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GovDiscovery AI Podcast with Mike Shanley
Ep. 36: Bill Steiger, former USAID Chief of Staff: Partnerships and Innovation at USAID
01:02:04
Bill Steiger, former USAID Chief of Staff: Partnerships and Innovation at USAID, joins Mike Shanley to discuss USAID’s role in foreign policy, innovation at USAID, partnerships and localization, and USAID funding and direction. Biography: Bill...
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- [00:02]
A
Welcome to the Aid Market Podcast where foreign aid partners connect to learn about key funding trends and market insight. The podcast is co hosted by Aid Connect Data, the pipeline and Market intel software for USAID Partnering and Connected International, the leading USAID partnering support consulting firm. Now here's your host, Mike Shanley.
- [00:28]
B
Welcome to the Aid Market Podcast. Today's guest is Bill Steiger. Bill was the former USA Chief of Staff Under Administrator Mark Green. He previously was the Managing Director at Pink Ribbon Red Ribbon, the leading international initiative against breast cancer and cervical cancer in Sub Saharan Africa and Latin America. He was the Senior Advisor to the Gen to the General Manager of the Global Fund. He was a Special Assistant to the Secretary for International affairs and the Director of the Office of Global Health affairs at the U.S. department of Health and Human Services. He also served as the U.S. member of the Executive Board of the World Health Organization, President of the Executive Committee of the Pan American Health Organization, and US Member of the Board of Directors of the Global Fund. Bill is currently a Global Health Consultant at the George W. Bush Institute. Bill, thank you very much for joining us today to share your insight, expertise and thoughts on USAID and the aid market.
- [01:30]
A
Thanks Mike. It's great to be with you. It's a pleasure and an honor to be on the podcast. I've enjoyed watching your interactions with other guests over time, and when a fellow Packer fan calls me up and says he'd like me to do something, it's very hard for me to say no.
- [01:43]
B
Well, following the episode with Mark Green, I think we're biasing a lot towards packers fans on here, so we'll well Bill, thank you. And so let's get started starting a bit more generally. Usaid. What do you see as the role of USAID and where does that fit into overall US Government foreign policy?
- [02:05]
A
So very much, I think. Like Mark Green told you on an episode earlier in the year, USAID is essential to American foreign policy and forms the core of our network of agencies that provide foreign assistance in service of that foreign policy and national security strategy. Obviously, USAID could do more, can be doing better, but every administration learns pretty quickly that USAID is incredibly useful in the service of furthering our foreign policy goals and our national security objectives overseas. And so in terms of the architecture, I think there's probably room now in the next few years for a rebalancing between some of the elements of that foreign assistance and foreign policy architecture. And we can get into that in particular because of the rise and creation and now five years of history of the US International Development Finance Corporation, or usdfc, that has changed a little bit, the calculation about roles and responsibilities between usaid, dfc, the Millennium Challenge Corporation, the State Department and others. And I'm hoping that whoever comes into office in 2025 can use the opportunity of the reauthorization of the DFC to rebalance and recalibrate the interaction between those agencies so that all of them are working together in a much more coordinated fashion, much more strategically aligned, and actually tactically connected as well on the ground. And that there is some kind of national U.S. foreign assistance investment strategy that will tie them all together.
- [03:44]
B
Yeah. Could you talk a little bit more about what that might look like when you talk about that rebalance with mcc, with dfc? And actually, Bill, I'd love to hear a little bit more about your thoughts of what that national investment, global investment strategy might look like as well.
- [04:01]
A
Sure. I think there are three big ideas that I would put on the table having to do with this architecture of foreign investment, and then one big idea that I know we're going to get into that has to do with how USAID operates and the choices it makes and the culture that it needs to develop for its own work in the service of a larger strategy. So one is that I think we need to go back to something that was Mark Green's brainchild in the Trump administration, and that is the journey to self reliance as the unifying principle, the fundamental guiding principle for US Foreign assistance working underneath the principles of a national security strategy. Our foreign assistance really should be about making sure that we can help on the national level and on the individual level, countries and their citizens achieve self sufficiency, self reliance, independence, and basically preserve and advance human dignity. If I had to summarize what I think the mission statement of USAID ought to be for the next 20 years, I would take all of the words out that are there now and boil it down to that phrase, preserving and advancing human dignity. The journey to self reliance is the core of that. I think all of the parts of the US Foreign assistance architecture, including some that are some agencies and departments that are not normally considered part of foreign assistance or don't think of themselves as part of a foreign assistance like the Department of Health and Human Services really ought to be operating on that principle that we should be working ourselves out of a job in foreign assistance. Our goal should be to reduce over time, strategically, the number of places we are working, the number of sectors in which we are working, the amount of money we are spending in foreign assistance, because we've been successful in helping to transition countries from recipients to partners to fellow donors. As Mark Green likes to say in that strategy. Then where does USAID fit in? I think there are a couple of big changes that I would love to see in terms of the positioning of the Agency. One is that USAID really should look and operate a lot more like the Millennium Challenge Corporation. What does that mean in practice? I would love to see the Agency start to establish compacts at the country level with host country governments after consultative processes with both governments and civil society and the private sector in which we, the United States would commit to do certain things with funding in certain sectors and the national government and others would commit to do certain things, particularly advancing their own contribution, financial contribution to development. And those compacts would have binding milestones that would allow us to hold each other accountable and allow us to reduce our assistance or condition our assistance as we need to if there's backsliding or if there is non compliance with the terms of the compact. In that there should also then be clear and formal divisions in my mind of responsibility between USAID and MCC around countries that actually have MCC compacts. In other words, USAID's investments on a priority basis should be to support the successful implementation of those compacts. And in countries that have not yet qualified for a compact at the threshold level, a lot of USAID's assistance should be geared towards in a number of sectors helping to advance that country along the qualification pathway to get to eligibility for a compact according to the MCC's metrics. So make much more of USAID's assistance into compact like arrangements that promote performance and mutual accountability and make sure that USAID is much more intentionally and strategically supporting the MCC's actual compacts at both the compact eligibility level and the pre eligibility level. Then the third big idea has to do with the engagement of USAID with the private sector, starting with the dfc, but not exclusively with the dfc. A primary objective of our US Foreign assistance in every sector really should be empowering and working with the private sector to create jobs, sustainable livelihoods for the beneficiaries, the citizens of the countries in which we work and at the same time leveling the playing field and creating the fertile conditions for better two way trade and investment that will benefit both the the American people and the businesses and citizens of the countries in which we work. And that means changing a lot of the orientation of some of our agencies, including usaid, to recognize that the private sector is not evil. Right? The private sector is actually the generator of most growth, that generating and creating jobs is really what's going to lift people out of poverty. It's not going to be government subsidies, it's not going to be our traditional programs, but it's going to be actually giving people back to my original thesis. The dignity that comes with work, that has living wage and the ability to grow and support a family and ultimately move up the economic and social ladder. That is going to imply, I think that USAD does have to do some things differently. One, it has to do more co financing and co design with the DFC in a very intentional way. It's great so far that even in fiscal year 23 the DFC did about $9 billion in transactions. 30% of them, sorry, 20% of them were sourced and supported by USAID. That's great. But there's more room to grow. It means more flexible financial vehicles and funding vehicles and better use of some of the authorities that USAID has like other transaction authority to support us, to support DFC transactions and also to prepare for the playing field and the enabling environment for the private sector, including American companies, to do business in some of these places and to fill in some of the gaps where maybe the deals are just too small for the dfc. There are a lot of very productive investments that USAID can make on its own in conjunction with the DFC and also the MCC that don't rise to the level probably of what the DFC expects in terms of the size of the deals it wants to do. But they're still commercially viable, they're still profit making, they still have development impact. And finally, that probably means reorienting or expanding the orientation of USAID staff, notably the Foreign Service, by creating a backstop, as they call it, a cone they call it in the State Department, but a dedicated career pathway for Foreign Service officers to focus on the private sector.
- [11:01]
B
And very interesting. What about the Department of State? What do you see as the ideal relationship between USAID and the U.S. department of State?
- [11:12]
A
So that's a complicated question and gets controversial.
- [11:16]
B
We have 50 minutes left on the show, Bill.
- [11:18]
A
So listen, I have very strong views on this point. I believe that the relationship between the Department of State and USAID should be much more collaborative than it sometimes is probably starting in Washington, because actually the relationship in the field is much more cordial and cooperative and productive than people sometimes think it is. Based on their experiences that they have in the Washington bureaucracy. I have come to the conclusion that the Office of Foreign Assistance at the State Department, created under the Bush administration with Apologies to Secretary Rice, has probably outlived its usefulness. I think it's probably time to either eliminate that office or radically restructure it to focus on a few things that were the original intent to. Of what F was supposed to do and not what it does today. Today, it is far more of an obstacle to progress than it is a useful tool to make sure that there is actually coordination amongst our foreign assistance agencies. And that's partially a flaw of its creation because it never, in either legal or political terms, was able to bring in the agencies beyond USAID and State in any meaningful way to force coordination. It does not have budgetary authority over anything but those two entities. So it doesn't control what Commerce does, doesn't control what HHS does, doesn't control what even the DFC and MCC do. So its role has become much more of a way. Its purpose has become much more, in my view, of a way to control usaid for the State Departments, regional bureaus in particular, to have control over USAID and to take funding away from USAID from permanent, particularly one of the funding accounts, the Economic Support Fund. State Department should not, in my view, try and recreate the role of being a foreign assistance agency. State Department is where we get our foreign policy guidance in the interagency. It should be the prime policy implementer of the U.S. foreign National Security strategy, and I would think, a major player in designing our foreign assistance investment strategy. But then it needs to get out of the way and allow actual implementation to be done by the folks in the field who are more oriented and trained in development. In a lot of places, State Department is too big. It is an agency. It is a department that has components that are looking for a mission, that are looking for a purpose. I thought it was very instructive when Secretary Tillerson did a anonymous survey of employees at the beginning of his tenure, both State and aid. As Mark Green always says, the people at AID were really clear on what the mission of the agency was. They were bought in. They understood what it was supposed to be doing. Might not have always been executing exactly the way that we might have wanted or they might have wanted, but they really understood what USAID was supposed to be doing and what it was supposed to be for. The figures at the State Department were far lower. It wasn't really clear for a lot of State Department employees what they were supposed to be doing, what their unit's purpose really was, what their guiding principles were, beyond a few basic ones. And so that makes it. That makes the relationship hard. I'VE always advocated that there needs to be incredibly close collaboration on a day to day basis between the state teams in Washington and the state teams and the USAID teams in Washington, as it often happens in the field. And that can be achievable. But sometimes the fight about money gets in the way. I also think that the State Department really needs to get on board with the idea of the Journey to Self Reliance. That is that there are going to be places in which we change or reduce our foreign assistance based on the positive achievements of our country level partners. They're going to be countries that don't need traditional foreign assistance anymore. They might need security assistance, they might need democracy programs, they might need the cultural programs and benefit from the exchange that we have with them. But they need to transition to a peer to peer relationship instead of being in a donor and recipient relationship. And that requires in some cases that, yes, ambassadors are going to lose some of their foreign assistance portfolio, which ambassadors never like to see. So we had a terrible time in our implementation of the Journey to Self Reliance even in a couple of very small places, Jamaica and Albania, to get the State Department in Washington and the embassies on the ground to agree that we were going to move from the traditional programs we've been doing to something that was much more of a sustainable, legacy oriented joint working relationship. Perhaps leaving some money on the table to do that, but creating institutions that would live beyond the donor recipient relationship and have peer to peer co investment kind of strategies. Something that has happened, for example, in Portugal over the last 50 years. There is still a Luso American foundation. That's the legacy of USAID's programming in Portugal. But we recognized that Portugal has progressed beyond the need for traditional foreign assistance. We also do lots of other things with Portugal in the context of security relationships, intelligence sharing. Right. Working on drugs and human trafficking. There's a lot of assistance, even if it's not foreign assistance relationship, complicated relationship that happens in a country like this or with Taiwan or with South Korea. But they've graduated beyond, they've progressed beyond what USAID has been able to do. So I think getting more flexibility and yet more cohesion and coordination with the State Department will be critical. And I think changing the way that F operates will be part of that new dynamic for that to work.
- [17:00]
B
Thanks, Bill. Now I'm interested in this next one. So you were Chief of Staff with Mark, under Mark Green at the top of usaid, saw everything from the inside, all the interagency stuff, the, the, the global implementation of the Journey to self reliance. And then the last few years you've been watching the current administration run usaid. I'm very interested in your thoughts on what do you feel? Well, what have you been thinking as you've been having been on the inside, knowing how it works and then observing it the last few years? What's gone well? What are things that you feel are left to do to make USAID more responsive and more effective and just any other thoughts that have come up as you've watched this administration lead the administration of usaid?
- [17:45]
A
I want to give this administration a lot of credit. I have been impressed with many of the initiatives that Administrator Power has announced and that the organization is carrying out. I am a big fan of the push towards localization. I agree with what the administrator and others around her have been saying on this topic. I don't think that the current push goes far enough and we can talk about why and how, but I champion the same cause that she does, which is the agency and all of us Foreign assistance needs to move more directly, more aggressively into working, working with local implementers and engaging local communities and local citizens in its work on the design and on the implementation side. So I appreciate that. I very much enjoyed your conversation with Jamie Rogers, the head of the Office of Acquisition Assistance and Senior Procurement Executive. He is a terrific guy and a great person to be leading this continuation of a transformation at usaid. A lot of people don't want to give the previous administration a lot of credit for what we started, but effective procurement and partnering reform that Mark Green launched with my friend Randy Tift continues, perhaps under a different name, but very much the spirit and many of the actual tools that we put in place continue to be part of this current administration's approach. And I think that's tremendous. I appreciate what Jamie says about culture at usaid, and I agree with him that the agency needs to embrace a culture that celebrates what he calls successful failures. That's the key issue. The risk aversion in general of the institution is something that I think everyone from the administrator on down knows that they need to tackle. So I'm grateful and pleased to see that they agree with that. We have to continue from the outside, encouraging and in the inside doing reforms that empower the staff at USAID and partners to take risks and make changes, even in award course corrections, and to come to the place that we all recognize and realize that, as they say in Silicon Valley, failing fast is actually a virtue, that it's better to commit resources maybe than on a smaller scale to Something to try and see if it works and when it becomes pretty clear early on that it isn't working, to cut our losses and shift those resources into something else and to harvest the lessons from that failure. As Jamie says, every failure, as they've learned, as he described at his last employer at the National Aeronautics and Space Administration, is a great opportunity to figure out how to do something better the next time. It's not a failure in and of itself and it's an experiment that didn't work. But the scientific method is all about a bunch of experiments that don't work until you find the one that actually delivers on results. And USAID has been for many years more about committing large amounts of money to safe projects than that might not fail, they might not achieve a lot, but at least they don't go down in flames and therefore attract negative publicity or negative attention from Congress. And Congress is key to this. Congress also has to allow the agency to take more risk. We can talk about what I think that means as well, but I appreciate that the administration has embraced diversification of the partner base, has embraced moving towards more localization, has embraced more risk taking. I have to give them kudos for the new, not so new, but this administration's risk appetite statement, published and available, which was an adaptation of the one that we put out when I was acting chief risk Officer at usaid. And I will say that their document's probably better than the one that I helped to publish. It's bolder in some ways. It's clearer in other ways about this issue of a greater risk tolerance for experimental failure on the implementation side. Not that the agency is now recognizing in some way that corruption is acceptable, that waste is acceptable, that fraud is acceptable. No. But that it's acceptable for our investments in foreign assistance not to work as long as we are harvesting those lessons and the funding and putting into something that's likely to be more productive, so on in principle. Big picture. I very much agree with what this administration has set out as its directions on those issues. I fault them to a certain extent on implementation, and I hope we can talk about that because they are taking a number of steps that are necessary but insufficient. And there are other things I believe that either any administration that comes in in 2025 can take to move forward very quickly to advance this agenda of better management, efficiency, diversification, localization, and paying for results.
- [22:43]
B
Well, Bill, let's stick with that. Yes. What are some of those things that you think could be done better? And then, yeah, it sounds like, you know, what would be your suggestions? Guidance for the next administration, the next USAID administrator? On how to best learn from. Yeah, on how to best learn from these failures.
- [23:06]
A
Great. So let's start with localization and kind of the big picture of the portfolio. And then I'm going to get into the weeds with you, if that's okay. Like a little bit like Jamie did on procurement.
- [23:17]
B
That's exactly what this podcast is for. Let's get into it. Bill.
- [23:20]
A
Good. And I know your audience is going to enjoy, or at least going to enjoy the conversation around some of these, even if they don't agree with me. So the big picture is look after 60 years of USAID and more than 70 years of US foreign assistance, in the way we think about it now, it's long past due that we should make working with local organizations the default. It should not be a nice thing to do. It should not be part of the portfolio. It really should be the portfolio. And there are programs that have shown that this is possible to do in a relatively short period of time to move from very few local implementers to a majority of local implementers. The President's Emergency Plan for AIDS Relief is the prime example of this, and I was part of this. Ambassador Debbie Burks, the Global AIDS Coordinator, gets most of the credit, but she was able to make sure that USAID and through the Department of Health and Human Services, the Centers for Disease Control and Prevention cdc, moved each of their portfolios the vast lion's share of PEPFAR funding to local implementers approaching more than 60% when I left in 2020. It's been a little backsliding, but that was only in a three or four year period. It can be done, and as I say, it should be the guiding principle on procurement on both the competition side and on the implementation side, that we want to work directly with local partners, not trying to put American institutions out of business. There will always be a place for both large and small American organizations for profit and nonprofit to work in this portfolio. Jamie pointed out, there's right now plenty of money to go around. Some people might say too much money, but there's going to be an opportunity for working with both Americans and locals. But the default should be working with locals and especially in parts of the world that have become much more developed over the last 60 years, that have robust private sectors, that have, that have very vocal and vibrant civil societies. Those places should be approaching a 100% localization in the very near future. That's Eastern Europe, that's South America. That's Parts of South and Southeast Asia and even some countries in Sub Saharan Africa. We could move them much more quickly than is actually happening today. When I was at USAID, there was only one country in the more than 80 to 90 countries in the agency's portfolio, depending on how you counted some of the regional programs, that was fully 100% localized. Paraguay, relatively small country, but able to do it. There are others, Mexico, India, that were very far along on that journey, bigger portfolios. And it can be done. So I'm hopeful that really the next administration takes a quantum leap in embedding localization at every level as the default approach to the worldwide portfolio. It is the moral thing to do. It is, I think, also the most cost effective thing to do. And it is also the core on the, on the procurement side of implementing the journey to self reliance, we should be helping local organizations and local institutions move and strengthen themselves out from under, perhaps in some cases the prime recipient subrecipient dynamic, to being able to manage and implement funds on their own. Whether those funds come from the United States government or national governments, local, private sector, local philanthropy, or international philanthropy. There is enough talent in the private sector and in NGOs in many of the countries in which USAI works to be able to move quickly to localization and more quickly than it's happening today. And PEPFAR shows you can even do it in sub Saharan Africa in some relatively poor countries. So that's the first thing the culture needs to embrace localization as the default, not just as a portion of the portfolio. So what does that mean in practice? What really has to happen? A few things. One is that you have to redefine what it means to be local and what portion of USAID's portfolio is included in the denominator for calculating localization. And here I fault the administration on both of these points. I think the definition of local is not tight enough. I advocate for the PEPFAR definition of local, which is more stringent than the one the agency uses. And with apologies to my friend Randy Tift, I think he probably, yes, I would make some modifications to recognize locally established partners as part of this definition, although I might not go as far as Randy does, because there's some gamesmanship that can happen there with large local, large international players turning themselves into quote unquote, local organizations for the benefit of continuing to be eligible for funding. You have to watch that. But a second part then, aside from the definition of local, is the denominator. And what's happening today, unfortunately, is there's too much of the portfolio excluded from that denominator. So humanitarian assistance has not been part of that definition, at least until recently. Grants and cooperative agreements with international organizations, UN agencies and others, which now are almost 50% of the assistance side of the USAID business, are excluded. And then a lot of acquisition, a lot of contracts are excluded. That means that the administrator's 25% target is really more a much smaller percentage, a much smaller slice of the overall portfolio. It's more like 25% of 25% instead of actual 25% of 100. I think that the next administration really needs to set a target globally of much more like 50% in the next five years of the portfolio and back that up by assigning percentages, shares of that overall global goal to each one of the missions, regional and national, overseas, in the same way that it already does that with the Small Business Goaling Program run by the Office of Small and Disadvantaged Business Utilization, or osdbu. Osdbu, taking a global quota given to it by the Small Business Administration is able to translate that negotiating with each mission into a certain percentage of each portfolio at the country level and at the regional level, plus with the Washington bureaus to translate that into a share that's based on capacity, that's based on the reality on the ground. And the agency has, you know, what has hit that goal and exceeded that goal every year since it's been doing this, and the missions have embraced it and they're working with it. And so I. We had this debate, Mark Green and I and others when we were in the administration about whether, when we were pushing for diversification, we should establish some sort of a quota system for the missions, and we didn't do it. I think in retrospect, that was probably a mistake. I think that's a mistake that administrator power has made. The 25% is too general, doesn't cover enough stuff, and it's not forcing the missions to really do their share based on what's possible on the ground in each place to meet a larger corporate goal. So, okay, then beneath that, let's go one level down. What then has to happen to make that sort of vision a reality and even implementing those numerical goals? One is that the procurement culture has to change and Washington, I think, has to set some new standards and expectations for the entire agency, not taking away their flexibility in being able to actually translate these mandates into particular specific programs, but setting having much clearer guidance from Washington about what localization actually means. I tend to view. I tend to have the view that Ambiguity leads to inactivity, leads to paralysis, and that if no one is actually, that if, if no one is actually particularly responsible for implementation of any of these goals, then nothing happens because everyone is responsible. And that diffuses that accountability and responsibility throughout the organization instead of making sure that everyone plays their part and is held accountable for it. So the first thing you have to do is you have to reestablish or establish performance indicators at all levels in people's performance plans to reward high performers, reward innovation and reward localization as cort values of of USAID and translate that into the annual implementation, annual evaluation procedures and also into promotions in both the Civil Service and the Foreign Service. Then you have to set some new defaults in my opinion, for procurement, both on the competition side on the front end and on the management side or investment side on the back end. One, open competitions with low costs and low barriers to entry should be the default. That means we make on the assistance side, grants and cooperative agreements. We make annual program statements and the equivalent the standard for assistance. On the contracting side, acquisition, we make statements of objective and broad agency announcements. 2. Step competitions with oral presentations, the default for acquisition. For programmatic acquisition, it doesn't mean we can't use other vehicles, but that, that should be the assumption that everything is going to be like that, flowing down from that. When you get to awards or sorry, I should say, yeah, when you get to types of awards, we should move to pay for performance awards as much as possible. That should be the standard award that USAID uses. On the assistant side it would mean limiting significantly the use of leader with associate awards and moving much more towards as has been happening as Jamie mentioned, fixed amount awards, including in much smaller amounts to local organizations. On the acquisition side it means limiting as far as possible the use of cost plus fixed fee contracts and moving towards fixed fee contracts that are based on performance indicators or performance milestones. So Jamie's foreign boss at NASA has said publicly in congressional testimony that the cost plus fixed fee contract is the bane of that organization. That's the number one target that he had to try and reform. The same is true at USAID on the acquisition side. That doesn't mean that there will never be room for a leader with associate or indefinite delivery, indefinite quantity IDIQ contract or that there isn't a place for Washington based buy ins. There are a lot of Washington based buy in contracts I like. I just think in many cases the procedures are too slow, the barriers to entry for new partners and underutilized partners are too high and it has created those kind of largely Washington based, very complicated vehicles, have created an oligopoly that has limited the ability of the agency to diversify and especially to work with local partners. A couple other things have to happen. One is that you have to move. Also I will say another thing that's part of this on the innovation side is a much greater use of innovation incentive awards. Congress took the cap off that kind of competition and award just two years ago and the agency really ought to embrace that. The prizes and competitions, the kind of pay for ideas mechanisms that are both widely popular on the outside and bring entrants into the USAID ecosystem who never would have considered that they might have worked with the agency before, from the private sector, from academia, and lots of even interesting individuals from around the world who are willing to show their ideas and develop their ideas. I think then for the money. Finally on this point, it means that USAID has to become much more directive in some ways about how it is asking missions to structure their notices of funding opportunity and asking them to use vehicles that will allow for the pooling or the combination of different flavors of money from different appropriations or from different lines. What do I mean by that? I love the idea of having every mission in the world do a new partnerships initiative on its own that could be completely run at the local level or it could be addenda that hang off of a global or multiple global depending on the sector. Perhaps NPI umbrella announcements that are shaped in Washington. Every mission should have an NPI and that NPI should be sector agnostic, should be an open competition for various kinds of implementers to do various things that might cross some of the funding lines to do more integrated programming. And that should be a growing percentage of the awards in a country should be through an NPI like vehicle. And the Regular RFIs and RFPs, requests for or sorry, RFPs and RFAs, requests for application and requests for proposals should be fading away as they're no longer necessary because the individual offices in missions should be using NPI like vehicles or open APSs, including as I say, ones that cross the lines between them. Another thing I love is I would love if I were in charge to make sure that every mission is running something that looks very much like American Schools and Hospitals Abroad program or asha. That's a vehicle. As you, as most of you and your, as you and most of your listeners know that right now is a relatively small 2530 million Washington based program in which all sorts of organizations from around the world find an American partner That has a relation already. There's an existing relationship between those two partners. The American partner is the frontman for the, if you want to use that expression for the award, but passes through virtually all of the funding to the local partner. They're relatively small awards. They're very flexible. Right now they're just for, as the name implies, schools, hospitals, pharmacies, libraries, et cetera, universities. But you could take that same model and use it in almost every sector that automatically brings in new partners, but partners that have relationships with Americans and that through which we can promote ties to the United States. It's also country agnostic. It includes, as you know, applicants from Western Europe. I wouldn't necessarily recreate that for everything, but you could create regional versions and country versions that would be another vehicle for promoting localization. And finally then I think you need to harvest more resources inside the agency from various budget lines to promote vehicles like Development Innovation Ventures or div like some of the new vehicles that the private sector Engagement team has been working on and developing that are more flexible pools of funding from which the agency and missions can draw and work on all sorts of different projects together. DIV. Because again it brings in new applicants. It's focusing on new innovations and on these investment vehicles or some of the new contracts that they've developed on that side it would allow for more co financing with the dfc, more blended finance vehicles and the ability to work much more closely with the private sector. So I think you gotta work on that. On translating a vision of localization through a set of expectations, a new set of expectations that involve people's performance. The default options or what should be the default options for notices of funding opportunity and for the choice of instrument that will follow from them at the country level. And also then creating more flexible vehicles through which missions can put their funding.
- [39:46]
B
A lot I want to hear more about from you on that bill. But maybe starting with the pay for performance is one idea there that the award value would have to get smaller or do you see there can be a. A fixed price agreement for a hundred million dollars plus. And I asked that too. I'm curious how you are thinking about. Obviously there's the contracting officer shortage within USAID as a result of that. It's just there's more large dollar amount prime awards. You see that as an issue. Do you see that as something that these ideas could work within or is there. Yeah. Any changes in that dynamic? You know, to put in other terms, it's easier to give out one multi hundred million dollar contract to A prime and then have them manage the localization the new partnership piece of it then give out a bunch of small ones. So so yeah I guess I'd be curious about about your your thoughts on there if you think that even is is is an issue and how you would see these ideas playing out in there. Can can you have a $200 million fixed price agreement on a USAID project?
- [40:53]
A
Well, I think every contract at USAID should be performance based and I think there's a way to do that right. There are performance based contracting vehicles that we should be using no matter the size of the award that would both protect the agency and make sure we're maximizing performance and and providing flexibility for the agency if the implementer isn't actually doing what it's supposed to be doing. It's one of the principal flaws that I saw for example in the supply chain management contract that the Global Health Bureau put out before I got there. The current iteration of it. The contract had no pay for performance aspects to it and also had no off ramps that would allow the agency to move workaround if the principal implementer, head of the consortium and its members weren't actually performing. There was very little in the way of incentives and there was very little in the way of accountability that the agent no levers for accountability the agency can pull. So there are ways to build that in I think to every contract. I also think that every large implementation contract should have built into it transition awards which would allow for pieces of the work over time to be moved gradually and under supervision and carefully to local organizations as part of the push on diversification and localization that would move subs on the pathway to being primes. It's one of the principal ways that the PEPFAR original PEPFAR treatment awards moved from major international consortia to local groups over the course of four or five years. I also think that in terms of one of the major trends that I've seen that is the bothering me about the acquisition side of USAID is an increasing reliance or an increasing justification of using General Service Administration schedules and the already pre competed players that are part of that schedule to make programmatic awards. Traditionally GSA schedules were for more the work that an agency had to get done for staffing, sometimes for monitoring and evaluation, for technical skills, for engineering, things like that. But aid has been in my opinion pushing the limit and using GSA schedules to do more programmatic work, including in some areas like resilience and food security where that wasn't those vehicles weren't really Part of the portfolio before and the justification of this is what's called category management, which is an expectation that omb, the Office of Management Budget sets every year for what percentage of the acquisition portfolio of a federal agency should should be done by what are supposedly best in class, best in price, pre competed vehicles that are in the hands of or that allow for competition among a small number of vetted by the GSA for profit companies, some of them small businesses, some of them large businesses. There's a place for category management. The agency's IT work, information technology work. The agency's work, yes, probably in a lot more of evaluation, the staffing, contracting work that the agency has, that all should be done in best in class category management contracts. I don't think that a lot of the programmatic work overseas should be and that is increasingly skewing the portfolio over the last four or five years toward the contracting side and away from acquisition side. When you marry that with the huge percentage of the portfolio in the hands of the international organizations and UN agencies, it means there's not a lot left over for experimentation. Which is one of the reasons I think that the localization drive in this administration hasn't gone as far as fast as the administrator and others would like to. So I do think it's possible and I think it's possible that there are possible workarounds for the staffing crunch. And I don't want to minimize the fact that there are not enough contracting and agreement offices at usaid. But I also think there are never going to be as many as everyone would like. So as Jamie himself says, the agency has to get creative and I applaud the administration for taking some steps that are making that are maximizing the use of current staff, the increasing use of warrants for foreign service nationals. A great idea. We should be doing more of it. We should be doing more with eligible family members, should be doing more with personal service contractors having warrants. We should be outsourcing as much as possible a lot of the pre award work either to third party contractors, again something that could be done off GSA schedules or putting it in the hands of as he said himself, Jamie Rogers said himself in the hands of potentially artificial intelligence. I think there is a role for AI to revolutionize all of aid's internal processes. It's a document heavy agency people don't want to write these things. Everybody knows it. No one wants to write the next nofo. No one wants to write the reports, no one wants to write the evaluations. No one wants to Score things. No one wants to sift through the enormous amount, no one has the time to sift through the enormous amount of information that's already published by the agency and its partners about what's working and what's not working. AI can help on every score, on every one of those fronts to, as people say all the time, return the officers at the agency back to higher level, more meaningful work, the stuff that they signed up to do. But there are other ideas. I am a firm believer that one of the things that holds back the increase in the number of competitions every year is that staff at USAID career staff really do not want to participate in technical evaluation committees. And to a certain extent, I can't blame them. The way they're currently structured, especially without AI support, they're very time consuming, they're often very, very complicated. And people, in a lot of cases, it's not their core interest. So other agencies in the federal government have solved this problem. The National Institutes of Health, at hhs, the National Science foundation, they all use third party external reviewers who are vetted for conflict of interest. And the law allows for this, Regulations allow for it. The automated directive system already has very specific criteria for conflict of interest for outside reviewers. It can be done. The agency just chooses not to do it almost ever. But that is a multiplier, a force multiplier for the workforce on one of the key areas of procurement. That is not. That's a pain point for the staff. Right now we need to find a way to bring in outside qualified reviewers to work on these competitions on these tech panels, which also, of course, has two purposes. One, if you have more people working on tech panels, you can have more of them, which means you can make, you can have more competitions to then make more awards. And it's a great way to get to the administrator's other goal in localization, which is 50% local engagement or involvement in the portfolio. I have been disappointed that the agency has walked back from the scale or the threshold of the definition of what would count as local involvement. There are 14 criteria that the agency set out. It used to be, or was going to start to be that nine of them, nine out of 14, meant that a project or a proposal or an initiative had local engagement. Now something can qualify. Only meeting two of those 14 criteria, that's too low. But an easy way potentially to get local engagement is to have local people, local experts, even people from local communities, as long as they don't have a conflict of interest involved in the vetting and the recommendations of applications. Finally, I think there is a way, the one statutory reform I would recommend that Congress could make with usaid, that would have a huge impact to increase the amount of revenue that could go towards the core business of the agency, which is grant making, contracting and grant or award management, contract and grant management, and that is creating a working capital fund for acquisition and assistance. Right now, the operating expense budget is limited and it has not grown in pace with the growth of the portfolio. The program budget, it's still only under $2 billion, including humanitarian assistance. The amount of program dollars has increased from when I was there, about 20 billion to now almost 40 billion, somewhere in the neighborhood of 38. That's unsustainable. But a working capital fund for acquisition and assistance would allow the agency, under certain limitations and with certain structures and guidelines, to turn program money into OE money, to use program dollars to both hire more staff focused on procurement, but also to invest in the technology, to invest in the third party or external support contracts that are necessary to make all of this run more efficiently. That would include paying, for example, honoraria to external reviewers. You could pair that with a working capital fund for information technology, or you run it all through an ANA working capital fund. There already is one at the agency. It just happens to be for the relationship with the State Department around the International Cooperative Assistance Services. I can never remember what it stands for. Icas. Somebody will correct me. But the money that goes to funding the missions and embassies overseas, that's shared across the federal government. That's a working capital fund. That's how USAID makes its contribution. You can do something with a governance structure, with rules, with clear outcome measurements that would allow the agency to vastly expand the amount of resources it has at its disposal for acquisition and assistance. Because I don't see any way, Mike, that Congress is going to raise the OE budget sufficiently in the next few years to cover this problem. There's got to be a creative solution. For me, it's a working capital fund, plus these other reforms, some of which the agency has already started and others which I think they need to implement.
- [50:44]
B
And bill on that. Let's go right into directly USA funding. Does USAID have enough funding? Does USAID have enough flexibility with their funding? And is there anything it needs to do with its own budget, either internally and or requesting from Congress or anything else along those lines?
- [51:04]
A
So multiple answers to that question. The bottom line, paradoxical answer at the top level to your question is yes and no. At the same time, it both has too much Money and it has not enough money. I alluded to this just a second ago. It probably has too much programmatic money. I think that the, the budget, especially in the humanitarian side, is outstripping the ability of the agency to properly implement and manage the funds. And it does not have enough core operating expense money to match that size, that responsibility that Congress has given it. So something has to give. My answer is if you don't want to increase the OE budget because you don't trust the agency to spend the money on its core business, fine, then use a vehicle that's much more targeted, like a working capital fund. But one way or the other, that ratio I think has to change and change pretty soon to get out of this current problem. Second, I think the humanitarian budget has now starting, as Mark Green likes to say, it's now starting to cannibalize the development side of the program budget. There are places in the world where we're investing humanitarian money, where we've been doing so for 20 years in now what are grinding man made chronic crises that are not the original intent of the humanitarian account. And we need to find a way to shift that programming and indeed the financial responsibility for those programs that we're going to be doing onto other parts of the budget over time and also onto local budgets. In other words, there are places in the world where we are helping to subsidize national governments in ways that are not productive. I'm worried that in some places our humanitarian assistance has actually become counterproductive. So I worry about that part of the budget. Finally, yes, USAID needs more flexibility. It is not usually in the way that people think. I have maybe a different view than some. The problem overall is not necessarily that there are too many directives. It's the kind of directives, it's not even really the major sectoral directives that are the problem. To me, the biggest lack of flexibility comes from the country level top lines, the country by country directives, which have a minimum amount of money that the agency must spend in these places, those when they intersect with the sectoral directives, especially when the sectoral directives are probably too large, mean that money gets misallocated and there is not enough money for certain things. Where for example, in sub Saharan Africa, both governments, civil society, the private sector are asking us to do stuff that's beyond what we have funding to do on economic growth. In particular, the agenda I talked about with the private sector at the beginning that is going to need some more flexible funding, some relief from Congress around these sector around these country level earmarks or directives and some additional flexibility on some of the sectoral ones. The agency, however to be fair, when you talk to the appropriators, the agency does not always ask to use some of the flexibility that it already has. There are ways to transfer funds between accounts between countries. There are ways to ask for deviance, for ways to deviate from some of the directives and the agency is reluctant to do that. There needs to be a mature conversation about why some of these things are affecting the agency's ability to be responsive to both the situation on the ground, a vision for self reliance and also some of our national security priorities. So a mature conversation with Congress about that relief is important. What's also important of course is a mature conversation about the non statutory barriers that Congress puts in place that slow down USAID's work. The holds, the constant request for information, the four and five bites at the apple that the committees of jurisdiction get on every one of these country level programs. There's two we're spending too much time on paperwork with the Hill and we need some relief and in some cases if it's not statutory, we need an administrator who's going to stand up ideally with support from the White House and say I'm going to do what the Foreign Assistance act legally obligates me to do. I'm going to treat a notification as a notification, not as permission and we're going to move because we need to move more quickly. So there's a combination there Mike, between some of the things the agency can do for itself, some relief that Congress can give it and also I think an overall recognition that the in the budgeting process the balance between humanitarian development, between operating expense and program is out.
- [55:44]
B
Of whack and looking ahead to the next elections I guess quickly on that point but then a more general question. Do you think there's depending on which way the elections go for Congress, hope for support from Congress to lower some of those administrative requirements, perceived or real for usaid. And then I'd be interested in your thoughts of A lot of our many of our listeners are working for USAID's partners, new partners, established partners, local organizations obviously for any election year they're interested in how might they best be able to support who got regardless of who, who, who will win when. What would your suggestions be for those organizations on there's a lot of groups working on various visions and policy suggestions for either Trump or a Harris administration. Are there any that you feel you know are more likely to be aligned with what the, the policies that either one of those administrations might, might pick up for, for the USAID work?
- [56:45]
A
Well, I expect to see some recommendations to the transition team of the winning candidate come out here or to both, both candidates, maybe even before the election that will have some very interesting things in them that will have genuine bipartisan support and consensus. I think there is a growing bipartisan consensus around innovation and the role that USAID can and should be doing in promoting innovation. And that includes things like not just the paper performance things we've talked about, not just expanding the kinds of vehicles like div. That we talked about, but even having the agency spend much more of its portfolio on the expansion or the implementation widely of innovations it's already paid for somewhere. This is something that groups have been talking about. Now how can we help the agency fund more of the problem, the solutions to problems that it's already funded one place someplace and help to do them more places? I think there's a consensus around the idea that the Agency needs to have a better coordinated relationship with the MCC and the dfc. I think there's going to be traction around this idea of compacts with national governments. There's a bipartisan consensus I think around the idea of greater sustainability of our foreign assistance, of finding a way towards self reliance and perhaps ultimately getting out of some sectors or some countries based on those countries performance. And I think there's going to be a bipartisan consensus around the idea that while we have a moral obligation on the humanitarian side, that our humanitarian funding can be and should be working better in concert with our development money and that we have to be careful of the moral hazard in some cases of what our humanitarian assistance is doing. And then finally some of the legislation that's already been submitted and introduced on the Hill around some reforms, around localization, around diversification. I love those, those bills, they're great. And I think some of them have a chance to pass in the new year that would give some additional tools to the agency to do what the administrator and the administration has said they do want to do and goals that I would endorse. I hope they get bolder in some cases in the legislative process. I hope they throw some ideas in there like a working capital fund. But what people should take away is that there is a consensus that USAID is important. It has a key role to play in the architecture of foreign assistance. It's going to be crucial to our national security and our economic security going forward to have smart and well invested humanitarian and development assistance. And that we can make some changes that will make all of that more impactful and more efficient.
- [59:23]
B
Bill, we always like to end with a so what question for the implementing partners. Again, who knows how what's going to happen with the election, but what do you suggest they do internally now? Where should they be focusing their energy and time so that they can best fulfill their missions and best support USAID's missions for years to come?
- [59:44]
A
Well, I hope that everybody can be focusing on holding all of us, whoever us are who are in the foreign assistance establishment and those people who come into senior roles at USAID accountable for the things that we have promised. Hold everyone accountable. Hold the next administration accountable on reducing burden. Right? There is a way to reduce the burden on every implementer, American, foreign, large or small. The burden that USAID imposes in every aspect of its procurement process is still too high. Hold everyone accountable for that reduction, that promised reduction in burden. And hold the agency accountable and the rest of the government accountable on the issue of transparency. Because one of the things that will help in flexibility, in gaining flexibility from Congress and in actually implementing some of these ideas I put on the table and the administration has put on the table is in exchange, the agency has to be more transparent with how it operates, what it's doing with its money, and how it works with implementers. It has to be better communicating with implementers, including those that are trying to break in and don't make it right. The agency is not always good at explaining why some application or proposal might not have qualified, and it's not always really good at explaining how much money it has for what, where and when. And so I think that one of the best roles that implementers can be playing in the next few months of a transition, whichever way it goes, is to be engaging in these conversations around accountability, around burden reduction, around diversification, and around transparency.
- [61:20]
B
Well, Bill, this was a very interesting conversation. Thank you very much for joining us on the Aid Market podcast and sharing your expertise and insight into usaid. I really appreciate it. I know our listeners really appreciate hearing your valuable perspective on this.
- [61:36]
A
My pleasure. Thanks so much.
- [61:38]
B
All right, thank you very much, Bill.
- [61:43]
A
Thank you for tuning in to the Aid Market podcast. If you enjoyed today's show, be sure to subscribe wherever you get your podcasts and connect with Mike Shanley on LinkedIn to stay updated on the latest USAID funding trends.