As development goes local, foreign aid donors are slowly pivoting away from some familiar partners and taking chances on new ones. Prime international contractors are also being urged, through donor policy and specific contract provisions, to subcontract project components to local groups. This is in many ways very exciting as local organizations bring a unique set of competencies and qualifications such as the ability to understand local development challenges, connect with local communities and influence project design early on.
While donors and global implementers are already reporting success in forming trusted partnerships with local organizations, there are also some horror stories. Fraudulent or bogus nongovernmental and civil society organizations and underperforming or unethical private sector partners are a reality in most emerging markets, threatening international development projects all over the world.
“Partnering with local organizations to implement development projects is critical, but there is certainly some risk inherent in contracting local groups,” explains Devex Director Pete Troilo, who has led due diligence projects across Asia. “The best way to mitigate the risk is to screen and get to know your potential partners and vendors.”
Conducting professional due diligence is common in most industries. Many banks, manufacturers, energy firms, and other commercial enterprises and foreign investors have integrated due diligence into all pre-investment and operational decision-making. They conduct these formal reviews to confirm a potential partner organization’s capabilities, investigate their standing and reputation, and uncover any anomalies, conflicts of interest, or misrepresentation.