The Truth About Development Contractors

Anyone that’s been working as a development consultant the last few years remembers our industry’s version of the shot heard round the world. I remember it like it was yesterday. As I recall it was early 2011 and Shah’s declaration went something like this: “USAID is no longer satisfied writing big checks to contractors and calling it development.”

I remember that I had mixed feelings. On the one hand I remember feeling pretty nervous. After all, I make a living working for the contractors that Shah was talking about. That statement felt like a declaration of war on my livelihood. You could almost imagine someone from the audience responding with: “Them’s fighting words Rajiv!”  

On the other hand, it was hard to argue the point. I had always felt that as contractors we could and should be accomplishing a lot more than we did. As a management consultant trained to fix poorly performing organizations and institutional structures, the “brokenness” of the whole thing was one of the reasons I found it so appealing. High-level shakeups can be great enablers of change and that’s why I felt a real sense of opportunity when Shah challenged the industry that day. To me it represented the kind of chance I’d been looking for to put into action all the ideas I’d come up with over the years that I knew would enable development contractors to deliver more sustained and meaningful results for USAID … and to do it all with less.

That was early 2011. It’s been close to four years now since Shah dropped the gauntlet. A lot has already been written about what USAID tried to do next, how the industry responded, and what has ultimately transpired as a result. While things have certainly changed across the industry the last four years as a result I don’t think anyone involved on any level really feels satisfied with how the whole thing has turned out. It still feels to me like a missed opportunity for everyone that really cares about development.  

I think one of the biggest reasons that the whole thing feels unresolved is the lingering misperception that the development contractors vying for USAID contracts are one big homogenous group. Or, the related misperception that for profit contractors are vastly different from the not for profits that USAID engages through cooperative agreements.  These misperceptions are a real problem, but I understand where they come from.

When I got into the development consulting industry nearly 20 years ago I was indoctrinated into a very simple paradigm for thinking about the industry. It involved organizing the entire competitive landscape into three categories; (1) the real companies (2) the body shops and (3) the NGOs.

The “real companies” were the large, established, diversified, firms for whom development consulting was just one of many professional services offered, and for whom USAID and other donor organizations were a tiny portion of the overall client base. The real companies were well-known household names; names that even people living west of the Mississippi might recognize.

The “body shops” were the small, single purpose firms that engaged exclusively in development consulting and were completely reliant on USAID and other donor organizations for their survival. The body shops were well known names among people with a 202 area code … but that’s about it.

The “NGOs” were organizations that thought profit was evil. They were the places where you imagined you got to take a break from your typewriter and abacus every couple hours to join your colleagues for a Kum ba Yah around a campfire. I suspected that the only folks outside our industry that might even recognize the name of one of the NGOs were the kind of people that rode their bikes to work.  

That was the mid 1990s (back when I still thought I was a Republican … before I started riding my bike to work.) My employer at that time was Price Waterhouse. We ran in the real company circle and that identity was a real source of pride for our practice, it was a defining part of our culture. Our main competition back then was the body shops; as I recall we never gave much thought to the NGOs.

We referred to the other side as body shops because the ratio of people those firms employed on a contract to contract vs. permanent basis was heavily skewed towards the former. By contrast, that ratio at the “real companies” like ours was overwhelmingly skewed towards the latter.  The implication was that when USAID hired a firm like Price Waterhouse, Deloitte, or KPMG they got an established team of professionals. When USAID hired a body shop like Chemonics or DAI, or one of the really small boutiques, what they really ended up with was just a ramshackle bunch of stringers. It was a self-serving characterization of course.  Which would you rather have?

As card-carrying members of the real company camp we tended to look down on the body shop side of the industry as a bunch of profit-motivated hacks that cared way more about money than they did development. Sure, we were in business too, but we also had principles. It was understood among the big, diverse, real companies like ours that the body shops were the ones responsible for that ugly moniker of “beltway bandits” that we always felt unfairly saddled with. It took several years before I would ever even start to question the notion that we were better than them. What I saw as a superiority of the real companies over the body shops (and an irrelevance when it came to the NGOs) wasn’t just an opinion back then, it felt like an irrefutable fact.

It's a good thing that time and experience has a way of blowing up all the black and white paradigms that we tend to construct as young professionals and replacing those dualistic conceptions with a whole spectrum of interesting greys. Nearly twenty years have passed since my first indoctrination to development consulting and my understanding of the industry has become much more nuanced. While I stuck with the “real company” side of the industry (the same company actually) for well over a decade eventually I let go. Since then I have since spent considerable time working for all the other sides (i.e. the body shops and the NGOs) and my perspective has evolved considerably ... at least enough to recognize how ignorant I was at the beginning of my career.

I’ve recently come to realize that my own experience has given me a fairly unique vantage point that enables me to shed useful light on some of the most common myths about development contractors. As a result I’ve decided to share my practical insight on some of the most unhelpful stereotypes and monikers that I believe continue to hold back the dialogue on building great development partnerships. This new series of my blog is designed to provide USAID with a better framework for understanding the pros and cons of different development contractors and a methodology for deciding how best to engage with them to achieve more powerful and more sustainable development results - the kind of thing I think Administrator Shah has been looking for since 2011.

- DS

Next Up … #1. Every Organization Is Different