J_A 21-121.BEP, AID-165-C-17-00001 _ Approved.pdf

US Agency for International Development Samoilova 21 1000 Skopje, NORTH MACEDONIA Tel: (389-2) 310-2000 Fax: (389-2) 310-2463 www.usaid.gov/north-macedonia

JUSTIFICATION AND APPROVAL FOR OTHER THAN FULL AND OPEN

COMPETITION (J&A)

DATE: June 14, 2021

TO: Deborah Broderick, Agency Competition Advocate

FROM: Margareta Lipkovska Atanasov, Contracting Officer’s Representative

(COR), USAID/North Macedonia, General Development Office

SUBJECT: Justification and Approval for Other than Full and Open Competition

(J&A) for a funded extension of Contract No. AID-165-C-17-00001, “Business Ecosystem Project” (BEP) with Palladium International LLC

1. This document sets forth the facts and rationale justifying the use of exception to competition, in accordance with AIDAR 706.302.

This document was prepared by Margareta Lipkovska Atanasov, COR for the subject contract, from USAID North Macedonia’s General Development Office (GDO).

2. Nature and/or description of the action being approved:

This is a request to approve the use of other than full and open competition for a contract modification to increase the total estimated cost (TEC) of the cost-plus fixed fee contract with Palladium International AID-165-C-17-00001 by $1,100,000, from the current TEC of $6,283,045 to a revised TEC of $7,383,045. This request also includes an extension of the activity’s period of performance by fifteen (15) months, from the current end date of September 27, 2021 to December 31, 2022. This is the first request for a non-competitive extension of this contract.

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

BEP is a four-year activity (September 28, 2017 until September 27, 2021), with a TEC of $6,283,045, which was competitively procured through a full and open competition. The project’s goal is to transform the competitiveness of micro, small, and medium enterprises (MSMEs) in North Macedonia by strengthening business services, finance, and market linkages to catalyze a significant increase in MSME growth, productivity, and employment.

To achieve its goal, BEP implements activities under three complementary and mutually reinforcing objectives:

1. Improved Business Service Organizations services to micro, small and medium enterprises

2. Improved micro, small and medium enterprises access to sources of financing

3. Increased investment by lead companies to improve their MSMEs productivity (i.e., private sector engagement)

If this extension is approved, the Business Ecosystems Project (BEP) will provide technical assistance, within a limited scope of the private sector engagement (PSE) objective of the project, to the Ministry of Economy (MoE), the Ministry of Agriculture (MoA) and the Government of North Macedonia’s Fund for Innovation and Technological Development (hereafter, the Fund).

The assistance will integrate successful PSE principles into government micro, small and medium size enterprise support programs and prepare Ministry staff to implement the support measures. It will also build the capacity of private sector support organizations (BSOs) to serve as facilitators and catalysts for the private sector. Increased effectiveness of government measures and the sustainability of these activities are particularly important at this moment as North Macedonia struggles to sustain businesses and help post-pandemic economic recovery and growth. By providing technical assistance to the government to shape their private sector support measures, and by working with BSOs to communicate and help facilitate the access and use of those measures, USAID will sustain U.S. Government investments after the end of the project extension.

The COVID crisis caused delays in the implementation of the PSE measures, particularly in procuring and delivering equipment. Some of the lead company investments were postponed until 2021. At the same time, the government, BSOs and partner institutions focused all of their assistance and available funding on immediate support to MSMEs for their survival during the crisis. An extension of BEP’s PSE objective, which should also help with the post pandemic recovery of the MSMEs, will allow USAID to partner with the MoE, the MoA, and the Fund to design sustainable MSME support programs based on successful USAID PSE principles. USAID will work with the MoE, the MoA and the Fund to structure the economic support measures, outline the promotion steps and build the capacity of government staff to implement and sustain PSE activities after BEP ends. The 15-month extension will allow for the planning and implementation of one cycle of the government's economic support measures.

The extension will also allow BEP to build the capacity of BSOs to serve as facilitators and catalysts to help the private sector understand the value of, plan for, and invest in product and supply chains, taking on BEP’s current role in facilitating private sector investment in North Macedonia's business ecosystem.

The Mission also seeks to use a surplus of government financing (up to $394,000) that was transferred to USAID for agricultural loan guarantee to support the new PSE interventions per the request of the MoA. This activity will model the MoA’s support to dairy and high value crops off of successful BEP PSE interventions, assisting the MoA to establish a mechanism that will provide farmers the technical assistance and advisory services to successfully access and use rural development and agri-food sector funding from the European Union’s pre-accession assistance program (EU IPARD). While EU IPARD assistance is plentiful, farmers lack the technical and bureaucratic know-how to apply for and use the assistance.

The TEC of the Business Ecosystem Project is $6,283,045 and is fully funded. The additional cost of this 15-month extension is estimated at a value of $1,100,000. All the planned services would be targeted and within the current scope of the contract.

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

AIDAR 706.302-70(b)(5) permits other than full and open competition “for the continued provision of highly specialized services when award to another resource would result in substantial additional costs to the government or would result in unacceptable delays.”

5. A demonstration that the proposed contractor’s unique qualifications or the nature or the acquisition that requires use of the authority cited:

USAID/North Macedonia has concluded that Palladium is uniquely positioned to provide highly specialized services and approaches under BEP. A new award would result in unacceptable delays and additional costs to USG.

Palladium International has developed and applied different forms of engaging the private sector globally while responding to market opportunities. On an international scale, supply chain management is one of their core capabilities. In 2018, Palladium worked with USAID to shape the Agency’s strategy for engaging the private sector, specifically in market-based approaches and blended finance. That Palladium expertise was extremely beneficial as BEP structured different models of PSE to be applied in North Macedonia. Palladium is also the thought leader of USAID’s pay-for-results approach, which has also been applied through several BEP activities.

BEP is USAID/North Macedonia’s flagship activity which supports private sector competitiveness and reflects key priorities of the government’s Plan for Economic Development and one of the key requirements for EU accession. BEP has applied an integrated approach to addressing impediments to private sector growth by supporting BSOs to strengthen their services to MSMEs, facilitating access to finance and development of alternative sources of financing for MSMEs, and engaging lead companies in identifying and investing in market-based solutions together with their suppliers/buyers. BEP’s personnel have developed a unique working relationship with the MoE, the MoA and the Fund by helping them structure their economic assistance programs. BEP used the learning from their engagements to inform its broad base of BSOs and financial advisors to work with the MSMEs in developing applications for the most appropriate assistance measures.

USAID/North Macedonia, through BEP, is the leader among donors in engaging the private sector to invest in activities that contribute to its own development. Through its integrated approach, BEP partnered with lead companies to:

• Address the low quantity and quality of milk in the dairy sector;

• Promote and scale production of high value crops while introducing new PSE models to the market;

• Demonstrate an approach for unlocking value through productivity upgrades in the apparel sector; and

• Support direct employment through co-financing “training for employment” initiatives.

USAID/North Macedonia is currently working on the design of its next set of activities under the recently approved CDCS for the period 2020-2025, which are largely focused on developing resource partnerships in which local partners will co-create and co-invest in programming. Due to these reasons, a direct follow on to BEP is not envisioned. USAID/North Macedonia did not consider direct award to a local contractor because the USAID PSE policy and initiatives are new and there are no local organizations that are familiar with them, understand the principles, or have implemented such initiatives.

6. Description of the efforts made to ensure that offers are solicited from as many potential sources as practicable, including whether a notice was or will be publicized as required by the Federal Acquisition Regulation (FAR) 5.202 [AIDAR 705.002]

A notice of this non-competitive action was publicized from May 27, 2021 to June 11, 2021 on beta.sam.gov in accordance with FAR 5.201. No expressions of interest were received.

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

Upon approval of this justification, the Contracting Officer will request a full technical and cost proposal from Palladium International for the additional work requested. The Contracting Officer will conduct a thorough cost analysis of that proposal, with the same level of rigor as used with a competitive procurement, to ensure that the actual cost to the Government will be fair and reasonable.

8. Description of the market research conducted, and the results or a statement of the reasons market research was not conducted:

Outside of the publication of the notice referenced in Section 6, no new market research was conducted as the PSE policy and approach were applied for the first time in North Macedonia through the BEP project. No new market research was conducted because of the logical relationship of the support, i.e., extension of services from the same contractor and the same technical advisors and consultants that have provided assistance for the BEP project since its inception.

Palladium International, the contractor implementing BEP, was selected based on a full and open competitive procurement process in 2017.

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

The envisioned activities under the proposed extension are specifically timed to a one-year cycle of economic support measures that both the MoE and MoA will implement, and any delay will harm the USG’s ability to assist the government of North Macedonia in this specific timeframe.

The MoE and MoA have requested USAID assistance to make sure the economic support measures are successful. This is of even greater importance as the Macedonian economy struggles with the continued economic down-turn resulting from the pandemic and the government seeks to increase sustainability and growth in the near-term. BEP is uniquely positioned to finalize the institutionalization of the PSE approach with the government institutions it is already working with.

Throughout the implementation BEP has played a critical role in promoting and applying the PSE approach. During the outreach phase, BEP learned that companies feel safer to invest in their own capacities rather than in their suppliers/buyers or partners (vertically/horizontally in the value chain). Lack of trust among businesses is a large cost to doing business in North Macedonia.

Moreover, small and medium enterprises focused on their daily operations and survival and do not have time to engage in building partnerships, do not have the know-how and human resources required for independent identification, coordination and implementation of inclusive growth initiatives. Following numerous iterations and presenting the benefits participating companies would gain from the interventions to more than 200 MSMEs, partner companies accepted BEP as the impartial, trusted broker who helped them craft a market-based solution which companies would not have done themselves. BEP then worked to scale and replicate these interventions and present to the relevant government institutions for their adoption in the national economic support program. This catalytic role that BEP is playing, the trust it has built with both the public and private sectors is the key reason for using other than full and open competition.

Due to this specific situation, as it is also described in detail under point five above, no other source can practicably compete for this requirement.

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

As mentioned above in Section 6, no sources expressed interest to the notice published on beta.sam.gov.

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

USAID/North Macedonia does not expect additional needs for subsequent acquisition of these services beyond the end of the proposed extended period of BEP.

All subsequent requirements for similar goods and services will be procured through full and open competition.