The Millennium Challenge Corporation - Washington, DC USA

March 2011

Market Overview

The United States established the Millennium Challenge Corporation (MCC) in 2004 as a new development partnership between the U.S. and developing countries. Created by Congress, and with strong bipartisan support, MCC is designed to provide grants to countries that have demonstrated a commitment to promoting good governance and economic reform. The MCC views economic growth as the catalyst for poverty alleviation and works with countries based upon their commitment to ruling justly, encouraging economic freedom and investing in people.

In creating the MCC, the U.S. was seeking to create a country-driven development mechanism where projects are designed and implemented by the recipient country. The procedures of the MCC are based upon four fundamental principles: good policy performance, country ownership, country responsibility and tangible results.

To receive MCC assistance, countries must complete a three-step process consisting of:

• a per capita annual income test based on World Bank country income levels;
• an assessment against 17 independent and transparent policy indicators to examine the country's commitment to policies that promote political and economic freedom, investments in education and health, control of corruption, and respect for civil liberties and the rule of law; and
• submission of a compact proposal that outlines the country's priorities for MCC assistance.

The MCC provides two different kinds of monetary assistance - compact agreements and threshold agreements. A "Compact" is a large, 5-year grant provided by the MCC to an eligible country to fund specific programs targeted at reducing poverty and stimulating economic growth. Since its inception, 40 countries have been selected as eligible for MCC assistance, and of these, 22 countries have signed compact agreements. A "Threshold" is an agreement between the United States and a developing country that demonstrates a meaningful commitment to reform and a high probability of success, but does not yet meet all 17 policy indicators. Thresholds are smaller grants that are provided in hopes of helping countries become eligible for compact agreements in the future. At this time, the MCC currently has signed threshold agreements with 21 countries.

Since 2004, MCC has committed over $7.9 billion to support poverty reduction compacts and, $495 million in poverty reduction threshold programs in sectors such as agriculture and irrigation, transportation, water supply and sanitation, and access to education.

The MCC does not replace the U.S. Agency for International Development (USAID) or other U.S. government assistance programs. Rather, in countries that receive both MCC and USAID funding, the agencies will collaborate to provide a comprehensive portfolio of development assistance. The MCC will fund economic growth related activities and USAID will focus on sectors not covered by the MCC, such as education, health and food aid. USAID also provides targeted technical assistance within or complementary to, the MCC threshold agreements.

MCC is managed by a nine-member Board of Directors, chaired by the Secretary of State and the Secretary of the Treasury, which selects eligible countries and approves compact proposals. To limit the growth of a large bureaucracy and to keep funding focused on recipient countries, Congress has capped the number of MCC staff at 300. A full list of MCC board members and key staff is available from the MCC website.

The Selection and Preparation Process: Briefly, the MCC process involves the identification of eligible countries, the selection of candidate countries, the development of a country's compact proposal and, monitoring a country's project preparation and implementation using MCC funding.

Identification and Selection of Candidate Countries: Every December, MCC prepares a list of eligible countries that meet MCC's low income level criteria and are committed to its three criteria: governing justly, investing in their citizens, and encouraging economic freedom. Candidate countries must not be subject to legal provisions that prohibit them from receiving U.S. economic assistance. In 2010 the list comprised 55 low income countries and 29 lower middle income countries.

To determine which eligible countries will be selected for MCC funding, each country is then measured against 17 independent policy indicators, varying from civil liberties and anti-corruption to immunization rates and inflation. A scorecard is created which ranks the candidate's policy performance against other countries in its peer income group. Successful countries are then invited to submit proposals for funding.

Development and Approval of Compact Proposals: Once a country is selected, it must develop a funding proposal outlining its priorities for MCC assistance. The proposal must be based on a timely and meaningful consultative process with civil society, including the private sector. MCC evaluates and conducts due diligence on each proposal. If a country proposal is approved by the MCC Board, MCC and the country enter into a country-specific compact that outlines the responsibilities of both parties and stipulates the progress benchmarks to ensure accountability and outcomes. Signing of a country compact is followed by a direct transfer of U.S. funding to a Millennium Challenge Account (MCA) - an accountable entity in the recipient country.

Implementation of Programs and Monitoring Results: Consistent with the country-led development approach, the implementation of MCC-funded projects is conducted by the recipient country, specifically the MCA within the country, with ongoing oversight by the MCC in Washington. In each country, the MCA is responsible for establishing an accountable agency with a defined structure and procedures, which then develops and carries out all plans for the implementation of compact activities. These activities include: financial plans, procurement plans, work plans and monitoring, evaluation and audit plans. It becomes the central point of contact for MCC, other donors, contractors and consultants. Along with establishing an accountable entity, the country also selects fiscal and procurement agents, responsible for the financial and reporting systems, developing standard bidding documents and working on procurement activities prior to the compact's entry into force.

Foreign Competition and Canada's Capabilities

All MCC funding is untied, so local firms as well as international firms, are eligible to bid. Given the MCC's aim of engaging local stakeholders, it is expected that where local capacity exists, preference will be given to local or regional firms. However, the MCC is mostly funding projects in sectors where local capacity is weak; as a result, governments often turn to foreign companies and institutions for goods, works, and consultancies.

Canada has recognized international expertise in many of the sectors of funding priority in the approved MCC compacts including: infrastructure, agriculture/agribusiness, private sector development, finance sector development, land management, irrigation, institution and capacity building and vocational training and health (telemedicine).

At the end of FY2010, the breakdown of the MCA spending portfolio was as follows:

In recent years, an increasing number of MCC-financed contracts have been awarded to Canadian firms. As with projects financed by the World Bank and the UN, Canadian firms and NGOs are advised to work with a local partner in order to be competitive.

Procurement Guidelines

In September 2010, MCC announced that it would be updating its Program Procurement Guidelines (PPGs) (PDF*, 573 KB) and released the Material Interim Amendment 2010-001 (PDF*, 222 KB) that modifies the Program Procurement Guidelines version of October 23, 2009. The MCC procurement guidelines are principally based on the World Bank's "Guidelines for the Selection and Employment of Consultants by World Bank Borrowers" and "Guidelines for Procurement under IBRD Loans and IDA Credits," which define the policies and procedures for compact related procurement of goods, works, consultant, and non-consultant services. Even so, they have been adapted to better reflect the needs of MCC programs and the applicable laws and regulations that govern them.

One of the main changes made to the PPGs in 2010, was an amendment to prohibit the eligibility of government-owned enterprises to compete for MCC-funded contracts, with the exception of government-owned enterprises with academic, research or statistical manadates.

Other key differences between the MCC guidelines and those of the World Bank are: a requirement for broader advertising of procurement opportunities, tighter restrictions on currency use, a prohibition on national preference, the inclusion of a list of excluded parties by the U.S. government and, the identification of English as the official MCC operating language.

Additionally, the MCC has developed Standard Bidding Documents for: small works, consulting services, design-build, design-bid-build and, goods procurements. All the documents are available online in English; a number of them are also available in French for use in Francophone Africa and, Spanish for use in Latin America.

MCC partners with compacts signed after July 2007 must comply with the current PPGs. MCC partners with compacts signed before July 2007 must comply with the procurement guidelines that were written specifically for their compact, which are usually very similar. The current guidelines and the compact-specific procurement guidelines are posted on the MCC website.

Approved Country Compacts

The funding priorities included in each recipient country's approved compact proposal are summarized in the table below. In many countries, the projects outlined in the compact proposal are based upon the development needs identified in the country's Poverty Reduction Strategy Paper (PRSP)¹prepared in collaboration with the World Bank. Approved compact proposals contain more detailed project information and firms are encouraged to review these documents to learn more about future opportunities. Individual MCA country websites also include information on the current status of individual projects.

Note: This table includes the 19 countries whose compacts are still under implementation. Compacts nearing the end of the typical 5-year MCC funding cycle (e.g. Vanuatu, Benin, Armenia and Nicaragua), will be completed in 2011. Those nearing completion, represent fewer opportunities for Canadian firms. Compacts that have been completed (e.g. Cape Verde and Honduras), are considered to be "closed out."

Identifying Opportunities

All MCA procurements are solicited, awarded and administered by the MCA accountable entity, the organization established by the partner country to manage the programs identified in the compact. MCC is not a party to these contracts. The MCA accountable entity is required to post procurement notices on its own website as well as, United Nations Development Business and dgMarket.

Complementary to this, and in order to streamline information about business opportunities, MCC launched a Business and Procurement section on their own website. This new web page provides a direct link to MCC's compact program procurements, threshold program procurements and corporate procurements, including information pertaining to 'Planned Procurements' and 'Contract Awards' at or above US$200k, from the Compact Proucrements sub-page. The webpage also enables users to obtain up-to-date information about procurements via an RSS feed and includes an in-depth video and downloadable podcast presentation on the full range of MCC's various business opportunities.

Corporate and Threshold Procurement

For the most part, procurement for work related to studies and technical assistance that support the operational work of MCC in Washington, remains tied to U.S. firms, NGOs and consultants. These assignments are advertised on the U.S. government's federal business opportunities website, FedBizOpps. MCC threshold programs are primarily implemented by U.S. federal agencies, and the associated contracts are also tied to U.S. firms.

Canadian Government Contacts

Canadian Embassy, Washington, D.C.
Office of Liaison with International Financial Institutions (OLIFI)
E-mail: IFIWashington@international.gc.ca
Internet: www.IFIWashington.gc.ca

Useful Internet Sites

• Millennium Challenge Corporation (accessed November 2010)
• MCC Program Procurement Guidelines
• Center for Global Development, MCA Monitor
• dgMarket "Tenders and Procurement Opportunities Worldwide"
• FedBizOpps (U.S. Federal Business Opportunities)
• United Nations Development Business (UNDB) On-line
• World Bank
• World Bank Guidelines for Procurement under IBRD Loans and IDA Credits
• World Bank Guidelines for the Selection and Employment of Consultants by World Bank Borrowers
• World Bank Poverty Reduction Strategy Papers

¹ The World Bank's Poverty Reduction Strategy Papers (PRSP) describes a country's macroeconomic, structural and social policies to promote growth and reduce poverty, as well as associated external financing needs.
²  Funding levels in these descriptions are included only for project activities, not for administrative expenses. Therefore, the funding levels indicated may not add up to the total MCA allocation for a country.

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