What needs to change for USAID to hit its localization target?

Earlier this month Samantha Power, United States Agency for International Development’s administrator, made a landmark speech with a number of key pledges for her agency. The most prominent was a commitment to increase funding to local partners to 25% within the next four years. Currently, around 6% of the agency’s funding goes to local partners. Power’s ambitious plan has been welcomed by the development community, but with a note of caution. Ten years ago Raj Shah, a previous administrator, made a similar pledge, but later backed away from it in the face of opposition from within Congress and the NGO community. One of the key entities campaigning to strengthen the USAID focus on localization is the Modernizing Foreign Assistance Network, known as MFAN, which promotes more effective and accountable U.S. foreign assistance. MFAN recently reorganized itself, moving from a grant-funded model to a membership-based one. It has appointed an interim director, and a group of co-chairs to lead the transition. Devex spoke to MFAN’s co-chairs about what needs to change to achieve USAID’s goal. Local voices must be empowered Tessie San Martin, chief executive of nonprofit FHI 360 and co-chair of MFAN, said that it’s not just about getting more money to local NGOs. She highlighted another of Power’s commitments — that 50% of all projects must “place local communities in the lead” by having local entities co-design and lead the work. “We often hear discussions about who’s getting the money and implementing the projects,” she said. “But that is just about who’s acting on behalf of USAID. It’s not just about who’s doing the implementing. It’s about whose priorities are being implemented.” If the localization agenda simply means local NGOs implementing western priorities, the project will have failed, San Martin said. “It’s very important to get community voices front and center,” she said. “We’ve seen previously that when international organizations provided training to local entities to go the last mile, those entities ended up leaving behind their own agendas.” That means USAID needs to change how it does acquisition and procurement. “We need to rethink how projects are designed. There needs to be more focus on co-creation to ensure local priorities are understood while the tenders are being drawn up,” she said. Contracts need to be smaller, which means USAID capacity needs to grow Traditionally, USAID contracts have been very large, and most have been won by a small number of suppliers. To increase locally-led development, this model will need to change, said Larry Nowels, former specialist in foreign affairs at the Congressional Research Service, and another MFAN co-chair. Because local entities are smaller than the contractors who have traditionally won USAID work, that means USAID will have to offer smaller contracts. As a result, USAID will need to hire more grant and contract officers, and it is likely they will need to be in the countries where the contracts are delivered. “If USAID wants to give small grants at local levels to local entities, it needs to build the capacity to do that, because it doesn’t currently exist,” Nowels said. “USAID committed to double the number of foreign service officers, as far back as 2007, but they never hit those targets. They aimed to have 2,200 officers, but they topped out at 1,800 or so. And with the hiring freeze during the last administration, USAID staffing fell further. They’re still short of the vision they set 14 years ago.” Similarly, he said, USAID will have to focus on building the bidding skills of the contractors on the ground, to ensure they understand how to apply for grants. And there will need to be a focus on ensuring that these organizations have the reserves and balance sheet strength to receive the funding. Congress and the White House need to offer more autonomy USAID will also need support from elsewhere in government to carry out its plans, said Lester Munson, a principal at consulting firm BGR and the third MFAN co-chair. “It’s not just Congress, but also the White House,” he said. “Both branches of government have a habit of interfering.” This, in turn, requires USAID to get better at reporting back to Congress. More trust will be needed in both directions to give USAID the freedom to carry out its ambition. “Risk management has been an obstacle all along the way,” said Nowels. “How much is USAID increasing the risk it incurs by turning over the money to local contractors? Because there’s a feeling in the agency that Congress is just waiting to say ‘Hey, look, you lost the money’.” However, he said that in recent years the Millennium Challenge Corporation, another aid provider, has taken some less than favorable results back to Capitol Hill and found they were well received for their honesty. “That should cause some reflections within USAID that maybe they’re overly risk-averse,” he said. Western contractors will need to offer support The final change will need to come from western contractors, said San Martin. While ten years ago, there was reluctance or hostility among NGOs towards USAID’s localization agenda, now the reception is more positive. “The responsibility is on contractors in the global north to support this movement,” she said. “At the moment, our business model is based on winning large service-level contracts and then subcontracting, and we’ve seen that’s not the way forward. We have to think about how our role is changing. “There is huge recognition that circumstances are changing. There’s buy-in to the idea of doing things a different way. But now making that happen is a challenge.”