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Cablegate: Launching Quick Response Funds for Field Officers

DE RUEHBUL #0561/01 0460549
R 150549Z FEB 10




E.O. 12958: N/A

Ref: A) 12/18/2009: Email and attachments Nickerson to Hogan
"Justification of Two-Tracked Approach" (NOTAL)
B) 1/19/2009: Email and attachments Nickerson to Hogan, et al; "QRF
- prep for the Wednesday call" (NOTAL)

1. This is an action request. See paragraphs 2, 9 and 10.

2. Summary and Action Request: Embassy Kabul Interagency Provincial
Affairs (IPA) and the Financial Management Office (FMO) have been
working to design a mechanism to disburse USD30 million in 2009
Supplemental Economic Support Funds (ESF) designated for use by
State Department field officers for "Quick Reaction Funds" (QRF).
During her November visit to Afghanistan, the Secretary highlighted
this funding as a key State Department priority. As envisioned in
the Congressional Budget Justification, these funds would be used
for "small, quick impact projects... to support the activities of
local neighborhood organizations, government organizations, and
community-based organizations, including nonprofits, small
businesses, professional associations, charitable organizations, and
educational institutions." Embassy appreciates Washington's support
for our proposed two-tracked approach to spending the money, which
would allocate USD 24.5 million to USAID to help fund the District
Delivery Program (DDP) and the remaining USD 5.5 million to "Field
Operational Funds for Governance." Embassy urgently requests
technical assistance from Department to design the most appropriate
mechanism for launch of the Field Operational Funds. End Summary.

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Bulk of QRF for District Delivery

3. The District Delivery Program (DDP) is being designed in an
interagency consultative process with the Government of Afghanistan
(GIRoA), and will provide basic service packages to high priority
districts throughout Afghanistan. The DDP is being carefully
planned with GIRoA, the U.S. Mission, and other donors, in
accordance with the Counterinsurgency and Afghan First principles
encompassed in the USG civ-mil strategy toward Afghanistan. GIRoA
will implement the DDP, with most funding from the U.S. side coming
from USAID and DOD.

4. Embassy recommended transferring the bulk of the QRF funds - USD
24.5 million - to USAID in support of the DDP, in order to reinforce
our efforts to build capacity of local and district governments.
Embassy reasoned the DDP would provide a strategically planned
mechanism for assistance that would have immediate and far-reaching
effects at the local level, in accordance with QRF goals. Embassy
appreciates Department support for this plan, and understands that
SCA/A has a Congressional Notification in the pipeline.

--------------------------------------------- -----
Remaining Field Operational Funds More Challenging
--------------------------------------------- -----

5. Embassy has dubbed the remaining USD 5.5 million as "Field
Operational Funds for Governance." USD 5 million would be set aside
for use by field officers, and USD 500,000 would be allocated to
maintenance of an oversight and tracking database. Embassy and
SCA/EX have agreed to model the database after the database used in
Iraq for a similar QRF program, which NEA/I-Assist manages.

6. We have drafted two possible mechanisms for the use of the USD 5
million in the field: the first would entail drafting an obligating
instrument that would allow the creation of a pool of Afghan
contractors as part of a larger indefinite quantity contract (IQC)
(reftel B). The second would be modeled closely to the Iraq QRF
program, whereby an "imprest fund" would be set up for cash advances
to the field not to exceed USD 10,000 per PRT field officer with
designated duties, and micro purchases up to USD 3,000 per project
(reftel A).

Two Possible Mechanisms and Action Request

7. After a series of conference calls, emails and memos, we
understand that the Office of the Procurement Executive has made a
policy determination that the IQC option is not viable for us
because "letting a contractor execute/manage grants unacceptably
permits contractors to perform inherently governmental functions,
per the Federal Acquisition Regulation (FAR) part 7.502(a)." SCA/EX
has recommended that the Embassy follow the model used by U.S.
Mission Iraq for its own State Department quick response program,
which is implemented through micro purchases, grants, and expedited
procurements. Embassy Kabul has told the Department, there are a
number of challenges that may make the "Iraq model" impractical.
These include, but are not limited to the following:

- Setting up and managing the "Iraq model" would require a minimum

KABUL 00000561 002 OF 002

of one temporary FMO and two locally employed staff in Kabul (which
we anticipate would become permanent positions) and one officer in
SCA/A. This seems excessive for a $5 million program in a universe
in which strapped Embassy offices are handling some $2.4 billion in
civilian assistance. Costs associated with these new personnel
would also be equivalent to a large share of the entire fund.

- A limited number of our field officers have grant and contract
training, but overall our field staff lacks the capacity and
training to manage foreign assistance funds.

- Moving money in Afghanistan's cash-based economy is extremely
complex. Unlike Iraq, the use of U.S. Treasury checks is not an
option because the military does not provide this level of
cashiering services in either U.S- or coalition-led field locations
and have no plans to do so within their current, massive
uplift/battlefield preparations. Afghanistan's banking
infrastructure is not sufficiently developed to allow electronic
funds transfers (EFTs) to the vast majority of field locations in
Afghanistan. Embassy is exploring possible use of cash-courier
services through Standard Chartered Bank, which would carry a
transaction cost per service, but we are not yet sure this will be

- The daily cash counts associated with this approach, in addition
to the project design, tracking, justification and implementation,
will be a time-consuming process for our field officers, who already
face multiple and intricate demands on their time. We believe it
would also put an unreasonable burden on them to be personally
responsible for the cash - an average of $2000 to $3000 per grant.

8. With barely more than seven months remaining to obligate the USD
30 million in Economic Support Funds designated for use by State
Department Field officers, it is becoming critical that we begin
spending in order to contribute to our governance goals in the
field. Our field officers are anxious to begin implementing small
projects ranging from shuras to rule of law capacity training. This
will also support our efforts to bring governance to the districts
in support of the imminent uptick in military operations.

9. Action Request: We have tried here at post to design a
mechanism that takes into account the realities in the field as well
as Department requirements. While we have consulted with a range of
qualified grant and contracting officers here in Kabul, we have
reached the limits of our technical capacity to launch this program.
We therefore request that Department select a mechanism or design
an alternate that will allow the most expeditious, cost-effective
launch of the Field Operational Funds, considering all the points
raised in paragraph 5. Specifically, Post requests that the
Department reconsider the IQC approach, which Embassy Kabul
continues to believe is the most efficient option in the long term.
We believe it would significantly reduce the administrative burden
on field staff and introduce an acceptable level of contract/grant
management capacity without burdensome training requirements on
field officers who are not accustomed to managing foreign assistance
money. No matter which approach is ultimately implemented, we
recommend the Department fund and establish the oversight database
based on the Iraq database. This will be far more cost-effective
and expedient than tendering for an entirely new database, which we
understand could cost $2 million.

10. Action Request, continued. If for policy reasons the
Department chooses to model the Afghanistan QRF program on the Iraq
system, we recommend the following actions as an integral part of
that plan:

- Extend all grant and contract training waivers that were granted
in Iraq, and define the training requirements for personnel in

- Provide a FMO TDY officer with specific foreign assistance grant
and contract experience to deploy immediately to Afghanistan to set
up the program.


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