USAID moves to keep more dollars flowing to the countries it’s actually helping.

The U.S. Agency for International Development operates throughout the world, but all its work is local. It’s been on a drive to concentrate more contract and grant dollars to organizations in the countries where a project is occurring. At USAID, they call that localization. For a progress report,  Federal Drive Host Tom Temin spoke to the agency’s senior advisor for localization, Sarah Rose.

Interview Transcript: 

Tom Temin Why don’t you tell us a little bit in more detail what you mean by localization and why is that really important to the dollars and to the mission?

Sarah Rose Absolutely. So first of all, just as a bit of background, USAID is really the world’s premier international development agency. It’s a catalytic actor. It drives development results around the world. Our work also advances U.S. national security, our economic prosperity, demonstrates American generosity and really promotes a path to recipients self-reliance and resilience as well. But the point that you mentioned is really important to how we work. When we talk about localization, we’re talking about how USAID implements its mission, its mandate and its model. And so what that means is that USAID has really reaffirmed a commitment to putting local actors at the center of our work and strengthening local systems by shifting our funding and our decision making power to the people, the organizations and the institutions that are really driving the change in their own countries and communities. So this is important because we know that local leadership over development and humanitarian goals as well as programming, is really important for ensuring equity effectiveness and sustainability. And just as a little bit of background, back in November of 2021, the head of USAID Samantha Power, she outlined two targets that USAID is working towards as part of the reaffirmation of our commitment to really advancing locally led development of humanitarian assistance. So one of these targets is to increase our funding to local entities, and we have a goal of channeling at least a quarter of our funds directly to local partners by the end of 2025. And then the second target is really intended to push us to better elevate local voices with a goal that half of our programs, at least half of our programs will create space for local actors to exercise leadership and decision making power over things like priority setting, project design, project implementation, and how we define and measure results.

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Tom Temin And let’s maybe make this realistic. Describe a typical project the actors or organizations that would be involved in carrying it out. And it sounds like at this point, then they might be from other countries, but they travel to the location on behalf of USAID and do the work and help the local people do the work. Is that basically how it’s set up now?

Sarah Rose That’s right, Tom. So basically, the vast majority of USAID’s funding goes to organizations, entities, firms, etc., that are based internationally. Many of them are based in the United States in fact. Many of these organizations have country offices, etc. Many of their staff are from that country as well. But the organization itself is based primarily in the United States as well as other international countries as well. And so what we’re trying to do is think about how we can shift more of that funding to go directly to those organizations again, that are leading changes in the countries and communities where they live and work.

Tom Temin And the issue, though, I would imagine, is you have to make sure that there are organizations locally that have the capacity to do that work and to do it in a way that complies with U.S. standards for, you know, not taking bribes and other business ethical standards, correct?

Sarah Rose Absolutely. One of the most important things that we do in our work is thinking about how we can safeguard American taxpayer funding from fraud, waste, abuse and mismanagement. That was always one of our highest priorities. But we also know that when we meaningfully involve local actors in our work, this can make the development gains more durable. And this is another aspect of safeguarding taxpayer funding. But when we’re thinking about individual programs, for instance, you know, when we think about increasing the amount of funding that we’re providing directly to local organizations, you know, there are ways that we can do this that lower the risk both for the United States as well as for those organizations themselves, because there are plenty of organizations working, operating in their own countries, in their own communities, striving to advance well-being for the people that live in those areas as well. But one of the things that we’re doing, too, is really thinking about how we can increase our use of pay for results mechanisms. So these are important design approaches that can facilitate partnering with organizations that don’t have as much experience working with USAID, although it can also be used with larger and more experienced organizations as well. And this model really involves paying upon the achievement of outputs or results that are tied to outcomes. You know, this is as opposed to only reimbursing for costs or inputs. And what this does is that it limits the fiduciary risk for U.S. aid. And it also generally requires less sophisticated financial and operational management capacity of the partner as well. I will note that one of the biggest challenges that we face as an agency is that we have a shortage of contracting and agreement officers here at US AID, in fact, we call this our contracting officer staffing crisis. So if you actually look at the data on this last year, USAID’s contracting officers handled a workload that was vastly in excess of contracting officers at many other agencies. And I’ll look at just the Department of Defense for comparison last year at USAID each contracting officer managed an average of $108 million compared to each contracting officer at DOD, managing an average of $11.6 million. And so to scale our localization efforts, what we are really looking at is different ways that we can expand our contracting and agreement officer workforce. And so what we’re doing is taking a proactive approach to thinking about how we can hire new contracting officers and agreement officers and also creating incentives to be able to retain our current workforce.

Tom Temin We’re speaking with Sarah Rose. She is senior advisor for localization within the Office of the Administrator at the U.S. Agency for International Development. Would it be accurate to say that suppose you’re building water treatment capacity in a particular country and instead of using, you know, an engineering firm from the United States that sends people there, has people there, you use an indigenous firm, maybe the dollars go a little further in the sense that the capacity of that industrial base in that country to do water treatment also increases at the same time that you get the water treatment plant.

Sarah Rose That’s exactly the idea behind localization. I mean, the idea is really to think about how can we strengthen local systems, how can we strengthen the systems of actors that are operating in a particular country, in a particular community to be able to own, manage and sustain this work, these objectives that we all share as well.

Tom Temin So got it. And what about the variations in just again, indigenous, for lack of a better word, capacity? It must vary a lot according to the zones that the U.S. operates in Africa. Some of the Asian countries, some of the lower European countries and so on. I mean, they’re not all equal, are they?

Sarah Rose What we find is that there are everywhere in the world, there are organizations and individuals that are very high capacity. In fact, you know, one of the things that we have done recently is we it was just last year we released USAID’s first ever local capacity strengthening policy, which really sets forth a set of principles about how we think about capacity and how we think about capacity strengthening as part of our work, because it is a key part of what USAID does. But what that recognizes and what we recognizes is that capacity exists everywhere. What kind of capacity might vary? Right. And so in some cases, I think the particular question that you were asking is, you know, is there capacity of local organizations to work with USAID directly? You know, USAID has some specific requirements about working with us as a federal agency. Of course, you know, and if an organization hasn’t worked with us before, you know, some of those aspects of working with the USAID can, in fact, be challenging. So there are different kinds of capacities to think about what we are aiming to do with our localization goals. Again, it is be able to shift more funding and more decision making power to those organizations that have a lot of that substantive and technical capacity and have that real deep rootedness connectivity within their communities that ends up being so important for being able to achieve and sustain those development results. In terms of working with USAID, you know, there are different ways that we can go about either strengthening the capacity of organizations to work with USAID and also being more accessible, thinking about how we can change our own business practices to make it easier for organizations again that are less familiar with USAID, that haven’t worked with USAID before, whose primary mission and mandate is around those technical and substantive things, and not primarily around working with a donor. How can we make it easier for them to partner with us as well?

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Tom Temin And let’s get a progress report. So far, it looks like 10% of the dollars now are localized and you’re headed toward 25%, as you said. When do you expect to hit that goal?

Sarah Rose Yes, that’s a great point. And I wanted to just highlight, too, that that 10% number that you highlighted. So just in June, USAID released its first progress reports looking at localization. And again, this report looks at our progress towards the two goals that the head of USAID Administrator Power set out back in November of 2021. And that first goal is that a quarter of our funding will go directly to local actors, to local partners by the end of 2025. And there’s a second goal as well that I don’t want to lose sight of because it’s really seen as equally important to how we think about advancing locally led development and humanitarian response. And that is that at least half of our programs will be locally led, will create space for local actors to exercise decision making and have agency over things like priority setting, activity design, implementation and how we define and measure results as well. So with this progress report does that again, we released it just in June. You can find it on our website. And what that progress report actually shows is, again, Tom, as you mentioned, that as of fiscal year 2022, 10% of our funding is going to local partners. That does show that we have a way to go until we reach 25%. Our goal, our target. But it also shows that we’re really headed in the right direction. If we look just year on year, right, we look just from FY21 to FY22, what we see is an increase of $623 million going to local partners. That’s a 66% year on year increase by dollar value in the amount of money going to local partners. If you’re looking at the percentage in percentage terms, it’s a 38% increase in the percent of funding going to local partners. Most of this funding is obligated through USAID’s in-country missions, our country offices that are located in the countries where we work, that’s not terribly surprising. They’re the ones who have the in-country presence. They have the local networks. The way that they work really is in support of these country specific programs. But if you just look just at mission funding and these are over overseas operating units, you see that 18% of our our funding is going to local partners there. Interestingly enough, too, there’s a lot of sort of, you know, heterogeneity and how this looks around the world and by sector as well. And we see that our missions in Africa in particular are leading the way. And they have already directed nearly 25% of their funding to local partners in fiscal year 2022.

Tom Temin And all of this then gets back to the challenge for the agency itself that you mentioned earlier, and that is oversight and management supervisory capacity.

Sarah Rose Absolutely. And so, again, you know, one of the things that’s important in terms of thinking about how we advance our localization goals, we’re not doing this in a vacuum. There’s a number of other priorities that we are advancing as an agency that are really complementary to these localization efforts as well.

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