How much does USAID spend with local partners?

In late 2017, USAID announced a framework focusing on the “journey to self-reliance” — a bid to orient the agency’s work toward achieving “a time when foreign assistance is no longer necessary.” The framework has been both criticized and cautiously embraced by the international development community, but whatever you think about it, it is having important effects on procurement with USAID. The agency has since released a new Acquisition and Assistance Strategy, which changes how it will choose partners and award funding in line with the framework. The first “principle” of the strategy is to diversify its partner base, with special emphasis on working with new, underutilized, or local partners, or locally established partners. Those terms have been tightly defined to ensure they prioritize locally led entities and not just local subsidiaries of global organizations. The goal is to address the concentration of USAID awards within a “relatively small circle of large organizations” to encourage more collaborative approaches to development with local partners and to better develop local capacity. Now, one year into the implementation of the A&A Strategy, we analyze USAID spending data to better understand the dynamics motivating these decisions. How concentrated are USAID funding awards historically? How important are local contractors? To answer these and other questions, we looked at the last five years of USAID spending data for prime awards from USAspending.gov. USAID’s local partners According to the available data, USAID spending with all its partners increased slightly but consistently from fiscal year 2015 to the end of fiscal year 2019, rising from $15.7 billion to $16.9 billion. At the same time, the amount that went to local awardees hovered at around $1 billion throughout. Of the 33,417 awards distributed by USAID over that time period, 13.5% went to local awardees, but in terms of monetary value, they received only about 6.9% of the $83.9 billion awarded. Where are the strongest markets of local, in-country USAID partners? For the last five years, more than half of USAID awards to lower-income country partners went to organizations from South Africa, Kenya, Afghanistan, and Pakistan. This makes sense — the first two are among USAID’s most-funded destinations. For instance, Kenya and South Africa saw USAID spend $2.6 billion and $1.8 billion over that time period, respectively, of which 32% and 60% went to local organizations. However, in several countries with similar amounts of spending, less than 10% of funds awarded in prime awards went to local organizations. For example, just 6.2% of the $3.8 billion spent in Afghanistan went to Afghan organizations, and 4.5% of the $2.8 billion spent in Ethiopia went to Ethiopian organizations. In small countries with lower levels of spending, these percentages are somewhat better — 27% of the $189 million spent in the Dominican Republic and 21% of the $137 million spent in Bosnia and Herzegovina went to local awardees. The New Partnerships Initiative These figures highlight how underutilized local organizations are among USAID’s prime awards, despite the momentum behind efforts to localize procurement. These efforts have a long history at the agency, but often with limited success. New energy has now been infused into them through the New Partnerships Initiative. The initiative is a key component of the A&A Strategy and aims to engage “new and underutilized” partners — both local organizations on the ground in project countries as well as small U.S. businesses. However, the new initiative and strategy emphasize that local subawards will be key metrics of local engagement going forward, rather than a focus solely on prime awards. Despite this, an initial look at the available prime awards data for fiscal year 2020 indicates that USAID’s commercial engagement of local organizations may already be improving. The agency has spent more with local partners in several African countries in the first few months of fiscal year 2020 than in all of fiscal year 2019, including in Burkina Faso — where there was no local spending last year — Côte d’Ivoire, Eswatini, Guinea, Lesotho, Liberia, and Malawi. USAID was on track to exceed the 2019 figures in countries with larger overall budgets as well, including Namibia, Ethiopia, and Nigeria. A one-year increase does not make a trend, however, and the truly important measure is not the nominal amount of spending with local partners, but the annual local spending proportion. Do you want to know more about our methodology and analysis? Reach out to our experts at analysts@devex.com.