GovDiscovery AI Podcast with Mike Shanley

Episode 32: USAID Market Chat with Christy & Chuck
Date: September 10, 2024

Episode Overview

In this episode, host Mike Shanley is joined by Chuck Pope (veteran of USAID, now CEO of Pope International) and Christy Hollywood (COO of Connected International, former VP of Business Development at Cardinal) for an in-depth discussion of current trends in the USAID partner landscape. The conversation explores funding delays, the localization agenda, adaptive program management, barriers and opportunities for new and local partners, the operational pivots of legacy implementers, the impact of election-year politics, and predictions for how the market will shift post-2024 U.S. elections.

Key Discussion Points and Insights

1. Current USAID Market Trends

Delays & Acceleration During an Election Year

• Chuck Pope highlights significant slowdowns in funding and operational activities at USAID throughout the summer, with anecdotal evidence of business development VPs struggling to justify the delays to stakeholders.
  • “Everything this summer has been slow and delayed... Now it seems everything is kind of speeding up to try to get as many things awarded as possible before we, you know, who knows what happens November. So, yeah, so we're all living the dream.” (Chuck, [01:05])
• With the election looming, some processes are being accelerated to finalize awards.

Contracting Officer and Staffing Issues

• Staffing shortages continue to be a core problem.
  • “Whenever we talk about issues at aid, we're usually talking about... the greater malaise of the lack of staffing.” (Chuck, [01:57])
• Jamie Rogers (head of OA) is working on strategies to address ANA (Acquisition and Assistance) staffing gaps and will be providing updates soon. (Chuck, [01:57])

Monitoring, Evaluation & Adaptive Management Enhancements

• Christy Hollywood observes sustained growth in monitoring and evaluation (M&E), especially adaptive management and learning.
  • “We're starting to see continuing to see more quality assurance surveillance plans and understanding those are about the adaptive management part.” (Christy, [02:48])
  • There’s increased focus on service level agreements, referencing other agencies' examples.
• USAID is participating more in high-level interagency and cross-donor initiatives such as the Global Infrastructure Partnership. (Christy, [02:48])

2. Partnering & Localization Developments

Localization: Policy & Practice

• USAID is expanding what “local” means, broadening the inclusion strategies, and systematically enabling missions to engage with local organizations. (Christy, [04:38])
  • “All that work they've been doing is starting to show fruit... They're starting to translate materials, mostly the early stage stuff so that local partners can get more engaged.” (Christy, [04:38])
  • Removal of mandatory named key personnel is helping improve competition for local actors.

Capacity Strengthening Beyond Compliance

• Both USAID and partners are moving toward real capacity building for local actors, not just compliance or “check-the-box” activities. (Christy, [04:38])

Persistence and Permanence of Localization

• Chuck and Christy emphasize that localization is not just a policy trend—it’s an enduring priority across administrations.
  • “I told them localization is here to stay… there was this tendency to maybe… want to wait it out and that again, you know, it’s here to stay and, you know, it just makes sense.” (Chuck, [06:27])
  • However, reaching “25% of USAID’s funding for local partners by 2025 is mathematically not going to happen” but co-design, local leadership, and more accessible processes are still moving forward. (Chuck, [06:27])

New Partnerships Initiatives

• USAID is lowering entry barriers for new partners:
  • Updates to 2 CFR regulations, with de minimis rates rising from 10% to 15%, helping orgs without capacity for a full NICRA process. (Chuck, [10:00])
    • “Administrator Power, Jamie, they are serious about lowering the barriers to entry… They are taking those steps.” (Chuck, [10:00])
  • Ongoing education and reform internally to promote these tactics.

The Umbrella Award Model

• Chuck advocates for a return to “umbrella awards,” allowing INGOs/large primes to push majority funding to subs, improving compliance and capacity support for local orgs. (Chuck, [11:39])
• Christy draws comparisons to Australian DFAT’s heavy use of this model, especially in resource-constrained environments. (Christy, [13:03])

3. Barriers for New Partners and Entry Tactics

'The Long Game' for New Partners

• Christy stresses that successful market entry for new orgs is a 12–18 month process, with most wins via subawards or small purchases, not direct primes.
  • “It is the long game. It takes usually 12 to 18 months to get your first anything and usually that’s going to be a sub award or maybe a really small purchase.” (Christy, [13:03])
• There is a disconnect between what USAID calls “innovation” (usually proven, scalable ideas) and what new entrants hope to sell (“brand new” concepts). (Christy, [13:03])

Past Performance as a Barrier

• USAID expects either USAID or directly relevant bilateral/multilateral experience, with methodologically similar work a plus.
  • “…it’s a little bit of a needle to thread… really working with folks to get into how are they actually implementing their projects now? How does that align with norms for USAID…” (Christy, [15:20])
• Early subawards are often the stepping stone to prime contracts.

Budgeting and Market Entry Costs

• New entrants are often surprised by requirements like summary budgets at concept stage and investment needed for project design before bidding. (Christy, [16:45])
• Market entry must be resourced for a 12–24 month timeframe—“This isn’t the market for you” if looking for quick wins. (Mike, [16:04])

4. Operations of Established Partners

BD Obsession & Resource Allocation

• “Everybody seems to be concerned with their piece of the pie… So everybody is obsessed with, with [business development].” (Chuck, [18:18])
• Larger firms are catching up on localization efforts, some moving faster than others, with late movers concerned about being left behind.
• There’s a shift to regionally based, leaner, and remotely managed operations, away from large D.C. footprints, which is both pragmatic and matches USAID’s evolving preferences. (Chuck, [20:18])

Teaming, Mergers, and Venture Capital

• Increased teaming arrangements, strategic mergers, and influx of venture capital are changing the partnership landscape.
  • “Everybody’s teaming up, everybody’s got all these… It seems like every week somebody’s getting gobbled up...” (Chuck, [20:18])

Process Reengineering & Local Hiring

• Adoption of Lean Six Sigma and other process efficiency strategies is rising.
• There’s a trend toward local hiring for business development and operations, in keeping with USAID’s vision for localization and cost reduction. (Christy, [21:51])

AI Adoption

• Large implementers are building AI engines for recruiting, past performance, and internal knowledge management, but mid/small orgs lag.
  • “What we’re not seeing as much of is kind of that mid size small organization building out their library around an AI system…” (Christy, [22:57])
• USAID’s market complexity (vs. other parts of the Fed Gov) makes AI tools harder to adapt.

5. The 2024 U.S. Elections and the Future of the Market

Transition Planning & Uncertainty

• Policy work is accelerating in anticipation of possible leadership change or acting administrator situation.
  • “You can see that in the last couple of months, we’ve seen a relative onslaught of new policy drafts coming out…” (Christy, [28:06])
• Both guests anticipate high turnover at the top of USAID regardless of which party takes the White House.

Differences (and Continuity) Across Administrations

• If Democrats win (e.g., Harris): Possible expansion of regional programs, especially in migration geographies where Harris has expertise. Existing localization and global initiatives likely continue.
  • “Because of her deep experience working with the Northern Triangle, maybe expanding those programs to other countries... that as the immigration tide has shifted…” (Christy, [28:06])
• If Republicans win: Likely reduction in working through public international organizations (PIOs), innovative funding mechanisms to foster new partners/entry, but localization will persist.
  • “The group that will come back to aid under a Republican administration, guess what, they love localization.” (Chuck, [25:21])
  • OIG’s scathing report on PIOs cited as reason for shift away from this channel. (Chuck, [25:21])

Geopolitical Factors

• The next administrator will face continued volatility: “Does China try to retake Taiwan in 2026?… Afghanistan, Ukraine, Israel…” (Chuck, [25:21])
• “There are going to be changes at AID in November. My hunch is even if the Democrats keep the White House, I think Samantha Power will be moving on.” (Chuck, [25:21])

Notable Quotes & Memorable Moments

• On delays: “Everything this summer has been slow and delayed... Now it seems everything is kind of speeding up to try to get as many things awarded as possible before we, you know, who knows what happens November.” (Chuck, [01:05])
• On localization: “Localization is here to stay… it just makes sense. And one of the things you have to keep in mind with localization, there are different parts…” (Chuck, [06:27])
• On new partners: “It is the long game. It takes usually 12 to 18 months to get your first anything and usually that’s going to be a sub award or maybe a really small purchase.” (Christy, [13:03])
• On adaptation: “Having your operations closer to the projects as opposed to a large office on K Street makes sense programmatically and it also makes sense from a budget standpoint.” (Chuck, [20:18])
• Elections: “There are going to be changes at AID in November. My hunch is even if the Democrats keep the White House, I think Samantha Power will be moving on.” (Chuck, [25:21])
• On technology: “There are a couple large implementing partners that we’ve heard have been building their own AI engines… What we’re not seeing as much of is kind of that mid size small organization building out their library.” (Christy, [22:57])

Important Timestamps

• [01:05] Chuck on delays and election-year dynamics
• [02:48] Christy on surge in monitoring & adaptive management requirements
• [04:38] Christy on evolution in localization and local partner support
• [06:27] Chuck’s perspective: localization is a lasting shift
• [10:00] USAID regulatory reforms: 2 CFR update
• [13:03] Christy on the “long game” for new entrants and persistent barriers
• [15:20] Christy on past performance requirements and practical tips for alignment
• [18:18] Chuck on established partners' BD focus, structural pivots, and the new normal for office locations
• [22:57] Christy on AI adoption and process innovations
• [25:21] Chuck on election outlook, anticipated changes at USAID
• [28:06] Christy on how policy teams are preparing for transition and possible impacts

Conclusion

This episode provides a comprehensive window into USAID’s ongoing shifts—from funding cycle adjustments amid political uncertainty, through localization and market entry reforms, to internal operations and future-facing technology investments. Christy and Chuck’s pragmatic, candid advice and predictions are essential listening for anyone seeking to understand or influence the foreign aid and development market heading into the 2024 election cycle and beyond.