Pre Solicitation USAID Ukraine Harvest SOO.pdf

USAID/Ukraine HARVEST Activity (RFP) No.

ATTACHMENT J.1 – STATEMENT OF OBJECTIVES

1. PROBLEM STATEMENT

Small to medium Ukrainian grain and oilseed farmers (smaller farmers) have low yields and output that have fallen below pre-war levels because they do not reliably use high-yield varieties, sufficient amounts of appropriate agro-inputs and services, or farming practices that optimize productivity, including equipment, and do not plant all of their arable land, as shown in GOU data such as:

https://www.ukrstat.gov.ua/operativ/operativ2017/sg/pvzu/arch_pvxu_e.htm. The war has also damaged or contaminated some land, leaving it unsuitable for production and led to a reduction in the labor force due to conscription and displacement. Smaller farmers are not using improved inputs, services, or farming practices, or planting all of the land that is fit for production as they face difficulty accessing financing. Public extension resources are constrained, and private extension services are geared towards companies’ suppliers, the products they sell, and the customers who buy them. Moreover, the war has disrupted imports and internal distribution routes resulting in decreased input supply and increased prices, reduced in-person extension, and reduced farmers’ cash flow as they face higher costs and lower revenue (largely due to increased logistics costs). Smaller farmers face difficulty accessing sufficient financing as they often do not have solid financial records or farm plans, and have limited collateral, which makes it riskier for banks to lend to them and reduces the size of the loans they can qualify for. Input suppliers have also limited credit provision to larger farmers, as they felt lending to smaller farmers was too risky in the wartime context. At the same time, smaller Ukrainian grain and oilseed farmers realize low revenue and profits which have also fallen below pre-war levels as they have difficulties accessing higher-value and more diverse and profitable markets, sell through intermediaries, have limited bargaining power and economies of scale, and face lower sales prices due to the war. Low output and productivity also reduce farmers’ revenues and net incomes. These smaller farmers face difficulty accessing markets that are higher-value, more diverse, and more profitable because they do not have sufficient information on how to identify these markets and how best to orient their production to meet the demands of these markets. Furthermore, the war closed and constrained major export routes, reducing overall demand and increasing logistics costs. Alternative routes are less efficient and have higher transport costs, while Black Sea shipments faced increased insurance premiums and inspection delays (when the Black Sea Grain Initiative enabled now-closed ports to operate), which add to the overall costs.

While some market information is available online or from other farmers, it is often incomplete or not detailed enough to be of help. Consulting with market intelligence providers is expensive, making it difficult for smaller farmers to afford this type of support. Smaller farmers also have limited bargaining power and tend to sell through intermediaries as individuals. This makes them less attractive to end buyers, who prefer to purchase larger volumes to maximize economies of scale.

2. OBJECTIVES

This activity will support productivity through access to high quality inputs in combination with agronomic support and extension services. The Contractor has three interlinked objectives that the contractor must achieve using operating principles stated in section 6, below while integrating critical cross-cutting issues, as indicated in this section below.

● Objective 1: Profitable, climate-smart, market-oriented production expanded

● Objective 2: Farmers’ access to profitable markets improved

● Objective 3: Market system efficiency and inclusiveness improved https://www.ukrstat.gov.ua/operativ/operativ2017/sg/pvzu/arch_pvxu_e.htm

3. REQUIRED MINIMUM RESULTS

The Contractor must achieve the following overall minimum targets over the life of the activity:

● Aggregate output of target commodities among assisted producers exceeds baseline level by at least 20 percent for assisted producers.

● Value of annual sales of producers and firms receiving USG assistance (Standard Indicator EG.3.2-26): Aggregate value of sales for all target commodities among assisted producers must be increased by at least 15 percent above the 2022-2023 marketing year baseline for assisted producers by the end of activity.

● Number of individuals participating in USG food security programs (Standard Indicator EG.3-2):

Reach at least 14,000 legally registered producers of target commodities with farms between 10 to 2,000 ha (small to medium).4

● Leverage at least $90 million in private sector investment to complement USAID funding to achieve objectives over the period of performance.

4. THEORY OF CHANGE

IF small to medium-sized grain and oilseed farmers in Ukraine (male and female) can sustainably access affordable and high-quality inputs, services, and appropriate technical assistance that support their productivity, quality, end-market alignment, and resilience, AND if they can use services and practices to increase their bargaining power, purchasing power, and output aggregation, AND if they have access to information about end market demands, standards, and pricing, THEN these Ukraine’s small to medium sized farmers can successfully use production practices that maintain and increase production, access more diverse and larger markets, and increase profits, AND these producers can contribute to global and domestic food security and Ukraine’s economic resilience and growth.

5. OPERATING CONSTRAINTS

● Geographic focus: The Contractor must work only in GOU-controlled areas.

● Target participants: The Contractor must focus support on small and medium producers (10 to

2,000 ha) that grow the target commodities but should also engage larger producers and agribusinesses as partners and participants where it benefits smaller farmers and sector recovery.

● Target Commodities: The Contractor must support barley, corn, soybean, sunflower, and wheat (“target commodities”), which are important for global food security as well as Ukraine’s economy (including export markets) and have the greatest potential to achieve Activity objectives.

● Grants Under Contract (GUCs): The Contractor must incorporate GUCs, which may be between $15,000,000 and $30,000,000.

● Quick Start: Given that that Activity will start up as the 2024 planting campaign is underway, the 2023-24 marketing year is in full swing, and farmers have faced two years of mounting challenges, the Contractor must implement a rapid startup and ramp up.

● Other: The Contractor must consider cross cutting Operating Principles and Security requirements in J.1.6 below and H.19 respectively.

6. OPERATING PRINCIPLES

4 The target is about 40 percent of registered farms up to 2,000 ha. As of 2021, GOU reported that there were about 35,000 legally registered commercial farmers with holdings of 10-2,000 ha.

Across Objectives, the Activity must apply the following:

● Adaptive management: The Contractor must use an adaptive management approach that incorporates ongoing monitoring for contextual changes, stresses, and shocks, determine when adaptations are needed, and quickly pivot to implement adaptations in a way that ensures no harm. In addition, pursuant to FAR 52.243-2, the Government anticipates that the Contractor may be required to procure equipment or commodities in order to meet the goals of the contract. Russia’s on-going invasion and the unpredictable nature of events may require that the Contractor substantially increase resources dedicated to equipment or commodities procurement to meet programmatic goals. Equipment and commodity needs, in the event of expansion, may not be limited to strictly agricultural equipment but also e.g. export or energy equipment and commodities (including but not limited to, generators, transformers, building materials, construction equipment, and vehicles plus necessary management costs) that will aid the agricultural sector in Ukraine more broadly, directly and indirectly. The Contractor may be required to rapidly scale up, including to increasing the award by up to 33% of the total estimated cost, as part of USAID/Ukraine's broad provision of emergency support to Ukraine during Russia's full scale invasion.

● Market-based: The Contractor must use a market-based approach, as noted, to ensure that activities strengthen, leverage, and expand existing market functions and structures as much as possible, foster sustainability of Activity approaches and outcomes, and do not harm existing market systems by creating distortion or other unintended negative consequences. The Contractor should tailor its approach based on market system functioning across geographies to strengthen and leverage existing market systems where they are intact, expand and deepen market systems coverage where there are gaps, and use emergency-based distribution only where markets are not functioning sufficiently.

● Localization: The Contractor must maximize local partnerships and co-creation with diverse and representative local system actors (public and private), including GOU, to ensure activities are locally owned, appropriate, and sustainable. The Contractor also will foster local capacity strengthening to position local system actors to sustain and maintain interventions and be engines for sector recovery and growth.

● Private-sector engagement: The Contractor should maximize partnerships with private-sector actors, in Ukraine, regionally, and internationally including but not limited to U.S.-based companies, to drive co-investment and support sustainable market-based approaches, and leverage complementary resources and expertise. These partnerships could include leveraging private-sector resources and expertise, co-investment in joint initiatives, aligned investment by the private sector, and donations of goods or services where emergency provision is warranted.

7. COLLABORATION AND COORDINATION WITH OTHER DONOR-FUNDED EFFORTS

To maximize efficiency and reach, the Activity must collaborate and coordinate with USAID, USG and other donor-funded efforts to maximize joint results. The Activity should identify and implement specific partnerships as needed to maximize joint outcomes.