RFP_SOL-72012124R00020_STRONG-UA_103124.pdf

Request for Proposals (RFP) No. SOL-72012124R00020 RFP Issue Date: October 31, 2024 Questions Due: November 12, 2024, 9:00 am Kyiv local time RFP Closing Date: December 3, 2024, 4:00 pm Kyiv local time

Subject: Request for Proposal (RFP) No. SOL-72012124R00020 USAID Support for Trade, Recovery Opportunities, and National Growth in Ukraine (STRONG-UA) Activity

The United States Agency for International Development (USAID) is seeking proposals to implement the USAID Support for Trade, Recovery Opportunities, and National Growth in Ukraine (STRONG-UA) activity to support Ukrainian small and medium enterprises (SMEs) at scale to: i) invest in their recovery and growth; ii) to develop new market linkages, and; iii) enhance their innovation and competitiveness.

as described in the attached Request for Proposals (RFP). USAID/Ukraine anticipates awarding one cost-plus-fixed-fee term type contract with a base period of performance of two (2) years plus three (3) one-year option periods. In order to understand the magnitude of USAID’s requirement, the Government estimates 55,255 person days level of effort of professional technical staff for the full five year period subject to the availability of funds. Given the urgency of need in Ukraine at this pivotal time, achieving the results stated in the government requirements using maximum flexibility and adaptive designs for the base period are highly encouraged and prioritized over option years.

USAID invites all interested and responsible organizations to submit offers in accordance with the requirements of this solicitation. USAID will conduct this procurement as a full and open competition under which any type of organization may submit a proposal. The procedures set forth in Federal Acquisition Regulation (“FAR”) Part 15 will govern the procurement. The principal geographic code for this contract is 935. The North American Industry Classification System (NAICS) code for this acquisition is 541611.

The competition will utilize a Highest Technical Rated with Fair and Reasonable Price and Realistic Cost (HTR) process, not a tradeoff process. In this process, USAID is concerned with getting the best technical solution that has a fair and reasonable price and realistic cost. There will not be a tradeoff to justify paying a premium for a higher technical rated proposal.

Proposals must be submitted in accordance with the instructions listed in Section L of this RFP and must be signed by an official who is authorized to bind the organization. Proposals received after the closing date and time stated above will be processed as late and handled in accordance with FAR 52.215-1. Only electronic submissions will be accepted. It is the responsibility of the Offeror to ensure that its proposal is received timely in its entirety and USAID bears no responsibility for data errors or delays resulting from transmission or conversion processes. Proposals not in conformance with this RFP may be excluded. Section M states the criteria by which proposals will be evaluated. Oral explanations or instructions given before award of the contract will not be binding.

Issuance of this RFP does not in any way obligate USAID to award a contract nor does it commit USAID to pay any cost incurred in the preparation and submission of a proposal. Award of a Contract under this RFP is subject to availability of funds and other internal USAID approvals. USAID reserves the right to reject any and all offers, if such action is considered to be in the best interest of the US Government.

This RFP can be viewed and downloaded from www.sam.gov. USAID bears no responsibility for data errors resulting from transmission or conversion processes. Further, be aware that amendments to solicitations are occasionally issued and will be posted on the same website from which you downloaded the solicitation. USAID advises interested parties to regularly check the above website for amendments.

Offerors not registered in SAM should start the process as soon as possible. For further information on the SAM process:

https://www.workwithusaid.org/resource-library/registration-eggspectation;

https://sam.gov/content/entity-registration

Any questions regarding this solicitation must be submitted in writing via email to Brian R. Ellis at bellis@usaid.gov with a copy to kyivrcoeg@usaid.gov by the date and time specified above.

Thank you for your interest in working with USAID.

Sincerely, /s/

Brian R. Ellis Contracting Officer http://www.sam.gov https://www.workwithusaid.org/resource-library/registration-eggspectation https://sam.gov/content/entity-registration mailto:bellis@usaid.gov mailto:kyivrcoeg@usaid.gov see cover letter

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PART I - THE SCHEDULE

SECTION B - SUPPLIES OR SERVICES AND PRICE/COSTS 8

B.1 PURPOSE 8

B.2 CONTRACT TYPE AND CONTRACT SERVICES 8

B.3 ESTIMATED COST, FIXED FEE, AND OBLIGATED AMOUNT 8

B.4 CONTRACT BUDGET AND CEILINGS 9

B.5 INDIRECT COST 9

B.6 COST REIMBURSABLE 10

B.7 PAYMENT OF FIXED FEE 10

SECTION C – PERFORMANCE WORK STATEMENT 11

C.1 PURPOSE 11

C.2 BACKGROUND 11

C.3 RELATIONSHIP TO OTHER ACTIVITIES 13

C.4 THEORY OF CHANGE 14

C.5 SCOPE & RESULTS 14

C.6 COMPONENTS 20

C.7 OPERATING CONSTRAINTS AND CONTRACT PARAMETERS 22

C.8 MANAGEMENT OF GRANTS UNDER CONTRACT (GUC) 24

SECTION D - PACKAGING AND MARKING 25

D.1 AIDAR 752.7009 MARKING (JAN 1993) 25

D.2 BRANDING STRATEGY 25

D.3 BRANDING AND MARKING POLICY AND CREATION AND DEVELOPMENT OF

WEBSITE 27

D.4 BRANDING IMPLEMENTATION PLAN (BIP) AND MARKING PLAN (MP) 27

SECTION E - INSPECTION AND ACCEPTANCE 28

E.1 NOTICE LISTING CONTRACT CLAUSES INCORPORATED BY REFERENCE 28

E.2 INSPECTION AND ACCEPTANCE 28

SECTION F - DELIVERIES OR PERFORMANCE 29

F.1. NOTICE LISTING CONTRACT CLAUSES INCORPORATED BY REFERENCE 29

F.2. PERFORMANCE PERIOD 29

F.3. PLACE OF PERFORMANCE 30

F.4. PERFORMANCE STANDARDS 30

F.5. AUTHORIZED WORK WEEK 30

F.6. DELIVERABLES 30

F.7. PROFESSIONAL TECHNICAL LEVEL OF EFFORT (LOE) 39

TABLE OF CONTENTS

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SOL-72012124R00020

USAID STRONG-UA Activity

F.8. KEY PERSONNEL 40

F.9. GEOSPATIAL REPORTING REQUIREMENTS 42

SECTION G - CONTRACT ADMINISTRATION DATA 44

G.1 CONTRACTING OFFICER’S AUTHORITY 44

G.2 CONTRACTING OFFICER’S REPRESENTATIVE (COR) 44

G.3 TECHNICAL DIRECTIONS/RELATIONSHIP WITH USAID 44

G.4 AIDAR 752.7003 DOCUMENTATION FOR PAYMENT (NOV 1998) 46

G.5 PAYING OFFICE 48

G.6 INVOICING INSTRUCTIONS 48

G.7 ACCOUNTING AND APPROPRIATION DATA 48

G.8 CONTRACTOR’S PRIMARY POINT OF CONTACT 48

SECTION H - SPECIAL CONTRACT REQUIREMENTS 49

H.1. ADDITIONAL REQUIREMENTS FOR PERSONNEL COMPENSATION 49

H.2. AUTHORIZED GEOGRAPHIC CODE 50

H.3. USAID-FINANCED PROJECT WEBSITES (MAY 2024) 50

H.4. LANGUAGE REQUIREMENTS 52

H.5. ENVIRONMENTAL COMPLIANCE 52

H.6. FOREIGN GOVERNMENT DELEGATIONS TO INTERNATIONAL CONFERENCES (ADS REFERENCE

350MAA) AUTHORIZED WORK WEEK 54

H.7. EXECUTIVE ORDER ON TERRORISM FINANCING 54

H.8. CONSENT TO SUBCONTRACT 55

H.9. ELECTRONIC PAYMENT SYSTEM 55

H.10. GENDER CONSIDERATION 56

H.11. GRANTS UNDER CONTRACT 56

H.12. LOGISTIC SUPPORT 57

H.13. PLANNING, COLLECTION, AND SUBMISSION OF DIGITAL INFORMATION TO USAID (JUN 2024) 57

H.14. RESTRICTIONS AGAINST DISCLOSURE (AAPD 16-02) (MAY 2016) 65

H.15. INFORMATION TECHNOLOGY AUTHORIZATION (MAY 2024) 66

H.16. FAR 4.21 PROHIBITION ON CONTRACTING FOR CERTAIN COVERED TELECOMMUNICATIONS AND

VIDEO SURVEILLANCE SERVICES OR EQUIPMENT (SECTION 889) (DEC 2021) 67

H.17. SECURITY 67

H.18. SEXUAL MISCONDUCT (DECEMBER 2020) 71

H.19. DUE DILIGENCE 72

H.20 AUTHORIZED WORK WEEK 72

PART II - CONTRACT CLAUSES 73

SECTION I - CONTRACT CLAUSES 73

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I.1. FAR 52.252-2 CLAUSES INCORPORATED BY REFERENCE (FEB 1998) 73

I.2. AIDAR 752.252-2 AIDAR CLAUSES INCORPORATED BY REFERENCE (MAR 2015) 76

I.3. FAR 52.204-1 APPROVAL OF CONTRACT (DEC 1989) 77

I.4. AIDAR 752.229-71 REPORTING OF FOREIGN TAXES (JULY 2007) 77

I.5. FAR 52.204-25 – PROHIBITION ON CONTRACTING FOR CERTAIN TELECOMMUNICATIONS

AND VIDEO SURVEILLANCE OR EQUIPMENT (NOV 2021) 78

I.6. FAR 52.217-8 OPTION TO EXTEND SERVICES (NOV 1999) 81

I.7. FAR 52.247-67 SUBMISSION OF TRANSPORTATION DOCUMENTS FOR AUDIT (FEB 2006) 82

I.8. AIDAR 752.228-3 WORKER’S COMPENSATION INSURANCE (DEFENSE BASE ACT)[(DEV

JUN 2022)] CLASS DEVIATION NO. M-OAA-DEV-AIDAR-22-10c 82

I.9. AIDAR 752.7005 SUBMISSION REQUIREMENTS FOR DEVELOPMENT EXPERIENCE

DOCUMENTS (SEP 2013) 83

I.10. AIDAR 752.222-70 USAID DISABILITY POLICY - ACQUISITION (DEC 2004) 84

PART III – LIST OF DOCUMENTS, EXHIBITS AND OTHER ATTACHMENTS 85

SECTION J - LIST OF ATTACHMENTS 85

ATTACHMENT J.1 – FORM AID 1420-17 –CONTRACTOR EMPLOYEE BIOGRAPHICAL

DATA SHEET 85

ATTACHMENT J.2 – PAST PERFORMANCE MATRIX 85

ATTACHMENT J.3 – STRONG UA BUDGET TEMPLATE 85

ATTACHEMENT J.4 – SUMMARY TABLE OF PROFESSIONAL TECHNICAL LEVEL OF

EFFORT (FOR THE TECHNICAL PROPOSAL)

PART IV – REPRESENTATIONS AND INSTRUCTIONS 86

SECTION K - REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS OF THE OFFEROR 86

K.1. NOTICE LISTING SOLICITATION PROVISIONS INCORPORATED BY REFERENCE 86

K.2. FAR 52.204-8 ANNUAL REPRESENTATIONS AND CERTIFICATIONS (MAR 2023)

K.3. FAR 52.209-5 CERTIFICATION REGARDING RESPONSIBILITY MATTERS (OCT 2015) 59

K.4. FAR 52.209-7 INFORMATION REGARDING RESPONSIBILITY MATTERS (OCT 2018) 91

K.5. FAR 52.209-11 REPRESENTATION BY CORPORATIONS REGARDING DELINQUENT

TAX LIABILITY OR A FELONY CONVICTION UNDER ANY FEDERAL

LAW (FEB 2016) 93

K.6. FAR 52.222-22 PREVIOUS CONTRACTS AND COMPLIANCE REPORTS (FEB 1999) 93

K.7. FAR 52.222-25 AFFIRMATIVE ACTION COMPLIANCE (APR 1984) 93

K.8. FAR 52.225-2 BUY AMERICAN CERTIFICATE (MAY 2014) 94

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K.9. FAR 52.230-1 COST ACCOUNTING STANDARDS NOTICES AND CERTIFICATION

(OCT 2015) 94

K.10. FAR 52.230-7 PROPOSAL DISCLOSURE—COST ACCOUNTING PRACTICE CHANGES

(APR 2005) 97

K.11. INSURANCE—IMMUNITY FROM TORT LIABILITY 97

K.12. AUTHORIZED NEGOTIATORS 97

K.13. SIGNATURE 98

SECTION L – INSTRUCTIONS, CONDITIONS, AND NOTICES TO OFFERORS OR RESPONDENTS 99

L.1. FAR 52.252-1 SOLICITATION PROVISIONS INCORPORATED BY REFERENCE 99

L.2. FAR 52.216-1 TYPE OF CONTRACT (APR 1984) 99

L.3. FAR 52.233-2 SERVICE OF PROTEST (SEP 2006) 100

L.4. GOVERNMENT OBLIGATION 100

L.5. GENERAL INSTRUCTIONS TO OFFERORS 100

L.6. PROPOSAL SUBMISSION 101

L.7. INSTRUCTIONS FOR PREPARATION OF THE TECHNICAL PROPOSAL 102

L.8. INSTRUCTIONS FOR THE PREPARATION OF THE COST PROPOSAL 106

L.9. WAIVERS UNDER FAR PART 4.2101 PROHIBITION ON COVERED TELECOMMUNICATIONS

AND VIDEO SURVEILLANCE SERVICES AND EQUIPMENT (JUNE 2023) 113

SECTION M - EVALUATION FACTORS FOR AWARD 114

M.1. GENERAL INFORMATION 114

M.2. AWARD PROCESS 114

M.3. TECHNICAL EVALUATION CRITERIA 115

M.4. EVALUATION OF PAST PERFORMANCE 116

M.5. COST/PRICE EVALUATION 118

M.6. DETERMINATION OF COMPETITIVE RANGE 118

M.7. AWARD 119

ATTACHMENT J.1 Form AID 1420-17 –Contractor Employee Biographical Data Sheet https://www.usaid.gov/forms/aid-1420-17

ATTACHMENT J.2 Past Performance Matrix:

http://www.usaid.gov/documents/1868/past-performance-matrix

ATTACHMENT J.3 Strong UA Budget Template

ATTACHMENT J.4 Summary Table of Professional Technical Level of Effort (for the Technical Proposal) https://docs.google.com/document/d/1_aDN1jdkOc-VFUn3Ue4tCGOSOvCEaymq/edit#heading=h.11si5id https://docs.google.com/document/d/1_aDN1jdkOc-VFUn3Ue4tCGOSOvCEaymq/edit#heading=h.qbtyoq https://www.usaid.gov/forms/aid-1420-17 http://www.usaid.gov/documents/1868/past-performance-matrix

PART I – THE SCHEDULE

SECTION B – SERVICES AND PRICE/COSTS

B.1 PURPOSE

The purpose of this contract is to provide technical assistance and other services as described in detail in Section C for the implementation of USAID/Ukraine’s program entitled “USAID Support for Trade, Recovery Opportunities, and National Growth in Ukraine (STRONG-UA) Activity.”

B.2 CONTRACT TYPE AND CONTRACT SERVICES

This is a cost-plus-fixed-fee (CPFF) term type contract. For the consideration set forth in the contract, the Contractor must provide the level of effort described in Section F.8 to accomplish the goals and objectives set forth in Section C.

B.3 ESTIMATED COST, FIXED FEE, AND OBLIGATED AMOUNT

Base Period

a) The estimated cost for the performance of the work required hereunder, exclusive of fixed fee, if any, is TBD. The fixed fee for the contract period is TBD. The total estimated cost plus fixed fee is TBD.

b) Within the estimated cost plus fixed fee specified in paragraph (a) above, the amount currently obligated and available for reimbursement of allowable costs incurred by the Contractor (and payment of fee, if any) for performance hereunder is TBD. The Contractor must not exceed the aforesaid obligated amount unless authorized by the Contracting Officer pursuant to the clause of this contract titled “Limitation of Funds” (FAR 52.232-22).

c) Funds obligated hereunder are anticipated to be sufficient through [ TBD ].

Option(s) Period

a) The estimated cost for the performance of the work required hereunder, exclusive of fixed fee, if any, is TBD. The fixed fee for the contract period is TBD. The total estimated cost plus fixed fee is TBD.

b) Within the estimated cost plus fixed fee specified in paragraph (a) above, the amount currently obligated and available for reimbursement of allowable costs incurred by the Contractor (and payment of fee, if any) for performance hereunder is TBD. The Contractor must not exceed the aforesaid obligated amount unless authorized by the Contracting Officer pursuant to the clause of this contract titled “Limitation of Funds” (FAR 52.232-22).

B.4 CONTRACT BUDGET AND CEILINGS

a) The following itemized budget sets forth the estimates for individual line items of cost:

Line Item Base Period (2 Years)

Option Year 1 Option Year 2 Option Year 3 Total (Base + Option Years

Direct Costs

Subcontracts and Grants Under Contract

$80,000,000*

Indirect Costs

Total Estimated Costs

Fixed Fee

Total Costs Plus Fixed Fee

*This is the anticipated ceiling amount that may be spent during the life of the award (base plus option years) for subawards that include subcontracts and grants under contracts (GUCs).

B.5 INDIRECT COST

The contract clause entitled “Allowable Cost and Payment (DEC 2002)”, FAR 52.216-7, specifies that the indirect cost rates must be established for each of the Contractor’s accounting periods that apply to this contract. Pending establishment of revised provisional or final indirect cost rates, allowable indirect costs shall be reimbursed on the basis of the following negotiated provisional or predetermined rates and the appropriate bases for the Contractor:

Contractor Fringe Rate %

Overhead Rate %

Overhead Ceiling Rate%

G&A Rate %

G&A Ceiling Rate %

PRIME (Insert Name) Base of Application Source: (insert) Period: (insert)

*The un-shaded columns in the indirect cost table are the current approved indirect cost rates for the Contractor.

The Contractor will make no change in its established method of classifying or allocating indirect costs that impacts this contract without the prior written approval of the Contracting Officer.

Reimbursement for indirect costs must be at final negotiated rates, but not in excess of ceiling rates specified above.

The Government must not be obligated to pay any additional amount associated with indirect costs above the ceiling rates established in the contract. This advance understanding must not change any monetary ceiling, cost limitation, or obligation established in the contract.

Note: Contractors are allowed to recoup indirect costs (overhead , G&A, etc.) as other direct costs if it is part of the contractor’s usual accounting procedures, consistent with FAR Part 31 and the contractor’s NICRA.

B.6 COST REIMBURSABLE

The U.S. dollar costs allowable must be limited to reasonable, allocable and necessary costs determined in accordance with FAR 31 (Contract Cost Principles), FAR 52.216-7 (ALLOWABLE COST AND PAYMENT), FAR 52.216-8 (FIXED FEE), if applicable, and USAID Acquisition Regulation (AIDAR) 752.7003 (Documentation for Payment).

B.7 PAYMENT OF FIXED FEE

At the time of each payment of allowable costs to the Contractor, the USAID paying office ordinarily pays the Contractor a percentage of fixed fee that directly corresponds to the percentage of allowable costs being paid. Three exceptions to paying fixed fee in this manner apply:

(1) If the CO determines that this method results in paying a disproportionately higher ratio of fixed fee than the percentage of work that the Contractor has completed, then the CO may suspend further payment of any fixed fee until the Contractor has made sufficient progress to justify further payment, up to the agreed percentage.

(2) Because the clauses entitled "Allowable Cost and Payment" (FAR 52.216-7) and "Fixed Fee" (FAR 52.216-8) are incorporated into this contract, the terms and conditions of these clauses apply after total payments of fixed fee reach eighty-five percent (85%) of the total fixed fee.

(3) For a term-type contract, monthly payment of fixed fee will be paid in proportion to the LOE delivered during that month and, pursuant to FAR 52.216-8, it will be made upon receipt of a proper invoice. In the event the Contractor has not delivered the total LOE at the expiration of the contract period, the fixed fee will be adjusted proportionately to the LOE delivered. For example, if the Contractor has expended 85% of the total LOE, then the Contractor is entitled to 85% of the fixed fee amount, provided that the performance has been satisfactory.

[END OF SECTION B]

SECTION C – DESCRIPTION/SPECIFICATIONS/STATEMENT OF WORK

SUPPORT FOR TRADE, RECOVERY OPPORTUNITIES, AND NATIONAL GROWTH IN UKRAINE

(STRONG UA) ACTIVITY

C.1 PURPOSE

The purpose of the Support for Trade, Recovery Opportunities, and National Growth in Ukraine (STRONG UA) activity is to support Ukrainian small and medium enterprises (SMEs) at scale to: i) invest in their recovery and growth; ii) to develop new market linkages; iii) enhance their innovation and competitiveness, and iv) support a more conducive enabling environment to accelerate private sector growth during and after the war.

The Overarching Objective is a significant increase in employment and revenues in partner SMEs, resulting in economic growth and increased tax revenues.

The activity will undertake five focus areas:

1. Capital Mobilization for SMEs. Securing funding from financial institutions, both local and international, for small and medium-sized enterprises.

2. Mobilizing New Co-Investments. Increasing the investment of SMEs' own resources.

3. Creating New Market Linkages. Establishing and securing connections between SMEs and potential buyers.

4. Enhancing Innovation and Competitiveness. Improving the innovative capabilities and competitive edge of SMEs while reducing transaction costs.

5. Expediting Business Competitiveness Reforms. Accelerating necessary reforms which will enhance the overall competitiveness of businesses

C.2 BACKGROUND

Ukraine has many advantages – abundant natural resources, a skilled and competitively priced workforce, and access to European markets. But it also faces a host of challenges. The war with Russia has destroyed infrastructure and disrupted markets and supply chains with devastating consequences for Ukrainian SMEs. Over 90% of all Ukrainian businesses experienced losses averaging $227,000.1 Beyond the war, Ukraine has long suffered from widespread corruption, substantial tax and customs leakages, uncertain property rights, unreliable rule-of-law, and State control of a significant portion of the economy.

1 Assessment of the Impact of War on Micro, Small, and Medium Enterprises in Ukraine https://www.undp.org/sites/g/files/zskgke326/files/2024-02/UNDP-UA-assessment-war-impact-enterprises-ukraine-summary.pdf

Access to finance is a particular constraint. Domestic credit to the private sector as a percentage of GDP is extremely low – less than 17% in 2023,2 (less than half that of other lower-middle income countries and a quarter of the Eurozone). The Center for Economic Policy Research estimates the overall level of SME demand for financing at $73 billion3, while the actual amount of credit provided to Ukrainian SMEs is only $12.1 billion, according to the National Bank of Ukraine statistics, indicating a substantial gap in financing for Ukrainian SMEs. In a 2022 study, the SME Finance Forum estimated an SME financing gap (unmet need) of $29 billion.

Additionally, a recent Ministry of Economy survey reported that 58% of Ukrainian enterprises cited access to finance as their primary challenge. The war has further exacerbated this issue, making SMEs more reluctant to borrow and finance providers more hesitant to extend credit, especially to new borrowers. Consequently, businesses lacking access to finance for working capital and capital expenditures struggle to survive and are unable to invest to accelerate growth and recovery.

Loss of markets is another significant obstacle to growth. The war disrupted traditional markets and supply chains, causing GDP to fall precipitously. As a result, Ukrainian businesses are struggling to find new market opportunities and need support in developing new customers, including meeting the standards required in some new markets.

Meeting the demands of new markets, along with new labor and skills constraints, requires that businesses become more efficient, innovative, and competitive. Europe is a potential source of new opportunities, but it is a competitive market with high standards. Ukrainian businesses and industries can compete but need to develop and implement competitiveness strategies. Despite Ukraine's strong foundation for innovation, ranking 3rd among lower-middle-income countries according to the Global Innovation Index 2023, it still places 34th out of 37 European nations.

The country's lowest scores are in market sophistication, institutions, and infrastructure, hindering its ability to fully leverage its innovative potential.

Businesses face challenges such as inconsistent enforcement of laws, complex licensing procedures, and burdensome regulations, all of which impede business growth and private investment. Corruption remains a pervasive issue, further complicating the regulatory environment and business interactions with the government. The Contractor must prioritize advocacy and transformation efforts to facilitate legal and regulatory reforms that encourage firm-level investment and growth, with a particular focus on addressing corruption. While Ukraine has made commendable strides in anti-corruption reforms, its 2023 ranking of 104 out of 180 countries in Transparency International's Corruption Perception Index underscores the need for further progress. To fully modernize Ukraine's business enabling environment and to align with European Union (EU) rules and directives, additional reforms are critical in areas such as licensing, standards, and the financial sector.

3 Rebuilding Ukraine: Principles and policies

2 International Monetary fund data (see p. 66) https://www.imf.org/-/media/Files/Publications/CR/2023/English/1UKREA2023001.ashx https://cepr.org/system/files/publication-files/178114-paris_report_1_rebuilding_ukraine_principles_and_policies.pdf https://www.imf.org/-/media/Files/Publications/CR/2023/English/1UKREA2023001.ashx

C.3 RELATIONSHIP TO OTHER ACTIVITIES

a. USAID Strategy Alignment

STRONG UA will support USAID/Ukraine’s Country Development Cooperation Strategy “DO 4:

Inclusive, Sustainable Market-Driven Economic Growth” and “IR 4.1 Strengthened SME competitiveness,” “IR 4.4 Inclusive, innovative finance expanded.”

b. USAID Activities

USAID and other donors are currently providing direct support to Ukrainian firms and the banking sector, largely through grants and liquidity facilities in addition to supporting a range of other areas including trade facilitation and investment promotion, as well as reforms in the enabling environment and the financial sector.

The Investment in Business Resilience (IBR) activity is a five-year, $93M activity which expires in 2027 and is focused on unlocking capital for Ukrainian businesses. It largely works with and provides grants to private sector finance providers, as well as co-investment grants to Ukrainian businesses to facilitate new investments.

The Competitive Economy Program (CEP) is a $170M activity which expires in October 2025.

CEP supports the competitiveness of Ukrainian businesses through: i) firm level assistance and

ii) the advancement of open and efficient cross-border trade. CEP operates through four components: i) a better business enabling environment; ii) support for emerging industries; iii) trade facilitation and export promotion; and iv) private sector-led recovery through enhanced access to investment and finance (primarily focused on facilitating investments in Ukrainian enterprises).

The State-Owned Enterprise Reform Activity (SOERA) is a $100 million activity focused on privatization of state-owned enterprises ending in 2028.

The Agriculture Growing Rural Opportunities (AGRO) activity is a $205 million activity focused on restoring Ukrainian agricultural sector performance through increasing market access for agricultural producers, supporting small- and medium-sized agricultural enterprises through transparent land markets, irrigation policy reforms, and anti-corruption within the agricultural sector. AGRO ends in November 2026.

U.S. Development Finance Corporation (DFC) - Loan Portfolio Guarantees - The Development Finance Corporation, together with USAID, is providing Loan Portfolio Guarantees to Ukrainian commercial banks. As of June 2024, DFC has guarantees with Raiffeisen Bank Ukraine, Bank Lviv, and ProCredit Bank.

The Economic Resilience Activity (ERA) activity is a $325 million activity which runs through August 2026 and is focused on strengthening public and private sector export logistics and infrastructure in order to increase the country’s overall agricultural exports. ERA achieves its https://www.usaid.gov/sites/default/files/2023-06/Ukraine_CDCS%202019-2026_EXTERNAL.pdf goals by leveraging public and private sector investment to increase Ukraine’s grain shipment capacity and by upgrading Ukraine’s border crossing points to reduce export costs and increase export efficiency.

The GROW Activity is an $10.0 million 4-year activity through the World Council of Credit Unions and works with Ukrainian credit unions to improve their ability to meet demand for credit by building a better regulatory and legislative environment, strengthening the regulatory capacity of the National Bank of Ukraine, and providing liquidity for and building the capacity of credit unions to provide finance to agricultural producers and SMEs. This activity follows the Credit for Agriculture Producers (CAP) activity, an 8-year, $11.9 million project with the same implementing partner, aimed at providing agricultural finance primarily in rural areas through credit unions. CAP concluded in September 2024.

c. Other USG and Donor Coordination

Ukraine is receiving abundant support from numerous bilateral and multilateral donor partners to win the war against Russia and improve Euro-Atlantic integration. Donors and international financial institutions (IFIs) globally are committed to supporting an independent and prosperous Ukraine. In the financial sector, there are a number of partial guarantee programs as well as liquidity facilities from the International Finance Corporation (IFC) and the European Bank for Reconstruction and Development (EBRD), in addition to the DFC guarantee programs noted earlier.

C.4 THEORY OF CHANGE

The development hypothesis for STRONG UA is:

● IF Ukrainian financial institutions can facilitate a significant amount of additional credit to Ukrainian SMEs AND support them to establish new market linkages,

● AND IF SMEs can innovate and adapt to meet the demands of new markets, while developing new sources of investment capital,

● AND IF the Government of Ukraine adopts enabling environment reforms to address legal and regulatory constraints to private sector development and investment,

● THEN Ukrainian SMEs will be able to both recover faster and mobilize more investment, which will lead to increased export growth, increased public revenues, improved labor outcomes, and broad-based economic growth for Ukraine.

C.5 SCOPE & RESULTS

STRONG UA will achieve its results aligned with its overarching objective through the following five Focus Areas:

Focus Area One - Capital Mobilization for SMEs. Enable access to finance for investment and working capital. Encourage local financial institutions, mainly banks, to provide market-rate and market-based credit to SMEs by reducing their own risks (e.g., buying down bank and non-bank risks and covering the part of loan loss provisions rather than subsidizing interest rates of borrowers). Particular focus is on SMEs which otherwise would not obtain financing. These credit transactions would not occur without USG support.

Focus Area Two - Mobilization New Co-Investments of SMEs. Help SMEs access de-risking opportunities that require them to invest their own capital, measured by their co-investments, that would not occur otherwise.

Focus Area Three - Creation of New Market Linkages. Facilitate connections between Ukrainian firms and buyers domestically and globally, measured by increased sales and exports that would not be possible without US Government (USG) support and prepare SMEs to innovate to take advantage of those opportunities.

Focus Area Four - Enhancing Innovation and Competitiveness of SMEs. Provide consultancy services to help SMEs improve their performance, measured by revenues and margins, adopt labor saving technologies and innovations, reduce transaction costs of doing business and attract funding, and support new ventures that will attract private sector investments into SMEs.

Focus Area Five - Expediting Business Competitiveness Reforms. Support reforms to improve business performance, reduce transaction costs, and expand SMEs' access to finance. Provide technical assistance for advocacy and transformation within the legal, policy, regulatory, and enabling environment to support private-sector development. The Government of Ukraine (GoU) should be an active part of this and prioritize reforms that focus on development needs rather than current political demands.

Collectively these five Focus areas will work in harmony, creating more profitable, and thus more bankable small and medium-sized enterprises while building new market linkages and fostering innovation and competitiveness. Supporting market linkages, innovation, and competitiveness, in turn will make enterprises more bankable. In the process of engaging with both the business community and the financial sector, the Contractor will identify the enabling environment and systemic constraints and advocate for reforms.

One critical aspect of STRONG UA's work is to create, establish, maintain, and oversee networks of advisors who will work directly on the outlined Focus Areas. These networks, further defined in Section C.6 below, will be compensated based on performance and target completion. The Contractor's responsibilities include collaborating closely with advisors to ensure timely deliverables, target achievement, and quality control. Additionally, the Contractor must address any risks of misconduct, fraud, or result fabrication upfront, while effectively mitigating corruption risks.

Achievement of the objective also depends on three key factors:

● Development of large networks of service providers (primarily paid on a success fee basis) which will: i) identify SMEs and facilitate them in obtaining first time financing or financing at significantly improved, but market terms and conditions; ii) facilitate them to obtain co-investment and cost-share grants to de-risk their own investments; iii) support them in identifying and reaching out to new markets and buyers; and iv) support them in innovation and competitiveness.

● Strategic use of grants and/or sub-contracts to buy down risk and incentivize financing from Ukrainian finance providers.

● Cooperation between businesses and public authorities, fostered by STRONG UA to identify and address regulatory/legal constraints that hinder investments in Ukrainian SMEs.

The approach to selecting SMEs for assistance under STRONG UA is sector-agnostic, avoiding concentration in specific sectors or sub-sectors to allow for flexible implementation. The Contractor must propose initial priority sectors, but must ensure there will be no overlap with other USAID activities.

STRONG UA targets small and medium-sized enterprises. STRONG UA has a special focus on unfinanced and under-financed businesses,first-time borrowers, and those directly impacted by the war. Activities under STRONG UA should adhere to market terms and conditions to minimize potential market distortions. This approach distinguishes STRONG UA efforts from some GoU programs that, while well-intentioned, may inadvertently create such distortions in the SME sector. Any de-risking tools, including risk mitigation for financial institutions or leveraging co-investments by SMEs, must align with market terms and support the long-term sustainability of financed transactions.

STRONG UA represents a departure from traditional long-term development models.

Development in a war-torn country requires a constant, adaptive stance. This activity will follow a pause and reflect model to assist Ukraine in constantly shifting priorities. All parties (both USAID and Contractor) will meet 30 days after the award and thereafter at least bi-annually to agree upon the six-month aspirational targets for each of the focus areas above. All parties will continue every six-month with a pause and reflection strategy meeting, whereas the focus area objectives/targets will be looked at in detail to see what is working and what needs improvement or adjustment. Allocations of resources may be adjusted based on methodologies and outcomes, while consistently maintaining a focus on the overarching goal, such as achieving overall targets for each year and for the program as a whole. As needed, new aspirational targets will be agreed upon collaboratively and noted within the Annual Workplan.

Outlined below are the anticipated aspirational results under STRONG UA. These results are intended to be indicative and are designed to provide a magnitude of the intended results with the understanding that targets will shift - either up or down - over the life of the activity based on the conditions on the ground.

C.5.1 Focus Area One - Performance Objectives for Capital Mobilization for SMEs:

Transaction Origination and Risk-Sharing Tools.

Financing for SMEs will be mobilized through transaction origination and risk mitigating tools to finance providers of market-rate and market-based credit. Projections for the annual targets are presented below.

Transactions are defined as the following: either a) funds disbursed, or b) funds committed (as evidenced by a signed offer agreement from a finance provider and a written acceptance by the finance seeker). Assumptions envisage an average transaction size of $50,000, an estimated 8,00 transactions in year one, and estimated average transaction origination costs paid to transaction originators/advisors of 5% and risk mitigation to finance providers of 6% (against the amount of financing mobilized and over the five-year life of the award). Repeated transactions for the same firms over time, such as access to credit lines on an annual basis, may be permissible as an exception, provided that they demonstrate both additionality and significant improvement in transaction conditions.

Indicator / Target Year 1 Year 2 Year 3 Year 4 Year 5 Total

Number of Transactions 800 4,000 TBD TBD TBD 20,000

Amount Mobilized (millions)

$40.0 $200.0 TBD TBD TBD $1,000

The Contractor will be responsible for providing evidence of completed transactions, evidenced by disbursement or commitment letters signed by the finance provider and SME, as well as demonstrating the additionality of the transactions.

Risk mitigation tools are instruments that enable financial institutions, primarily banks, to partially cover the credit risk associated with transactions. Although grants and/or sub-contracts to financial institutions are expected to serve as the primary risk mitigation tools to partially cover their loan loss provisions for new transactions, other instruments that address credit risk or expected credit losses, ensuring alignment with the existing prudential regulations established by local authorities, particularly the National Bank of Ukraine, can be taken into account.

C.5.2 Focus Area Two - Performance Objectives for Mobilizing New Co-Investments of SMEs:

SME Cost-Sharing and Co-Investment Grants.

The Contractor must engage its network of transaction advisors to assist SMEs in mobilizing their own investments (including but not limited to equity and quasi-equity capital) by initiating and executing transactions that involve de-risking SMEs investment through financing co-investment and cost-sharing grants. With no less than 5:1 leverage, e.g. $10 in co-investment and/or cost-sharing grants will result in at least $50 in co-investment (contributions by the enterprise supported), and projections assume a maximum grant size of $20,000 for Year 1 and Year 2. The average grant size may be adjusted to respond more flexibly to ongoing market demand, but it should prioritize small businesses first, followed by medium-sized businesses.

Indicator / Target Year 1 Year 2 Year 3 Year 4 Year 5 Total

Number of grants 100 200 TBD TBD TBD 5,000

Amount of the SMEs own Co-investments Mobilized (millions)

$10.0 $20.0 TBD TBD TBD $50.0

By "own co-investments of SMEs," the Government is referring to contributions that will facilitate an increase in companies’ assets, with a preference for non-current assets such as property, plant, and equipment (PPE). Contribution to the co-investments of SMEs should encompass only elements of financing and investing cash flows, as defined under U.S. Generally Accepted Accounting Principles (U.S. GAAP)4. Any elements of operating cash flows under U.S.

GAAP should be excluded from the definition of own co-investments of SMEs, as they pertain to the routine operations of the businesses. Assumptions envisage an estimated average transaction origination and execution costs of 5%.

C.5.3 Focus Area Three - Performance Objectives for the Creation of New Market Linkages.:

Through its new market linkage advisors, the Contractor must establish new market linkages that lead to increased sales for SMEs, both domestically and in foreign markets. Individual new market linkages advisors or firms with relevant capacity may be engaged, as well as providers of training and certifications. Projections assume a value per new market linkage of $50,000 (new additional revenues achieved).

Indicator/Target Year 1 Year 2 Year 3 Year 4 Year 5 Total

Number of new market linkages established

200 500 TBD TBD TBD 2,000

Value of new market linkages (millions)

$10.0 $25.0 TBD TBD TBD $100.0

4 https://asc.fasb.org/1943274/2147482740

C.5.4 Focus Area Four - Performance Objectives for Enhancing Innovation and Competitiveness of SMEs.

The focus of the innovation and competitiveness advisory support is to provide consultancy services to SMEs. This support is expected, though not limited, to improve performance (sales and margins), adopting labor-saving technologies and innovations, reducing transaction costs associated with business operations, and attracting new financing.

Projections assume 1,100 advisory support engagements over the life of the activity with an average cost per SME supported of $5,000. Performance targets have not been established but the Contractor should be able to demonstrate a reasonable impact arising from services provided (which could include cost-sharing for services provided). The Contractor is expected to facilitate new venture investment funds (at least four) over the life of the award, with an estimated amount of finance mobilized on average $80M and with support of $8M in catalytic funding.

Indicator/Target Year 1 Year 2 Year 3 Year 4 Year 5 Total

Number of consulting engagements provided

100 250 TBD TBD TBD 1,100

New Venture/Invest Funds supported 0 1 TBD TBD TBD 4

Value of new funds supported (millions)

0 $20 TBD TBD TBD $80

C.5.5. Focus Area Five - Performance Objectives for Expediting Business Competitiveness Reforms.

Effective engagement between the business community and the GoU is vital for fostering economic growth. Establishing regular communication will enable both parties to identify and prioritize essential reforms - new regulations and amendments to existing ones - that improve the business environment and support growth.

The central aim of this Focus area is to support and implement the necessary regulatory changes that will enhance the business environment, enabling small and SMEs to grow rapidly and ensure impact and long-term sustainability of those regulatory changes. At this stage, no specific laws, amendments, or reforms have been prioritized. No specific aspirational targets are set for this focus area. Instead, the Contractor shall propose justified actions, including advocacy, legal, and regulatory reforms, along with problem-solving initiatives, to address urgent needs for reducing the cost of doing business, facilitating trade and investment, and ensuring competitiveness. These proposals should be informed by expertise and ongoing dialogue with local businesses, financial institutions, and the Government of Ukraine. This reform “package” should complement other USAID and donor activities. These interventions should align with the central aim of this area and may evolve over the duration of the award.

C.6 COMPONENTS

Under the STRONG UA, activities will fall under three work streams or components as described below.

C.6.1 COMPONENT ONE: Access to Finance & Investment Mobilization for SMEs

Risks and transaction costs are high in Ukraine. SMEs are understandably reluctant to borrow given the high uncertainty, and finance providers are reluctant to extend financing, particularly to businesses they don’t know well. Risk will be addressed in two ways: 1) through grants and/ or subcontracts to banks and other finance providers to buy down their risk and build the provisions (reserves) against loan loss, and 2) cost-sharing/co-investment grants to SMEs.

A transaction origination network (individuals and/or firms paid on a success-fee basis) will facilitate the interface between SMEs and finance providers, reduce transaction costs, and identify and shepherd through financing. The transaction network will facilitate SME cost-sharing/co-investment grants with a finance provider network, or a broad and diverse group of finance providers, with an appetite to consider new opportunities.

Thus, STRONG UA shall:

● Develop a large network of transaction originators to identify unfinanced or underfinanced SMEs and create a pipeline of financing opportunities/requirements.

● Develop a network of finance providers (banks, venture capital, leasing companies, etc.)

with appetite to consider new opportunities.

● Facilitate financing for this pipeline through grants and/or sub-contracts to Ukrainian finance providers to buy-down their risk and build loan-loss provisions (increasing appetite for this financing).

● Provide, when needed, cost-sharing and co-investment grants to Ukrainian SMEs to encourage their own investment contribution.

C.6.2 COMPONENT TWO: New Market Linkages, Innovation and Competitiveness

The war has disrupted traditional markets and supply chains, and Ukrainian SMEs need support broadening their customer-base, including meeting the standards and demands required in some new markets. STRONG UA will substantially increase new market linkages with particular attention to cross-border transactions into the EU. It will accomplish this through a network of market linkage advisors (individuals and/or firms paid on a success fee basis) who will work with enterprises to identify and close new market opportunities.

In addition to this, facing increasing difficulty finding skilled labor, Ukrainian enterprises and industries need to innovate and become more competitive, as they seek new markets, particularly as they enter new markets in the EU. In addition, new financing channels (venture and investment capital) need to be available. This requires a network of innovation and competitiveness consultants to provide advisory and business development support to SMEs and encourage innovative new financing and investment instruments appropriate for different phases of SME growth.

Thus, STRONG UA shall:

● Engage a network of market linkage advisors who will work with SMEs to identify and close new market opportunities and directly advise SMEs on product, process, and material innovations to improve their ability to fully benefit from new market linkages and enhance their competitiveness.

● Engage a network of innovation and competitiveness consultants considerate of gender equality and inclusion who will provide advisory service to these SMEs to help them become more innovative and competitive.

● Work directly with partner financial institutions to review and advise on improvements to systems that reduce the transaction costs for working with SMEs.

● Support the launch of new venture/investment growth funds if there is market demand.

C.6.3 COMPONENT THREE: Reforms and Advocacy for Business Competitiveness

STRONG UA will improve the enabling environment to reduce the cost of doing business, facilitate trade and investment, and bring Ukraine closer to European integration. This can be achieved by directly supporting regulatory and policy reforms, institutional strengthening, public-private dialogues, enhancing legal frameworks, policy advocacy etc. This approach aims to maximize the involvement and engagement of representatives from the Government of Ukraine in the reform process, working with the Government to implement reforms and enhancing its accountability. The approach should be evidence-based, targeted and prioritized, identifying and advocating for reforms which have the greatest potential to impact the business enabling environment.

Thus, STRONG UA shall:

● Propose a set of advocacy, legal, and regulatory reforms, along with problem-solving actions, to address the most timely needs for reducing the cost of doing business, facilitating trade and investments, and ensuring competitiveness. This reform package should complement other USAID and donor activities.

● Maximize the involvement of the GoU in the reform process and enhance its accountability.

● Support other legal and regulatory result-oriented reforms as directed.

C.7 OPERATING CONSTRAINTS AND CONTRACT PARAMETERS

In addition to addressing the development challenges and achieving performance objectives, the Contractor must address and integrate each of the following cross-cutting requirements and key principles below:

a. Collaboration and Flexibility: Collaboration with USAID and other USAID funded activities as well as setting performance metrics will be required, as USAID and the Contractor learn and adapt. Collaboration with other U.S. government agencies, particularly the Development Finance Corporation, is strongly encouraged.