USAID's private sector engagement policy takes shape

WASHINGTON — The U.S. Agency for International Development launched a new private sector engagement policy late last year, and since then the agency has been staffing up and drafting plans as it works to implement greater engagement with companies across its geographies and sectors. There hasn’t been a big push to create new partnerships — though there have been a few announcements. Much of the work in recent months has been on changing USAID’s systems, operations, and culture in line with the policy, said Sarah Glass, acting director of USAID’s Center for Transformational Partnerships. “One of the things we have heard from the development partner community is that sometimes USAID awards are too restrictive to enable creativity to engage the private sector in their work.” --— Sarah Glass, acting director of USAID’s Center for Transformational Partnerships In the past six months, USAID has identified private sector engagement points of contacts for nearly every USAID mission and all of the sectors and regions at headquarters. That group of people will be leading the implementation and the creation of private sector engagement plans. USAID has provided countries with a strategic framework and a series of guiding questions to help structure their private sector engagement plans, but each plan will be country- and sector-specific and developed at the local level. All USAID missions will submit their private-sector action plans by the end of the year alongside their typical annual planning cycle, though a few missions have volunteered to complete their plans this summer to serve as examples for others. Teams at USAID headquarters are also developing private sector engagement plans. “We didn't provide a specific template to say, ‘Here's what you must do’ because we really didn't want this to be a ‘check the box’ exercise. We wanted it to be a plan that was workable for the mission in the way that they most needed it to work,” Glass said. In addition to having a private sector engagement point of contact, some missions have also set up cross-sectoral working groups to think through the role of the private sector in global health, democracy, rights and governance, and agriculture in addition to economic growth. To support this work throughout the agency, USAID has been hiring — it recently added a senior private sector engagement adviser in an effort to add development finance knowledge to the team in Washington, D.C., and Glass said that more positions will be posted soon. “A lot of this next year ahead will focus on that talent strategy component across the broader agency, but first we have needed to have some hires into our USAID Washington team so that we're prepared to provide the support that's needed,” she said. The Center for Transformational Partnerships and the Office of Private Capital and Microenterprise are jointly leading the private sector efforts at USAID, but if Congress signs off on USAID’s reorganization plans, they will come together in a new private sector engagement hub that will manage the work. Seeking input USAID brought together implementing partners for a workshop about the new policy, potential barriers and constraints in implementing it and sample procurement language the agency was considering related to engaging the private sector. “One of the things we have heard from the development partner community is that sometimes USAID awards are too restrictive to enable creativity to engage the private sector in their work; sometimes USAID procurements are not seeking those market-based approaches,” Glass said. The workshop was aimed at getting input from implementers to improve procurement language and determine what might work best. That feedback will be incorporated into a guide for implementers that will serve as a companion document to the policy, she said. USAID is also taking feedback from a subcommittee of the Advisory Committee on Voluntary Foreign Aid, or ACVFA, which has reviewed the policy, interviewed staff, and offered recommendations about staffing; talent and skills; leadership and culture; and implementation mechanisms. Among the recommendations are that USAID ensure that private sector engagement is focused on local companies and not just multinational corporations, and that the agency gets the linkages right with the new development finance corporation. Glass said a meeting between the subcommittee and USAID Administrator Mark Green was “really good” and that the agency is working through next steps on how to incorporate some of the recommendations. Due diligence Due diligence processes at USAID aren’t changing — they will continue to be decentralized and conducted by the operating unit looking to develop a partnership with the private sector. The Center for Transformational Partnerships provides guidance and a template to others in the agency on due diligence, but the work is best conducted locally, Glass said. Those guidelines are published online so that all partners can understand what factors USAID is assessing. “Overall one of the things we feel really strongly about is that partnering with the private sector has to enable better development results or it's not something that we should do. And so as you do your due diligence, it has to focus on where is there additionality in this activity,” she said. “How is this helping us lead to greater scale, greater sustainability, greater effectiveness, greater efficiency than we could have on our own. And if we're not, then that's not an activity that we should undertake.” USAID always starts with the development challenge — asking whether collaboration with the private sector could help address it. It also evaluates the potential downsides or unintended consequences when it assesses a partnership, Glass said. It did so with a partnership announced in June with PepsiCo aimed at addressing food and water challenges by improving agricultural productivity. “One of the roles that USAID plays is to hold private sector companies accountable for having a positive impact on the world in their social impact and in their environmental impact.” --— Sarah Glass, acting director of USAID’s Center for Transformational Partnerships “In the case of consumer packaged goods companies like Pepsi that are developing a broad range of different products, the answer that we have come to is that the downsides don't outweigh the positives, for example, improving the empowerment and the livelihoods of women in their very large global supply chains,” Glass said. “One of the things that we were explicit about in the new policy is that one of the roles that USAID plays is to hold private sector companies accountable for having a positive impact on the world in their social impact and in their environmental impact,” she said, adding that USAID should be part of the conversation as companies are looking to improve their social and environmental impact. Looking ahead The challenge ahead is to ensure that USAID better understands the role and potential impact of the private sector and integrates it into the development strategies, she said. A key part is assessing “where the development benefits make sense and offer something valuable to the community in which we are working.” “The question is not should we engage the private sector, the question instead is how.” --— Sarah Glass, acting director of USAID’s Center for Transformational Partnerships To that end, USAID recently published a Private Sector Evidence and Learning Plan that will guide USAID’s work in building evidence around how to best engage the private sector and in identifying the right metrics to measure success in this field. “The question is not should we engage the private sector, the question instead is how. What works and what doesn’t work … and how are we better building that evidence around what does make good sense, what does increase our development impact,” Glass said. In the past, USAID has often measured private sector engagement based on how many dollars it has leveraged in partnerships, but that “doesn’t always equate to greater development impact,” and so in many cases, in not the right indicator, Glass said. The plan outlines three qualitative learning questions the agency is focused on: how and to what extent does private sector engagement improve development and humanitarian outcomes; which specific factors drive effective engagement with the private sector and which private sector engagement relationship qualities influence results. USAID has found that certain types of relationship, governance of agreements, or level of engagement can impact success, so it plans to better document what is working so it can define best practices. “We're going to spend the next year working to develop a more meaningful set of indicators so that we're not just focused on what are the dollars leveraged but that instead we have a small set of indicators that are better incentivizing the kinds of collaborations that we're looking to develop,” Glass said.