The Timeliness and Cost-Effectiveness of the Local and Regional Procurement of Food Aid
Introduction
Advocates of local and regional procurement (LRP) of food aid and cash and vouchers often argue that sourcing food nearer to distribution sites is both faster and more cost-effective than traditional food aid sourced in and shipped from the donor country (“transoceanic food aid”).1 Some reasonable evidence exists to support the cost-effectiveness and timeliness claims of LRP advocates (Clay and Benson, 1990, Coulter et al., 2007, Haggblade and Tschirley, 2007, Hanrahan, 2010, Organization for Economic Cooperation and Development (OECD), 2005, United States Department of Agriculture (USDA), 2009, United States Government Accountability Office (USGAO), 2009, WFP, 2006, WFP, 2010). But the data come largely from WFP operations rather than from deliveries by the US-based nongovernmental organizations (NGOs) that have traditionally served as the primary delivery channel for US project and emergency food aid. Moreover, past timeliness and cost-effectiveness estimates have relied largely on comparisons with hypothetical shipments or with broad program averages that do not match by destination, source, delivery time period, and commodity very well. It therefore remained unclear whether US NGOs, typically dealing in much smaller volumes than WFP does, could truly improve on the timeliness and cost efficiency of transoceanic food aid deliveries if they could employ an LRP option for sourcing commodities. The LRP Learning Alliance projects described in Lentz, Barrett, Gomez, and Maxwell (2013) afforded an unprecedented opportunity to carefully evaluate these key claims.
In this paper, we generate timeliness estimates by comparing LRP LA activities against carefully matched in-kind, transoceanic US food aid shipments to the same countries during the same timeframe. All LRP transfers reached recipients faster than food aid from our matched transoceanic shipments. Our findings indicate that procuring food locally or distributing cash or vouchers results in a savings of nearly 14 weeks, a 62 percent gain in timeliness. The amount of time saved varies by country. Not surprisingly, landlocked countries tend to receive transoceanic shipments more slowly than coastal countries, so the timeliness benefits of LRP vary spatially in intuitive ways.
As with the timeliness estimates, we estimate cost-effectiveness by comparing LRP activities against carefully matched in-kind, transoceanic US food aid shipments, now matching by commodity type as well. We find that cost-effectiveness varies markedly by country and commodity. Procuring unprocessed grains and some pulses locally seems to result in significant cost savings—procuring grains locally resulted in cost savings of over 50 percent, on average—while locally procuring processed commodities such as vegetable oil or corn soy blend (CSB) may or may not be cost-effective relative to transoceanic shipments.
The appropriateness of LRP relative to transoceanic food aid often depends on the objectives of the project. Our findings do not indicate that LRP is always superior to transoceanic food aid in cost-effectiveness terms, although it is always superior by timeliness criteria. However, where markets can adequately meet increased demand for food generated through LRP, LRP can often afford valuable cost and time savings, potentially allowing donors to reach more recipients and/or reach them faster. In an environment of growing demand and diminished resources for food aid, such gains make LRP a valuable part of the international food assistance toolkit.
Section snippets
Literature review
A 1996 European Commission (EC) regulation stating that local purchases can reduce transport costs and delivery times heralded a series of policy changes across major food assistance donors and agencies (Coulter et al., 2007, EC, 1996). In the following 14 years, WFP, the Canadian government, and the US government all cited the timeliness and cost effectiveness of LRP relative to transoceanic food aid as major reasons for the evolution of their policies (Hanrahan, 2010, United States Government
Data and method for timeliness analysis
Our data allow us to compare LRP activities against carefully matched in-kind, transoceanic US food aid shipments by destination, time period, and commodity. We compare event histories of LRP and transoceanic deliveries to the same country during the same time period so as to control for subtle differences due to timing (e.g., equivalent trafficability of roads, seasonal bunching of ocean freight contracting), imperfect matching of locations with different sea routes, differences in vessel type
Timeliness findings
We find that food procured locally and distribution of cash and vouchers are significantly faster than transoceanic food aid deliveries for all nine countries. Several of the comparison transoceanic shipments had not yet arrived by the time of analysis, so we truncated these, estimating the arrival dates to be the latest confirmed date that the shipment had not yet arrived. Comparisons relying on these “truncated” dates necessarily underestimate transoceanic delivery times, understating the
Data and method for cost comparisons
We estimate cost-effectiveness by comparing LRP activities against matched in-kind, transoceanic US food aid shipments. We use the same criteria for the cost comparisons as in the timeliness comparisons above, except that we also now matched only with reasonably similar commodities. Following a needs assessment, an agency constructs a food basket to meet a portion of the target population’s protein-energy and caloric needs.
Cost comparison findings
Comparing matched total costs for matched LRP and transoceanic shipments, we find that the cost advantages of LRP vary markedly by commodity category. To illustrate this fundamental point, we present separate cost comparisons for processed products, pulses, and cereals.
We find that LRP, on average, is not more cost-effective than transoceanic shipments of processed products: vegetable oil and corn soy blend. On average, purchasing vegetable oil or CSB locally costs 26 percent more than
Policy implications and conclusion
Not all food assistance responses are equally suitable in all situations (Barrett et al., 2009, Barrett and Maxwell, 2005). The specific goals for a given food assistance activity matter in determining the best form in which to provide assistance: in-kind food aid shipped from the US, locally or regionally procured food aid, vouchers, or cash transfers. For example, an agency or donor may be willing to trade off cost efficiency for speed or in order to support local producers or processors.
Acknowledgments
We thank members of the Local and Regional Procurement Learning Alliance (Catholic Relief Services, Land O’Lakes, Mercy Corps and World Vision), USAID, USDA, and WFP, and especially the many private voluntary organizations that provided us with detailed timing and cost data, including ACDI-VOCA, Africare, CARE, Save the Children, and Share de Guatemala. Without their invaluable assistance, this paper would not have been possible. We also thank Samuel Bell, Audrey Boochever, Ivi Demi, Teevrat
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