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Millennium Challenge Corporation

November 2012

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:

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. 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 22 policy indicators. Thresholds are smaller grants that are provided in hopes of helping countries become eligible for compact agreements in the future. Since 2004, MCC has approved over $9.8 billion in compacts and threshold programs.

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.

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. For FY2013 the list comprises 62 low income countries and 13 lower middle income countries.

To determine which eligible countries will be selected for MCC funding, each country is then measured against 22 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.

Note: The MCC Board of Directors reserves the right to terminate a country compact when partnership countries fail to uphold the agreed upon commitments to good governance, economic freedom, and investing in their citizens. In late 2012, MCC had terminated contracts in Madagascar and Mali as a result of military coups but, was working with the MCA in Madagascar to revive the program.

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).

MCC Spending Portfolio for FY2011
Sector/AreaUS$
Transport$2,923,000,000
Agricuture$1,604,000,000
Program Administration & Monitoring$929,000,000
Water Supply & Sanitation$757,000,000
Energy$609,000,000
Health, Education & Communication Services$603,000,000
Banking and Financial Services$451,000,000
Governance$307,000,000

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 updated 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 mandates.

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) Footnote 1 prepared 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 summary below includes the countries whose compacts are still under implementation. Compacts nearing the end of the typical 5-year MCC funding cycle or, those nearing completion, represent fewer opportunities for Canadian firms. Compacts that have been completed are considered to be "closed out." Once a compact is closed out, a second country compact may be created to build off of the success of the original compact.

Summary of Approved Country Compacts

Burkina Faso MCC Country Compact
Compact value: $481 million, signed July 2008
Burkina Faso MCA
Agriculture ($142 million): water management and irrigation; diversify agriculture production; improve access to rural finance.
Bright 2 Schools ($29 million): construct additional classrooms; provide daily meals; adult literacy.
Land tenure ($60 million): increase investment in land and rural productivity through improved land tenure security and land management.
Roads ($194 million): upgrade primary and rural road segments serving the Sourou Valley and the Comoé Basin; reduce travel time to markets and reduce vehicle operating costs; strengthen road maintenance.

Cape Verde MCC Country Compact II
Compact value: $66 million, signed February 2012
Cape Verde MCA
Land management ($17 million): new land information management system; strengthen land rights; increased efficiency in land administration.
Water and sanitation ($41 million): reforming national policy and regulatory institutions; transforming utilities into independent corporate entities; improving quality and reach of water and sanitation infrastructure.

Indonesia MCC Country Compact
Compact value: $600 million, signed November 2011
Health and nutrition ($132 million): reduce stunted growth; prevent malnourishment in children; increase adult immune systems.
Green prosperity ($333 million): reduce greenhouse gas emissions; technical and financial assistance for renewable energy; improve land management; protect natural capitol.
Procurement modernization ($50 million): increase in quality of goods and services; strengthen procurement and financial audits.

Jordan MCC Country Compact
Compact value: $275 million, signed October 2010
Jordan MCA
Water and wastewater: As Samra wastewater treatment plant expansion project; wastewater network reinforcement and expansion project; water network restructuring and rehabilitation, raise general awareness of water-related issues.

Lesotho MCC Country Compact
Compact value: $363 million, signed July 2007
Lesotho MCA
Water ($164 million): Metolong Dam program and conveyance system; urban and peri-urban water infrastructure; rural water supply and sanitation; wetlands restoration and conservation.
Health ($122 million): health centers and central lab infrastructures; blood transfusion center; national health training college; health system intervention; medical waste management.
Private sector development ($36 million): civil legal reform; national ID/ credit bureau; land administration reform; payment and settlement system; gender equality in economic rights.

Malawi MCC Country Compact
Compact value: $351 million, signed April 2011
Power ($309): improve availability, reliability, and quality of the power supply by increasing capacity and stability of the national electricity grid and bolstering efficiency and sustainability of hydropower generation.

Moldova MCC Country Compact
Compact value: $262 million, signed January 2010
Moldova MCA
Agriculture ($102 million): Transition to High Value Agriculture project; irrigation reconstruction, access to agricultural finance, rehabilitation of an integral section of the country's national road network.

Mongolia MCC Country Compact
Compact value: $285 million, signed October 2007
Mongolia MCA
Property rights ($27 million): land registration system; privatization of land plots; peri-urban land leasing.
Vocational education ($47 million): national framework; industry-led skills standards system; competency-based training system; career guidance system.
Health ($39 million): capacity building; prevention; early detection; management.
Roads ($80 million): improved road conditions within the north-south economic corridor; railway construction.
Energy and environment ($47 million): improvement of air quality through creation of a facility fund for purchase of energy efficient products and homes and support introduction of wind energy to the national grid.

Morocco MCC Country Compact
Compact value: $698 million, signed August 2007
Morocco MCA website: www.app.ma/en/
Fruit tree productivity ($301 million): intensification and expansion of rain-fed production; irrigation; fruit tree sector services.
Small-scale fisheries ($116 million): development of fish landing sites and port facilities; development of wholesale fish markets; support to mobile fish vendors.
Artisan sector ($112 million): literacy and vocational education; artisan production and promotion.
Financial services ($46 million): access to microfinance; new financial product development; improvement of efficiency and transparency.
Enterprise support ($34 million): training.

Mozambique MCC Country Compact
Compact value: $507 million, signed July 2007
Mozambique MCA
Water supply and sanitation ($203 million): technical assistance and capacity building; rehabilitation/expansion of urban water supply systems; rehabilitation/expansion of municipal sanitation and drainage systems; construction/reconstruction of wells.
Rehabilitation construction of roads ($176 million): technical assistance; road rehabilitation.
Land tenure services ($61 million): national policy monitoring process; land administration capacity building; site specific secure land access.
Farmer income support ($18 million): rehabilitation of endemic areas; control of epidemic disease; research and development support; improvement of productivity; business development support.

Namibia MCC Country Compact
Compact value: $304 million, signed July 2008
Namibia MCA
Education ($145 million): infrastructure and equipment for schools; vocational education and training; textbooks; regional study and research center; tertiary education.
Tourism ($67 million): national park infrastructure; promotion; eco-tourism.
Agriculture ($47 million): land management; livestock; indigenous.

Philippines MCC Country Compact
Compact value: $434 million, signed September 2010
Philippines MCA website: www.mcap.ph
Kalahi-CIDSS ($120 million): provide infrastructure and sustainable asset management to support community-driven development projects.
Revenue Administration Reform ($54 million):: raise taxes and decrease tax evasion and revenue agent-related corruption.
Secondary National Roads Development ($214 million): rehabilitate existing 222km segment of road.

Senegal MCC Country Compact
Compact value: $540 million, signed September 2009
Senegal MCA (in French only)
Irrigation and water ($170 million): improve the productivity of the agricultural sector by extending and improving the quality of the irrigation system in the Senegal River Valley.
Road rehabilitation ($324 million): improve over 350 kilometers of road networks that are vital to creating reliable, cost-effective, and time-saving means of transporting locally-produced agricultural products to domestic and international markets year-round.

Tanzania MCC Country Compact
Compact value: $698 million, signed February 2008
Tanzania MCA
Transport ($367 million): rehabilitate high-traffic roads; upgrade the airport on Mafia Island; road maintenance.
Energy ($205 million): submarine electric transmission from the mainland to Zanzibar; small run-of-river hydropower plant; rehabilitate distribution infrastructure.
Water ($64 million): expand capacity of water treatment plant; improve capacity of Water and Sewerage Authority; rehabilitate water intake and water treatment plants; improve distribution network in the city of Morogoro.

Zambia MCC Country Compact
Compact value: $355 million, signed May 2012
Zambia MCA
Water supply, sanitation and drainage: infrastructure activitiy; instutional strengthening.

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

Useful Internet Sites

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