MCC Compacts: What You Need to Know

The Millennium Challenge Corp. seeks to promote economic growth by entering into compacts with governments in the developing world. But what role does MCC play on the ground once such an agreement takes effect? Alicia Phillips Mandaville, MCC's associate director for development policy, explains. To be eligible for a compact, countries enter into a four-step eligibility process. The first step determines eligible countries by examining their income and poverty levels, as well as U.S. or international sanctions they may be subjected to. Next, MCC publishes a list of the criteria used to determine a country's eligibility for a compact. Countries must score well on 17 indicators evaluated by organizations such as the Freedom House and World Bank Institute. The indicators range from political freedom to a country's ability to foster economic growth. MCC may enter into threshold agreements to help countries meet compact criteria. During the compact MCC gives partner governments the sole authority to implement a compact. "By the time we sign a contract, the country has said, ‘This is our plan for implementing it,'" Mandaville said. "It's a matter of getting the entity [that will implement the compact] up and running. Legal prep work for this happens over the 12 months before signing." Once the country is ready, work on MCC-funded activities - such as the Small-Scale Fisheries Project in Morocco, or water and sanitation and transportation projects in Mozambique - begins. Those interested in contracting opportunities with an MCC partner country need to look out for procurement notices from partner governments and ministries. Devex and MCC also publish procurement notices from partner governments. Payment for works, services and goods comes directly from the U.S. Treasury. At no point during the contracting process does the partner country have access to this money; its only responsibility is to hire. Although the partner government has exclusive implementing authority, the procurement process must abide by contracting guidelines set by MCC. MCC has very little presence on the ground over the course of a compact. (All current ones cover five years, except the one with Madagascar, which runs for four years.) In most cases, a resident country director and resident deputy country director represent the agency in the field. Unlike their counterparts at the U.S. Agency for International Development, MCC in-country officials do not have to be members of the foreign service. MCC officials "serve in an advisory role, but also say what countries can and can't do," Mandaville said. "They do continue to play an advisory role or they have a lot of experience working in the area the compact is in." MCC may, for instance, provide technical assistance on how to best implement a clean water project, or share internal expertise on how to conduct infrastructure improvement projects. "We try to manage country ownership versus universal quality control. We try to adjust to what we find on the ground," Mandaville said. "We're giving … technical guidelines up front so that a country knows what our expectation are and where red flags are likely to be." These "red flags" have proven to be one of the points of tension between MCC and compact countries. Mandaville said this conflict presented one of MCC's largest obstacles since the government corporation's establishment in January 2004. "What do you do if a country has a bad idea?" she asked during a Feb. 18 MCC event at the National Press Club in Washington. "We're clear about our expectations of return," she continued, noting that countries often have their own goals in terms of development results. In the past, MCC has suspended compacts with countries that do not stick to the original selection criteria. For instance, Nicaragua's scores on political freedom recently fell below MCC-acceptable levels after disputed elections raised questions about fairness. With the contract now suspended, MCC has cut off funding toward compact initiatives there. Nonetheless, Nicaragua can continue to use the money already given by MCC, and contractors will be paid for the work they have already completed. MCC does have relationships with USAID in countries where both are active. The two work together on threshold programs. But their interaction during the compact process is informal. "We're all part of the embassy team," Mandaville said, referring to the fact that MCC and USAID staff abroad tend to work out of U.S. foreign embassies. "They'll work together as colleagues." She added: "Everybody on both sides will say the [USAID-MCC] relationship is a relationship that has evolved in a good way." After a compact is complete Many of the compacts are in the early implementation phase and none is nearing completion. At this point, it is difficult to guess what a post-compact country will look like, according to Mandaville. "We're all starting to think about" when to leave a partner country, she said. "To be honest, [that's] good news."