USAID wants to reset the way it engages with the private sector

The Agency for International Development has always used private sector groups to deliver services in various countries. Now the agency has launched what it calls Private Sector Engagement Modernize, to deal with the private sector in a new way. For the whys and hows, the Federal Drive with Tom Temin spoke with the Executive Director of USAID’s private sector engagement hub, Michael Metzler.

Interview transcript:

Tom Temin
So Private Sector Engagement Modernization. What’s going on here?

Michael Metzler
So before we jump into modernize, maybe set the table a bit. So USAID is the U.S. government’s development aid agency. We have programs all around the world in all different sectors, from health, education, democracy, governance. And we been programming this work and doing this work for the last 60 years. For the last 20 years, we’ve been doing some of that work through the private sector, in partnership, I should say, with the private sector. And why would we do that, is very simple. If we want to extend our work, we want to accelerate our development impact, we want to have greater reach around the world, the private sector is a critical partner for us in doing that. So we’ve been doing it for a long time, we’ve gotten quite good at it. But what we’ve learned is, as we look at really scaling that work around the world, which we want to do, there’s a lot of obstacles within the agency itself to get that work done. And so the agency has set out a very bold vision, to scale private sector engagement across the agency and mainstream it across all of our different programs. To realize that vision, what we’ve decided is, we really got to take an internal look at how the agency is structured, its operating systems, its processes. Because frankly, a lot of those, over a long period of time were developed not with private sector engagement in mind. And so there are a lot of internal barriers that we’re facing to really realizing that vision, of scaling private sector engagement. Our office, the hub, has taken on this kind of burden busting, within the agency. And so it’s very different work than what we’ve traditionally done on the programmatic side. But it’s pretty critical to realize that vision that the agency has put out there.

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Tom Temin
What are the obstacles to scaling private sector engagement?

Michael Metzler
Unfortunately, there are many, but the good news is, they can be addressed. So many of your listeners will appreciate this, within the federal government. Everything from our HR systems, to our data gathering systems, our relationship management systems, our procurement systems. These are critical systems and through which we do our work at USAID, many of your listeners do their work and their agencies. Yes, some of them are bureaucratic, we live in work in the federal government. But I think, more to the point, they just weren’t built originally. We’re a 60-year-old agency, we’ve been doing private sector engagement for the past 20-25 years. And we’re still using basic processes and systems that were built not for private sector engagement. So what we’re trying to do is, not recreate those systems and processes. We’re just trying to adapt them to make this work easier. Because we are convinced, there’s a lot of excitement around engaging the private sector in development work all around the world. It is growing by the day. Our own policy on private sector engagement says, the future of development is really to engage the private sector at scale. And so there’s a lot of excitement around doing the work. But there’s also a lot of frustration, frankly, both within the agency and outside with our partners. Once we partner with them, they say we would love to do a lot more with USAID. But it takes too long, it’s too expensive, it’s pretty frustrating. And so sure you guys clean up your shop. And that’s what we’re doing.

Tom Temin
There seems to be two aspects to this. One, is the procurement and data gathering and so forth processes for what the agency buys to operate itself. And that it has in common with every agency, you got to buy computers, you got to buy office furniture, you gotta hire people. But the external engagements in the countries, where USAID operates, you use nonprofits, local organizations, construction companies, food delivery companies, etc. So it’s contracting with them, using USAID dollars. That’s the crux of the issue here?

Michael Metzler
Actually, I’m really glad you brought up that question, because it’s a really important distinction to make. What we’re talking about when we say engaging the private sector, it’s actually, not on the procurement side, in terms of the vendor relationship. Where we buy things, either for our own offices around the world, or even when we spend money within our programs through, what we call our implementing partner. What we’re talking about is, working with the private sector on our actual programs. Let me give you a real quick example, that I think would be helpful. Coca Cola. We’ve worked with Coca Cola around the world, they’re not our vendor they’re our partner. And why do we work with Coca Cola? Well, they have a real business interest around the world and getting clean water into their bottling plants. They need that to make money to be successful. A very important development aim for a lot of our programs around the world, is to help local communities access clean water and keep clean water systems in place. So there’s a clear direct overlap between our device element interests and the community’s development interest, in Coca Cola business’. Really good example of why we should work with Coca Cola, because together, we can do a lot more than we could do separately on our own. And so what we try to do is find those opportunities around the world with companies like Coke, or Pepsi Starbucks UPS, I can go on and on. We have over 700 different relationships like that. That’s what we mean by private sector partnership. And that’s what we’re trying to do more of with the private sector.

Tom Temin
Right. So that doesn’t really lend itself to standard federal procurement at all.

Michael Metzler
It doesn’t. Like I said, for USAID building system and operating model for what it needed for a long period of time. And then the agency, really was a pioneer in saying, private sector is kind of trading a lot of the markets that they traditionally were not in, but we’ve always been in and the communities we care about, more and more by the day, maybe we should start working with them. And that was 20-25 years ago. And we’ve done some incredible partnerships over that time. And now we’ve matured in that work enough to step back and say, Ok, what is now holding us back? It’s not the culture of the agency, it’s not the private sector itself. They’re willing to work with us. Right now, what we’re facing is, frankly, the bureaucracy that wasn’t built for it, we’re gonna adapt it for the future. That’s what modernize is all about.

Tom Temin
We’re speaking with Michael Metzler, executive director of the private sector engagement hub at USAID. Yeah, because in some sense, you have to be arm’s length. Because USAID doesn’t exist to help the Coca Cola company or anybody else. But yet in the country, that nation, those people and Coca Cola have a common interest, in this case, as you mentioned, fresh water, or whatever the case might be, clean water. And so it sounds almost as if you might be looking at a Memorandum of Understanding approach, as opposed to a procurement approach. Just to make sure that everybody’s interests remain separated. But yet, you can cooperate on the end goal, which is clean water, in your case, for the people of X, Y, Z nation. And on Coca Cola’s case, clean water for Coca Cola.

Michael Metzler
Yeah, typically, a lot of these partnerships are memorialized in things like, memorandum of understanding. And usually they cover the entire relationship with each of our companies. One of the things we’re doing under modernize, actually, is professionalizing, our relationship management function within the agency. So when we engage these companies, at a global level, we actually can do it in a way where we set multiyear strategies with them. We have dedicated, professionalized folks that work that relationship to make sure we’re doing is maximizing that relationship around the world. Frankly, getting a customer relationship management technology in place, so we can actually track that relationship around the world. And that’s a really good example of our systems haven’t caught up to all these relationships. We have a very hard time tracking, in real time, everything we’re doing with, use the Coke example. But again, there’s there’s many more Coca Cola all around the world. Well, if we’re spending any amount of time, not efficiently tracking that relationship and nurturing that relationship, we’re wasting time, we’re wasting energy on both sides of the relationship, that could be better spent focused on more new and scale programming with them.

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Tom Temin
Plus those companies, also, those private sector engagies, if you will. Can bring a lot of expertise to the issue as well. You look inside a Coca Cola bottling plant, there’s probably a lot of technology and equipment, that is common to a water processing plant. And I imagined in the case of Starbucks, do they roast beans? There’s commercial operation of ovens, I’m just making this up. But that applies here. Correct?

Michael Metzler
Well, yeah, you’re doing a good job of making it up, because that’s exactly it. If you look at the multinationals, but let me just point out, I’m using the multinational examples. But we also do a lot of partnerships at the local level with local private sector, which are also very critical to this, just to kind of understand the model. You’re exactly right, these companies bring tremendous expertise, technology, logistics, reach know how, which is why it’s important that we work with them. Because they bring capabilities to the table that we don’t necessarily have, or they can bring it to the table at scale that we don’t necessarily have. At the same time they look at USAID, for what USAID can bring to the table. And of course, we have a 60-year presence in a lot of these countries. We have a stellar reputation in most of these countries that they can partner with us on. We’re able to reduce their risk of entry into a lot of these countries, especially, when they want to extend their supply chains and into geographies that we’ve been working for a long time. And so, they look to us as they look to expand, we bring a lot to the table to help them. And we’re happy to help them, if what they bring accelerates development and our development objectives.

Tom Temin
So everybody benefits from better development in nations that need better development. And if that happens to be the commercial interest, great. And if USAID mission, in helping countries join the modern economy, then great also. My question is, what’s the first thing you’re going to do under this? You’ve got a fact sheet. What are you actually doing first?

Michael Metzler
Modernize. So modernize, as we took a step back and look at the agency systems, we’ve identified nine critical areas. There are nine initiatives, subinitiatives under modernize. Our administrator, Samantha Power launched officially, the whole modernized initiative under her leadership, in October. We had done a lot of prework on that. So we are moving forward on all nine of those initiatives, probably, the one we’re furthest along is, what I just mentioned, which is our relationship management system. We have to do a better job, as an agency engaging. Particularly, our largest and most strategic corporate partners, in a more holistic way as a way to maximize those relationships. So one quick example, we identified the 30 most strategic relationships with the 30 most strategic multinational. We’ve put people in relationship management positions, that’s part of their official position, more professionalizing that, we’re training them up. And we’re getting the right systems in place where we can track in real time, across the whole agency. Where those relationships are? What is part of those relationships and where they’re going?

Tom Temin
Yeah, often companies and federal operators don’t even speak the same language. So there’s probably a way to harmonize that.

Michael Metzler
You’re exactly right. That’s another big piece of what we’re trying to do is, education on both sides of that discussion. Because you’re right, we do not speak the same language. Part of the, professionalizing, of that of that role is, getting people actually from the private sector, ideally, that can come in and help us internally. With, not only speaking the language of the private sector, but just understanding how the private sector sees the world and how they think. Because it’s very different from the way we think, internally.

Tom Temin
I would think that’d be a great opportunity for someone that’s had a corporate career, sell the stock, divest of that company, but then you could really have a great public service piece to kind of crown it all.

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Michael Metzler
Yeah, you’re touching on another major part of modernize, which is the HR piece. Frankly, as an agency, we do a great job of attracting folks that have lived abroad, speak another language, worked in developing countries or academics in the technical area that we need them in. But we not do a great job attracting people from the private sector. And if we want to really change the agency and really scale what we’re doing with the private sector, we need to do a much better job of attracting the private sector. One of the big burdens to attract to the private sector, is what you pointed outside, which is they see our job announcements, federal job announcements and they can’t understand what they’re reading. So that’s like the first entry point, they have to understand what the job actually is. So, part of what we’re doing with our HR folks, in partnership with our HR is like, just really rethinking every step of the hiring process, performance management, all the way through to separation and every part of the HR lifecycle. How can we adapt the systems to really attract people from the private sector? Keep them once we have them, train them up, and get them to a place where they can have successful public sector careers. After they’ve done private sector work? Or we we attract them away from the private sector into the public sector.

Tom Temin
And how about you? Are you a career USAID’er? Or are you from industry?

Michael Metzler
So the irony is I am the latter. I am trying to hire less of people like me into the agency. I did not come from the private secto. I actually have a, fairly typical,background for current hiring and USAID. As a Peace Corps volunteer. I spent some time in the [non-governmental organization (NGO)] world. Went and got my development economics degree and then entered the agency there. Don’t get me wrong, I’m saying this a bit tongue in cheek, we definitely need all kinds of people coming into the agency. But as we look at the profile of the of the workforce in aid, what is clearly missing is this piece on tracking people from the private sector. So we just have to do a better job at that, we’re not displacing other types of employees, we need them all. But if we do better in that, it’s going to be a lot easier to change the agency from the inside. If you get people coming in from the outside that understand better how the private sector operates.

Tom Temin
I would classify you as an optimist.

Michael Metzler
I do think, we talked about this a lot, It is not easy to change a federal bureaucracy from the inside. And anybody that’s trying to do that, knows that. We’re trying to do it in a, holistic fashion, across nine different dimensions. And we’re trying to do it as fast as we possibly can. It is tough work, no doubt about it, but everybody that’s involved in it knows that it needs to be done, if we’re really going to go to the next generation of private sector development and engagement within the agency. So I think people are generally excited about it. Folks like me that have been doing development a long time and then have to transition to figuring out how HR systems work and procurement systems work, at a at a level of detail I’ve never engaged. It’s interesting, it’s challenging, but it’s interesting. But the payoff of all this, is what really people have their set their sights on.

Tom Temin
Well, if you figure out the far in detail, let us know.

Michael Metzler
We have folks that have tried to do that right now.

Tom Temin
And are you actually doing this internally? That is to say, you don’t have a $10 million contract with McKinsey or something?

Michael Metzler
Another great question. We are all doing this internally. And in fact, my personal view is, that’s the only way it’s gonna get done. Because you really need people on the inside. To change a lot of these systems, we really need strong partnerships and good relationships. And, the first thing you need is leadership cover. And frankly, we couldn’t have better leadership cover from the current administration. I mentioned, our administrator, Samantha Power has this view that we need to do what we’re doing within modernized, cross all of USAID programming. And so her leadership has been critical, but also partnership with our CIO colleagues has been great on some of the systems. And our HR are really open to working with us on that. And so that’s critical too, because if they weren’t on board, it would not get done. And so I’m very happy with the internal collaboration that we’ve seen thus far.

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