Why Unlock Aid is pitching USAID on a 'DARPA for Development'

Like many other tech companies, BAO Systems has faced a number of frustrations in trying to work with the U.S. Agency for International Development, according to its CEO, Steffen Tengesdal. As a subcontractor on USAID projects, his company found itself spending much of its limited time and resources helping prime contractors win bids — with little reward for BAO Systems, which often got little or no work, let alone financial benefit, from the deal. “We were simply used as ‘window dressing’ for the proposal as a small business and one that can deliver on the technical portions of a contract that USAID knows the ‘big dev’ prime contractors have often struggled with,” Tengesdal told Devex in an email. He learned that BAO Systems, a small business focused on data-driven decision-making for health and development, was not alone in seeing challenges while trying to partner with the agency. Rather, the issues are systemic. USAID, the world’s largest funder of development assistance, funnels most of the $20 billion it spends on projects annually to huge government contractors it has worked with before. That makes it nearly impossible for new and innovative technology companies to break in. In response, Tengesdal and other leaders of startups focused on development issues have formed Unlock Aid, an advocacy organization with ideas for how USAID can make itself more accessible to potential technology partners. Among the founding members’ first moves after its September launch was sending a letter to USAID Administrator Samantha Power asking her to consider them partners in streamlining the agency’s procurement rules. “To meet the challenges of the 21st century, USAID needs to attract the world’s best innovators, both inside and outside of the agency, and creating the conditions for this to happen will require hard work, policy changes, and leadership,” the letter reads. Their goal, they added, is to help “transform USAID into one of the most results-oriented, innovative aid agencies in the world.” Unlock Aid’s policy agenda calls for USAID to dedicate $1 billion to create a “Technology for Development Hub” that would fund research and development and scale proven technology interventions in countries where USAID operates. Unlock Aid refers to it as a “DARPA for Development,” in reference to the Defense Advanced Research Projects Agency, which develops emerging technologies for the U.S. Defense Department. Unlock Aid also wants USAID to hire more personnel with private sector and technology experience and increase the number of contracts that provide payment for outcomes rather than activities — and, in doing so, expand partnerships with technology-enabled companies beyond narrow applications. Previous efforts to shift USAID’s procurement practices have tended to focus on localization, or funding organizations in the countries where the agency operates. It remains to be seen whether USAID will embrace ideas put forward by Unlock Aid, whose membership includes some in-country groups such as Ghana’s mPedigree, which builds technology to address counterfeit medicines and other challenges. But Unlock Aid’s timing might be just right. Between the combination of people involved in the effort, a USAID administrator who has expressed interest in taking on the aid establishment, and Unlock Aid’s proposals for change, the group’s work could help remove some of the barriers that stand in the way of USAID partnering with international development innovators, as well as local partners and small businesses. Becoming a prime contractor Power is not the first USAID administrator to speak about ending the agency’s dependence on large contractors. Some of her predecessors have tried to tackle this problem through programs such as Development Innovation Ventures, Saving Lives at Birth, and the New Partnerships Initiative — all of which were designed to create ways for potential partners to work with the agency. But these innovation efforts hold little influence over the way USAID allocates most of its funding through its programs: putting contracts out for bidding that tend to go to the same contractors or their spinoff affiliates. Whether they are social enterprises in emerging markets or tech startups in Silicon Valley, smaller organizations have a hard time becoming prime contractors, no matter how promising their technology offerings may be. Zenysis Technologies, a San Francisco-based startup focused on big data and artificial intelligence for international development applications, is a founding member of Unlock Aid that has tried — and failed — to become a prime contractor for USAID work. The company has been a prime contractor for projects with the Global Fund to Fight AIDS, Tuberculosis and Malaria; Gavi, the Vaccine Alliance; and the Bill & Melinda Gates Foundation. But so far, it’s only served as a subcontractor for USAID. Last year, Zenysis applied for a COVID-19 funding opportunity with the New Partnerships Initiative, which launched in 2019 under then-Administrator Mark Green. The application was cumbersome, in part because the company does not have the same resources to put together concept notes that major contractors do, according to Sara Pacqué-Margolis, Zenysis’ vice president of growth. USAID did not select Zenysis, and due to the volume of submissions, the agency could not provide feedback. Pacque-Margolis wrote back to USAID to give the agency some feedback of her own. “If you’re going to have a new partners initiative, gear it to new partners in all of their forms. Make it worth their while,” she told Devex. “And let them learn from it.” Zenysis has also encountered a frustration shared by many of Unlock Aid’s founding members: Prime contractors list smaller technology companies as partners in their USAID proposals as a way to check a box — only to cut them out of promised work after the awards are received. And even when Zenysis is involved in USAID projects, prime contractors often see subcontractors as interchangeable, failing to understand the nuances of what various tech partners have to offer, Pacque-Margolis said. “[Unlock Aid’s] members represent innovations that can solve problems, but they’re locked out of how USAID spends its money.” --— Macon Phillips, interim executive director, Unlock Aid How Unlock Aid took shape Technology solutions that reduce head count and deliver faster results make less money for prime contractors, Tengesdal said. He wanted to help start what some call a “procurement renaissance” at USAID, but he knew BAO Systems was too small to take this on by itself. So Tengesdal teamed up with Walter Kerr, previously of Zenysis, and Macon Phillips, a digital strategy expert who has worked in politics, government, and international development. Together, they began forming a research project that would evolve into Unlock Aid. Interviews with 70 organizations uncovered how USAID was missing an opportunity to partner with tech innovators. That led the team to shift from research to advocacy. Ben Hubbard, the CEO at Parsyl — a technology company offering a “connected insurance solution for essential supply chains” — said he was drawn to how Unlock Aid brought together organizations with similar concerns and offered itself as an ally to USAID. “I had zero interest in joining an organization that whined about big contractors, because everyone does that and everyone is frustrated by that. And it’s old news,” said Hubbard, who was previously a chief of staff for former USAID Administrator Raj Shah. For some opportunities, many of Unlock Aid’s founding members have given up on USAID, leaving public money on the table. Instead, they choose to partner with the Gates Foundation and other philanthropic funders, which tend to be more nimble. “The international development sector is full of business models inconsistent with solving problems,” said Phillips, who is now Unlock Aid’s interim executive director. “Our members represent innovations that can solve problems, but they’re locked out of how USAID spends its money.” Unlock Aid is beginning with USAID but hopes that it can expand to other development agencies, too. The challenge of changing rules and incentives Unlock Aid may find it has a receptive audience in USAID’s front office. Power has suggested that she wants to expand the agency’s list of implementing partners beyond a select group of contractors to encourage healthy competition and new approaches. She recruited Don Steinberg, an international development expert who pushed the localization agenda as Shah’s deputy administrator, to support efforts to direct more funding to local partners. “The USAID team is reviewing the ideas proposed by Unlock Aid,” a USAID spokesperson told Devex via email. “We are always happy to hear from those with new ideas on how to innovate and best serve those most in need.” Lawmakers have also demonstrated interest in diversifying USAID’s partner base, with Sen. Tim Kaine, a Democrat from Virginia, and Sen. Marco Rubio, a Republican from Florida, introducing a bill to support the New Partnerships Initiative. Unlock Aid builds on past efforts to bring innovation to the agency, which have bumped up against challenges related to culture and bureaucracy. There are no easy ways for innovations that have emerged through efforts such as the U.S. Global Development Lab to scale within USAID or the development community as a whole, said Maura O’Neill, who was chief innovation officer at the agency and is currently an adviser to Unlock Aid. Staffers are “understandably fearful that if a different approach proves significantly better, would they lose their job?” she said. But the problems that USAID is trying to make progress on, such as achieving the Sustainable Development Goals by 2030, require new approaches, O’Neill said. “Could you go through the places where we want to move the needle on the SDGs and think about it in the way we thought about developing a COVID-19 vaccine or putting a man on the moon and bringing him back safely?” she said. “That’s the kind of thing that needs to happen.”