Using USAID FSN LCP to Establish Local Compensation Policies

Given the recent questions and discussions on the subject of compensation of foreign nationals under USAID Programs, I would like to donate and share with the community the attached policy and charts which designed for the use by contractors under USAID contracts, but which may very well be used by recipients under assistance instruments as well.

FSN Compensation Guidance under USAID Programs

FSN Compensation Chart

Contractors have been complying for many years with limitations in the AIDAR on the salaries paid to their foreign national staff in countries of performance. Although not required for Cooperative Agreements and Grants, the same limits are being applied by some Missions under assistance instruments, mainly because the cost principles require that the compensation paid to local (and all other) staff by non-profits be "comparable to that paid for similar work in the labor markets in which the organization competes for the kind of employees involved". Since US Embassy does their market surveys annually to determine appropriate rates for their local staff, local LCPs are supposed to be the benchmark for the salaries in those labor markets for similar employees.

Whether you agree or not with USAID's approach for grantee salaries, you may want to consider following the already established local market rates for similar positions, not only to make it easier for your staff, but also as a great proof of "reasonableness" often required by audits.

The attached guide to establishing the local rates uses similar methodology used by USAID and should be a good way of establishing and maintaining a local compensation policy similar to the local USAID Mission.

The policy document describes the process of establishing FSN level and step for each employee. It also has a section on TCNs. It is annexed by a spreadsheet which shows the FSN "series" used by USAID to establish FSN levels.

Please note that FSN levels may not cover all types of positions that you will require. Exceptions are considered when technical experts/professional employees have no comparable FSN level in the Mission, in which case local market rates should be put forward with explanation.

I hope that these documents de-mystify some of this process for many of you and you will find them helpful in establishing local compensation policies, preparing cost notes etc.

USAID is updating Source, Origin & Nationality Regs

USAID is proposing to update 22CFR228, or commonly known as Source, Origin and Nationality Regulations by submitting a notice for comment to Federal Register (RIN 0412-AA70).  Comments are expected by October 3, 2011.  We hope the new regulation is then finalized within a few months after the comments are received.  (But do not hold your breath, since AIDAR change submitted in 2006 to limit post differential and danger pay to 40 hours per week is still under consideration of the FAR Councils.)

The proposed update will remove the concept of "origin" all together and will simplify the concepts of "source" and "nationality".

In summary, under the new proposed regulations, if the award contains Geographic Code 000 (US), it will mean that commodities and services must be "available for purchase" and "can be serviced if warranted" in the US from/by US entities (legally registered and principle place of business in the US)  and must have their origin in any non-restricted country (i.e. current code 935) and that commodities must be shipped to the cooperating country from US or shipped to a freeport from US before being shipped to the Cooperating Country.

The commodities no longer have to be "made/manufactured in the US" to be eligible.

The above rule will not apply to restricted goods (motor vehicles, ag inputs etc.) and is also above and beyond the blanket waiver for Local Procurement for Code 935 goods and services up to $5Mil per award signed in August of 2011.

Once finalized, we will post the final rule and explain the changes.

Procuring Motor Vehicles with USAID funds

On August 8, 2011 USAID has updated 22CFR228 and ADS 312 with new rules and blanket waivers for procurement of motor vehicles funded by USAID.

Below is the breakdown of the regulations as they stand now for ease of reference:

Severance Payments for Local Hires

The question of allowability of severance for locally hired personnel often comes up on USAID programs, both contracts and grants/cooperative agreements.

The allowability is governed by FAR Subpart 31 (FAR 31.205-6 Compensation for Personal Services, (g) Severance Pay), Cost Principles for for-profits– and A-122 or 2CFR230 Cost Principles for non-profits (Appendix B, 18. Compensation for Personal Services) which say essentially the same thing and require prior approval of the funding agency for any severance payments, - an approval to be given under assurance that the company extends the same benefits to its US employees in similar positions. 

CPFF Contracts (and subcontracts) - Get the Fee You Deserve

The form of Cost Reimbursement contract most commonly used by USAID is CPFF, or Cost plus Fixed Fee.  These contracts come in two forms – “term” or “completion” and the form mostly refers to how the fixed fee will be paid.

Not understanding the difference and managing your billing correctly under these different types of CPFF contracts can lead to much disappointment and often lost fees.

Sub Reporting Requirements for Prime Contractors and Grantees under FFATA

There is a lot of lengthy and confusing instructions for mandatory new reporting requirements, the most comprehensive one is contained in the OMB memo dated August 27, 2010 here OMB Guidance

We tried to break it down below specifically for Subcontracts and Subgrants reporting by USAID Prime Contractors and Prime Recipients.

 

Housing Allowances Overseas

USAID Regulations and Best Practices

AIDAR 752.7028 allows for reimbursement of housing allowance for rent and utilities if such facilities are not supplied. Such allowance shall not exceed the amount paid to USAID employees of equivalent rank in the Cooperating Country, in accordance with the Standardized Regulations (Government Civilians, Foreign Areas), Chapter 130, as from time to time amended, or other rates approved by the Mission Director.

What is the problem with LQA?

Audits and Compliance: The High Cost of Being a Non-Profit

It seems that Defense Contract Audit Agency is no longer just for contractors …. Recipients of USAID Cooperative Agreements, especially those in high scrutiny war zones, like Afghanistan, Pakistan and Iraq are more and more subject to DCAA cost reimbursement audits.

Top Ten Warning Signs Your Company May Have Ethics Issues....

A little humor .....

It is important to have an Ethics and Business Conduct Policy. 

Here are the top ten warning signs that your company really needs one: