Unique Signatures Across the Industry (Part 2)

In the last installment of this blog series on development contractors I laid out what I believe are two truths about Chemonics International.

1. Chemonics provides the "best in class" Project Enabling Environment (PEE) to its programs around the world and I believe this is ultimately what makes them such a powerhouse in development consulting ... and such a formidable competitor for the rest of the industry.
2. Despite everything I'd always believed about Chemonics the truth is that you won’t find Darth Vader walking its halls. It turns out that Chemonics is just a well managed organization with great systems, highly engaged staff and some serious talent, especially when it comes to getting big, complicated and urgent things done for USAID.

In today’s entry I continue my efforts to advance the key theme of the blog series (Every Organization is Different) by examining unique signatures accross the industry.

In order to get to next couple examples we’ll have to skip down a few slots on The USAID 50. 

The reason is that I've not yet had the opportunity to work for #2 John Snow (JSI), #3 The Partnership for Supply Chain Management, #4 Development Alternatives, Inc. (DAI), or #5 Tetra Tech. And remember, my argument is that you can’t really know what any particular company’s unique signature is until you’ve rolled up your sleeves and gone to work for them.

If you want to hear what I think your company is great at you’ll have to hire me for an assignment! Alternatively, if anyone out there is interested in taking a stab at the companies I have to skip, I’d be happy to post your thoughts on an organization’s unique signature here under your name. Just email me at Drew.Schneider.MPP@gmail.com

The next two companies that I’ll be writing about in this blog series are Abt Associates, Inc (#6) and AECOM International Development (#8). Unlike Chemonics, whose entire business is focused on development contracting with USAID, Abt and AECOM are large, diversified services companies. In other words, while Abt and AECOM both do a fairly sizable volume of development work for USAID, development consulting is only one part of each company’s overall business.

The point is worth a bit of examination.

I suspect it may be tough for some of the folks in this industry to really appreciate just how challenging it can be for a large, diversified company to do field-level development work with USAID. Working with USAID involves a lot of idiosyncratic business practices that often don’t align easily with the business practices of more traditional, mainstream professional services work. USAID does a lot of things its own unique way. Not only is USAID’s way a fairly significant departure from that of most other US Federal Agencies, its an entirely different game altogether compared to the private sector. I know this because I'm intimately familiar with the headaches that can be involved … I had to deal with them for over a decade while I was managing USAID work from inside Price Waterhouse, PwC and IBM.

Its an important thing to recognize because it has implications in terms of the insight that I'm trying to share through this blog series. The whole discussion about Project Enabling Environments (PEE) that I’ve introduced is a good example. As you’ll recall, in the last installment I argued that Chemonics’ industry leading PEE is largely attributable to its solid leadership, highly effective support units, and its clear organizational commitment to quality management systems. All very important. All very true.

What I didn’t mention in the last post, because there was no proper context for it there, is that Chemonics’ industry leading PEE is also at least partly attributable to the fact that the entire organization - from top to bottom - is purpose built around USAID’s idiosyncratic business practices.  I’ve come up with a little metaphor that I thought might help hammer that point home.

Check out the photo below. Ever seen one of these?

It’s called a "Sprint Car.” A Sprint Car has only one purpose … it goes really fast in tight little clockwise circles on a racetracks covered with dirt.  As far as cars go, Sprint Cars are pretty funky. They have different sized tires on the inside and outside which makes it almost impossible to drive them in a straight line. And, the large, asymmetric winglike thing on the roof means that a Sprint Car driver can’t really even see out the left side. You’d never see one of these things on a drag strip or a Formula 1 course, let alone a highway or your neighborhood side streets. But nothing can go clockwise around a small dirt track better than a Sprint Car.

If the only thing you ever did was drive clockwise around a small race track covered with dirt you'd definitely want to drive a Sprint Car. But what if your life was more complicated than that? What if you also needed to use your car to drive to the grocery store? Or haul the new fridge home, or pick your kids up from school, or drive them to soccer practice? What if you also needed something to go camping with a few weekends each year? and drive to Florida every summer so your kids could spend time with grandparents?

Well if that was the case you’d need something a lot more versatile than a Sprint Car … maybe something more like a Jeep. (FYI, for any trivia night players out there here’s a nice little tidbit you should file away!)

Chemonics is like a Sprint Car. It is an organization deliberately designed for the sole specific purpose of development contracting with USAID. By contrast Abt and AECOM are like Jeeps. Both companies have multiple service offerings for multiple industries with multiple clients, so they need to be a lot more versatile. The need for versatility comes at a cost. Because the large, diversified companies that work in this industry are not purpose built specifically to contract with USAID they have to work a lot harder and smarter in order to keep up with Chemonics.

Here’s what I think it all means. If you are a large, diversified company I think its a mistake to believe that you’ll ever get to a point where you can consistently beat Chemonics at its own game. I do think you’ve got to work on making your PEE as effective as possible just to stay competitive, but you need to realize that your PEE will probably never rival what Chemonics has to offer.

That’s why effective business strategies for large, diversified companies that are competing against Chemonics need to focus on what your company brings to the table that Chemonics can’t. And, whatever that is should probably also be what the folks inside the industry come to recognize as your company's unique signature.

In the next installment we’ll see how well the logic holds up.

- DS   

Unique Signatures Across the Industry (Part 1)

In a recent installment to my blog series about USAID Development Contractors I introduced the argument that every contracting organization has a unique signature and that differentiation among development contractors tends to be revealed through a company’s strengths rather than its weaknesses. In this entry I've started to advance that argument by reflecting on my own experiences working for different companies in the development contracting industry.

As my regular readers know, in between I took a quick break to introduce the concept of PEE (short for Project Enabling Environment). I did that because I thought it would be helpful to socialize the key ideas behind PEE before diving into the details of my experiences with different companies. Since our industry's workforce is largely made up of migratory consultants like myself I think its important for USAID and its contractors to occassionally try to look at things from our vantage point. In my own experience I have seen a strong correlation between a company’s PEE and the likelihood that its project teams will be able to achieve a real, sustained impact in the field. And, from my perspective, each development contractor’s unique signature also tends to be shaped by some specific characteristic(s) of its PEE.

I got a little stuck trying to decide how to best dive into the next part, i.e. trying to figure out the the best way to share reflections on my experiences with the different development contractors. Where should I start? Should I go in chronological order? Should I go from most favorite to least favorite? What’s OK to say? What’s not OK? 

Well, ultimately I decided that the best way to approach it was to just go back to "The USAID 50” that I first introduced in Every Organization Is Different and flip a coin. Heads and I'd go through the list from top to bottom. Tails and I’d go from bottom to top.  So I reached into my bag and found a 2 Rand coin. I tossed it onto the table and it landed Kudu side up. 

Never been to South Africa? It means I’m starting from the top.

Chemonics International
USAID 50 Ranking: #1
Avg. Annual Obligation: $562 Million

When I first started working in development nearly 20 years ago we had a joke inside our practice at Price Waterhouse for whenever we lost someone to Chemonics. We mused that a defection to Chemonics was just another person surrendering to the dark side of the force. Not everyone was cut out to be a Jedi, right?

My first journey to the dark side started about five years ago when I went to work as a consultant for FIRMS, a USAID-funded private sector development project in Pakistan run by Chemonics. When I showed up for my first day of work on that project I was secretly expecting that I’d finally meet Darth Vader, his twin brother/sister, or maybe even the Emperor himself! That never happened. In fact, after working with the Chemonics team in Pakistan off and on over the last five years I have developed a completely different perspective of the organization.

As the numbers clearly show Chemonics absolutely dominates this industry. Its USAID contracting businesses is nearly twice as big as it largest competitor, DAI. (I consider DAI to be the nearest competitor to Chemonics because they are both multi-disciplined USAID contractors.) Regardless, any comparison of the leading USAID contractors inevitably leads to the following question. Why is Chemonics so dominant?

I think the answer depends a lot on who you ask. The Chemonics haters out there - and there are a lot of them - tend to claim that Chemonics is an awesome sales organization. And that’s it  (i.e. all they care about is winning.) The haters like to portray Chemonics as a well-oiled proposal machine that has been fine-tuned over the years to quickly and simply figure out four things … and four things only. (1) Who is influencing procurement decisions? (2) What do those decision makers want to hear in terms of a technical approach? (3) Who do those decision makers want to see leading the project team? And (4) How do we put it all together in a pretty, clearly written, and easy for USAID to score, proposal.

The haters may be right about the sales side of the company. Frankly I don’t know because I’ve never worked with Chemonics on a proposal, but I do have to confess that it does sound like a winning formula from a sales perspective.  Where I do have experience with Chemonics is what happens after the company wins and what I’ve discovered is that there's an important thing about Chemonics that the haters usually fail to mention (or that they just don’t know about.)

What is it? Very simple. Chemonics has the best PEE in the business.

If you are an implementor, especially on a large and/or complicated project, working for Chemonics is awesome. Chemonics surrounds its projects with a dream team of operational specialists from its home office that I can tell really take pride in being knowledgeable, crafty/resourceful, and helpful. Almost all of the Chemonics folks that I’ve worked with have been genuinely interested and engaged in their work. Its cool to see, and I think its an impressive reflection on the company’s senior management.

Want an example?

OK. Lets say you find one day that you need to urgently procure a million rainbow trout eggs that will generate really high yields of fingerlings. Only there’s a catch. The fish that hatch from those eggs can’t be able to reproduce among themselves to make sure that they don’t threaten the indigenous species of the area. Good luck, right?

Well, if you happened to be working for Chemonics at the time - like I was - you’d be delighted (and sort of shocked) to find out that Chemonics already has all the required documents (i.e. approval requests, background information, purchase order language, etc…) that you need to push through such a complicated procurement. They even have notes/records on which global vendors are qualified to supply such eggs - and which aren’t - so you can move the whole thing forward efficiently and effectively. And, if you encounter problems along the way (which is inevitable) there is always someone inside the organization that’s ready and willing to step in and engage with the team, the counterparts and the client … basically wherever you want help.

Want another example?

OK. Lets say you need to quickly get economic activity restarted in a remote, turbulent part of the country that has just emerged from armed conflict with insurgents. The immediate task at hand is figuring out how to put $10 million worth of small grants into the hands of local, private businesses in order to reconstruct facilities, replenish working capital, and restart operations.

If that kind of request ever comes your way - like it did mine - I can tell you that you really want Chemonics backing you up. I was floored by how quickly and effectively Chemonics was able to respond to the situation. Less than two weeks after we received the request from USAID to do the grants Chemonics had mobilized a “grants under contract” guru (and I mean guru!) from the home office to sit with me at my desk in Pakistan helping to think through the process, build out the operational infrastructure necessary to make the disbursements happen, and put together the training materials etc... that were required to socialize everything with our internal staff; engage contractually with our local partners; and make sure the whole system complied with the terms of the contract and all of USAID's various rules and regulations.

Want another example?

I’m happy to share more, but not right now. Hit me on email at drew.schneider.mpp@gmail.com if you’d like to know more.

Right now I want to get to the point. If you are a USAID Mission with a big, complicated, high profile and/or time sensitive problem to solve / program to launch, your safest bet right now is to call Chemonics. There’s no other organization out there right now that can get big, complex things done as well, and as consistently, as Chemonics. Period.

Chemonics’ effectiveness on the implementation side of the business is not an accident. Based on my experience it is clear that Chemonics actually cares a lot about management systems and how those systems impact quality. Setting up an environment that enables their projects, and the consultants working on those projects, to do their jobs effectively is a key part of the overall Chemonics strategy.

Don’t believe me? Do you know that Chemonics actually has ISO 9001 certified management systems. Is that news to you? If it is don’t worry, you are in good company as our industry’s appreciation of the importance of, and potential for, effective management systems is still emerging. And, as that appreciation grows I am convinced that more and more people in the industry are going to start to see the connection between Chemonics’ PEE and the kind of things that its projects are able to accomplish in the field.

Now, before I close this one out I think its important to remember that the basis of my overall argument for this blog series is that every company has a unique signature, and that an organization’s signature is generally revealed through strengths rather than their weaknesses. That’s why the focus of this discussion is on strengths.  I'm sure Chemonics has plenty of organizational challenges to overcome ... every company fumbles the ball from time to time. There are plenty of things that I think Chemonics can and should be doing to strengthen its industry leading PEE, but this isn’t the right time or place for that kind of reflection or discussion.

For now I’ll leave it like this. The next time you hear someone suggest that Chemonics is nothing more than a well-oiled proposal machine ask that person if they’ve got any first hand experience with Chemonics' PEE? If they don’t, then do them a solid and let them in on what really makes the industry’s leading signature so unique and so formidable … every company deserves to know the truth about why they lose so many bids to Chemonics.  

Oh ... and you can also reassure them that Darth Vader is nowhere to be found.

- DS

Next Up … Unique Signatures Across the Industry (Part 2)

A Quick PEE Break

One of the coolest things about doing development work is the opportunity it affords to invent and use acronyms. Our industry’s use of acronyms is kind of like the texting slang that today's teenagers use … both tend to require outsiders to use a decoder.

One of the acronyms that is often used in our industry, particularly among those who work in the area of economic growth and trade, is BEE which is short for Business Enabling Environment.

USAID’s Microlinks does a great job of describing what a business enabling environment is, and why it matters for economic growth and trade.

"The business enabling environment (BEE) includes norms and customs, laws, regulations, policies, international trade agreements and public infrastructure that either facilitate or hinder the movement of a product or service along its value chain. Burdensome and unpredictable regulation is costly both in terms of the time and money required for compliance as well as in opportunity cost. Reform of the BEE can result in substantial benefits for an economy including faster growth, less unemployment, more gains from trade, greater formalization, reduced poverty, less corruption and lower budget deficits."

In fact BEE is seen within the development community as such a critical enabler of growth and trade that the World Bank has set up an entire division to analyze, benchmark and improve the business enabling environments of the 189 countries that participate in its program.

The World Bank’s “Doing Business” project focuses on a number of regulatory and administrative areas that influence the relative ease or difficulty of doing business in any particular country. The effort tracks ten sub-indices related to a country’s business enabling environment and it provides an aggregate score based on a weighted average.

Want to know which country currently makes it the easiest to do business? According to the Doing Business team the answer is Singapore. (The US is ranked #4) Which country makes it the hardest? Chad. And the Doing Business portal doesn’t just tell you the answer, it goes to great lengths to explain why.

At this point you might be thinking "hey Drew, there’s got to be a point to this this whole thing about BEE right? … why don’t you get to it already?” 

Point taken, I just couldn’t figure out a better way to introduce the concept of PEE than first talking about BEE.

PEE is short for Project Enabling Environment. PEE is a concept that I have coined to describe how effectively a development contractor’s combination of systems, processes, management approach, home office resources, culture, etc… facilitate its project teams' efforts to deliver results.

The analogy is pretty clear right? Want your country to generate more jobs, more exports and more tax revenue? Make it faster, easier and more predictable to do business inside (and at) your borders.  Want your projects to generate better, more impactful, more sustainable results? Make it faster, easier and more predictable for your project teams to get things done.

And, just like BEE isn’t the only thing that matters for driving increased economic growth and trade, PEE isn’t the only thing that matters for driving more and better results. Neither offers a full solution, but both are a key part of their respective overall solutions.

The development community has had good success improving BEEs around the world by focusing on a few key things. The Ease of Doing Business Index boils most of it down to this:

1. Starting a business
2. Dealing with construction permits
3. Getting electricity 
4. Registering property 
5. Getting credit 
6. Protecting investors
7. Paying taxes 
8. Trading across borders 
9. Enforcing contracts 
10. Resolving insolvency

How would one go about cultivating a similar recognition of - and commitment to - improving the project enabling environment? Sharpen the focus and boil it down into a list of key things. The list might look something like this:

1. Setting Up A Project
2. Obtaining Required Approvals 
3. Allocating and Managing the Budget
4. Issuing Subcontracts and Purchase Orders 
5. Administering the Office
6. Hiring and Mobilizing Short & Long Term Staff 
7. Obtaining Computers, Software, Telecoms
8. Managing Logistics, Travel and Housing
9. Project Reporting / Monitoring & Evaluation
10. Managing Client Expectations

When you bring up the subject of PEE with the leadership of a USAID contractor they are always quick to point out that the complex web of federal procurement guidelines and USAID specific regulations creates some serious complications in terms of ensuring compliance. And of course they are right, the USAID/federal compliance environment can be a nightmare to deal with, especially for organizations that are not experienced with it.

While they are right  I don’t think the complexity of complying with USAID/USG rules and regulations  is an excuse for development contractors to ignore the effectiveness of their company’s PEE.

Think about it. The reason business enabling environments are challenging isn’t because countries set things up to frustrate business and discourage trade. (well, not always anyway) Challenging enabling environments are very often just the consequence of different agencies within a country each setting things up to comply with their specific requirements and preferences while failing to take into account how those choices impact the ease of doing business.

What we have learned now as a community through years of designing, implementing and evaluating BEE support programs is that a country can substantially improve its business enabling environment without changing the key regulatory objectives. It’s often simply a matter of streamlining processes, sharing information, integrating systems, training the workforce, automating workflows, establishing goals/targets and measuring results.

The same concept applies to a company’s PEE. Development contractors can absolutely improve their project enabling environments without compromising their compliance objectives. And they know it. The problem is that doing it requires focus, time, and financial investment … on activities that project teams in the field can’t write about in their weekly updates to USAID.

It’s a problem because development contractors perceive USAID as being oblivious to the idea that better project enabling environments lead to stronger development results and a more sustained impact. It is true that USAID generally doesn’t want to hear about anything, or pay for anything (directly or indirectly) that isn’t obviously linked to immediate programmatic results. Several different friends of mine that work in the home offices of the big development organizations have told me that their companies would really like to do more to streamline and automate their processes and systems, but that it’s just too tough to justify investments in something that USAID doesn’t care about.

Until USAID starts to recognize and appreciate the connection between PEE and Development Results, development contractors aren't going to move too far or too fast to improve their respective PEEs, even though many of them recognize its relevance and importance. There’s a clear opportunity here for USAID to take a few small steps to make it more of a priority and increase the return on US taxpayers’ investment.

Here’s what I recommend. In its next RFP, USAID should augment that decades' old requirement for offerors to describe their "Management Approach” with a new requirement to describe any innovations offerors have undertaken in the last 12 months to improve their project enabling environments.

- DS

Next Up … Unique Signatures Across the Industry.

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

Trends in USAID Discretionary Spending

An old colleague of mine wrote to me on Saturday with a suggestion related to my last blog post The Truth About Development Contractors. The suggestion was to include some data and analysis on what has actually happened in terms of USAID spending patterns since Shah’s statement about contractors in early 2011. It is a bit of a diversion from my original plan but I thought it was a good point so I put this short piece together. Also, I would like to give a quick thanks to everyone that wrote to me with encouragement about this new blog series. There has been a lot more interest so far in this one compared to the first series I did a few years ago … its confirmed for me that I’m on the right track.  On to the data. 

Initially I spent some time searching for something on the internet about USAID’s spending trends that was already prepackaged; i.e something that I could quickly summarize and provide a link to. I was surprised to find that there isn’t really anything out there that does an effective job. At least I couldn’t find anything and I literally searched for a couple of hours and came up empty. While there are a lot of articles, professional commentary, and things like speeches, etc... I couldn't find any existing work that breaks out all the numbers clearly, over the entire timeframe, and contextualizes the impact of budget and spending patterns on USAID contractors. 

Eventually I just decided to do the analysis myself. Here’s what I learned. 

1. The website US Government Spending is amazing. While I am sure the data isn’t perfect (data is never perfect) I was literally blown away by the breadth and depth of information that any ordinary person can access these days about how the Government spends money. I think the website is a huge and important step in the direction more transparency & accountability. 

2. I have an amazing wife. Despite the fact that she’s now 38 weeks pregnant she gave me a free pass this weekend to literally geek out for two straight days with over 200 megabytes of raw data that I was able to download on all of USAID’s contracts and grants that have been funded the past five years. Thank You!

3. USAID spending patterns have definitely evolved. The situation now confronting both USAID and its contractors isn’t pretty, as you’ll see in the exhibit below. 

I put together the chart below to illustrate at a high level what has happened the past five years. 

There are a lot of things that have been going on inside USAID - and across the Government - the past five years that contribute to the patterns outlined above. i.e. its not just the position on contractors that has changed. I’d love to go into all of the things going on in depth but for the purpose of this blog series about development contractors I need to stay on point! 

So here’s the main point I want to make. While the overall level of funding that USAID gets each year has gone down since Shah’s statement, the amount of that funding that goes to contractors each year has dropped much more sharply. The data suggest that the dramatic drop experienced by contractors is not just because USAID’s funding has gone down but is also attributable to some fairly sizable growth on the NGO/Grantee side of the industry.

I am not saying that the changes are good or bad, or that they are right or wrong, although I’m sure my own views will be clear when this blog series is finished. My only goal at this point is to point out that some real change in USAID’s funding patterns has in fact taken place. 

Something structural in the system has changed and I find that to be remarkable. I have been advising public sector clients for 20 years now … long enough now to appreciate how hard it is to change anything systemic. There are literally hundreds of quotes out there that have been captured and preserved over the years to help remind us of the overwhelming likelihood that efforts to innovate, especially in the public sector, will get stymied by the status quo. I think Machiavelli was first, and I think his quote still probably sums it up best:

It ought to be remembered that there is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things. The innovator has as enemies all those who have done well under the old conditions, and only lukewarm defenders in those who may do well under the new.

I have always admired Rajiv Shah’s willingness to take on the establishment in order to make things work better. The data I pulled together this weekend proves that he was more than just willing, he was also successful. For that reason alone I hope he sticks around!

- DS

Now with this little diversion out of the way I’ll get back to the plan.  Next up … 1. Every Organization is Different

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