It's now or never for NextGen reform
A recent investigation into a USAID $9.5 billion contract is an indictment of an old-world, top-down foreign aid model that is too dependent on DC contractors and management consultants
Dear Unlock Aid Community,
Last week, Devex and the Bureau for Investigative Journalism published a long-form investigation into USAID’s largest-ever foreign aid contract, the agency’s $9.5 billion Global Health Supply Chain award.
Entitled “‘Too Big to Fail:’ How’s USAID’s $9.5B Supply Chain Vision Unraveled,” the joint investigation is an indictment of an old-world, top-down aid model that funnels money via Washington, DC government contractors and expensive management consultants instead of working directly with highly capable, country-level service providers who are embedded within and accountable to the communities they serve.
It’s also the latest reminder of the perils of depending so much on a handful of big management consulting firms that have built their businesses around the business of winning government business – rather than working directly with the world’s best service providers to solve the planet’s hardest problems.
The joint Devex–Bureau for Investigative Journalism report found:
Allegations of shifting the goalposts to make performance look better than reality, for example, by “adopting easy targets and writing off bad results.”
Serious questions about the cost and sustainability of the agency’s $9.5 billion global health investment. An independent evaluation of the investments in one country found they were “unlikely to have any transformative or sustainable effect on the ‘supply chain.’”
Evidence of lack of relevant supply chain expertise or country context needed to successfully run the project. According to one contractor, “We had procurement analysts who were just making it up,” the first former employee said. “We had trash data, and then we had people who didn’t understand how humanitarian aid cargo actually worked. … It was a disaster waiting to happen.”
Now, under USAID Administrator Samantha Power’s leadership, the agency has put up for public tender a renewal to the $9.5 billion contract, but this time with an even bigger price tag – $17 billion – as part of a package of nine separate, 10-year contracts referred to by industry insiders as the “NextGen” awards.
“NextGen will be the largest-ever set of awards from the agency and one of the largest sets of awards currently being tendered anywhere by the U.S. government,” Devex reported in a previous story, “So big, in fact, that two of the larger Department of Defense contractors are understood to have abandoned their usual stomping grounds and joined the rush to bid for them.”
Rather than doubling-down on a status quo model that is not working, USAID can instead use these contracts to show that a new way to invest in global development is possible.
Enable existing in-country service providers to compete directly
Each of the NextGen contracts are presently set to be issued out of Washington, DC, so local and national healthcare and logistics companies have no shot at even submitting a bid, let alone winning – even though these firms deliver all kinds of goods to last-mile communities every day. Instead, USAID should disburse more of the $17 billion via its overseas missions. Then, let host country governments and USAID missions jointly select which service providers they want to use against lists of pre-vetted, in-country providers.
Unleash the creativity of private sector innovators to build markets
In those countries with a fast-growing private sector, USAID and the U.S. International Development Finance Corporation (DFC) could work together to rapidly build out the capabilities of existing technology, healthcare, and logistics service providers by providing them with blended finance transactions to displace the role of expensive government contractors altogether, including by offering companies a mix of working capital to help companies expand their footprints and other capabilities coupled with revenue in the form of pay-for-performance contracts.
Increase accountability by paying for results
Most of the NextGen contracts will pay contractors for their time and effort and reimburse for costs incurred instead of paying them to deliver results. Instead, USAID should pay contractors to deliver results against publicly-available, predetermined, and ambitious metrics, such as high on-time delivery targets. Meanwhile, USAID should also transparently publish on a regular basis the performance metrics for every country and contracted service provider.
You can see our full list of recommendations here.
Defining a legacy
When she first took office, USAID Administrator Samantha Power promised a “new model” for global development. And in the months since, her leadership team has put in place new policies that reflect her bold vision. This includes a new Policy Framework and an Acquisition and Assistance strategy that can reshape how USAID spends more than $100 billion over the next four years to shift more resources to new and local partners to better position the United States as a partner of first resort, work more with the private sector, and pay for results instead of activities.
The question now is if good implementation will follow good policy.
As the Devex – Bureau for Investigative Journalism joint investigation so painfully shows, USAID needs to start implementing these promised reforms now, starting with the $17 billion NextGen contracts. After all, if USAID won’t use these awards to take on business as usual, when will it?
The good news is there’s still time. With the exception of one of the nine NextGen awards – a $105.9 million contract that USAID awarded to Deloitte in July to build a software application as a part of a solicitation where competition was restricted to just legacy government contractors – USAID has yet to make funding decisions regarding the rest of the $17 billion. That means under Administrator Power’s leadership, USAID can avoid repeating its mistakes of the past.
At a time of growing global needs, and with public and Congressional skepticism on the rise regarding the value of our global development investments, we need to show that new, more 21st-century models are possible. We need your help to tell USAID to start now with NextGen.
P.S. Your voice can make a difference. In July, the U.S. Senate included in its spending legislation language that would require USAID to report on its plans for the “the design and implementation timeline of an aid delivery pilot program in which payments are made directly to logistics, technology, and healthcare providers only after verification of successful delivery targets.” Now we’re waiting for Congress to pass this bill.
Call or write to the Appropriations Committee’s State and Foreign Operations Subcommittee Chair Senator Chris Coons (D-DE) and Ranking Member Lindsey Graham (R-SC). Thank them for “including language that requires USAID to pilot new, more innovative models for global health supply chains in the State and Foreign Operations spending bill. Please make sure to fully fund USAID and to ensure this language is retained in the final bill that Congress sends to the President.”