Let’s Be Real: Time to Rethink How to Help Local Sustainability
By Carol J. Yee, COO
Within the USAID world of international development, many people talk about building the capacity of local organizations to become sustainable, so that U.S. implementers will work themselves out of a job because aid will no longer be needed. Let’s be honest – is the USAID network of large and small businesses and not for profits really working toward this transformation? Or are we trapped in behavior and processes that work against helping to build sustainability?
KANAVA International thinks it’s time to take a hard relook at how we operate if we seriously want to achieve this goal. What are some key impediments to sustainability and how could we do better?
1. Treat these organizations as partners and equals.
International development efforts work at the pleasure of other countries and regions as guests. Just as we want to be treated with dignity and as equals, so do our local counterparts, but we should never forget the countries we work in are sovereign states, proud of what they have accomplished and can accomplish on their own in the future. Yes, they may lack knowledge, training, experience, and/or investment, but that doesn’t mean we should demean or distrust them. Instead, we must work with them as partners, strengthening them so that they can do more.
2. Provide capacity building training in both technical areas and management systems.
Oftentimes, we focus on building their technical capacity, assuming that management systems will magically develop and strengthen to support their work as organizations grow. American organizations themselves need technical assistance and training to strengthen their management systems as they grow and scale, why shouldn’t we provide similar assistance to local organizations? And just because a local organization has worked under past USAID projects, does not automatically mean it is ready to receive direct funding from the U.S. government. The type of contract mechanisms they have implemented in the past may differ from the kind of mechanisms they may be awarded in the future. They may not have the right systems in place to implement a more sophisticated contract mechanism or understand how to properly price a proposal to manage risks associated with different contract types.
3. Allow local organizations to recover all their costs, both direct and indirect.
Under U.S. government contracting, organizations are allowed to recover all their costs, both direct and indirect, to make them whole. But the local organizations we work with often are not allowed to do the same. Instead, we view them with suspicion that they are trying to gouge the U.S. government and/or their prime contractors as the local organizations are unable to articulate how they treat direct versus indirect costs. And they do not know how to establish an indirect cost rate methodology to calculate indirect cost rates to apply consistently to all their projects. Consequently, we doubt the indirect rates they calculate, or we require them to only charge a de minimis amount for their indirect costs. By doing so, we tie these organizations to the specific projects they are working on, so they do not have the ability to diversify their portfolios. We do not allow them to recover costs for overhead staff that support all their projects as well as focus on business development. For U.S. organizations, our indirect rates support personnel in accounting, human resources, marketing, and business development, all normal functions that organizations need to support and grow their portfolio. Likewise, we should allow local organizations to recover indirect costs to support these functions. If we do not, then these organizations must figure out other ways to support their organizations, making them less transparent, perhaps requiring them to recover these costs from other projects, thereby subsidizing some projects and overcharging others, and potentially opening them up to inadequate practices.
4. Find ways to mentor local organizations to compliantly manage U.S. government funding so they can become successful U.S. government contractors.
Not only should we provide training and technical assistance to local organizations, but we should also develop ways to help build their capacity to be able to compliantly manage U.S. government funding in a way where they can succeed. If we award a project to a local organization that is too big and complicated for its current management systems, they may fail. Then we have a negative example showing how local organizations are not able to serve as U.S. government implementing partners. Instead, we need to find ways to build their capacity so they can succeed. For example, during a five year project, we could start working with local organizations on smaller types of awards, but at the same time work with them to strengthen their capacity to compliantly manage U.S. government funding. We could then aim to issue another award to them in Year 2 that uses a more sophisticated contract mechanism with higher dollar value and continue to mentor them and help strengthen their systems, and so on. By the end of this five year project, we would have built the capacity of these targeted organizations to receive funding directly from the U.S. government and price their contracts per the risk associated with the proposed contract type, either to carry on the work of the ending project or to do other pressing work. This is one way we can work in partnership with local organizations to be successful and sustainable.
5. Utilize both small and large U.S. organizations to build the capacity of local organizations to become U.S. government implementing partners.
Large businesses implementing USAID-funded projects provide the opportunity to build the capacity of local organizations to be better positioned to be sustainable and to potentially receive U.S. government funding directly. Additionally, they can focus on strengthening the technical capacity of these local organizations. At the same time, U.S. small businesses that are subcontractors under these projects, can serve as mentors to local organizations as they share a common path of starting with basic management systems that need to grow over time as the organization takes on large amounts of work using more sophisticated contract mechanisms. This is a win-win for all parties involved, including USAID.
To assist local organizations become sustainable organizations that can scale and support the development of their home countries requires a multi-pronged approach. To be successful, we need to both help them develop systems to support their technical work and provide opportunities where they can succeed. Without these opportunities, the naysayers will always find ways to show how local organizations “can’t be trusted.”
At the end of the day, it is in our interest to help these local organizations succeed. By doing so, they will support the growth of their local and national economy by creating jobs and opportunities within their communities. A strong local economy with jobs available also increases the security of these localities and reduces the lure of bad actors who target unemployed youth.
By rethinking how we approach the development of local organizations, we can actually make our world a safer and more prosperous world…and work ourselves out of a job.