PSC
Why Contracts are an Integral Part of the International Development Ecosystem The debate over who—nonprofits or contractors—should implement more of our foreign assistance programs is the wrong argument; the more useful question is what type of implementation instrument is most effective for a given program. International development companies proudly identify as mission-driven firms. We provide specialized technical expertise and high-quality project management services to USAID and other U.S. government clients working to improve the lives of people and communities around the world. As businesses, we invest in the talent and capabilities crucial to the work of development, allowing us more effectively to support America’s development objectives. USAID has three main instruments at its disposal to fund foreign aid programs: grants, cooperative agreements, and contracts. Grants and cooperative agreements (known as “assistance” instruments) facilitate the transfer of money, property, or services to a recipient in order to achieve a public purpose or benefit; the main difference between these two assistance instruments is that a cooperative agreement provides for substantial involvement by USAID. A contract, on the other hand, is a mutually binding legal instrument for acquiring goods or services for the direct benefit or use of the U.S. Government. Contracts are traditional procurement (or “acquisition”) instruments subject to the Federal Acquisition Regulation (FAR). In 2019 and 2020, two thirds of all USAID funding obligations went to assistance awards, with the remaining third going to acquisition awards. Each instrument is associated with different levels of government control over how taxpayer funds are used. 14
