Will this change to federal guidance speed up USAID localization?

The United States will soon be changing the way it gives out grants, the result of federal budget guideline revisions that will affect every government entity — including the U.S. Agency for International Development — later this year. It’s the result of a two-year process led by the White House’s Office of Management and Budget, which aimed to reduce the administrative burdens on the government’s new, smaller partners. It’s something USAID has been pushing for, especially amid the agency’s efforts to shift more money toward local organizations. But with USAID in the middle of a years-long staffing crisis, it won’t necessarily find it easy to adapt to the new way of doing things — a fact highlighted by Jami Rodgers, the director of USAID’s Office of Acquisitions and Assistance, at the agency’s latest business forecast update, at the end of last month. “These new changes to the federal assistance regulations will impact the way USAID works with every single assistance recipient, no matter the technical sector or the location,” Rodgers said. He called the revisions “the most sweeping updates” in the last decade, with major implications for how USAID works with new partners. Experts in bidding for USAID funds agree that the proposed changes are good, but they also have concerns. “Overall, these changes are very good. It makes it easier for new and emerging non-U.S. organizations to enter the USAID market,” said Chris O’Donnell, the founder of Development Essentials, a company that helps organizations win USAID grants. “But obviously, there’s some training and education on the USAID side and on the implementer side, too.” ‘Sweeping’ revisions Beginning this October, there will be a change to the de minimis indirect cost rate for new partners of the American government, allowing organizations to use up to 15% of their grants to cover operating expenses. That’s a 5-percentage-point rise from the current standard. The change will be particularly helpful for new partners, Rodgers explained, especially those without the capacity to negotiate for an overhead rate with the multibillion-dollar agency. Next, there are revisions to the SAM.gov registration requirements, which are necessary for any organization, corporation or entity to get paid by the United States government. An earlier rule allowed exceptions for foreign groups receiving an award of less than $25,000, Rodgers said — but the new revisions will allow USAID to exempt a foreign organization from registering in the SAM system if their awards are less than $500,000. It’s an attempt to drive down the administrative burden that is often a pain point for smaller, local organizations, and to reduce the bureaucratic hassle that often comes with working alongside the U.S. government. For Mike Shanley, who founded AidKonekt to help organizations work with the multibillion-dollar agency, revisions like these will result in two positive outcomes. The first is the practical implications: It will be easier for smaller organizations to recover costs, for example, with a higher overhead rate. But the second, Shanley said, is what those changes signal to organizations across the world. “This really puts new action behind USAID’s partnerships initiative and localization agenda and says: Not only are these the priorities of the agency, but here are actual, practical steps that USAID is taking to make it easier for new partners,” said Shanley, who also hosts the Aid Market podcast, which shares insights on funding trends. “There are millions of dollars being spent in various ways to do outreach to new partners, and to make it easier [for USAID] to work with those new partners.” There’s also a revision related to translation: Once the changes to the federal guidance go into effect, USAID will be able to receive final applications, documentation, and reporting in languages other than English. And, there will be an elevated ceiling for fixed-amount subawards, which provide payment to a subgrantee based on fixed amounts for predetermined milestones. These awards can ease administrative burdens for both USAID and the awardee, and are primarily reserved for projects with measurable objectives — such as workshops, policy papers, and other programming. The revisions will raise the maximum value of a subaward from $250,000 to $500,000. Rodgers explained that change will improve prime recipients’ ability to partner with “smaller, newer and less traditional local partners who are the most common recipients of fixed amount subawards.” “Clearly, the agency wants to move in this direction: Toward cutting red tape, and increasing a focus on results,” said Walter Kerr, the co-executive director of the advocacy group Unlock Aid. “It’s also been a major driver of the administrator’s big burden reduction program to make it easier to work with USAID. So, all of these changes are really welcome developments.” Keeping up By opening the doors for local partners in these ways, USAID will take on a great deal more work, experts told Devex. At the same time, the agency is grappling with an ongoing staffing crisis among contracting officers, who are responsible for designing, awarding, and overseeing contracts and grants. In 2022, USAID Administrator Samantha Power set the stakes: The workload of an individual contracting officer at USAID had increased by nearly 40% since 2015, while staffing for those positions had decreased by 3%. During a similar timeframe, USAID reported that the average contracting officer at the development agency managed $77.6 million in grants and contracts — five times higher than the $14.7 million managed by those at the Department of Defense. In fiscal year 2022 alone, the agency reported the workload for USAID contracting officers averaged $108 million per individual versus $11.6 million per individual at the Department of Defense. “What is the straw that breaks the A&A [USAID’s office of acquisition and assistance] camel’s back?” asked Charles Pope, a former senior contracting officer for USAID who now leads Pope International, which focuses on international development contracting. “Has it already happened? These workloads are unsustainable.” In the latest business forecast, Rodgers mentioned that the bureau’s progress had “remained steady,” but he didn’t offer hiring or vacancy numbers. USAID is still hiring operations staff in Washington, he mentioned, along with foreign service contracting and agreement officers across the world. But during a recent Aid Market podcast with Shanley, Rodgers mentioned that between 2018 and 2023, USAID obligated more than double the money toward programming — stating that “the lines of hiring kind of remained flat,” and that USAID “didn’t really move the needle on the makeup of the team.” “As we’re looking at the challenges that face the workforce, I’ve asked our folks to look at opportunities to streamline and improve how we do business, and that includes burden reduction efforts and reducing barriers,” Rodgers told Shanley. It’s something the agency is working on: Doubling down on staffing needs while also, welcoming new partners into the mix. But while USAID continues pushing toward its localization targets, others are urging the agency to prioritize internally first. “I can see [the federal guidance] really affecting the workload. You will probably get many more applications because most of these changes make it easier to apply,” said Pope. “I suspect there will be more applications — and those applications have to be looked at.” Update, Jul. 17, 2024: This article has been updated to reflect that the revisions will raise the ceiling of fixed subawards, not the floor of fixed subawards, to $500,000.