Authors: Sebastian Chaskel, Benjamin Stephens, Avnish Gungadurdoss, and Richard Crespin – CollaborateUp
Key Insights from the Article:
The United States Agency for International Development (USAID) is facing significant challenges in its foreign aid procurement. But there is an opportunity to overhaul and fix the inefficiencies in the system.
1. Current Contracting Challenge
There’s a critical issue with USAID’s current contracting and funding model. The current approach emphasizes administrative compliance over actual performance, which is creating significant strategic disadvantages for the United States in global development and geopolitical competition.
2. Competitive Landscape Implications
The current contracting model is causing the United States to lose strategic global influence. Developing nations are increasingly turning to alternative funding sources – particularly from competitors – that offer more flexible, though potentially riskier, funding mechanisms.
Proposed Solution: Fixed-Price Procurement Model
The key recommendation is a fundamental shift to a Fixed-Price Procurement Model, where:
– Payments are directly tied to specific measurable results.
– The burden of proof shifts to requiring written justification for NOT using Fixed-Price contracts by US agencies.
– This approach would incentivize outcomes-based implementation not just effort.
By transitioning to Fixed-Price Procurement models, USAID has opportunities to:
– Reduce administrative bureaucracy
– Incentivize performance and results
– Streamline procurement processes
– Expand the potential partner base, especially for smaller organizations
– Improve global competitiveness
Implementation Strategy
The article recommends the following drive and lead in terms of transition from the Office of Acquisition and Assistance (OAA):
– Developing a comprehensive framework.
– Establishing clear milestone and outcome criteria.
– Retraining staff.
– Providing continuous implementation support.
Furthermore, USAID needs to be more active not just because of geopolitical competition, but also because the world is failing to meet its SDG agenda and being more results based can help with being more efficient in a resource constraint environment (declining ODA).
How Can Fixed Procurement Models Help
Fixed-Price procurement models offer multiple benefits. Aligning risk and reward for achieved milestones leads to a results-driven culture, reducing costs plus administrative burdens, and allows for more and diverse organizations to partner up with USAID. Additionally, this model can incentivize paying for results beyond USAID to other multilateral aid agencies like WHO, UN etc.
This makes it cost effective and flexible in achieving results. All of this leads to faster adaptability and increases accountability as payments are based on verifiable results.
Other Recommendations
1. Make Fixed-Price the Default Procurement Mechanism
– Require written justification for not using Fixed-Price models
– Create a phased approach for implementation
– Develop exemptions for specific sectors like humanitarian assistance
2. Establish a Dedicated Team
– Create a specialized team within USAID’s Office of Acquisition and Assistance (OAA)
– Focus on designing and implementing Fixed-Price agreements
– Develop guidelines and sector-specific recommendations
– Capture and learn from initial implementation experiences
3. Launch a Comprehensive Change Management Program
– Retrain Contracts and Agreements Officers
– Shift organizational culture toward results-based thinking
– Develop training programs and toolkits
– Create internal incentive structures
– Involve the congress and key stakeholders for early buy-in and adoption, easing the transition and communicating the changes effectively