effective. Input metrics are the coin of the realm. The focus on these metrics is easy to explain. Input metrics can be easily quantified and reported. They fit neatly into power point presentations and thereby easily make their way into charts and graphs. We can “control” input metrics. We can therefore be personally or organizationally rated on input metrics as input metrics are tangible. Output metrics are less so. Output metrics or “effects” are much harder to quantify or even describe. They require thoughtful analysis and research. They require a cultural, sociological and economic understanding of “how things work” in the community. This research would have to be conducted by people with the academic background and experience who would know how to find and interpret that data. Those people don’t really exist on the current staffs. Finally, measuring output metrics would require sending people “outside-the-wire” to gather that data which would include risk to personnel and risk is something military leaders seem to avoid at all costs.
To many, capital investment or spending money instead, is a viable substitute for actual risk taking. Rather than risk soldiers and dealing with the resultant public opinion, applying money to the problem is seen as a rationalized alternative to leadership. In other words, it’s a good way to put “effects” up onto a scoreboard as input metrics and make an impression. One can report 5 million spent on a school, 20 million on a hospital, and another 50 million on road infrastructure. Colonels, Generals and the Corp of Engineers can point to these as proof of progress and the “good” that they are doing. The question is though without follow-up analysis, how do we know what effect we are having and are we really doing “good?” As TE Lawrence advises in the 15th Article of his Twenty-Seven Articles, “under the very odd conditions of Arabia, your practical work will not be as good as, perhaps, you think it is.”2 What is more elusive, more difficult to measure, and even harder to interpret or analyse are the output metrics. Sadly, this is an area which has not been focused on enough. Important questions need to be asked. These are important because what we do or fail to do has an impact on local communities. What are the direct and indirect results of our actions? What are the unforeseen consequences, or in military speak “2nd and 3rd order effects” of what it is we are doing? Are we, with the best of intentions, creating more harm, disruption and inequity in an already destabilized society? Are we creating unpredicted and unforeseen “effects” by our funding the seemingly good? These are all important questions. Contracting might not be the sole contributor to the instability in the country but it certainly isn’t part of the solution as it is now being applied. Current Contracting processes, in multiple and perverse ways are having the opposite effect of that which is intended and on a larger scale that we may imagine. In other words, the input metrics look sensational but the 2nd, 3rd and even 4th order effects can tell a different story. There are many reasons for this, but for the aim of this paper, I will confine it to four elements of the contracting phenomenon;
- The structure of the Afghan local contracting market: Under-represented and undercapitalized.
- Poor commercial and contractual practices between US Contracting firms and Afghan subs.
- Poor understanding of the overall socio-economic dynamic by the contracting officers in the contracting entities themselves
- Poor understanding of the role and functions that US funded projects play in local communities.
In order to gain a fuller understanding of the problem, let’s use a simple example that illustrates these 4 elements and how the overall process plays out. Let’s use a common example- an example that could have been found anywhere in Afghanistan from 2010 to 2016 when I concluded this primary research and the scope of this study.
The US military and I say the military because they essentially drive most of the effort in civil areas as well as the strictly military ones, decide to let a contract. Let’s assume there is a project commissioned to build a hospital in Parwan province (the province next to Kabul). Estimates and studies are conducted, monies are allocated, and RFPs are sent out. The usual suspects who do construction in Afghanistan (American companies who won’t be mentioned here) answer the RFP. Naturally past experience, past performance are major factors in the award making the barriers to entry for Afghans virtually insurmountable. Company “A” (an American large construction company) gets the contract as the Prime. Company “A” hires companies “B”, “C”, and “D” as subcontractors. Let’s assume at least 3 of these are local Afghan Construction companies providing manpower or labor, masonry, concrete pouring, and other non-electrical or plumbing tasks. Company “A” invoices USG per CLIN. The USG operates on a 30-day net payment schedule. This means that the prime contractor “A” theoretically doesn’t get their invoice paid by the government for 30 days. I say theoretically, because it is rare that the payment occurs in 30 days. Paperwork issues, clerical errors, invoicing questions can and often do slow this process down so that company “A” usually isn’t paid for as much as 50-70 days or longer. They then will turn around and pay their sub- contractors. A common practice for the well-capitalized, well-heeled US contractors are “when paid” clauses. This means that Company “A” won’t pay its subs until it itself is paid and further that Company “A” is also on a 30-day net. This means that we need to add the initial number of days that the prime contractors have to wait for their payment (through no fault of the Afghan company), to an additional 30 days net that the prime then has. This means that the Afghan contractors must also wait at least 30 days or more. This moves the payment cycle for Afghan subs out to 60-90 days! These are payment cycles that many US companies in the states would have a hard time weathering. Again, this cycle can be prolonged by Company “A” if there are clerical errors, disputes regarding work done or just plain lethargy on the part of the in-house prime contracts manager. This naturally has a cascading effect on the Afghan community as the subs who have been delayed payment, owe local companies that supply them materials and labor, so it can be literally months before the actual cash reaches the ordinary Afghan household.
One must ask how this process is fair to the Afghans? What recourse does the Afghan sub have for delayed or even lack of payment? The answer is that they really have little or none. When as I was a COR (Contractor Officers Representative), I was approached by a local national company’s representatives who threatened to walk off the job because they had not been paid for months. After verifying their claim and finding no reason for the withholding of their payment (the prime had been paid), I spoke to the contracting officers in hope that they could apply pressure to the Prime to pay the subs for both the reasons of project continuity but also in the end, of fairness and keeping the peace. The contracting officer responded by using an oft-cited legal contracting maxim called “Privity of Contract” to avoid getting involved. Simply defined this is the relation between two parties in a contract which entitles them to sue each other but prevents a third party from doing so or put another way, "The doctrine of privity means that a contract cannot, as a general rule, confer rights or impose obligations arising under it on any person except the parties to it." 3 In even simpler terms, it means they won’t get involved between Primes and Subs- “nothing to do with us.” I would posit that it has everything to do with them. That aside for a moment, there are multiple exceptions in case law history to third parties claims and considerations being remedied. In any case this really in many ways doesn’t legally apply to this situation and frankly has no place in Afghanistan. Should it even really be a legal maxim that even needs to be considered? Most contracting officers that I speak to are able to quote it but they don’t really know what it means or are familiar with its attendant case law. In any event the issue can easily be side-stepped by covenants in the original contract with the contracting parties. The reason why this is important is that third parties such in the case of the Afghan subcontractors must have the ability to quickly and personally address payment failures or abuse by the prime contractor. This transparency and the notion of enforcement are essential for gaining Afghan trust. At present, the contracting entity is rarely aware of these issues let alone involved in their resolution.
If the reasons for the contracts are, as well as our very presence in the country for the benefit of the Afghan people and stability of the country, then why should we let American contractors or any other contractors (such as Turks who are also notorious for non-payment), run rough shod over Afghans who are after all, the very people we are here to help? While the willing and conscious perpetrators may not be the US Government per se, the projects they fund and the contractors they hire certainly are and the inability or unwillingness of the contracting office to curb abuses make them appear complicit or worse yet, weak. The average Afghan does not make such subtle distinctions between the US government and private contractors. To them it’s just the Americans. The abuses described and the failure by US officials to remedy them are what contribute to the lack of trust and in some cases hatred of us and for some odd reason, we can’t understand why. “What’s their problem? We’re giving them a new hospital, right?”
Let me try to unpack the reality of the local economic infrastructure in the example used previously.
Understanding the Afghan Business Market
The Afghan small and medium sized business has more or less one thing in common- they are both undercapitalized. Apart from a few owned by wealthy and influential family actors such as the Popalzai, Wardak and Safis, most are living from invoice payment to invoice payment. Access to capital such as loans and lines of credit are extremely limited and difficult to obtain and are subject to credit terms that most Afghans have difficulty meeting or for religious reasons cannot abide. Because of this limit to funding, local companies are often unable to bid as stand-alone entities or build long-term enduring capacities that provide permanence and definition in their businesses. This “pay check-to-pay check” posture keeps firms constantly on the back foot unable to plan or fund future operations.
Access to cash is limited and usually is only obtained in a few ways. The first naturally is the receipt of invoice payments from Prime Contractors or in rare circumstances directly from the US government. This as has been mentioned is problematic for local companies due to the excessive times taken from invoicing to payment. These problems are exacerbated by “when paid” clauses in the contracts with Subs as Primes will refuse to pay Subs until the government pays the Prime- hence the payments can get kicked down the road indefinitely. Another issue facing local subs is that local Prime Project Managers will often “negotiate” invoices with subs forcing them into a position of taking less money than invoiced. They do this primarily as many of the local Prime Project Management staff are “bonused-up” on how much under budget they can come in on for a “FFP” (Firm Fixed Price) project- often at the expense of local companies. In this instance the prime contractor’s position is directly averse to that of the sub and certainly counter-productive to the objectives of the US government as it relates to the betterment of Afghan society. I say again, the contracting office is nearly always unaware of this dynamic involving primes and subs.
The Cash-Credit-Culture-Conundrum
This leads us to an analysis of the mismatch in business cultures that help amplify the situation. Like so many other aspects of our dealings in Afghanistan our failure to understand their culture and likewise their inability to understand or adapt to ours leads to loads of unintended consequences. In the contracting realm there are two culturally incongruent systems at work. In this case it’s a matter of “West” meets “East” in business. The West is overwhelmingly a credit culture. It relies on invoicing or the promise of payment, lines of credit for operating capital and loans to finance projects. This all surrounds and is animated by two concepts; “promise” and “future.” By Western standards promise and future are absolutes or in good business practice should be. In Eastern cultures, these concepts are less absolute. In Muslim cultures in particular, the concept of the future and the promise of someone to someone else is usually and quickly followed by the phrase “Inshallah” or “if god wills it.” The Eastern Culture recognizes that the future cannot be absolute and therefore seeks to indemnify one or both parties if a promise or agreement is not kept. Perhaps it is for this reason that credit or “Future” promise of payment is less often used than cash payments that exist in both the here and now. These two incongruent systems create friction between different cultural constructs operating side by side. I call this the “Cash-Credit Culture Conundrum,” As the old saying goes about “The Golden Rule,” …He, who has the gold, makes the rules,” or in this case, the US has the money so the Western way of doing business prevails.
Who’s Agenda, Who’s Priorities?
The American commercial side in Afghanistan has one objective- to make money. I would argue that they, the commercial operators under contract directly to the US government, have less than zero interest in the long-term goals of the US and Coalition, apart from that they stay and continue to let more contracts. It is truly a mercantilist mentality at best and mercenary at worst. Their allegiance to the goals and objectives of the US government extends as far as making the Contracting Officers Representative (COR) happy so that they will sign off on their invoice without question. I believe that in my experience over the years, it stops about there. They are neither interested in the long term social or economic development of the Afghan people, the promotion of education or democracy nor whether the government’s agendas are being advanced or not. While they may lament the death of US soldiers, as long as those losses do not affect them or their projects it hardly goes noticed. The US government, on the other hand, has a multitude of objectives one of which is the improving of conditions in Afghan society by the very projects it finances. The problem is that these mis-matched and even perpendicular priorities are having the opposite of the intended effects the US and Coalition are trying to achieve. In fact, it could be argued that the contracting process and those commercial actors in some cases is undoing the good work the military is trying to or even has already accomplished. The policies and actions of many contractors are literally pushing the local populations “off-sides” and un-doing the good work already done by the military and various NGOs. One might ask, if this is happening why aren’t commanders demanding accountability from the contracting entities? There might be for a number of reasons. The first is that the contracting entities and their personnel literally operate almost in a near vacuum, separate and apart from the projects, the people and the outside in general. They live in walled compounds cut off from the local population and in the rare occasion that they do venture out it is under heavily armed guard, often by air and almost always for a very short time. The second is that the contracting entity is often disconnected from the command element. It could be supposed that this is done intentionally for all of the most predictable reasons of undue influence. The third reason is that because contracting, like any bureaucracy, becomes what we call a “self-licking ice cream cone.” Translation- it becomes a process unto itself, for itself and focused on itself. The focus on process quickly subsumes the product or in more importantly the reasons for the project in the first place. The focus becomes the paperwork, the invoicing, the payments, reports from the COR as per the progress of the project’s completion and how that meets command timelines. Lastly, the personnel who conceptualized the project in the first place no longer are involved either because it’s been turned over to the contracting officer or more often the case, that person and the others who championed the project have rotated out and the original reason for the project has actually been lost, the process itself becomes the propelling force. The only people left are the people executing the task they were handed with no context and therein lays the problem.
To highlight just how damaging this phenomenon is, let’s ask this question. What good is constructing a school or hospital in a local community if 5,000 people who live in that local community were stiffed by US contractors in its building because they were engaged either directly or indirectly? Congratulations- your building project now serves as a constant reminder to literally thousands of locals of that fact which is why many of them are looted in the end by the locals for scrap piping and electrical wire. Many families in the community suffered financially as a result. They suffered anger and anguish by the endless lies and delays by the prime or worse yet bankruptcy. It was already pointed out that a major source of cash for companies is the family members and the communities themselves. What might be the consequences if those companies go bankrupt and lose that cash? More importantly what might be the consequences for the US military operating in the area after this? The locals probably will not be favourably disposed toward them. This, while the contractors who caused the damage are now long gone. Reports by SIGAR have documented multiple instances of violence, threats of violence and kidnappings as a result of non-payment of Afghan subcontractors. 4
Counter-Insurgency Strategy or COIN suggests that it is often a good idea to keep the people who are trying to influence and work with “on-side.” This generally includes not treating them like coolies or bankrupting them. Going back to my opening comment, I used the figure of 5,000 local national affecting by a project. One might wonder how I arrived at that figure. Let me illustrate in a roughly sociological way, the short and long-term effects that US Contractors have on the local community by non-payment. My basic point is that it’s not just the workers who are affected. To understand the far-reaching effect and interconnectedness of the Afghan family and society is to understand the ripple effects at work by any exogenous influence on the system. One needs to have an appreciation for the socio-economic context. Afghanistan, like many Eastern societies operates as a patrilineal kinship-based model. This simply means that men of working age are usually supporting or helping to support at least 7 or 8 other people. Those might include wives, sisters, younger siblings, aged parents or even grand-parents. Very quickly we can see that by commissioning projects in a local community each employing 350 workers based on our kinship model, we are affecting about 2,400 locals. That’s just considering those who are directly employed by the project. If this calculation can then extend to what I will refer to as the run-off industries; material suppliers, transporters, the number then grows arithmetically. We can further assume that the knock-on effect extends to other businesses in the local community such as grocers, fuel sellers and others. The 2,400 can quickly double in size. Most local communities are immediately no larger than 10,000. If we apply these numbers, we have adversely affected over half of the local population. I should amend that comment to read “The contractors have adversely affected over half of the local population.” Suddenly you have alienated whole communities without even knowing it! The command knows virtually nothing about it. Our soldiers operating in the local area however will be affected by it by either cooperation and intelligence drying up at best or out-right hostility and collaboration with the insurgents at worse as they lose faith.
COINS for COIN Strategy
In 2010, General Petraeus developed a strategy called “Money as a Weapon System” 5 the premise of the guidance was that apart from the “kinetic” aspects of conflict, the US could influence the local population through the application of funds and resources if applied in a thoughtful and directed way. The thinking went that money could be applied properly, could compliment the other activities the US and Coalition engage in. Most of this guidance was aimed toward commanders and contracting officers - but how does industry play a role? There are several questions that need to be asked that are fundamental to our progress: How do we ensure we have faithful contracting partners whose goals are aligned with ours? What carrots and sticks do we have at our disposal to encourage good behaviour and to discourage or even punish bad behaviour by bad actors? Do we have an obligation to the tax-payer? How about to our local implementation partners? How about to the local Afghan community as a whole?
One wonders if those in command have bothered to read the guidance. Once again, sadly the contracting process is that is doing just the opposite of what is advocated in the guidance. This holistic approach to COIN is critical. Money and resources are an indispensible element of this equation. Wrongly applied money upends all of the other complimentary efforts thus creating the very opposite of what is intended. Why is this guidance not being followed or even seemingly considered? It is most likely a result of what ails most other programs, efforts, plans and initiatives undertaken in Afghanistan. It suffers from what I call “Temporareality.” This is the phenomenon created when personnel rotate in and out of the country every 12 months and commanders stay not much longer than that. This rotating of personnel or PERSTEMP creates a condition of transitory mentality. Nothing is permanent – all is fleeting. Programs and initiatives are tied to individuals who champion them and after those people rotate away, they lose momentum and often disappear. There is little or no corporate memory and little continuity. Therefore, projects such as those we are describing become part of the execution task- nothing more. For projects with multiple months or year- long life spans, the original reasons for the project in the first place have been lost to posterity. The only enduring element that remains is the contractor. The result is merely a clinical transaction without regard for the welfare of those involved.
Conclusion and Recommendations
The challenges in Afghanistan are wide ranging and extend far beyond the focus of this paper. Bad local government, corruption, illiteracy, insurgent violence all conspire to thwart our progress in the country. These problems are massive and will take years or even decades to bring about positive change. The point is though that we can however chip away at those things that we know we are doing wrong and make immediate alterations. With regard to contracting the following steps should be taken:
- Develop better oversight and control over all verticals of contracting with regard as to who gets paid and when. Request Sub-Contractor example contracts to determine if good business practices are being exercised.
- Establish capital access programs to develop capacity across all industry groups
- Afghan First- not working – Afghan deficiency mentality- “We can’t do Afghan first because they can’t do it”- vicious circle.
- Privity of Contract Doctrine- re-examine the applicability of this precept. Get new legal opinions. There should be nothing wrong with holding prime contractors legally and morally liable for payment to subs and this includes assessing penalties and withholding payments.
It has been 16 years in Afghanistan for US Forces. All of our other strategies can be described as having mostly failed; not “fragile”; nor “guardedly optimistic” despite what the generals say. The reason for this has the myopic focus on military operations at the expense of other sectors of the society as a whole. There isn’t much that the US can or is willing to do about the political situation but there is plenty that it can do about the economy. The ignorance of what can only be described as the political economy in Afghanistan has cost the US years, lives and billions of dollars. Only in the concurrent development of a self-sustaining economy comprised of business operating as going concerns can the military and political strategies experience any success. The formation and development of small and medium sized businesses is elemental in moving forward. Small and medium sized businesses in nearly all economies, including our own, are the single largest employers. These businesses are developed and sustained by the entrepreneurial class. The US is arguably one of the most entrepreneurial cultures and societies on the planet. The question is why is it that we are not exporting this expertise?
One of the key problems with Afghanistan which will promote instability is bi-furcated society. As long as horizontal inequities remain- some groups with access to power and wealth and others remaining on the margin in poverty, stability and real democracy can never take hold? The only way to help counter that is to help development of a middle class and the vehicle toward that goal is through individually owned businesses. They have historically been the drivers of economic, social and political change throughout history. Doing our part to develop a more vibrant local economy by fair and equitable treatment of local businesses is a start. The US contracting agency needs to “own” this process and demand accountability from those they hire. It is after all, our money.
References
"Primum non nocere." Wikipedia. January 18, 2018. Accessed January 20, 2018. https://en.wikipedia.org/wiki/Primum_non_nocere.
"T.E. Lawrence, Twenty Seven Articles." PBS. Accessed January 18, 2018. http://www.pbs.org/lawrenceofarabia/revolt/warfare4.html.
"Contract Law Resources." Privity of Contract | Doctrine of Privity. Accessed January 20, 2018. https://www.lawteacher.net/study-guides/contract-law/privity.php.
H.R. Rep. No. SIGAR--17-21-SP at 1-21 (2017).
SIGAR Special Inspector General for Afghanistan Reconstruction JANUARY 2017 SIGAR - 1 7 - 2 1 - SP OFFICE OF SPECIAL PROJECTS NONPAYMENT OF AFGHAN CONTRACTORS : SIGAR INVESTIGATIVE EFFORT S HAVE HELPED RESOLVE DISPUTES, BUT PROBLE MS REMAINhttps://www.sigar.mil/pdf/special%20projects/SIGAR-17-21-SP.pdf
Gilbert, Emily. "Money as a Weapon System." Critical Military Studies 1, no. 3 (July 13, 2015). Accessed August 23, 2017. http://www.tandfonline.com/doi/full/10.1080/23337486.2015.1063810.