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Locally-Led: Operationalizing USAID’s New Vision

February 1, 2022

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Jenna Thoretz

Senior Manager, Global Initiatives, US

In January 2022, Humentum launched a new webinar series, Operationalizing Locally-Led Development, which will delve into the myriad operational challenges of realizing locally-led development. Moderated by Humentum’s CEO, Dr. Christine Sow, the first installment on 12 January unpacked the structural barriers to realizing USAID’s new vision for global development. A panel of experts from across the sector discussed systemic factors like policies and practices that may hinder the ability of local actors to meaningfully participate in the development cycle. Despite the sector-wide momentum on this issue, the panelists concurred that USAID’s ambitious agenda would never come to fruition unless the sector grapples with the structural challenges that inhibit locally-led development.

A History of Reform

Randy Tift, former USAID Chief A&A Policy Officer, began with an overview of USAID’s prior reform efforts to demonstrate why the time is ripe for real change. USAID has been working on locally-led development in some capacity over the past twenty years, with many lessons learned along the way. During Administrator Mark Green’s tenure at USAID, several reforms were made to the Acquisition and Assistance strategy supporting locally-led development. However, many past reform efforts, like Administrator Shah’s Local Solutions initiative, haven’t succeeded. In part, this is due to a lack of support from Congress and the partner community. However, the landscape has changed and there is now tremendous backing from across the sector and a desire to institutionalize this change.

Defining the Role of Local Partners

An essential part of operationalizing USAID’s vision is defining the role of local partners and organizations. For many, locally-led development means that more local organizations will become prime award recipients of USAID funding. This aim is reflected in USAID’s reform efforts, like the New Partnerships Initiative. However, Tift argued that the strategic use of sub-awards is still essential for locally-led development. The relationship between prime and sub-award recipients is explored in USAID’s new Local Capacity Development Policy, which suggests that partnerships are an opportunity to increase transparency, accountability, and local voice.

Professor Gavin Churchyard of The Aurum Institute agreed with Tift and argued that reservations to invest in local partners will persist if they cannot be held accountable . However, mutual accountability and confidence in local organizations will only be achieved with extensive investment in the leadership of these actors. Churchyard stressed that, in the future, the sector must develop partnerships of consequence over partnerships of convenience.

These partnerships of consequence reflect an equal relationship between organizations, with mutual learning and long-term investment as the keys to successful collaboration. Without them, the sector risks simply replicating the traditional structure and function of INGOs at the local level. As Larry Cooley of Management Systems International argued, this would be a shallow approach to locally-led development that substitutes local agents for international ones. Instead, locally-led development must be operationalized in a way that supports local leadership and ownership.

Structural Barriers to Success

While many in the development and humanitarian sectors support locally-led development, structural barriers threaten the movement’s success. For Professor Churchyard, lack of trust in local partners is one such barrier that manifests itself in various ways. For example, USAID contracts are often designed in a way that excludes local organizations from being successful applicants. There is often a disparity in indirect cost rates between local organizations and well established INGOs. While local organizations typically receive the 10% di minimis rate USAID provides, traditional INGO partners receive Negotiated Indirect Cost Rate Agreements (NICRA)  as high as 30 or 40%. Additionally, even when local organizations successfully secure USAID funding, they are often extensively audited. These audits are time and resource-intensive and inhibit organizations from focusing on their missions.

USAID’s often onerous compliance rules also prevent local organizations from receiving or complying with USAID grants, according to Justin Fugle of Plan International USA. In the past, NGOs and other actors have called for increased compliance measures due to fears of fraud and corruption in local organizations. Increasingly, however, actors have argued that most of these fears are unfounded and may be rooted in racism, as argued by Degan Ali in her testimony to Congress. Other US entities, like the Millennium Challenge Corporation and the Inter-American Foundation, provide taxpayer funding to local partners without nearly the same compliance hurdles as USAID. Moreover, these organizations do not face significant challenges related to fraud and corruption. In addition to compliance requirements, staffing issues are another structural barrier to locally-led development. For example, USAID’s local staff  have not been given the authority and incentives that would be required for USAID to grow and sustain internal locally-grounded leadership.

In deciding to lower compliance barriers, USAID and other international donors must be prepared to assume some initial risk when working with new local partners, according to Cooley. While working with new partners may bring new risks and challenges, USAID has the power to improve this process for local partners. Although Congress decides some issues, there are many practices, policies, and regulations within USAID’s direct control that could be altered to support locally-led development. Currently, organizations are often unable to make the initial investment in bidding on USAID contracts; there is little guidance on measuring competitiveness in a non-US-centric way; and the timing of the bid process is often unrealistic for local organizations. These structural barriers can and must be addressed by USAID if locally-led development is to become a reality.

Moving Forward

Considering the number of structural barriers highlighted by each panelist, there is much more work to be done as a sector. Moderator Dr. Christine Sow acknowledged the collective need for the sector to reimagine the world of work and how it should incorporate equity throughout its models and operations. Although there is a temptation to return to the status quo as the threat of the pandemic wanes, the development community must continue to shift power to the communities and geographies where work is carried out. This starts with decentralized decision-making, budgetary authority, and governance and accountability structures. As the system evolves, the role of INGOs in the future is not obsolete, but their role will change.

These shifting roles will cause discomfort for actors in both the North and the South, but power-shifting is not a zero-sum issue. As the world becomes increasingly interconnected, the sector must be agile and adapt accordingly. This is true for every organization, including USAID. In the coming months, Humentum will support our member organizations in navigating locally-led development by convening experts and delving into the key structural challenges to its success.

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