A Guide to Creating and Managing Successful Partnerships for IFI Projects

August 2011

Introduction - The Importance of Partnering

Regional and local firms (defined as those within borrowing countries) win a substantial and increasing share of International Financial Institution (IFI) funded contracts. Partnering with local firms is therefore a critical success factor in winning IFI funded projects for several reasons:

• Firms with local partners in borrowing countries are able to conduct business more efficiently - Local firms and individuals have necessary knowledge of the local economy, key contacts, and can further inform you about proper business customs and practices.
• Local firms can typically offer more competitive prices thereby reducing your operating costs. With Quality-Cost Based Selection (QCBS) as one of the prevalent methods of selection for IFI-funded contracts, financial evaluations can account for up to 25% of overall scoring.
• Firms with local partners in borrowing countries often experience a higher likelihood of success. For example, in many countries local language is essential for doing business. Language skills as well as cultural familiarity can play an important part in the successful execution of a project.
• During prequalification and evaluation of IFI funded proposals, points are awarded for local content. Depending on the country, the sector and the IFI, this ranges from 5%-20%. (Local content is comprised of level of effort of local team members (person days), and involvement of local experts and companies.)¹

The following charts offer a snapshot of contracts awarded ($ value) to borrowing vs. non-borrowing country firms in 2009 at three IFIs and demonstrates the overall trend of local companies winning IFI procurement:

More and more firms are establishing local companies, or entering into joint ventures and other strategic alliances with active local partners to establish market presence and enhance their chances of winning IFI procurement. Increasingly, foreign firms are also now subcontracting to local firms. Subcontracting with international firms that have IFI experience enables a company to gain experience in a specific country and reduces the cost of responding to Expressions of Interest (EOIs) and Requests for Proposals (RFPs).

'IFI Specific' Trends

African Development Bank (AfDB) - As a percentage of the total number of contracts, firms and suppliers registered in borrowing member countries won 87% of AfDB-funded contracts in 2007, 88% in 2008 and 90% in 2009. However, less than 50% of the dollar value of contracts is won by local suppliers. Firms from non-borrowing countries continue to win the majority of the higher value projects.

Percentage Share of AfDB-Funded Procurement ($ Value of Contract Awards)

	2006	2007	2008	2009
Non-Borrowing Countries	51%	57%	54%	65%
Borrowing Countries	49%	42%	46%	35%

Inter-American Development Bank (IDB) - Latin American companies continue to win more and more of the business funded from IDB loans. Until about 2000, the IDB's non-borrowing countries routinely won anywhere from 60-70% of annual procurement. Since 2000, with increased capacity and experience, suppliers from Latin America and the Caribbean have become more competitive technically and financially, and have steadily increased their share of procurement to over 90% of total procurement.

Percentage Share of IDB-Funded Procurement ($ Value of Contract Awards)

	2006	2007	2008	2009	2010
Non-Borrowing Countries	28%	5%	5%	5%	3%
Borrowing (LAC) Countries	70%	95%	95%	95%	97%

World Bank (WB) - In the last ten years, non-OECD countries have consistently won the majority of World Bank funded contracts which is a marked contrast from earlier years.

Percentage Share of WB-Funded Procurement ($ Value of Contract Awards)

	2006	2007	2008	2009	2010
OECD Countries	26%	29%	21%	18%	29%
Non OECD Countries	74%	71%	79%	82%	71%

How to Find a Partner

Steps to finding a partner include profiling the ideal partner, searching for and identifying prospective partners, contacting and meeting prospects, and assessing your preferred choice of partner.

Profiling the Ideal Partner

Decide what skills and experience you require and what traits are important to you. Examples of issues to consider include:

• Technical capabilities and past projects
• Knowledge of local market and language
• Domestic and international experience (have they won IFI contracts?)
• Financial strength and size of firm
• Education levels
• Personal chemistry and reputation

Searching for Prospective Partners

• Identify companies that have recently been shortlisted or awarded IFI-funded contracts using sources such as UNDB online and the searchable 'contract awards' databases found on the respective IFI websites.
• Carry out direct internet searches; search member profiles at Devex or use social networking sites like LinkedIn.
• Identify potential partners by asking Trade Commissioners at Canadian Embassies, trade associations, IFI local offices and project officers, government departments, and other business networks for suggestions based on your above criteria.
• Use your school alumni services.
• Attend trade shows in Canada. Firms from developing countries attending trade shows in Canada are demonstrating interest in international partnerships. This also allows you to meet in person without incurring high travel costs.
• The Private Sector Liaison Officers (PSLO) network has more than100 officers in 80 countries. This is a network of liaison officers based in business intermediary organizations with the objective of helping companies in the IFI business - contact your local Canadian PSLO as well as the PSLO in your country of interest for advice on potential partners.
• Don't exclude educational institutions and NGOs as potential partners as they could have the local knowledge that you want and may already have government-funded project experience.

Contacting and Meeting Prospects

It is advised when meeting potential prospects that you try and schedule meetings to take place in their offices as this enables you to assess human resources, technical capabilities, etc.

Identify key decision makers and involve them early.

Make the most of your meetings by being prepared to ask a lot of questions as well as promote why this firm should want to partner with you (bring brochures, PPTs, etc. to highlight what you bring to the table). Remember that a good local partner will likely have many suitors.

Assessing the Preferred Partner

Once you have identified a firm that meets your criteria, undertake due diligence.

Most due diligence can be carried out through internet searches, inquiries to Embassies and High Commissions, etc. However, you can also hire firms to provide you with a more detailed background check on your potential partner.

Partnership Arrangements

Partnering is used to describe strategic alliances, joint ventures, and teaming arrangements. Some arrangements will be one-off contract driven agreements, while others will be collaborations for longer periods of time.

One-off

• A teaming agreement is usually a project-oriented effort where the firms work together on a particular contract, but have no further business commitment to each other.
• A license agreement is a contract that grants certain use or production rights relating to a technology, or idea, to specified parties for particular uses, under agreed upon time frames.

Mixture

• A joint venture is an initiative between two or more companies. It can be short-term or long-term depending on the needs of the companies.
• Public/private partnership: Canadian services firms in sectors such as engineering, architecture, construction, legal, and management consulting can provide cost-effective, innovative solutions for public infrastructure and services by way of public/private partnerships.

Longer-term

• A strategic alliance is a relationship between firms that decide to cooperate to bring about an objective that neither could accomplish alone. Alliances can be formed along product or service lines, or along functional lines, such as marketing, support, or distribution.
• Merger or takeover: sometimes the best way to demonstrate a long-term relationship is to invest or purchase part of a local firm.

Mitigating Risks and Tips to Consider before Committing to a Partnership

In any relationship or partnership there may be a risk of disagreements or misunderstandings. These can be exacerbated by cross-cultural differences or time pressures. Companies must be aware of the reputational, financial and legal risks involved in order to protect themselves when going abroad. While there are risks in partnerships, these can be managed. Be sure to fully assess the firms/individuals with whom you are considering a partnership. Once you have selected a firm, carry out due diligence and ensure that agreements and expectations are understood and communicated. Approach partnerships with something to offer rather than focusing simply on what you can gain.

Scope of work and deliverables, time frame and milestones, contract amount and payment terms and conditions of working together should all be clearly defined from the outset of any partnership agreement.

This could include discussions on:

• ownership of jointly-developed intellectual property,
• confidentiality constraints,
• timeliness and quality of work,
• management of the relationship with the client, and/or
• termination provisions.

You may also want to outline how you will handle conditions governing follow-on work with the client, and methods for resolving disagreements.

In discussions with potential partners during the Expressions of Interest and Request for Proposal stage, keep exclusivity in mind. IFIs have guidelines pertaining to local consultants / firms being included in more than one bid so you'll want to address this with your potential partner.

Conclusion

Creating and managing balanced and mutually beneficial partnerships for IFI projects is an essential factor for success in competing for IFI business. As regional and local firms win more and more IFI-funded contracts, the value of working with them goes beyond local knowledge and price competitiveness. From a long term strategic perspective, it makes sense to work with those who are already positioned for success. Successfully identifying the skills and type of partners required, tapping into the above mentioned resources, meeting potential partners in person and then carrying out thorough due diligence on the most suitable ones is worth the time and the financial resources required.

References and Sources for Further Information

• World Bank Contract Award Database or Summary and Detailed Borrower Procurement Reports
• Inter-American Development Bank Contract Award Database
• African Development Bank Contract Award Database
• Canadian Trade Commissioner Service
• PSLO Network in Canada
• United Nations Development Business (UNDB) On-line
• Devex

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¹ Where goods are concerned, local preference is not stated outright. However, due to shipping and taxes, local firms often have an advantage. Firms operating in goods are encouraged to develop local partnerships to add value and to improve their distribution channels.