72012122C00002_02_FSR-IBR_JA.pdf

JUSTIFICATION AND APPROVAL (J&A)

TO:

CC:

FROM:

DATE: September 30, 2023

RE: Contract No. 72012122C00002, Financial Sector Reform

SUBJECT: Justification for Other than Full and Open Competition under the Expedited Procedures Package (EPP)

1. This document sets forth the facts and rationale justifying the use of other than full and open competition.

Approval is requested for the justification for use of other than full and open competition pursuant to the authorities under the Expedited Acquisition and Assistance Procedures (EPP) for Ukraine, Belarus, and Moldova, approved on March 6, 2022. Your approval of this J&A constitutes the justification for other than full and open competition as required by Tab 1 (D&F for the Authorization of Less than Full and Open Competitive Procedures in the Modification or Award of Contracts) of the EPP.

RECOMMENDATION

It is recommended that you approve this justification for the use of other than full and open competition pursuant to the Action Memorandum "Expedited Procedures Package (EPP) for Ukraine, Belarus, and Moldova" approved on March 6, 2022. Your approval of this J&A constitutes the justification for other than full and open competition as required by Tab 1 (D&F for the Authorization of Less than Full and Open to Less Competitive Procedures in the Modification or Award of Contracts) of the EPP.

2. The nature and/or description of the action being approved.

This is a request to approve a contract modification to increase the total estimated cost (TEC) of Contract number 72012122C00002, Financial Sector Reform (FSR), implemented by DAI ("the contractor"). The proposed modification, approved by Mission leadership via stoplight on September 18, 2023, will increase the TEC by $60,246,242 from $33,053,758 to $93,300,000. Of that amount, the grants under contract (GUC) to Financial Institutions line item is planned to increase by $12,000,000, from $5,000,000 to $17,000,000. In addition, $48,246,242 of the $60,246,242 will fund matching grants to enterprises, technical assistance associated with the matching grants to enterprises, and additional costs such as labor, other direct costs, indirect costs. This modification will also change the contract type from Cost Plus Fixed Fee (term) to Cost Plus Fixed Fee (completion) to tie fee payments to specific results, and modify the scope of work to increase targets for certain sub-objectives and add new sub-objectives, as described below. The below minimum additional results will be added to the current targets to create new life-of-project results.

The expedited provision of assistance takes priority over other options that would significantly delay such assistance. The timeframe to conduct fully competitive award procedures, if followed, would not enable USAID to act in a manner consistent with U.S. foreign policy objectives. The additional funding will allow USAID to increase its assistance to Ukraine’s financial intermediaries and businesses and therefore create jobs, reinvigorate tax revenue, and increase exports to Western markets and increase domestic sales in a manner not feasible via other competitive methods.

3. Description of the supplies or services required, including an estimated value.

Additional funding will allow USAID to rapidly direct assistance to SMEs that have been affected by the war. New and augmented grant components will target both financial intermediaries under the current scope and provide resources to add new support to firms directly via cost-share grants. The funding will also allow USAID to expedite the current FSR workstreams related to economic reform that improve the business climate, increase private sector competition, and foster a conducive environment for SMEs to withstand economic downturns, recover, and grow.

The general scope of technical activities has not changed, and FSR will continue to implement the sub-activities under the components of the original award. These include:

1. Market Regulation and Supervision

2. Financial Infrastructure

3. Private Sector Intermediaries and Facilitators

4. Transparency and Communications

However, under the new scope of work, FSR will implement sub-activities under a new fifth component for firm-level assistance. The new component will contribute to additional quantifiable results for job creation, domestic sales and exports, both of which are critical priorities under USAID’s strategy for economic recovery and growth.

Minimum quantifiable results for the additional funds anticipated under the modified award include:

● Job creation: at least 20,000 new, verified Ukrainian jobs

● Increased sales: directly produce $250 million in new exports or domestic sales

Additional outcomes include:

● Strengthened financial sector: Strengthened capacity of private sector finance providers, intermediaries, and facilitators to successfully introduce new and enhanced financial instruments and increase access to finance for SMEs, start-ups, and women- and youth-owned enterprises.

● Expanded use of financial services and products, preferably non-bank financial services.

● Improved market regulation and supervision.

● Improved transparency of financial institutions and communications with the public regarding the operations of both private and public financial institutions

Knowing that parallel programs like CEP are also working in a similar space, the Contracting Officer will also require both programs to share workplans to ensure transparency and reduce risk of duplicated efforts.

4. Statutory authority permitting other than full and open competition.

AIDAR 706.302-70(b)(3)(ii) and 40 U.S.C. §113; see Action Memorandum entitled, Expedited Procedures Package (EPP) for Ukraine, Belarus, and Moldova, approved on March 6, 2022.

5. A discussion of the proposed contractor's unique qualifications or the nature of the acquisition that requires use of the authority cited.

In August 2023, USAID/Ukraine’s Office of Economic Growth (OEG) determined that to achieve its objectives in Ukraine, greater assistance was needed to support the economy and financial sector. Based on 1) periodic reporting beginning in March 2023 observing the progress of the war and its impact on businesses 2) market reactions to the July 2023 Russian decision to pull out of the Black Sea Grain initiative, and 3) economic data received recently that showed the over 25% drop in Q4 2022 in Ukraine's economy, OEG established that the demand for and potential for new jobs, sales and export results along with a strengthened financial sector with expanded financial services and improved market regulation, supervision and communications would far outstrip the capacity of the existing FSR activity to meet them with the remaining funding. For example, a recent grant application from FSR resulted in 10x demand for viable opportunities for GUC support to local businesses (total viable demand being over $50,000,000). Accordingly, OEG seeks to expand FSR to fill these needs.

OEG seeks to modify the existing award, as opposed to conducting a new competition, due to the length of time needed to design, award, and begin implementing a new award. The process of design-to-award plus start-up implementation typically takes at least 12, if not 18, months for major programs. USAID would not be able to meet the immediate needs and take the steps described in the revised scope of work under the timeline required to put a new program into place. By taking advantage of FSR's current presence on the ground, strengthening the financial sector’s regulation, supervision, transparency, communication, and financial infrastructure;

strengthening employment, sales, and exports through firm-level, buyer-led technical assistance will help reverse employment trends and increase exports to help prevent Ukraine's economic collapse due to Russia's ongoing military aggression. FSR can achieve U.S. foreign policy interests of supporting the stabilization of Ukraine’s economy during the war by delivering the project's results immediately and without logistical delays, as it is positioned to immediately initiate this implementation in Ukraine for the following reasons:

a. Consistent Foreign Currency Balances: An increase in funding will allow FSR to seamlessly and immediately build upon the ongoing activities and efforts already initiated under FSR and effectively create new, urgently needed exports and jobs in Ukraine, and produce an additional $250 million in sales and exports, which are indispensable for maintaining Ukraine’s foreign currency balances during this unprovoked aggression and economic disruption. Further competition unacceptably increases the risk of not generating enough market demand to support foreign current balances.

b. Immediate Re-orientation Support: Since FSR’s inception on July 13, 2022, DAI has consistently demonstrated the essential capability to meet the immediate and imperative needs, in response to Russia’s invasion in 2022, initiating activities that supported vital needs within the business community. Thousands of Ukrainian enterprises are reorienting their businesses to sell to non-Russian buyers, but urgently need outside expert assistance to make this transition or those businesses will quickly fall victim to the economic disruption caused by this conflict. Ukrainian businesses can easily meet price points required by buyers from the EU, but lack the specialized training and certifications needed to export into European markets. Thousands of other successful Ukrainian businesses were overnight shut off from their Russian input suppliers and now urgently need specialized assistance identifying alternative sources of input supplies and assistance modifying their business processes to incorporate these alternative supplies into their supply chains.

Without this immediate assistance, many such Ukrainian businesses will quickly cease to operate.

A new contractor would require significant time and resources to establish itself in the current volatile and lethal operating environment in Ukraine - where there is an ongoing war - risking failure to provide much-needed timely assistance to the people of Ukraine. Introducing a new team would disrupt much-needed continuity and cost valuable time, the expenditure of which would impair foreign assistance objectives given the urgency of the current war-time environment.

Disruption or delay of this continued assistance would put at risk billions of dollars of needed Ukrainian exports and thousands of Ukrainian jobs due to the risks and threats to Ukrainian businesses.

c.Duplication of Relationships with Key Stakeholders: Over the course of the past year and a half, FSR achieved sustainable results and impact due to their close coordination with a range of Ukrainian stakeholders and beneficiaries at the national and regional levels, as well as with USAID, other USG implementer such as the U.S. Development Finance Corporation, implementing partners, and other donors. Since the start of the war, FSR provided assistance to the Ministry of Finance and the National Bank of Ukraine promoting available finance instruments. A new implementer would not only duplicate existing relationships but need significant time to develop productive relationships with key stakeholders, losing valuable time needed to respond to critical needs arising from Russia's aggression.

6. A description of efforts made to ensure that offers are solicited from as many potential sources as is practicable.

Publication of a notice is not required per the determination at AIDAR 705.202(b) and is not practicable under the circumstances. Due to the urgent nature of the needed assistance to respond to the immediate economic disruption from wartime, it was determined not to be practicable to solicit offers from potential sources.

7. A determination by the Contracting Officer that the anticipated cost to the Government will be fair and reasonable.

Prior to signing the award modification, a cost analysis in accordance with FAR 15.404-1 will be evaluated by the Contracting Officer to ensure that the revised cost to the U.S. Government is fair and reasonable. The Contracting Officer has determined that the anticipated cost to the Government will be fair and reasonable based on the IGCE saved in the file based on historical expectations for per-result costing, adjusted for war-time factors, in similar USAID programs.

8. A description of the market research conducted (see FAR Part 10) and the results or a statement of the reason(s) market research was not conducted.

No new market research was conducted. DAI was competitively selected through a full and open competition in 2022. The purpose of the proposed expansion is to mitigate the effects of wartime on the economy of Ukraine and specifically by facilitating the provision of financing to Ukrainian businesses. Considering that the increase in activities must begin immediately to respond to wartime needs and not impair foreign assistance objectives, it was deemed inappropriate to conduct market research.

9. Other facts supporting the use of other than full and open competition:

USAID/Ukraine has determined that, due to the urgency of responding to the current situation in Ukraine, resulting from the Russian invasion, other than full and open competition utilizing the authorities provided in the EPP is necessary for quickly and effectively implementing the activities and meeting the foreign assistance priorities of the Agency and the U.S Government.

10. Sources, if any, that expressed, in writing, an interest in the acquisition.

The Mission determined to expand the existing FSR contract to address the additional requirements, so publication of a notice is not required per the determination at AIDAR 705.202(b), and no sources submitted a written expression of interest in this acquisition.

11. The actions the Agency may take to remove or overcome any barriers to competition before any subsequent acquisition of the supplies or services required:

The Mission will continue to use full and open competition procedures whenever possible, including potential set-asides for small businesses.

12. Technical or Requirements Personnel Certification:

In accordance with FAR 6.303, I hereby certify that the technical statements included above and which form a basis for the justification are complete and accurate in accordance with the Expedited Procedures Package (EPP) for Ukraine, Belarus, and Moldova approved March 6, 2022 (attached).