"Localization" in USAID Programs?

USAID development programs are delivered in large part by “solution integrator” companies, which are either organized for-profit or are non-profit.???These have also been called "project management companies", "management consultants", "advisory firms", or, on the non-profit side, "501c3" or charitable organizations.?

The majority of them (certainly non-profits and most USAID for-profit contractors) do not sell similar (or any) services in commercial markets, except for, maybe, the original management consulting integrators, like Deloitte or Accenture, or, an occasional construction company that wonders into this space.??

This means that most USAID contractors/grantees’ major clients are either Bilateral or Multi-lateral Agencies (“donors”) or other US and non-US governmental agencies.

If you remove all “donors” or all “government” from this scenario, only a hand full of such companies will survive – mostly those who either have a commercial sales arm or privately funded non-profits that have funding sources outside the beltway.

So, where does “localization” fit in???What is the “localization” of USAID programs exactly, in the context of how USAID traditionally designs and funds its programmatic efforts?

Is the purpose of “localization” to shift the “integrator/project manager” aspect to locally registered companies in "development" countries???And if so, what would this accomplish??

Most of these countries do not have large government-funded management consulting “integrator” industries, simply because there is no sustainability aspect to such business models without a massive market for their services.??

Are we proposing to create a new industry of locally-led management consulting firms and NGOs who survive by implementing USAID and Multi-Lateral donor programs???

What is the sustainable purpose of creating such an industry unless USAID and International donors plan to stay in that country forever (which is hardly the point)?

Unless there is a post-donor market for such “consulting” firms or non-profits to conduct commercial business or receive private grant funding, this “localization” solution does nothing but shift short-term gains to a temporary industry.??Then there is a local taxation aspect, as well as compliance, accountability, and local oversight jurisdiction issues – all of which should be a concern for US taxpayers, which fund the foreign aid programs.

Having said that, increasing the amount of foreign aid $$$ that reaches actual beneficiaries, and decreasing the amounts spent on administration and compliance is a very good idea and should absolutely be an important objective in USAID's and any foreign aid agency's efficiency planning.

Making compliance simple by rewriting cumbersome regulations and providing access to information & support for implementors and contracting personnel would certainly move the needle greatly in this regard. But I can also logically see other ways to increase “locally” led and implemented work under USAID programs:

1.?????Increase direct purchasing of services from existing commercial local businesses and increase direct funding of locally-led innovative grant applications from local NGOs by USAID OAA in-country

and/or

2.?????Increase local subcontracting or granting targets in larger USAID contracts/awards and encourage best (measurable) efforts for large US and International “development” integrator contractors and NGOs.??This could be easily done the same way Small Business Participation is administered in USG programs, by creating a plan, rating the plan in proposals, and rating compliance with the plan during performance evaluation or fee awards.

Some of the barriers to #1 are a) lack of USAID staff in-country who can award, administer, and closeout multiple relatively smaller actions and b) lack of tools that such USAID staff must have to remove barriers to entry for local companies. Most local companies and, in fact, most commercially successful private sector companies in general, are not willing to re-build their business systems to comply with US Government rules or comply with jurisdictional rules outside their familiar legal frameworks.

Some of the solutions to #1 may be:

• Training of USAID COs and specifically Local A&A Specialists (who may become COs) on the use of innovative contractual or grant instruments within existing regulatory frameworks
• Increase issuance of commercial item contracts or other similar instruments that resemble local commercial practices
• Increase outreach to local businesses by creating industry days to explain the benefits of partnering with USAID
• Explain how USAID funding can assist the companies in developing and commercializing Intellectual Property Rights?
• Explain how USAID Co-Funded R&D could contribute to the commercial success of co-funded products/prototypes
• Explain Corporate Social Responsibility/Image and how it can be used locally ( allow for co-branding)
• Provide Market Entry to US non-traditional partners by matchmaking with local companies?

The solution to #2 is to require Local Contractor/NGO participation plans from US and International Implementors and award additional performance incentives (monetary or otherwise) for inclusion and efficient use of local partners which mirrors the #1 solutions above.

Thoughts?