Risk Management is Key to USAID Localization and Root Causes Efforts

Localization has been at the forefront of USAID Administrator Samantha Power’s agenda. One of the agency’s localization efforts is the Central America Initiative (CARI) to increase community resilience over poverty, violence, corruption, and climate change in Guatemala, El Salvador, and Honduras. CARI is part of the Biden administration’s larger root causes strategy, which seeks to address irregular migration by improving conditions in border crossers’ countries of origin. In order for CARI to effectively address the root causes of migration, USAID must move beyond including local partners within its existing framework and instead transform to better adapt to local realities. Only then can local organizations address the drivers of migration that are affecting their communities.

USAID has attempted to localize previously. Former Administrator Rajiv Shah introduced the Local Solutions Initiative in 2011. However, the initiative failed because of backlash from contractors, some in Congress, and bureaucratic obstacles. One concern that was raised – and that is still a limiting factor to localization efforts – is that USAID classifies many local implementing partners as “higher risk” and “lower capacity.” As a result, only six percent of USAID funding goes to local organizations, a percentage that has only increased two percent over the last decade. Power has addressed this by emphasizing the need to provide additional capacity-building support to local NGOs.

An aspect of risk management that has not been addressed, though, is the risk to local partners. Many local organizations are not equipped to manage the risks inherent in receiving multi-million-dollar contracts. Such contracts require complex management compliance and reporting requirements. Some local organizations do not have the experienced, trained staff to act as prime contractors for multi-million-dollar projects. Contracts also require strong English language skills. This results in funding opportunities circulating INGO-dominated networks. Training organizations to USAID standards can be extremely difficult for some local partners and can divert time and resources away from their missions.

Local partners also face non-financial risks, particularly when they are not included in planning and designing USAID programs. A CARI contract worth $135 million was recently awarded to Creative, a Washington D.C. based for-profit company, in order to accelerate project execution. This has resulted in projects with unrealistic timelines and goals that do not actually address the structural issues prompting people to migrate. This is exacerbated by the top-down subcontracting partnership model. Many local organizations that are included in USAID contracts are enlisted as subcontractors, which does not provide them with the ability to make decisions or to even receive adequate financial compensation for their labor. As a result, projects have been implemented that do not pay local organizations equitably and that even require putting people in dangerous situations. Multiple local NGOs in Central America have declined to participate in USAID-funded CARI projects for these very reasons.

Organizations in countries with repressive governments may also face reputational risks if they are seen as too closely aligned with U.S. interests. Individuals working at local organizations may also be at risk of displacement themselves. As a recent report by the Migration Policy Institute and Asociación Pop No’j detailed, the tendency to migrate is extremely community specific. This makes the role of local organizations even more important to CARI and larger root causes strategies. Local NGOs can determine long-term strategies, like improving access to education and health care or providing access to low-cost credit, that will help address community specific reasons why individuals are migrating.

This reveals a fundamental tension at the heart of using CARI to address the root causes of migration. Awarding USAID contracts to large contractors or INGOs, many of whom are U.S.-based, is a risk averse decision that allows for relatively swift implementation. However, while riskier for USAID, the most effective way to stop immigration is to give contracts to local organizations that can provide jobs to community members and that can tailor projects to what their community’s needs.

USAID must embrace change in order to reduce risk for its local partners. In addition to providing additional capacity-building support to local organizations, the agency should actively transform its procurement mechanisms to be more inclusive of non-traditional partners. Funding opportunities must be listed in local languages, as well as English, and must include smaller contract opportunities that are realistic for local organizations. These changes will improve the quantity and quality of funding for local partners. Doing so will also help move beyond the subcontracting model and will ensure that local organizations are included in project planning and organization. This will help cultivate long-term and sustainable partnerships between USAID and local organizations, which in turn will address driving factors of migration.

Achieving localization will require USAID to make significant investments by staff and of time and money. It is a daunting task that cannot be implemented through a single localization agenda and that will necessitate the agency to move beyond its risk averse tendencies. But failing to prioritize local partners is risky in and of itself and doing so is necessary to cultivate meaningful relationships and results that truly address the roots causes of migration.

PHOTO CAPTION: Samantha Power, Administrator of the US Agency for International Development (USAID), speaks during an event on “The State of Global Food Security and Nutrition,” hosted by The Center for Strategic and International Studies and the Eleanor Crook Foundation in Washington, DC, on July 18, 2022. (Photo by NICHOLAS KAMM/AFP via Getty Images)