How to Win Business with Foreign Donors

Development organizations may be tempted to compete for overseas funding to grow their business. But winning work with foreign bilateral donors requires a long-term commitment, smart partnerships and the ability to adapt to a new client's demands. "It's always hard to break in," said Emerging Markets Group President Andy Dijkerman. EMG is a U.S.-based firm that serves American, European and multilateral donors. "Even though the apparent barriers have come down," Dijkerman noted, referring to a trend by governments around the globe to allow contracting with foreign firms, "the hidden barriers are still there. And a lot of those hidden barriers are related to relationship development, being known and having credibility [with donors] and so on … One needs to be a bit patient in one's attempt to break in because it's not fast - it's slow." The reward can certainly be substantial. A diversified client portfolio may prevent a firm from becoming overly reliant on a limited number of donors. And, working with foreign donors allows organizations to learn different approaches that could make development assistance more efficient and innovative, Dijkerman said. Although donor agencies tackle similar issues, their business practices and willingness to experiment with new ideas and partners can vary greatly. It is thus paramount that a firm understands where it can add value to a potential new donor's programs. Additional factors to consider include cost rates, reporting requirements, contracting mechanisms and legal constraints. Tied vs. untied aid Firms should understand whether a government donor abroad observes an untied or tied aid policy, since this has implications on the organization's eligibility to directly bid on contracts. The U.S. government generally does not allow foreign firms as prime contractors. By mandate, aid from the U.K., Australia and Norway is untied and open to global competition regardless of a firm's nationality. In practice, even when aid is untied, there are still challenges for nonresident firms. One AusAID official estimated that only about 7 percent of procurements were awarded to outside firms since Australia untied its aid in April 2006. But many foreign bidders have partnered with local firms as subcontractors. Sub, prime, or acquire? Generally, there are four strategies for working with a new foreign donor once a commitment to this endeavor has been made: - subcontract with a local company. - bid on work directly as a prime contractor. - build a local presence by establishing a subsidiary. - acquire a local firm. But usually, firms partner with established contractors and nonprofits, and then eventually go out on their own as a prime contractor. Having a local presence in a donor country's capital is also a significant advantage when expanding, regardless of a firm's approach. "It's always been very helpful to be local in the geographic homes of the other donors," Dijkerman said. "And so it's natural to be a participant in that marketplace when you're locally registered and when you can go meet your clients, when you can relate to the local politics in that region, and so on and so forth." U.K.-based aid logistics firm Crown Agents, for instance, started a subsidiary to expand its business to the U.S. aid market. With a global network of field offices and clients, serving a growing number of U.S. aid programs was an attractive prospect, according to Crown Agents USA President Michael Deal. Nuances of working with U.S. aid agencies involve shifting partnerships, indirect cost rates, short-listing, and decentralized field offices, according to Deal. Crown Agents' U.S. subsidiary helps the company's network of field offices work with USAID and other agencies, and allows the group to bid on procurements as a U.S. entity. During its start-up phase, Crown Agents hired staff that had experience with U.S. foreign assistance, then sought out complimentary partnerships and subcontracting opportunities with established American firms. Crown Agents USA's first major contract came under a consortium of firms that bid on work for the then-newly established U.S. President's Emergency Plan for AIDS Relief. PEPFAR's mission and focus on getting drug treatments to AIDS patients presented an ideal fit for Crown Agents' supply chain expertise. Eventually, Crown Agents won a prime contract with the Millennium Challenge Corp. for a procurement attuned with its core expertise. Procurements under compacts with beneficiary countries are untied, but direct procurements with the agency are tied. Another approach is buying an established local firm or nonprofit. This allows the acquirer to expand into a new market by using the firm's reputation and capabilities. It also allows the company to immediately bid as a prime contractor. This strategy can be useful in tied markets. Coffey International Development acquired Management Systems International in January 2008 precisely to penetrate the U.S. aid market. "The USA is home to many of the businesses and foundations that operate in this space, and the scale of their investment is comparable to some of the publicly financed development agencies," Coffey International Development CEO Glen Simpson said in a press release. "A trusted, substantial presence in the USA is critical for Coffey to extend our ground breaking work in this field." Building a brand Once an entry strategy is chosen, building a good reputation and adapting to the new donor's procedures is essential. To do so, companies tend to keep close contact with agency staff so they understand the client's needs and objectives. Firms may want to participate in panel discussions at conferences or any event that allows them to share their areas of expertise. Company Web sites provide great tools to communicate a firm's work and partnerships. Writing white papers on current aid-related topics can also get the attention of donor staff, according to Deal and Dijkerman. As subcontractor, firms need to "delicately balance" the relationship with the prime contractor and the need to build their brand with donors. A strategic partnership does not imply that a prime contractor dismisses or overshadows its partners, Deal said. Additionally, differences in procurement approaches and relations building can change the whole way a firm goes about its business development processes. When writing a proposal, for instance, some donors want to make sure that a bidder has acquired firsthand knowledge about a program, has interviewed project designers, and has gained understanding of the recipient country. But others may forbid their staff to speak with bidders during the procurement process, Dijkerman said. Attention to detail is also crucial, Dijkerman stressed. After all, contractors must comply with various government rules and requirements.