Capital projects in foreign assistance

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1. What a capital project is

Title 22 of the U.S. Code includes a short set of provisions on capital projects, at sections 2421a to 2421e. In those provisions, AID means the Agency for International Development (22 U.S.C. 2421e(1)). A capital project means the construction, expansion or alteration of, or the acquisition of equipment for, a physical facility or physical infrastructure (22 U.S.C. 2421e(2)). The term also covers related engineering design, both concept and detail design, the procurement of equipment and related services, and feasibility studies or similar engineering and economic services.

2. A capital projects office in AID

The Administrator of AID shall establish a capital projects office (22 U.S.C. 2421a(a)). Its purpose is to develop an AID program that will focus solely on developmentally sound capital projects, taking into consideration the development needs of the host country and the export opportunities for United States businesses (22 U.S.C. 2421a(b)(1)). The office is also to consider specifically the opportunities for United States high-technology firms, including small- and medium-sized firms, in developing countries and countries in transition from nonmarket to market economies (22 U.S.C. 2421a(b)(2)).

3. What AID does through the office

AID acts through the office in coordination with the appropriate members of the Trade Promotion Coordination Committee (22 U.S.C. 2421a(c)). It shall support capital projects in developing countries and in countries in transition (22 U.S.C. 2421a(c)(1)). It shall periodically review infrastructure needs, explore opportunities for United States firms, and keep both United States firms and the Congress informed of these reviews (22 U.S.C. 2421a(c)(2)).

Each capital project AID funds must be developmentally sound, as determined under the criteria developed by the Development Assistance Committee of the Organization for Economic Cooperation and Development (22 U.S.C. 2421a(c)(3)). The office coordinates with other AID offices and works with country missions on capital projects that offer opportunities for United States firms. That work stays consistent with AID’s primary mission to help developing countries with traditional development projects (22 U.S.C. 2421a(c)(4)). It shall coordinate, where appropriate, funds available to AID for tied-aid purposes (22 U.S.C. 2421a(c)(5)).

The statute also gave AID a special role in meeting the infrastructure needs of countries in transition, by meeting the challenge of infrastructure assistance that foreign governments provide to them (22 U.S.C. 2421a(c)(6)). That role included undertaking a comprehensive study of the infrastructure needs of those countries (22 U.S.C. 2421a(c)(6)). The study was to identify the sectors most in need of rebuilding, and the state of technology and opportunities for United States high-technology firms, with an assessment of export opportunities (22 U.S.C. 2421a(c)(6)(A) and 22 U.S.C. 2421a(c)(6)(B)). Its results were due to the appropriate congressional committees within 12 months after October 28, 1992 (22 U.S.C. 2421a(c)).

4. Projects for poverty and environmental safety

AID shall develop a program for capital projects in basic infrastructure that measurably alleviate the worst manifestations of poverty or directly promote environmental safety and sustainability at the community level (22 U.S.C. 2421b(a)). The program takes into consideration the development needs of host countries and the export opportunities for services and goods from the United States.

AID carries out the program by working with AID technical support staff, regional bureau staff and country missions (22 U.S.C. 2421b(b)). Together they identify and fund such projects in countries receiving assistance under part I of the Foreign Assistance Act of 1961 (22 U.S.C. 2421b(b)). Examples given are basic sanitation systems, basic water supply and treatment, pollution control, and rural infrastructure benefiting poor communities or establishing environmentally sustainable patterns of rural development. The projects should have measurable positive effects on indicators of human and environmental health.

5. Coordination and funding

The President shall use the Trade Promotion Coordination Committee to coordinate activities under these sections with other relevant activities of the United States Government (22 U.S.C. 2421c). Congress strongly urged the President to use at least $650,000,000 for fiscal year 1993 and at least $700,000,000 for fiscal year 1994 for grants for developmentally sound capital projects, from listed accounts (22 U.S.C. 2421d(a)). The listed sources included the economic support fund under chapter 4 of part II of the Foreign Assistance Act of 1961. They also included the Support for East European Democracy Act of 1989, the Freedom for Russia and Emerging Eurasian Democracies and Open Markets Support Act of 1992, and the Multilateral Assistance Initiative for the Philippines. Such grants may be combined with financing offered by private financial entities or other entities.

Development assistance and Development Fund for Africa funds under chapters 1 and 10 of part I of the Act may not be used for capital projects that do not meet the criteria in section 2421b (22 U.S.C. 2421d(b)). That limit does not apply to projects for which funds were obligated or expended before October 28, 1992.

6. How the definition is used elsewhere

The capital project definition reaches beyond these sections. The sustainability rules for capital projects tied to overseas contingency operations adopt it by reference (22 U.S.C. 2421f(e)(2)). Those rules require assessments before funds are spent on covered projects (22 U.S.C. 2421f(a)(1)). Coverage depends on set values (22 U.S.C. 2421f(b)(1)). The Trade and Development Agency, which funds feasibility studies and design work for development projects, operates under a separate section (22 U.S.C. 2421(b)(1)). The agency is covered in the Trade and Development Agency, and the sustainability rules in sustainability rules for contingency capital projects.

7. Who acts under these provisions

Several actors appear in these sections. The Administrator of AID establishes the capital projects office and develops the poverty and environment program (22 U.S.C. 2421a(a) and 22 U.S.C. 2421b(a)). The Trade Promotion Coordination Committee is the body the President uses to coordinate the activities across the Government (22 U.S.C. 2421c). Congress is kept informed of the infrastructure reviews and was to receive the results of the transition country study (22 U.S.C. 2421a(c)(2) and 22 U.S.C. 2421a(c)).

Key terms

Capital project	Construction, expansion, alteration or equipping of a physical facility or infrastructure.
Capital projects office	The AID office that runs the capital projects program.
Developmentally sound	Meeting the criteria of the OECD Development Assistance Committee.
Tied aid	Funds AID coordinates for tied-aid purposes where appropriate.
Basic infrastructure	Sanitation, water, pollution control and rural infrastructure projects.

Every statement above links to the document behind it. The full source list for this piece is on the sources page.

This page describes public United States government programs for general information. It is not legal, regulatory or procurement advice, and it does not address the facts of any particular case.

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