Every Organization Is Different

In my recent blog post The Truth About Development Contractors I suggested that one key impediment to the ongoing dialogue inside USAID on cultivating great development partnerships is a misperception that “development contractors” are all part of one big homogenous group. In that post I also shared a little perspective from my own experience to help contextualize how easy it is to develop such a misperception.

This is where you ask: “So if USAID contractors aren’t basically all the same, then what makes them different?”

Great question. Happy to share my perspective!

For starters, USAID contractors come in a very wide range of sizes. According to data that I extracted from USA Spending during FY 2014 USAID administered contract transactions with 1,429 different organizations. As the table below illustrates the majority of companies doing business with USAID are actually quite small. While there were about 30 companies that received more than $25 million in new obligations from USAID in 2014 there were over 1,200 companies that received less than $1 million. Note: Of the 1,212 companies that received less than $1 million 205 of them actually posted net refunds to USAID (net de-obligations).

In fact, the exhibit above actually under-represents the total number of organizations that were contracted by USAID in FY2014. This is because the data on the spending website does not attempt to track all of the new, small, host country entities that are now doing business directly with USAID as a result of USAID Forward. The spending website lumps these new host country firms into a catch all entity called “Miscellaneous Foreign Awardees.”  In FY 2014 USAID awarded over $31 million to  Miscellaneous Foreign Awardees.

To most people the term Development Contractor is associated with the larger, more established firms. Those of us that work in the industry know these big names well. If you go to USAID’s website you’ll find a list of USAID’s Top 40 Vendors. While several of the big development contractors do show up on that list there are some difficulties with trying to use USAID’s top vendor list to analyze contractors. One challenge is that USAID’s list doesn’t distinguish between recipients of USAID's contract funds and grant funds; it lumps them all together. Another issue is that it doesn’t capture important trends over time, it only looks at a single year. Finally, the data on USAID’s website has not been updated in over 18 months - it is still using data from FY 2012.

I thought we needed a better "who’s who” of development contractors in order to really understand our industry so I’ve put one together. Initially I was thinking about calling the list "USAID’s Fortune 50 Companies.” I realized, however, that since nobody is really making a fortune in this industry it would be better to simply call it “The USAID 50” instead.

Here is where you say: “OK, so development contractors come in a bunch of different sizes. Anything else different about them?”

Yes. Here’s a few more things …

1. Ownership. Most development contractors are privately owned but there are a few that are publicly traded. Of those that are privately owned some have broad-based employee ownership, some are owned mainly by senior principles, and others are private investor owned.

2. Diversification. Some development contractors are single client, single line of business organizations. (i.e. project contracting is all they do and USAID is their only client).  Other companies run just a single line of business but provide these services to multiple clients. A few companies have both multiple lines of business serving multiple clients.

3. Purpose/Classification. While most development contractors are for-profit companies some of them actually come from the nonprofit world. A few organizations are even structured as larger holding companies that own and manage both for profit and not-for profit operating subsidiaries. In rare cases  competitors will get together and form independent joint venture entities in order to pursue specific kinds of opportunities.

Here is where you say: “OK, Development Contractors come in many different shapes, colors and sizes. All you’ve shown is that contractors aren’t all the same. Its a pretty big leap to claim every organization is different!”

That’s right. There are definitely distinctive organizational types and later in this blog series I will be introducing an organizational typology that I think could be very useful for USAID.

I still maintain that every development contractor has a unique signature. Understanding what that signature is requires a bit more familiarity. Since my first adventure into development work back in 1998 I have worked for a number of different development contractors and each experience has been noticeably different. What I find most interesting about my experience is the discovery that every organization's unique signature is defined by some specific aspect(s) of the development business where that particular company really excels.

This is where I expect to hear my wife chime in with her favorite jab “playing fast and loose with that word interesting again, eh Drew?”

OK, regardless of whether or not you find this as “interesting" as I do, the point to take away is that differentiation among development contractors is generally revealed through a company’s strengths rather than its weaknesses.  i.e. Want to know what really makes one development contractor different from all the others? Find out what that company does best.

Soon in this blog series I will be describing the unique signature that has defined my experience with each of the different development contractors I’ve worked for. But before I do that I need to provide a little more context.

- DS

Next Up … A quick PEE break