J_A for MESR - ACA approved (11-21-22).pdf

JUSTIFICATION AND APPROVAL FOR OTHER THAN FULL AND OPEN COMPETITION (J&A)

TO: Deborah Broderisk, Agency Competition Advocate

THROUGH: Laura Gonzalez, Director, USAID/Egypt Office of Economic Growth

FROM: Rasha Abdel-Hakim, COR for MESR, OEG

SUBJECT: Justification and Approval for other than Full and Open Competition (J&A) under

AIDAR 706.302-70(b)(5) for the Macroeconomic Stabilization and Reform (MESR) activity, Contract No. AID-263-18-C-00002

1. This document sets forth the facts and rationale justifying the use of other than full and open competition, in accordance with AIDAR 706.302-70(b)(5). This document was prepared by USAID/Egypt, Office of Economic Growth (OEG) for the

Macroeconomic Stabilization and Reform (MESR) activity.

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 No. AID-263-18-C-00002, the Macroeconomic Stabilization and Reform

(MESR) activity implemented by DAI Global, LLC (DAI). The proposed modification will

(1) increase the contract TEC by up to $2,500,000, from the current $23,858,763 to

$26,358,763; (2) expand the scope of activities under the contract; and (3) extend the current period of performance and completion date specified in the contract (April 2, 2018 - April 1, 2023) by twelve months to April 1, 2024.

With this extension, USAID intends to modify the contract’s scope of work by enhancing the four areas specified below:

a. Build the capacity within the Ministry of Planning and Economic Development

(MPED) to develop the "Green National Accounts" and the "Green gross Domestic

Product (GDP)” estimates that incorporate the impact of the environmental variables when measuring economic activities.

b. Support the efforts of the MPED to establish and build the technical capacity of an internal unit for Climate Change and environmental sustainability policies.

c. Build the capacity of the newly established Fiscal Risks Unit at the Ministry of

Finance (MOF) to identify, analyze, and monitor fiscal risks, especially those related to climate change factors and the related fiscal policies to be adopted to address those risks.

d. Support the efforts of the MOF to implement its new Medium Term Revenue

Strategy in collaboration with the International Monetary Fund, especially providing technical support and capacity building to the newly established Tax Policy Unit

(TPU).

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

Greening the Egyptian economy and designing appropriate adaptation and mitigation projects to transition to a low carbon economy is at the top of Egypt’s agenda, as articulated by the President on many occasions. Egypt will host the United Nations

Framework Convention on Climate Change Conference of Parties 27 (UNFCCC COP27) in

November 2022 and has recently published the Egypt National Climate Change Strategy

2050 and updated Nationally Determined Contributions (NDCs). The GOE ministers have also undertaken numerous efforts to align Egypt’s climate efforts with the rest of the African and developing countries. All these actions and efforts attest to the paramount importance given by Egypt’s Presidency to climate change. The National

Climate Change Strategy 2050 includes specific goals and milestones related to economic growth and low-emission development, enhancing adaptive capacity and resilience, and climate financing of infrastructure and climate related projects. The timely achievement of those goals is critical for Egypt to adhere to its NDCs, especially with regards to the priority adaptation areas such as water resources and irrigation, and agriculture, and the emissions reduction target for electricity generation, transmission, and distribution to 33% of the business as usual (BAU) by 2030.

The specialized services that will be delivered through the MESR Activity to address the four areas described in Section 2 will therefore contribute to developing the capacity within the two most prominent cross-cutting ministries (MOF and MPED) to help Egypt implement its National Climate Change Strategy to comply with its commitments under the NDCs and capitalize on all potential opportunities arising from green transformation.

This will also allow Egypt to play a greater role in leading the climate change efforts of the African countries, especially as it relates to identifying risks and opportunities, and developing blended finance mechanisms that can take the most advantage of private and public available financial resources.

In that context and pursuant to the proposed contract modification, estimated to cost an additional $2.5 million, DAI’s technical support will include the following:

a. Building the capacity within the MPED to develop the "Green National Accounts" and the "Green gross Domestic Product (GDP). Specifically, DAI’s technical assistance will include: (1) Conducting workshops with international experts, academia, research institutions, and the MPED to identify the required tools, statistical methods, and detailed data to incorporate climate change variables in the

GDP; (2) Developing a guidebook that explains the detailed process for developing green GDP statistics; (3) Training the MPED National Accounts Unit on the guidebook and working with them to develop the green GDP estimates; and (4) Creating a number of master trainers at the Unit to ensure the sustainability of the process in the future.

b. Providing technical assistance to the MPED in developing the mandate, structure, and job descriptions for the new Climate Change Unit (CCU) to be established at the

MPED. DAI assistance will also include building the technical capacity of the CCU to identify the parameters for greening public investments, developing and incorporating environmental sustainability criteria in the selection of public investment projects, and analyzing the environmental-economic impact of implementing adaptation measures. DAI will also assist the CCU in developing a network of research institutions inside and outside Egypt to exchange expertise and experiences related to climate change mitigation and adaptation measures. In addition, DAI will build the capacity of the CCU in identifying alternative finance mechanisms for the different climate mitigation and adaptation projects, including blended finance, green and blue bonds, Sukuk, sustainability bonds, and debt swaps.

c. Providing technical assistance to the MOF in developing the mandate, structure, and job descriptions for the new Fiscal Risk Unit at the MOF. DAI assistance will also include developing and conducting training programs to build the capacity of the key staff to identify, analyze, and monitor all types of fiscal risks, including contingent liabilities, risks inherent in the public private partnership projects, and risks associated with the import of strategic commodities. An important component of the DAI technical assistance will be to work with the Fiscal Risk Unit on evaluating and managing climate -related fiscal and physical risks and the design of fiscal interventions to mitigate those risks and capitalize on transition opportunities. DAI assistance will build the capacity of the Fiscal Risk Unit to use fiscal diagnostic tools to improve the fiscal response to climate change, align fiscal priorities with Egypt’s environmental commitments- including its Nationally Determined Contributions

(NDCs), and develop a roadmap that identifies the short and medium-term priority climate related fiscal policies and provides recommendations to take best advantage of the opportunities and access to finance related to the global transition to a low-carbon economy.

d. Providing technical assistance and capacity building to the newly established TPU in the areas of revenue analysis and forecasting and the design of tax policies that promote economic growth and improved compliance rates. DAI will also train the

TPU on the use of different models to estimate the revenue impact of alternative tax policies on the most important macroeconomic variables such as investment, sector performance, employment, value added, and most importantly public and private investments allocated to climate related projects.

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

AIDAR Section 706.302-70(b)(5) (based on the authority provided by 40 U.S.C.

113(e)(2)), provides an exception to full and open competition when it would impair or otherwise have an adverse effect on programs conducted for the purposes of foreign aid, relief, and rehabilitation. This authority may be used for: “An award 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 of the acquisition that requires use of the authority cited:

Per the requirements of AIDAR 706.302.70(b)(5), DAI has unique qualifications in terms of its strong and long experience in undertaking specialized macroeconomic policy work, particularly in Egypt. In addition, its current staff possess in-depth knowledge of the challenges facing the Egyptian economy and have very strong and well-established relationships with the relevant ministries (MOF and MPED). These combined attributes make DAI the most qualified contractor to undertake the additional activities proposed under the contract modification without substantial unacceptable delays and costs. The

MOF and MPED are committed to accomplishing a number of reforms in the timeframe of this extension as per Egypt’s Nationally Determined Contributions (NDCs) published on June 8, 2022, and its new Climate Change Strategy 2050- approved by Egypt’s

President in May 2022. Both documents, along with the broader Egypt Vision 2030 document revised most recently in 2021 with the help of DAI under this MESR contract, ensure the integration of climate change into general planning of all sectors in the country. As such, the timely implementation of the proposed new interventions is now central to the GOE’s macroeconomic goals. Such interventions could not have been foreseen at the time of the contract award as Egypt’s NDCs and its National Climate

Change Strategy were only recently published in 2022.

DAI is uniquely positioned to implement the additional work envisioned under the modification as outlined in Section 3 above in the most cost effective and timely manner. The MESR Activity has been the main donor-funded technical assistance project working in the macroeconomic stabilization and reform area in Egypt since major economic reforms were enacted in coordination with the International Monetary

Fund’s $12 billion Extended Funds Facility in 2016. The MESR activity succeeded in implementing significant reforms in this area that were highly praised by both the MOF and MPED and other stakeholders, and the relationships built on these successes between MESR staff and the staff at the two ministries have been cemented. That trust would allow efforts on setting up new Government of Egypt (GOE) units and changing statistical methodologies to be completed in this one-year timeframe. This would not be possible to implement in the same short timeframe if a new implementing partner team were to take the necessary time to mobilize and establish these relationships anew.

The quality of DAI’s technical assistance under the MESR contract was exceptional and its overall performance was of a high standard. On several occasions, the Minister of

Finance and the Minister of Planning expressed to USAID, and in media interviews, their deep appreciation of the successful macroeconomic stabilization-related work done through MESR. They specifically highlighted the important innovative interventions that

DAI/MESR was able to introduce in collaboration with both ministries. Specifically, DAI supported the MOF in introducing Program Based Budgeting (PBB) into the

Government’s budget system for the first time. DAI developed a PBB manual and provided extensive training to thousands of government officials in a number of ministries to help them shift from the current line-item budgeting to the more efficient

PBB system. The Minister of Finance celebrated the introduction of the PBB system and the dissemination of the PBB manual in a major event, reflecting the importance of this important milestone in improving public financial management. DAI also introduced, for the first time, a fully automated system for public investment planning (ISSIPPM) that supports the MPED’s decision-making capacities with regards to public investments.

This system also enables a more robust monitoring of these investments to ensure equitable distribution of resources aligned to Egypt’s economic, social, and environmental development goals and priorities.

DAI’s successful experience in supporting the introduction of PBB, the establishment of the ISSIPPM, the update of Egypt Vision 2030 (that includes a significant chapter about climate change), and the introduction of economic, social, and environmental criteria in the selection of public investments puts it in a unique position to assist the MPED in establishing the green GDP methodology (Section 3.a). This also puts it in a unique position to assist the MPED in establishing a strong Climate Change Unit (CCU) to achieve the GOE’s goal of greening public investments (Section 3.b). Moreover, DAI initiated and supported the first Alternative Finance Conference in Egypt, in collaboration with the MOF and MPED in May 2022. This experience gives DAI an exceptional edge to build the capacity of the CCU in identifying alternative finance tools that best suit climate change mitigation and adaptation projects. It also enables advanced work with the MOF to select the most efficient mix of those financing mechanisms to be able to fund the climate-related public investments included in

Egypt’s Climate Change Strategy and comply with Egypt’s announced NDCs (Section 3.b).

It is estimated that for Egypt to comply with its updated Nationally Determined

Contributions, it would need $246 billion, with mitigation accounting for $196 billion and adaptation costing $50 billion. Securing the adequate level and mix of financing tools is therefore of paramount importance for the GOE to allow it to address the climate change risks. DAI’s technical assistance services are truly specialized as evident from the critical and timely reform initiatives that DAI was able to successfully support as mentioned above.

In addition to the above, DAI has been the main entity which provided technical assistance to the MOF to establish the TPU and define the competencies required for its staff. This puts DAI in a unique position to continue its specialized technical services and build the capacity of the TPU to design and implement tax policies that can best generate local resources for the green transition, while ensuring that those taxes will encourage and attract foreign and local investments in green and environmentally sustainable projects (Section 3.d). This is a critical component of the MOF’s Medium

Term Revenue Strategy, recently approved by the Prime Minister, which focuses on the mobilization of domestic resources for the green transformation.

Moreover, DAI will be uniquely positioned to build the capacity within the MOF to identify and quantify the fiscal and physical risks and opportunities from greening the economy. MESR has had success introducing key reforms in the fiscal area and it is currently supporting the MOF in holding an upcoming important panel discussion during

COP27 on fiscal climate-related risks. Importantly, DAI has developed a robust diagnostic tool for identifying climate risks and opportunities from low carbon economic growth that will be particularly useful in supporting the MOF in the areas mentioned.

This expertise greatly improves the chances that the MOF adopts the appropriate fiscal measures to smooth the transition and maximize the benefits from the green transformation (Section 3.c).

Both the MOF and the MPED have sent official communications to USAID articulating their urgent need for USAID’s assistance in the areas described above. These separate requests came in light of the global focus on climate change and the significant political support that the Egyptian President and the Parliament are providing towards a post-

COP27 green transformation to build a cleaner and more resilient Egyptian economy.

It is expected that these technical assistance services will require a 12-month extension of the contract to guarantee the robustness and sustainability of the interventions as requested by the GOE. Those interventions are building the capacities of the Fiscal Risks and the Tax Policy Units at the MOF, establishing and building the capacity of the new

Climate Change Unit at the MPED, undertaking extensive research work related to developing the green GDP and green National Accounts, and developing the capacity within the National Accounts Unit to sustain this work. Delaying the procurement of these technical assistance services until their inclusion in a new Macro activity, currently in the design phase due to funding uncertainties, would cause an unacceptable delay of approximately twelve months or more in the provision of specialized services customized for further improving Egypt’s public financial management, investment planning, and macroeconomic performance. This will affect Egypt’s commitments for climate change mitigation and adaptation measures post COP27. The proposed contract modification to extend the MESR contract and increase the TEC would permit

USAID/Egypt to continue to help the MOF and MPED build on and expand successful interventions without losing the momentum that has been accomplished to date.

Continuing this work without interruption will support the targets set by Egypt’s NDCs, while preserving a strong public financial management system and a public investment portfolio that supports the implementation of Egypt’s Climate Strategy and Economic

Reform Program, as highlighted by Egypt’s President.

In addition, Egypt is highly vulnerable to the adverse effects of climate change, ranking the 83rd most vulnerable country and the 129th most ready country according to the

GAIN Vulnerability Index. This reinforces the argument that delaying the necessary technical support to the GOE in the areas described above will definitely jeopardize

Egypt’s plans to address the negative impacts of climate change and restrict its ability to raise the necessary finance for the mitigation and adaptation projects required for the transition to a greener economy. This will in turn impose additional pressure on the

GOE budget and have a negative impact on the growth of the economy. The proposed contract modification, therefore, represents the best interests of the Agency in supporting Egypt’s continued economic growth and financial stability, while furthering its commitments to good public financial management and a “green transformation”.

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 Federal Acquisition Regulation (FAR) 5.202 (AIDAR 705.002):

The contract with DAI for the MESR activity was competitively sourced as required by

FAR 5.202 (AIDAR 705.002). The performance under the additional scope is a continuation of the provision of highly specialized services already being delivered under the contract.

USAID/Egypt synopsized a Notice of Intent to modify MESR Contract on www. SAM.gov on October 30, 2022, for two weeks. One entity responded to the synopsis seeking clarification of the requirement. Based on the response received, as well as prior market research, DAI is best positioned to meet the agency's requirements without additional costs or unacceptable delays. This reinforces USAID/Egypt’s market research that DAI is the only offeror, for the reasons discussed above, that can meet

USAID/Egypt’s requirements with out additional cost or unacceptable delays.

A notice of this J&A will be publicized on www.sam.gov, as required by FAR 5.301(d)(1) within the time frame required by FAR 6.305(a).

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

The historical costs for the current contract, which were carefully reviewed and negotiated, will allow the Contracting Officer to determine that the anticipated additional costs to the U.S. Government as a result of the proposed modification are fair and reasonable, along with analyzing the specific costs incurred. Prior to signing the modification, the Contracting Officer will require a detailed proposal, including certified cost and pricing data, for the continued provision of highly specialized services by DAI.

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

The current contract was awarded through full and open competition and the proposed modification consists of an extension of services already being provided and the proposals received in response to the original solicitation. In light of this, USAID/Egypt has conducted market research to explore whether there are any donors or contractors doing current work similar to the areas described in section 3 above, including posting the synopsis discussed in Section 6 above. Based on the knowledge of USAID/Egypt’s staff of the market for these types of services and the lack of response to the synopsis, the market research confirms that DAI is the only option that can avoid unacceptable delays to services critical to USAID’s goals in Egypt as discussed above

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

On climate financing, the updated NDC could cost $246 billion, with mitigation accounting for $196 billion and adaptation costing $50 billion. Any delays in securing the financial resources for these mitigation and adaptation projects and developing the necessary macroeconomic environment conducive to green public and private investments will put the Egyptian economy in a critical situation. Such delays would certainly prevent Egypt from implementing its updated NDCs to address mitigation.

Delays with adaptation implementation would be particularly harmful for the country as

Egypt is highly vulnerable to the adverse effects of climate change, including water scarcity, drought, extreme heat, rising sea levels, and food insecurity. In fact, Egypt has both a huge need for investments and a great urgency for macroeconomic policy actions, as it ranks the 83rd most vulnerable country and the 129th most ready country according to the GAIN vulnerability Index for climate change.

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

As referenced under item six (6) above, the proposed request is made under the terms of an existing contract previously synopsized in sufficient detail. No further efforts have been made to solicit offers.

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:

If any subsequent requirements beyond the scope and the duration of this award are needed, the action will be competed in a full and open competition to the extent practicable.

https://gain-new.crc.nd.edu/country/egypt

12. Technical or requirements personnel certification:

In accordance with FAR 6.303.2(c), I hereby certify that the technical statements included above, and which form a basis for the justification are complete and accurate.

Rasha Abdel-Hakim, COR MESR Date

13. Contracting Officer Certification:

I hereby certify that the justification is accurate and complete to the best of my knowledge and belief.

Martin Fischer, Supervisory Contracting Officer Date

14. Clearances:

Meti Zegeye, Resident Legal Officer Date

Margaret Sancho, Mission Competition Advocate Date

15. Approval:

Deborah Broderick, Agency Competition Advocate Date