Latest USAID NextGen contract criticized over innovation, transparency

The U.S. Agency for International Development released a request for proposals, or RFP, in March for a contract worth up to $4.1 billion over 10 years — one of the biggest it has ever put out. The contract — known as Integrated Procurement Service Agent, or Integrated PSA — covers the purchase and delivery of health supplies for malaria, family planning, and reproductive health. But more could be done within the contract to promote innovation and transparency, such as changing cost models and committing to publishing more information, according to a review conducted by specialist procurement analysts on behalf of the group Unlock Aid. Members of Unlock Aid — which formed last year to lobby for reform in how aid is delivered — are chiefly contractors interested in innovative service delivery, some of whom are delivering services to USAID. The Integrated PSA contract is part of the Next Generation Global Health Supply Chain Suite of Programs, known as NextGen, which cumulatively are worth up to $17 billion. NextGen is a successor to an existing set of supply chain contracts, the largest of which is currently run by Chemonics International. Integrated PSA is one of the two largest contracts in the suite. The other, a contract for HIV health supplies, was slated to be released on March 30 but has not yet appeared. Originally, all nine contracts in the NextGen project were due to have been awarded by Nov. 30. Some have already been delayed to 2023, but the largest contracts are still listed in the USAID business forecast to be awarded by that deadline. The fact that some RFPs have still not appeared has left industry insiders concerned that those contracts will also be pushed back. The review praised the Integrated PSA for its emphasis on targets and for allowing subcontractors to specialize. However, it also suggests four main “areas of improvement”: a move away from cost-based models, a reduction in the level of paperwork required, published data on compliance with key performance indicators, and changes in the maximum and minimum percentages of work that should be subcontracted. The criticisms come after a major speech last year from USAID Administrator Samantha Power, in which she promised that USAID would make changes to its structures to work with a wider range of private partners. She also promised that 25% of USAID funding would go to local partners within four years. Walter Kerr, executive director at Unlock Aid, said Integrated PSA offered an opportunity for USAID to show that it was fulfilling these objectives. “Administrator Power herself has said the agency needs to remove ‘unnecessary barriers’ to enable it to work with more diverse partners and improve results, and RFPs like this are opportunities for the agency to walk the walk,” he said. Crowding out innovation With the Integrated PSA contract, USAID appears to have defaulted to “cost-reimbursable” models in which services are delivered for a cost plus a fee for services, according to the Unlock Aid review. This choice of payment mechanisms “crowds-out opportunities for new organizations that have never worked with USAID before.” “The moment USAID uses any element of ‘cost-reimbursable’ methods to pay a contractor, the compliance requirements skyrocket, which discourages and often makes it impossible for new, non-legacy contractors to participate,” the document said. Also, USAID would require contractors to submit “arcane documentation” that was “exceedingly expensive, complex, and time-consuming to obtain,” the review said, adding that legacy USAID partners would already have this documentation but new organizations would not. The review called on USAID to move toward a “firm fixed price” model. The FFP approach pays contractors the same amount for delivering services, regardless of their cost. In theory, this should promote the use of more innovative and efficient solutions while also reducing concerns about mismanagement, because the government only plays for what it gets. The review added, however, that FFP also transfers more risk to the contractor. Lack of transparency The review praised USAID for requiring the winning prime contractor to submit quarterly reports containing key performance indicators, such as on-time delivery. However, the review also said that there is a missed opportunity because the agency will not make these indicators public. In particular, it called on the prime contractor and USAID to publish the amount of work being carried out by subcontractors. USAID has previously focused on subawards as a way of widening participation outside its range of traditional subcontractors. The review expressed concerns that USAID prime contractors frequently recruit subcontractors to make their bids look good and then do not use their services. “Many local partners and innovators expend enormous business development resources just to get on a single winning prime contractor’s proposal but often later see just a fraction of the funding that was promised during the proposal stage,” the review said. “These high costs of doing business – often for little or no financial return – discourage many organizations from wanting to work on large USAID awards managed by bigger contractors.” Adding transparency to the Integrated PSA would protect subcontractors and encourage more agencies to work with USAID, the review added. The review also called on USAID to remove the 70% maximum limit on funding that can be transferred to subcontractors from the Integrated PSA. Instead, it suggested requiring that at least 5% of the Integrated PSA contract be subcontracted to new and underutilized partners whose work with USAID in the previous five years was worth less than $25 million — a definition taken from USAID’s New Partnerships Initiative. USAID amendments In April, USAID amended the RFP to address a number of technical issues raised during the contract’s Q&A period. Unlock Aid said that the amendment largely failed to address issues raised in its review but added that there was still a chance for a future amendment to do so. “In the past, we’ve seen USAID show some willingness to respond to concerns raised by smaller organizations about proposals that inhibit their ability to work more closely with the agency,” Kerr said. “We’re hopeful they will respond again.” USAID did not respond to a request for comment by press time.