Throughout history, philanthropy has too often consisted of rich people deciding what poor people need and imposing it upon them. The world needs a new approach that leaves behind the old paternalism founded on the idea that rich people are smarter and more trustworthy than poor people, and we need to discard still-persistent myths of “welfare queens” and other negative stereotypes built on a mindset that if given control over donor or public funds, low-income people would misuse them, spending them on drugs, alcohol, or frivolities. While these things have happened, they are the exception, not the rule, and should not form the basis of public or donor policies. In fact, low-income people more often know best what they need. Donors can and should empower them to decide how to use their resources. The Biden administration has a special opportunity now to use a more innovative and inclusive approach to spending the up to $4 billion in additional funding it envisions for international development in the Northern Triangle countries of El Salvador, Guatemala, and Honduras. Here is how.
First, the Biden administration should understand that if it cannot be contracted, it cannot be done. Many well-meaning philanthropists and development professionals lack a basic understanding of the contractual mechanisms that enable philanthropy. They believe policy pronouncements and big ideas shape the field, but unless those can be converted into a contract—and a grant, impact bond, or other fancy-named instrument is nothing more than a form of contract—it cannot be done.
At the same time, that does not have to be as limiting as it might sound. Contracts are amazing things and can be made to perform a whole toolbox worth of functions. Unfortunately, most donor organizations only use a couple of the instruments at their disposal. Getting away from this hammer-and-screwdriver-only mentality and using all the other tools in the box requires more creativity in contracting.
Second, the new administration should know that systematically evolving away from the kind paternalism described above requires rethinking how donors contract for the products and services they want to provide to the people they want to help (commonly called “beneficiaries”). Donors do not actually “do” philanthropy. They pay other people to do it. Therefore, giving beneficiaries more control involves both rethinking and rewriting the contracts and ensuring these new contracts benefit the donor, the beneficiary, and the implementer (the people and organizations the donors pay to do the philanthropy). Most people focus on the first two (the donor and beneficiary), but ignoring the third (the implementer) can lead to a host of problems.
My team at CollaborateUp, an international consulting firm, has worked in and around many philanthropic programs and advised donors, including the U.S. Agency for International Development (USAID), on how to make innovative use of contracts to fulfill policy goals, especially around co-creation—working directly with beneficiaries and implementers to design and carry out programs.
This commentary focuses on USAID because (1) it has some of the most complex contracting rules (so if it can be done there it can be done almost anywhere) and (2) there are dozens of examples to draw upon. As the administration contemplates its 2021 budget and, specifically, how to use international development funds in more targeted ways to abate migration from the Northern Triangle, USAID faces a choice: it can continue to advance co-creation and other tools for development effectiveness or go back to “donor-driven” ways of working. This commentary proposes going forward fast, but in full compliance with the Federal Acquisition Regulations (FAR) and the AID Acquisition Regulations (AIDAR) that govern USAID awards. Despite these voluminous restrictions, USAID has already been at the forefront of using co-creative methods to design programs and has encouraged its missions and offices to incorporate co-creation throughout the program development and contracting cycle. Broadly speaking, this cycle includes the following stages:
- Strategy development: To include region- and country-level strategies supported by strategic frameworks for specific development goals (e.g., education, economic development, biodiversity).
- Program development: Turning strategies into specific interventions.
- Procurement: Consists of two phases—pre-solicitation (before USAID formally asks for applications, proposals, or quotations) and solicitation (when there is an active procurement).
- Implementation, monitoring, evaluation, learning, and adaptation: Performing the actions contained in the programs, either through a contract performed by an implementing partner or through another agreement (e.g., a government-to-government agreement) while also adjusting as needed based on evidence or experience.
USAID already often incorporates co-creation with its host governments and implementing partners into many of these stages. What it has not done on a wide basis is co-create directly with beneficiaries. This has been done in pockets but can be expanded on a much wider scale, as follows:
- Involve beneficiaries in strategy and program outcome and impact design. Imagine that USAID wants to improve farmer incomes and sustainable farming practices for a country in the Northern Triangle. During strategy development and program design, it would convene a representative cross-section of farmers, farming association leaders and members, agriculture-related business leaders, and other supply chain participants to make recommendations regarding the impacts and outcomes they would like to see. USAID already has numerous examples of doing this for some populations and areas (e.g., through the Global Development Alliance program and its many co-creation processes run over the last 10 years as well as its Private Sector Engagement Policy and New Partners Initiative). As such, this is not a radical recommendation per se except in that this method should become the default rather than the infrequent exception. Or, if the development community wants to get really radical, pull in knowledge and ideas from across multiple sectors by assembling a diverse set of people from across society. This would help unlock different connections—how food is connected to health, how economic development is tied to democracy, how education is connected to everything—and break up the typical echo chambers of English-speaking people who understand how to work in the donor system. In either example, random sampling of people does not need to prescribe the “how” in this stage. Rather, USAID would solicit their views on the “what” and “why.”
- Apply realpolitik. USAID is and should be a self-interested donor. The U.S. taxpayer foots the bill and should expect a return on investment linked to accomplishing the foreign policy goals of the United States. Continuing the example of improving sustainable farm incomes in the Northern Triangle, treat the feedback from farmer-beneficiaries and their suggestions for desired outcomes as just that: feedback. Then put that feedback through a set of decision-lens questions that ask if it will produce the desired (see diagram 1):
- Development outcomes for the beneficiaries? Simply including the farmers and their supply chain partners upfront increases the probability of producing better development outcomes for these beneficiaries, but this question offers the chance for development professionals within USAID to weigh in based on their experience and give their views on whether or not the chosen outcomes can or should be achieved.
- Foreign policy outcomes for the United States? At this moment in the procurement process, it is 100 percent acceptable that U.S. foreign service officers and diplomats put their thumb on the scale and choose the outcomes they think have the highest probability of achieving U.S. foreign policy aims. Given that the Biden administration wants to abate northern migration, this presents an opportune moment to both align with U.S. foreign policy goals and engage the people of these countries in jointly designing programs. In fact, some in the region have already started taking matters in hand, forming the HUGE Business Council (an acronym for Honduras, the United States, Guatemala, and El Salvador) “to boost development in the region by linking foreign investors to locals who are willing to share risk and expertise.” HUGE aims to specifically target the communities driving northern migration and could offer a good interlocutor for USAID.
- Business outcomes for USAID and its implementing partners? As touched on earlier, new contracts should benefit the donor, the beneficiary, and the implementing partner. Ignoring implementing partners or assuming they will do as told can lead to a collapse in the market for implementing products and services or to entrenched resistance, which can take the form of lobbying or subtle sabotage during implementation. At the same time, this factor should not be over-weighted such that implementing partners can engage in rent-seeking or oligopolistic behavior. Under Administrator Mark Green, USAID made deliberate efforts to both respond to implementing partner concerns over new co-creation processes and to diversify the supplier base to bring in new partners and reward old partners who could adapt to the new ways of doing business.
- Involve beneficiaries in co-creation to expand pay for performance. USAID has already greatly expanded the use of co-creation in procurement and regularly hosts co-creation processes with its implementing partners, through which USAID and the partners work side by side to design the program. Under this proposed new model, USAID would continue to do so and would use the output of recommendations 1 and 2 to form the basis of the statement of objectives or work (SOO or SOW) that it would further refine with its partners. Specifically, USAID would:
- Use the beneficiary-articulated outcomes, adjust them as needed using a realpolitik lens, and then incorporate the output into the SOW or SOO.
- Convene implementing partners in co-creation processes, for example, a workshop, and have them develop potential approaches to achieving the SOW or SOO outcomes.
- Bring back a small group of the beneficiaries to provide feedback to the implementing partners on whether or not the proposed approaches would accomplish their goals. As an example, work with HUGE to engage businesses and with local leaders to engage communities.
- Use this process to develop specific outcome and impact-based targets and metrics and link payments to them.
The FAR/AIDAR allows USAID to include outside parties in a selection committee. As an example, in a Broad Agency Announcement it can form a Peer and Scientific Review Board that can include outside parties, including beneficiaries, as non-voting members. At the same time, development officials should carefully consider this level of inclusion to avoid conflicts of interest or ceding too much control.
- Build in adaptation and include beneficiary feedback in evaluating performance. There appears to be a widely held belief that modifying a contract once issued implies someone made a mistake. The Agency needs to continue changing this mindset and back it up with training on how to incorporate greater adaptation into contracts, for example, making greater use of the Changes Clause in the FAR or by incorporating into the contract the impact and outcome-based targets and metrics and an evaluation of achieving those targets based on beneficiary feedback.
This process, which can be adapted for many other donor environments, would change the balance of power in favor of beneficiaries while still retaining adequate control on the part of the donor, ensuring it meets its own needs. It also takes into account real-world constraints and dynamics, especially around the role of implementing partners. If systematically implemented at scale, this approach at USAID could become a model for empowering beneficiaries to control their own destinies by breaking the cycle of infantilization and paternalism and helping them become more self-reliant. For the Biden administration, in this particularly challenging moment, it also offers an opportunity to work with the people in the Northern Triangle on the underlying causes of northern migration and to design and implement programs for them and with them.
Richard Crespin is a senior associate (non-resident) with the Project on Prosperity and Development at the Center for Strategic and International Studies (CSIS) in Washington, D.C.
Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).
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