New Details on USAID Contracting Reforms: A Shift to Local Partnerships

The U.S. Agency for International Development is pushing ahead with plans to reduce its reliance on large contracts and to deliver more aid money through country systems and local organizations, according to documents that provide a detailed look at the ongoing reform of the agency’s procurement practices. The changes are in step with the Obama administration’s promise of changing the way U.S. delivers foreign aid and, in the process, reduce its reliance on large-scale, indefinite quantity contracts. “If you think of country systems, they are like muscles and they only get stronger when they’re used,” said Porter McConnell, Oxfam America’s policy advisory for aid effectiveness, referring to U.S. plans to partner more with local organizations in the developing world. “So the best way the U.S. can strengthen these systems so that they can deliver services to citizens is to actually use those systems.” In a guest post on the Modernizing Foreign Assistance Network blog, McConnell said the implementation and procurement process is “taking the concept of country ownership and making it real.” The international development industry in the U.S. has been consulted throughout USAID’s ongoing reform process, Alan Chvotkin, executive vice president and counsel of the Professional Services Council, told Devex. He explained that USAID staff have consulted and briefed PSC, a trade association for companies providing technical and professional services to the U.S. government, on the proposed changes to the agency’s contracting practices. “We are familiar with it,” Chvotkin said. The reform has six main objectives: strengthening the capacity of USAID partner governments, strengthening private sector and local civil society capacity, increasing competition and broadening the agency’s partner base, using U.S. resources more effectively and efficiently, boosting U.S. ties with other bilateral and multilateral donors, and rebuilding the agency’s internal technical capacity. The process, which USAID refers to as implementation and procurement reform, or IPR, appears in line with the Obama administration’s goal of changing the way it does business in terms of international development, a commitment that President Barack Obama, U.S. Secretary of State Hillary Clinton and USAID Administrator Rajiv Shah have emphasized on numerous occasions. McConnell and Chvotkin said their organizations will remain engaged in the ongoing reform process. Oxfam and its partners will be closely monitoring the reform process to make sure it is translated into reality, McConnell said. PSC will be working with its members to identify follow-up questions and suggestions. End of large-scale contracting? To achieve its reform goals, USAID is exploring ways to reduce its reliance on large indefinite quantity contracts and “Leaders with Associates” grants. According to a USAID presentation, given in July, the agency will increase the number of its fixed-price contracts as well as stand-alone grants and contracts awarded by its operating units. Individual task order ceilings are set to be imposed on IQCs for 2011. Chvotkin explained that in his understanding, the proposed reforms will not affect existing USAID contracts but are likely to impact future contracting opportunities with the agency. There will be a move away from large multisector IQCs, he said. Some contracting practices appear to be in line for elimination, including time and material contacts for activities beyond 90 days, the three-year extension option for five-year IQCs and the option for extending LWAs beyond the five-year base period. There is also indication that new LWAs will be phased out in 2011. The IPR’s focus on large-scale contracts comes as no surprise. Shah told the U.S. Senate in April that the agency was reviewing its largest contracts. “We’ve already put aboard an acquisition review in place to review all contracts over $75 million, and we will take that further in having really specific detailed guidelines for procurement reform that are fundamentally based on the premise that we should be doing much more work in-house, especially related to program design and oversight,” Shah said. >> USAID Contracting Reforms Slated for June, Shah Tells Congress Increased opportunities for local organizations Aside from providing more aid through country systems, USAID’s wants to improve its engagement with organizations and businesses in partner countries. The agency plans to mandate its country missions to set aside at least $2 million in program funds and issue these as grants to local non-governmental organizations. It is also considering developing simple eligibility procedures for local NGOs and improving their capacity to write grants and reports, among other qualifications that would allow them to better compete for USAID grants and contracts. In addition, USAID plans to require its primary contractors to use small U.S.-based businesses and local NGOs and companies in partner countries as subcontractors for more substantive program components. Enforcement procedures will be put in place to ensure primary contractors’ compliance, according to USAID documents. Medium-term targets What do these reforms and plans translate to in real, numerical terms? Medium-term targets prepared by the agency’s procurement reform group provide actual figures. Based on the targets, USAID would channel 20 percent of its program funds through country systems in at least 25 partner countries by fiscal 2015, up from the less than 10 percent of program funds it currently provides through such channels. USAID would increase its direct grants to local nonprofit organizations to 6 percent of program funds, from the current 2.46 percent. The agency would also increase its direct contracts to private businesses in partner counties to 4 percent and increase the number of its local partners from the current 332 to 600. To broaden USAID’s partner base, the procurement reform group recommends that the agency channel 5 percent of its program funds through contracts with U.S.-based small or disadvantaged businesses in 2015. The group also suggests an increase in the number of USAID’s fixed-price contracts for equipment and commodities. Meanwhile, on improving its relations with other donors, USAID said it will revise relevant policies and guidelines over the next 15 months. 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