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Skip Sourcebook Navigation Choosing Results-Oriented Assistance Instruments
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Core Values Sources FAQ Glossary USAID ADS Updated 10/10/02
In selecting which instrument to use to implement a results-oriented foreign assistance activity, it is important to understand the differences among the available options. Assistance instruments and procurement contracts are not interchangeable. Statutory requirements, Office of Management and Budget (OMB) guidance (OMB, "Implementation of Federal Grant and Cooperative Agreement Act of 1977" (Pub.1, 95-224), 43 Federal Register 36860-36865 (August 18, 1978) (the 1978 OMB Guidance), and USAID policy (see ADS Chapters 200 (PDF 1MB) and 300 (PDF 75KB)) provide criteria and a collaborative procedure for choosing the right instrument for an activity. This page provides information to help USAID Teams, Activity Managers, and Agreement Officers make the right choice.
How different are "Assistance Instruments" and "Procurement Contracts"?
Paul Dembling and Malcolm Mason, two of America's foremost authorities on the legal aspects of grants and cooperative agreements, have summarized the differences between assistance instruments and procurement contracts by writing that they:
"Serve different purposes;
Are entered into through different procedures;
Carry different conditions;
Permit different remedies;
Are enforced differently;
Are administered, generally and properly,
by different groups of people and in a different spirit; and
On significant issues, have totally contradictory rules."Essentials of Grant Law Practice (ALI ABA 1991), p. 3.
Do these differences make one type of instrument more suitable for results-oriented activities than the other? No. As a general matter, both types are equally appropriate and effective for use in results-oriented activities.
Can the type of instrument be selected on the basis of such considerations as cost or administrative convenience? No. The criteria for selecting an assistance instrument or a procurement contract are based on statute and mandatory policy. It is not permissible to utilize one type or the other based on subjective reasons, or merely to avoid certain requirements.
What do the differences between assistance instruments and procurement contracts mean in practice? The following table notes some of the terminological and substantive differences between assistance instruments and procurement contracts:
Instrument Type(s) Grant or Cooperative Agreement Contract General Nature Assistance Acquisition Purpose Support or Stimulate a Public Purpose Purchase for Government's Direct Benefit or Use Relationship Partner Vendor Can It Be Results-Oriented? Yes! (Results-Oriented Assistance Instruments) Yes! (Performance-Based Service Contracts) USAID's Role Donor/Funding Agency Purchaser/Client Implementor's Role Implement Program Provide Goods or Services M/OP Officer Agreement Officer ("AO") Contracting Officer ("CO") Main Implementor Recipient Contractor Sub-Implementors Subrecipients Subcontractors Offer Application Bid or Proposal Offeror Applicant Bidder or Offeror Activity Program Work or Services Solicitation Request for Applications (RFA) or Annual Program Statement (APS) Request for Proposals (RFP) or Invitation for Bids (IFB) Description of Activity Program Description Statement of Work Cost-Sharing Often Very Rare Competition Encouraged by Policy Mandated by Statute Award Protests No formal procedure; handled informally within USAID Can be filed with USAID, GAO, the Court of Federal Claims, or the Federal District Courts Activity Manager Administrative Authority Limited by regulation to selected essential aspects CO delegates broad Technical Directions Authority to "Technical Representative" ("CTO") Basis of Payment Costs Usually Fixed Price or Rate, or Costs Plus Profit or Fee Timing of Payment Reimbursement, Normally in Advance Reimbursement, normally after expense incurred Performance Disputes AO Decision May be Appealed Within USAID Only CO Final Decision May Be Appealed to Armed Services Board of Contract Appeals or Court of Federal Claims Termination Rights For Cause, Mutually, or Changed Circumstances For Default or Unilaterally by USAID for Convenience Choosing Between "Assistance Instruments" and "Procurement Contracts" to Implement an Activity: Law, Policy and Procedure
As noted above, selection of the appropriate type of instrument with which to implement a foreign assistance activity is governed by statute and by OMB and USAID policy and procedure. Grants must be used, by statute, when two criteria apply:
the principal purpose of the relationship between USAID and an implementor to be created by the agreement "Is to transfer a thing of value to the...recipient to carry out a public purpose of support or stimulation authorized by a law of the United States..."; and
substantial involvement by USAID is not anticipated in the conduct of the activity. See 31 U.S.C. 6304.
USAID policy adds a third criterion, which flows from the first two:
that the recipient will have "substantial freedom to pursue its stated program." See ADS 304.5.1c (PDF 75KB). Cooperative Agreements, again by statute, must be used when the "principal purpose of the relationship" test (same as for grants) is met; and substantial involvement by USAID is anticipated in the conduct of the activity. See 31 U.S.C. 6305; ADS 304.5.1b. (PDF 75KB)
USAID policy does not permit the use of either grants or cooperative agreements in connection with activities over which "USAID plans to exercise a substantial degree of operational control". See ADS 304.5.2. (PDF 75KB) As a general rule, OMB does not favor the reservation of such control ("Agencies should limit Federal involvement in assisted activities to the minimum consistent with program requirements." 1978 OMB Guidance, Sec. C2.) USAID policy also imposes limits on the permissible degree of substantial involvement under cooperative agreements.
Procurement Contracts must be used when:
- the principal purpose of the instrument is "the acquisition, by purchase, lease, or barter of property or services for the direct benefit or use of USAID or any other Federal Government entity." See 31 U.S.C. 6303; ADS 304.5.1a (PDF 75KB)
Are certain types of activities linked to specific types of instruments?
No! As OMB's 1978 Guidance notes, "the selection of the appropriate legal instrument [must] be based on the character of the specific transaction (i.e., procurement or assistance) rather than on a functional activity or class of Recipient." (P 36860, col.3) Thus, for example, federal funding for research is not always provided through assistance instruments and construction, studies, and technical assistance can occur under either assistance or procurement. It is not the activity but rather the U.S. Government's primary purpose in funding it, and the nature of the relationship intended to be created by the funding.
The chart below depicts the criteria for choosing among implementing instruments.
Contract Agreement Cooperative Agreement Grant Agreement Commonly-used Synonyms Acquisition instrument or award Assistance instrument or award Role expected of USAID during activity implementation USAID states what goods/services/results it wants to buy and then monitors and evaluates the Contractor's performance in providing these goods/services/results.
USAID decides on the requirements and standards and, depending on the type of contract, may provide significant technical direction during contract implementation.
By contrast, USAID has more limited management control when an activity is implemented through assistance awards (grants or cooperative agreements), because the nature of these instruments prohibits USAID from exerting day-to-day operational control over the recipient. The program remains largely the recipient's; with USAID ensuring (prior to award) that the proposed program supports an SO. "Substantial involvement** is anticipated between USAID and the recipient during the performance of the proposed activity." "The recipient is to have substantial freedom to pursue the stated program." "Substantial involvement is not anticipated between USAID and the recipient during the performance of the proposed activity." Nature of the activity " A contract shall be used when the principal purpose of the instrument is the acquisition ... of property or services for the direct benefit of USAID or any other Federal Government entity." There are no clear categories of activities that are better suited for one type of assistance instrument over the other. Type of implementing organization There is no general restriction, but most profit-making firms seek and propose for acquisition awards (contracts). There is no general restriction, but most non-profit organizations and universities seek assistance awards (grants or cooperative agreements). Trends from history 40% of awards 55% of awards **In the case of cooperative agreements, USAID may exercise "substantial involvement" in prescribed areas, which provides some additional management control as opposed to a straight grant. Unless a deviation is approved in accordance with ADS 303.5.3 and ADS 303.5.11, substantial involvement is limited to:
- Approval of the recipient's implementation plan.
- Approval of specified key personnel.
- Agency and recipient collaboration or joint participation.
- Agency authority to halt a construction activity immediately.
(See ADS 303 (PDF 542KB), Grants and Cooperative Agreements, for further information on substantial involvement.)
What is the procedure by which the appropriate instrument is selected, and who has the authority and responsibility for the choice?
USAID policy provides the following guidance: (see ADS 304.3 (PDF 75KB) and Series 300 Interim Update #17 (Word 36KB) "Choosing Between Acquisition and Assistance Instruments")
The Strategic Objective Team makes the initial call when it formulates the elements of planned activities. The Team determines the purpose of the transaction and the intended nature of the relationship. In some cases, it will be quite clear from the outset which type of instrument is best suited for a particular activity. In other cases, clarity will only be achieved through an iterative process, or following consultations with the cognizant Agreement Officer.
The Agreement Officer reviews the proposed document describing the activity (a program description for assistance instruments, or a statement of work for procurement contracts) and either approves or questions the method selected. He or she may already have had input at the requirements formulation stage.
It is essential that discussions between the Strategic Objective Team and the Agreement Officer concerning the appropriate instrument be collaborative. All participants in the process must share the objective of full compliance with applicable law and USAID policy, without preconceived preferences.
In the event of a disagreement between the Strategic Objective Team and the Agreement Officer that cannot be resolved through discussions, the Agency Procurement Executive in USAID/Washington has the authority to make the final determination. (The 1978 OMB guidance specifically requires (Sec. D) that decisions between assistance and procurement be "made or renewed at a policy level.")
Sample Concerns and Requests for More Sources and Resources
As a strategic objective team, when do we choose between assistance instruments (grant or cooperative agreement) and procurement contracts?
As early in the strategic planning process as possible, or as soon as the team has begun its activity planning and is ready to respond to the following series of questions: What is the principal purpose of the transaction? Is it to accomplish a public purpose of support or stimulation authorized by Federal statute? If so, how much substantial involvement is expected between the recipient and the Strategic Objective Team when carrying out the activity contemplated in the agreement? Or is the principal purpose acquisition of property or services for the direct benefit or use of the Federal Government?
We have several registered non-governmental organizations (NGO) that have existing relationships in-country but have limited resources. How do we choose which NGO can best produce results that are aligned to USAID's strategic objectives? What are the competition requirements related to choice of recipients for grants and cooperative agreements?
It is USAID policy to compete all grants and cooperative agreements. Competition is defined as being met when the requirement has been announced and award was made following an impartial review and evaluation of all applications received. USAID shall announce its assistance requirements by publishing an Annual Program Statement (APS) or a Request for Applications (RFA). APS and RFAs shall be posted on the USAID Internet Site, as well as in local publications, Mission Bulletin Boards or local websites.
Our team knows of only one NGO with an existing relationship and with predominant capability in achieving the results we want. Can we waive competition requirements? What are the other instances when we can waive competition requirements?
Competition is not required for the following categories of assistance awards:
- amendments to existing assistance awards;
- follow-on awards intended to continue or further develop an existing assistance relationship;
- awards based on unsolicited applications, provided that the Strategic Objective team or the head of the Operating Unit certifies that the proposals were not solicited by USAID; that based on a review by an appropriate technical specialist and an Agreement Officer they are unique, innovative, or proprietary; and that they represent appropriate use of USAID funds to support or stimulate a public purpose and that they fit within strategic objectives;
- awards for which one recipient is considered to have predominant capability based on experience, specialized facilities or technical competence, or an existing relationship with the cooperating country or beneficiaries;
- situations which the cognizant Assistant Administrator, or the Office Director who reports directly to the Administrator, deem to be critical to the objectives of the foreign assistance program;
- certain small awards (estimated to total $50,000 or less and not to exceed one year); and
- activities that respond to specific Congressional mandates (earmarks).
Where can I find the Code of Federal Regulations, circulars and OMB-prescribed grants management standard forms? What about guides for best-practices?
- PART 226--Administration of Assistance Awards to U.S. Non-governmental Organizations
- Grant Management by OMB contains circulars, OMB-prescribed grants management standard forms, current policy documents of interest to grants managers, and links to other sources of information, such as the Chief Financial Officer's Council Grants Management Committee.
- Creating Opportunities for U.S. Small Business - A Guide to Doing Business with USAID and A Guide to Best Practices for Performance-Based Service Contracting
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Last Updated on: October 10, 2002 |
