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USAID
Administrator Rajiv Shah in a town hall meeting in Geneva.
Photo
by: Eric Bridiers for U.S.
Mission Geneva / CC BY-NC-SA
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Donor agency reform has become such a
ubiquitous refrain around the world that I sense a kind of “reform-fatigue” has
set in. In just the past two years, Australia, Germany, Japan, and the United
Kingdom have all undertaken major reforms. Some colleagues in the development
community seem to have tuned out and assume it’s all part of a long-term
evolutionary change, not something to pay much attention to in the short term.
But the U.S. Agency for International
Development’s reform agenda – formally titled USAID Forward
– is one of a few important exceptions. Many had the initial impression that
this reform agenda was all about reining in large contractors – in part because
of ill-considered rhetoric from USAID that
served to overshadow the full nature of the reforms. Now that changes are being
implemented, it’s clear that the reality is more nuanced than that. While many
details remain uncertain, I see three themes stemming from USAID Forward that could have a lasting impact on the
way nongovernmental organizations and development consultancies do business
with the agency.
More strategy
Taking a page from other bilateral and
multilateral donors, USAID is now preparing
country strategies for all of the 70 or so countries where it operates. Around
a dozen have been approved so far and the plan is to have strategies for all
countries where USAID operates by the end of
fiscal 2013. (Although public versions are supposed to be made available, they
aren’t yet easy to find on the USAID website,
so we’ve compiled a list here.)
The strategies are meant to be more
than just perfunctory; USAID intends to make
them central to its planning function. They are designed to be the blueprint
for development activities in each country, with projects flowing from the
strategy. They also will be the development component of the so-called
“integrated country strategies” that are being prepared by U.S. embassies under
the direction of the U.S. State Department.
This could have real implications for
the organizations that do the on-the-ground work and have spent decades
learning to read the tea leaves at USAID. In time,
there may be less to gain from trying to understand what a particular mission
director is thinking in order to prepare for upcoming solicitations. A careful
analysis of the country strategy document may instead yield clues to the areas
of focus and type of programs USAID plans to
launch in the country. (Note that Devex will soon begin publishing analyses of
each USAID country strategy.)
More design
Over the past two decades, an
increasingly understaffed USAID became known
for bidding out individual contracts that are large and general. USAID looked to implementing partners to both define the
problems and also provide the solutions. This approach required close
partnership with the biggest implementing organizations who built up internal
capacity to design and manage programs across a range of geographies and sectors.
But as part of its reform agenda, over
the past few years USAID has hired hundreds
of new staff and trained them to design and manage projects. These new staff
will increasingly write more specific requests for proposals based upon more
detailed up-front project design work. That project design may be done by small
firms and independent consultants, much like the World Bank uses consultants to
help design its projects before procurements are issued for international
competitive bidding. And the scope of design work may increase as it will
include analyzing the capacity of partner government systems (part of USAID Forward’s emphasis on using country systems) and
integrating science and technology-based innovations into project design.
This new approach may result, over
time, in segregating project design from implementation, with larger NGOs and
implementers bidding on well-defined contracts while smaller organizations and
individual consultants work on project design. This also has the potential for
reducing the up-front costs of preparing a proposal, an additional factor that
could lead to more competition for the USAID contracts
and grants I describe below.
More competition
In the past, the term “project” in
the USAID context would generally refer to an
activity approval document and the individual request for applications (for
grants) or request for proposals (for contracts) which flowed from it.
Now, USAID has redefined the term “project”
to entail an integrated approach to solving a development problem, including
direct agreements with governments, direct procurement through local
organizations, funding for other bilateral aid agencies and international
organizations, as well as more traditional direct procurements. As a
result, these new projects which flow from country strategies will increasingly
be larger and more fully designed.
But although projects are getting
bigger, individual procurements are likely to get smaller and more numerous:
smaller because more funds will flow through local organizations, international
organizations, and governments, so less funding will be left for direct
procurement; and more numerous because they will be more specific in nature and
more of them will be designed for local organizations. That’s because a key
element of USAID Forward is a push to do more
contracting at the local level, fostering competition for direct awards to
local firms. In the past and today, local firms were able to receive USAID funding, but generally only through subcontracts
or “grants under contracts” mechanisms run by larger USAID contractors.
So the new project concept, more
funding going through governments and other agencies, and more local
contracting could, taken together, lead to a larger number of contracts overall
and many more small and mid-sized contracts as opposed to the mega contracts of
the past. With more focus on pushing aid through government systems and
international organizations, the total amount of funding available to
contractors may – over time – go down. And those trends together may well lead
to a more competitive bidding environment.
What does all this mean for USAID’s
long-time implementing partners? Many of the largest contractors and NGOs
see USAID Forward and the related trends
around untied aid and country systems as a challenge. And some are responding
by expanding internationally through mergers and acquisitions to become global
development solutions providers that can work across agencies and geographies.
(A Devex feature story published today explores this trend.)
Others, particularly those who are
smaller, may find more opportunities as a result of these changes, in
particular in the areas of project design, IPR (implementation
and procurement reform), and monitoring and evaluation.
Of course, for all the energy behind USAID Forward, there remain reasons to believe this
ambitious reform agenda won’t be entirely successful. Much depends on the
agency’s new staff and their ability to manage a larger volume of smaller
contracts. If Congress were to significantly cut USAID’s operating budget, it
would slow these reforms to a crawl, since so much is predicated on USAID taking on management, planning, and design
functions that they have contracted-out in the past. Much also depends on the
Policy, Planning, and Learning Bureau and its role in ensuring country
strategies don’t become competitive to broader thematic priorities like Feed
the Future and the Global Health Initiative but rather integrate with them. If
country strategies become just another report that collects dust on a shelf in
the Reagan building, everyone will soon go back to the old way of doing things.
A new administration or even a new
secretary of state in a second Obama administration could certainly slow down
or alter these reforms but the fundamental shifts are likely to persist in the
coming years since they are tied to global trends furthered at Busan and
coordinated with other donor nations. Perhaps the biggest threat to USAID Forward is a black swan event: a dramatic case of
corruption or waste that creates a political backlash to pushing more aid
through foreign governments and local companies. A decade or two ago, that risk
would likely have been higher, but after untold cases of corruption in
connection with the wars in Afghanistan and Iraq, it may take a GSA-style case to draw
enough political heat to topple USAID Forward.
So these three implications – more strategy, more design, and more competition
– are likely to have legs to some degree, even after President Barack Obama,
Secretary of State Hillary Clinton, and USAID Administrator
Rajiv Shah have left the stage.
In the end, development work is done
by NGOs, development implementing firms, and aid workers. Funding organizations
like USAID will continue to rely on the
organizations that actually implement development projects, which is, after
all, where most of the world’s development expertise lives. But the reforms
that flow from USAID Forward could have a big
impact on the way USAID engages with its
partners which could, in turn, have a big impact on the thousands of
organizations and professionals who ultimately do the work on the ground level.
It’s a trend we at Devex will continue to cover.
Views expressed by columnists and
guest contributors to Devex are their own.
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