How Do I Partner with the Private Sector?

For a partnership to be successful, the private sector’s business objectives – including expanding sales and profitability – must align with the  investor’s development goals. However, businesses still need the flexibility and ownership to create business strategies that work for them. Partnering for Innovation has developed an approach to collaborate with businesses to develop formal partnership agreements that meet both business and development objectives.

First, our selection process looks not only at the development impact an applicant will have, but also at whether the company is likely to be profitable in smallholder markets. Using an expert selection panel and thorough, in-person due diligence, we select businesses with the highest likelihood of success. Once a company has been selected for investment, we work closely with that company to negotiate a performance-based partnership that lays out the results and milestones that the company must reach to receive payment. These simple, streamlined agreements give businesses a significant level of flexibility in meeting milestones; as long as the company achieves the agreed-upon results, it’s up to them to find the strategy that works best for them. We continue to engage with businesses during the implementation period through a hands-on approach that builds trust and collaboration, and we regularly check in on progress, provide advice, and identify areas where capacity can be improved.

How to Partner with the Private Sector?

Partnering for Innovation’s complete approach for successful private-sector investments includes the following steps:

 

1. Conduct a Rapid Market Assessment

 

REMEMBER!

A rapid market assessment may be conducted via desk research, an in-country scoping trip, or some combination of the two.

Remember that the purpose is to collect the information you need to develop a clear RFA that will lead to successful private-sector partnerships; it is NOT to write an in-depth academic analysis of the country’s agricultural markets!


LEARNING BRIEF #1: Rapid Market Assessments

Read more about how to conduct a rapid market assessment before investing in private sector agribusinesses.


Supportive or Disruptive?

Make sure that your investments are supporting the local market system rather than disrupting it! How will you know? Consider the following questions:

If commercial or investment financing is already available, will your investment undermine those lenders?

Rather than using an investment, can you make existing financing options more accessible by blending them with commercial debt, equity, or retained earnings?

Will your de-risking investment lower the private sector’s risk enough for them to enter the smallholder market?


SUCCESS FACTOR: Commercializing Agricultural Research

Read more in-depth information about identifying market opportunities for agricultural products and services that have been developed through public research.


LEARNING BRIEF #2: Designing a Targeted RFA

Read more about how to establish a clear set of criteria for evaluating potential shared-value partnerships, including sample evaluation criteria.


SECTOR ANALYSIS: Bringing Seeds to Market & Drip Irrigation in Smallholder Markets

Read more about how a well-designed RFA can lead to a dynamic partnership portfolio capable of achieving both development and commercial objectives.

 

2. Design a Request for Applications 


When you invest in the private sector, you become a market actor who influences the other stakeholders operating within that system. As such, it is important that you thoroughly explore your potential role in the market, as well as your likely impact or harm to other market players. A rapid market assessment allows you to gather the information you need about the local agricultural sector to evaluate where your investment is most needed, where it will provide the most value, and where it will offer the most impact and the least harm to both smallholder farmers and the private-sector businesses who support them. Use the Rapid Market Assessment Tool as a starting point to consider the following market attributes at the country , industry , and firm levels:

Evaluate the Health of the Local Financial System

When planning to introduce investments into a private-sector system, it is critical to first evaluate the existing financial landscape to identify gaps that are preventing the private sector’s growth and where funding might best be invested to address those gaps. For example, if affordable credit options are already available to private-sector businesses, then other forces such as government policies may be affecting the private sector’s ability to grow, and investing may not address the root problem. Alternatively, if credit opportunities to private-sector businesses are impeded by prohibitively high interest or inflation rates, then an investment may provide private-sector businesses with the critical investment needed to scale up their businesses and better serve the agricultural market. Specifically, consider the stability of the financial sector, the current availability and affordability of capital, existing barriers to rural banking (for smallholder access to finance to purchase new technology), and the broader ecosystem of investors beyond traditional lenders. For a list of questions to help evaluate the local financial system, please visit the Rapid Market Assessment Tool.

Identify Existing Financing Gaps and Opportunities

If there are opportunities for investing in the private sector, the next step is to determine exactly where those investments will have the most impact. By identifying specific financing gaps that are preventing agribusinesses from scaling up their operations, moving into underserved regions, or introducing new products and services into the smallholder market, investments may be deployed at the exact point in the value chain where it will provide the most benefit to smallholder farmers and strengthen the other players in the market system. For example, in Nigeria there are existing financial institutions that provide credit to the private sector, but high national inflation rates combined with the inherent riskiness of the agricultural sector resulted in loan interest rates as high as 40 percent for agribusinesses. As a result, traditional loans are not affordable for local businesses. In this situation, funding can be invested at the company level by helping agribusinesses purchase the capital assets they need to increase production in order to expand their number of product lines or geographic coverage; alternatively, investments can be used instead to guarantee traditional loans at a fixed rate from local financial institutions, thereby reinforcing existing players in the market system. For a list of questions to help identify existing investment gaps, please visit the Rapid Market Assessment Tool.

Identify Existing Service Gaps and Opportunities

In addition to identifying financing gaps, it is also important to identify service gaps in the value chain or portfolio. This effort involves identifying not only businesses with new agricultural technologies, but also the businesses providing critical services that support the agricultural sector as a whole. In fact, usually it is not hard to find new, innovative technology to solve agricultural problems; rather, the limiting factor tends to exist around building the distribution networks, finding the marketing channels, or addressing the regulatory challenges of introducing new products to the smallholder market. For example, Partnering for Innovation invested in a company producing small-scale irrigation equipment tailored to smallholder farmers in Kenya; however, smallholders required microfinance to purchase the equipment, extension services to use the equipment effectively, and distribution networks to get the equipment into local, rural shops. Without this ecosystem of support services the company had to build these amenities into their own business model, and the price of their product increased proportionally. As a result, the cost of the irrigation equipment became prohibitively expensive for smallholder farmers, and the company had to pursue larger-scale commercial customers instead of the program’s target market. For a list of questions to help identify existing service gaps, please visit the Rapid Market Assessment Tool.

Investigate Sector or Industry Growth Potential

Once investment and service gaps are identified, the next step is to evaluate the targeted industry or sector for potential growth and expansion. While this issue is key for traditional venture capital investors, it is also an important concern for investors, as industries with significantly limited growth may be better served via investments in policy change, public institutions, or support services rather than the private sector. For example, Partnering for Innovation invested in a company producing innovative, affordable milk-testing technology for smallholder farmers in Rwanda to improve their milk quality and increase sales; however, the product failed to sell as the Rwandan government mandated low milk prices, so farmers had no price incentive to invest in a technology to improve milk quality or substantially increase production. In this case a public-sector investment in extension services to improve animal health and overall livestock management may have been more appropriate, as the private-sector dairy industry was impeded by government regulations beyond their control. For a list of questions to help assess industry growth potential, please visit the Rapid Market Assessment Tool.

Understand the Social, Political, and Legal Landscapes

Finally, after assessing the agricultural and related financial sectors thoroughly, it is also useful to research the current social, political, and legal frameworks within which agribusinesses must operate. While these issues may not affect the private sector currently, they do have the ability to change the operating environment in either the short-term or permanently. Therefore, looking at the agricultural sector through these various frameworks will provide a more nuanced view of the local landscape in which the private sector must operate. For example, upcoming contentious elections may shut down production or distribution in the middle of the growing season, local cultural traditions may require significantly different marketing approaches for women customers, or new national trade agreements may make it more difficult to procure imported seeds or equipment. For a list of questions to help understand the social, political, and legal landscapes, please visit the Rapid Market Assessment Tool.
 

You can only get the information you need to effectively evaluate applications if you design a Request for Applications (RFA) that asks the right questions, so thoughtful RFA design is the first step in building a dynamic investment portfolio. The following design process will allow you to develop an application for potential private-sector partners that will attract the best, most targeted investments for achieving your stated funding goals. Use Partnering for Innovation’s RFA Template as a starting point for designing your own RFA for de-risking investments using the following steps:

Determine Investment Funding Goals

The first step in designing an RFA is to determine your overall objectives for the investment round. First, coordinate a meeting with key stakeholders to discuss the concrete goals or specific impact you intend to achieve through the upcoming RFA. This meeting can be as formal as a bidder’s conference with multiple stakeholders, or as informal as a discussion with your program director and partnership management team. The purpose is to determine the intended impact of the funding, what key activities will produce the intended impact, what types of organizations are most likely to produce the desired results, and what gaps in your existing partnership portfolio should be addressed through the upcoming investment opportunity. Clarifying these questions will ensure that staff, funders, and other relevant stakeholders have the same expectations for how the upcoming investment round will fit in with existing activities.

Decide On a One-Step or Two-Step Application Process

Once you determine your investment goals, you need to decide on a one- or two-step application process. In a one-step application process, your partnership management team posts an RFA, and applicants submit a full proposal for a one-time review by a technical evaluation committee (TEC). In a two-step application process, an expression of interest (EOI), or a request for a basic concept note, is requested initially instead of a full proposal; an internal review committee assesses this concept note and recommends the top 15 or so applicants for submission of a full proposal that is then evaluated by a commercial review committee of technical and commercial experts. For the purpose of this guide, we will discuss the process for a one-step application review process for top-rated applicants.

Develop the Evaluation Criteria

Once you decide these key issues, design an application process that reflects your choices. This process should include a deadline for submitting questions, a final application deadline, and your application evaluation criteria. Remember that the only criteria the TEC reviewers may use to evaluate applications are the published evaluation criteria stated in the RFA, so these must be developed carefully with an eye toward the key elements of a successful application. For example, if the TEC members decide later in the review process that the published evaluation criteria are not leading to the selection of the best applications considering the investment goals, then they cannot simply agree to use different or amended evaluation criteria. Rather, they must cancel the whole application, redesign the evaluation criteria, and ask applicants to reapply under a new RFA. For this reason, the evaluation criteria are the most critical section of the application process and demand special attention during RFA design. For specific examples of RFA evaluation criteria, please visit Designing a Targeted RFA.

3. Organize Application Submissions

Open and public RFAs are a great way to identify potential partners who can help you achieve your development targets, but they are also an important tool for identifying other stakeholders and sector actors that could contribute to your portfolio in other ways — even applicants that are not selected could become strong sub-partners or service providers later. A good RFA should draw the broadest possible range of applicants for not only investment, but also other kinds of potential partnerships. Use the following steps to publish your RFA and to screen and organize the resulting submissions:

Post RFA Through All Available Outlets

Post the RFA publicly on all appropriate websites, listservs, and social media. Appropriate outlets should include websites and listservs for your company or organization, your funders and donor networks, relevant stakeholders and service providers, related trade or agricultural associations, major regional and sector actors, and current investment partners. The RFA should also be publicized through social media sites such as Facebook, LinkedIn, and Twitter. It may also be worth posting the RFA in regional or national print newspapers or trade publications.

Publish Application Questions & Answers

Once the RFA is posted, applicants invariably have questions about what the language in the application really means or what information counts toward certain application requirements. However, to maintain a fair and transparent RFA process, all applicants must have access to the same information. Therefore, you must be careful not to answer any questions directly either via email or over the phone, and instead should reply that “all questions will be compiled and answered publicly on the date specified in the RFA.” Once the deadline for submitting questions specified in the RFA has passed, collect and compile all questions received before the deadline. Grouping similar questions together, provide answers to all questions as clearly and succinctly as possible even if the answers seem obvious or repetitive. The Q&A document should also be posted publicly on the appropriate website, and if possible an alert or update should be sent to any other outlets where the RFA was originally posted. For an example of the kinds of questions and answers you may provide during the application process, please visit the Q&A Document Example or the Grant Application Q&A Video.

Organize Submitted Applications

As applications are received, save them in an assigned folder. Do not review or comment on applications before the application deadline, as it is up to applicants to submit complete applications with all required documentation. To provide equal information and fair treatment to all applicants, do not follow up with individual applicants regarding missing documentation or inaccurate information; rather, simply save and file the applications (as well as the email or system time stamp confirming that the application was received on time) as they arrive, without noting any particulars of the application or the organization or company that is applying.

Conduct Initial Eligibility Check

Once the application deadline has passed, collect all submitted applications and conduct an initial eligibility check of each one to ensure that they meet the requirements outlined in the RFA. For example, confirm that all required application sections are submitted, including budget, cost notes, organizational information, or organizational financial documentation if required. Any applicants that do not submit all the required information are disqualified without further consideration. To provide equal information and fair treatment to all applicants, the partnership management team cannot ask individual applicants to submit missing or inaccurate documentation to complete their application.

4. Facilitate Individual Application Review

 
TIPS: TEC Member Guidelines for Application Review
  • they may not discuss applications with anyone, including other TEC members, during the individual review process
  • they must review each application according to the evaluation criteria in the RFA and no others
  • they must review each application according to its own merits and not in relation to or in competition with other proposals
  • they must score each criterion for every assigned application

SUCCESS FACTOR: Smallholders to Shareholders & Business Models Guide

Read more in-depth information about different business models that businesses use to target smallholder customers.

A technical evaluation committee (TEC) is a group of experienced development experts, donor counterparts, and sector experts who are invited to review applications. Before the TEC meets to discuss and rank applications together, instruct TEC members to review and score each application individually to ensure that it meets the requirements established by the RFA evaluation criteria. In this first review, you should also instruct TEC members to identify the top applications for group discussion according to their scoring. Having individual TEC members review each application will also help guide and inform the discussion during the TEC review. Use the following steps to facilitate each TEC member’s individual review of all submitted applications:

Invite Reviewers to Participate in the TEC

“TEC” is a USAID term, but regardless of who your funder might be, it’s important to have a qualified committee of reviewers with regional, sector, and commercial experience. A TEC should have at least five total members and should include a broad and balanced range of expertise of both commercial and development expertise. For example, reviewers must include commercial business owners or experienced investors in your targeted sector; commercial reviewers should represent different points in the agricultural value chain, such as service providers, distributors, processors, or exporters. In addition, reviewers should include representatives from your funders and your program’s investment management team to ensure that your funding goals are addressed and lessons learned from past investments are incorporated. Also, select a TEC Chair from your investment team to coordinate review activities, facilitate the TEC meeting, and compile application rankings and feedback.

Identify Potential Conflicts of Interest

Ask each TEC member to complete a conflict of interest disclosure to formally acknowledge any potential conflicts of interest (or the appearance of such) in reviewing any of the received applications. An individual is considered to have a conflict of interest if that person or their spouse, partner, child, friend, or relative works for, is negotiating for, or has a financial interest (including as a board member) in any organization under consideration. TEC member disclosures are required and should be exhaustive when declaring potential conflicts of interest. Undisclosed conflicts of interest can result in cancelled investments if discovered later on, so a TEC member must declare a conflict of interest not only when there is a clear relationship between them and the applicant, but also where there is the appearance of a relationship. No TEC member may comment on (either through scoring or verbal discussion) any applicant with whom they may have a conflict of interest. For an example disclosure form, go to the Conflict of Interest Disclosure Form.

Coordinate Individual Review of Applications

All TEC members must review all applications, so ask the TEC Chair to provide each voting member with the full applications for review (minus the budget and cost notes), (reviewer instructions, scoring criteria from the RFA, and a formatted scoresheet that includes each criterion for every application. Once the TEC members receive all the information they need to get started, work with the TEC Chair to coordinate a meeting or conference call with all members to brief them on the individual application review process, guidelines (see box), and timeline. Remind TEC members that it’s important to judge each application by its own merits and not in relation to other applications in order to ensure that it meets your specific investment goals. For a full sample packet of review materials for TEC members, please visit the TEC Reviewer Instructions, Sample Application Scoring Criteria ( in the RFA Template), and Sample Formatted Scoresheet.

Determine Initial Overall Ranking of Applications

After trying both numerical and adjectival scoring, we’ve found that adjectival scores are a better approach for meeting the program’s investment objectives, so TEC members will score each criterion stated in the RFA for each application and note them in their individual scoresheets using adjectival ratings (see box). Once TEC members submit their individual scoresheets with the adjectival score for each criterion of every application, the TEC chair then compiles the individual scoresheets to identify the top applications for discussion by sorting each individual scoresheet first by the most heavily weighted category, and then by each subsequent category in order of importance. This process results in clear rankings and allows the TEC chair to identify the top 15 or so applications to discuss in the TEC meeting, although some finesse may be needed. For an example of a formatted, sortable individual scoresheet for scoring applications, please see the Sample Formatted Scoresheet; for an example of a compiled and sorted scoresheet for determining overall application rankings, please see the Sample Overall Ranking Scoresheet.

5. Convene TEC for Consensus Application Review

 

TIPS: Adjectival Scoring Guide

Outstanding (O): greatly exceeds minimum requirements, several significant strengths and no significant deficiencies; extremely high probability of success

Very Good (VG): exceeds minimum requirements, significant strengths and some weaknesses, but no significant deficiencies; high probability of success

Satisfactory (S): meets minimum requirements, strengths and weaknesses, but no deficiencies; moderate probability of success with moderate-to-low risk of failure

Marginal (M): meets minimum requirements, few strengths and several significant weaknesses or deficiencies; low probability of success with moderate risk of failure

Unsatisfactory (U): does not meet minimum requirements, significant deficiencies outweigh strengths; unacceptably high risk of failure

 
TIPS: TEC Facilitation Guidelines
  • ensure every member speaks
  • ask probing questions to generate substantive discussion
  • ensure scores are applied consistently across all members and applications
  • ensure comments are applicable to the particular evaluation category being discussed
  • remind members that the consensus score is based on discussion and not previous individual scores
  • confirm the consensus score after each category discussion
  • keep track of time rigorously to ensure evaluation of all aspects of all proposals
Each TEC member’s individual review of the investment applications is only the starting point; once they score and submit the applications according to their own expertise and perspective, you will convene a TEC meeting so that the members can meet in person to discuss each application in depth and come to a collective agreement about how it should be ranked. It will be up to you to help facilitate this meeting so that each reviewer has the opportunity to apply their unique experience in assessing each investment application, and to ensure that the TEC members apply scores fairly and consistently across all applications. Use the following steps to facilitate the TEC and determine the TEC’s consensus scores for all top applications:

Convene TEC Meeting

Once TEC members review each application individually, convene a TEC where the members come together to discuss the merits of the top-ranked applications in person and assign a final consensus score, or a score that the group decides on collectively, based on that discussion. A consensus score is not based on the reviewers’ individual scores — it is not an average of those scores nor the score that appears most frequently. Rather, it is the score that best reflects the strengths and weaknesses identified during the TEC members’ discussion at the meeting. This approach allows TEC members to advocate for applications about which they feel strongly (either positively or negatively), and to change their minds about applications if strengths or weaknesses are identified during the discussion that they did not consider during their initial review. Only these consensus scores will be used to determine the final application rankings.

Facilitate Consensus Scoring of First Application

Ask the TEC chair to open the meeting by reviewing the scoring criteria from the RFA. Going in alphabetical order (not in order of initial, individual rankings), the TEC Chair should ask a TEC member to summarize the first application for review by highlighting the key proposed activities, the lead company or organization, any proposed strategic partnerships, and expected impact for both the business and smallholder farmers. Beginning with only the first evaluation criterion, the TEC Chair should facilitate a discussion of the applicant’s strengths and weaknesses while ensuring that all TEC members have the opportunity to contribute feedback. Once the TEC members discuss all aspects of the first evaluation criterion, the TEC chair then asks for consensus on an adjectival score from the group for that criterion only. Once the consensus score for the first criterion has been determined, the TEC chair should then facilitate discussions to determine consensus scores for each remaining criterion for that application. At the end of scoring all criteria for the first application, the TEC chair should check the time and how long it took to score the first application, and determine how much time should be allotted to discuss each application to ensure that all applications are reviewed within the meeting timeframe.

Facilitate Consensus Scoring of All Applications

Continuing in alphabetical order, the TEC chair should facilitate similar discussions for each criterion for all remaining applications. It’s a lot of work to score each criterion individually, so this may seem daunting! However, it is necessary — each criterion is weighted differently, with some criteria ranked as more important than others, so they are scored individually rather combining scores or giving one overall application score. For example, an application that receives an “outstanding” score for smallholder impact but only a “satisfactory” score for administrative systems should be ranked higher than an application that receives opposite scores for those categories, since smallholder impact will be more heavily weighted. In addition, while it is uncommon, applicants do have the right to request feedback on unsuccessful proposals and may even protest a TEC’s decision not to invest in a particular company. To ensure the consistent, transparent, and fair review of all applications, do not skip any criteria or applications even if their scores seem obvious.

Document Discussion in the TEC Memo

The TEC chair should note key discussion points and final consensus scores for each criterion on a flipchart to facilitate the scoring process, and a designated note-taker should capture the key discussion points and final application scores to document the process and ensure transparency. These TEC notes are used to compile a detailed, comprehensive TEC memo that documents how scores were determined, concerns TEC members had, and any other feedback. This information may be required if there is a protest or request for more detailed feedback, or during any eventual partnership negotiations, so the TEC memo is extremely detailed. For example: “Barbara stated that there is clear need for cold storage in rural Kenya; but when Arnold brought up the high cost of the applicant’s solar technology, all members agreed that the applicant should only receive a ‘satisfactory’ rating for the technology criterion.” With this level of detail, the memo clearly documents the TEC’s decision-making process and ensures transparency on how investments were selected. For an example of a detailed TEC memo, please see the Sample TEC Memo .

Determine Final Rankings of Applications

After the TEC meeting, compile the consensus scores in a spreadsheet and determines the overall rankings by custom-sorting the scoresheet as before. Again, each application is sorted first by the most heavily weighted category and then by each subsequent category in order of importance. Once you sort the applications by the rankings, discuss your shortlist with your organization’s leadership, your funding representatives, and any other important stakeholders to ensure an appropriate portfolio mix of investments according to your funding goals or any gaps in your current investment portfolio. For example, the fourth- or fifth-ranked applicant may receive preference if it is the only applicant focusing on a target geographic area or an intervention area underrepresented in your portfolio. For an example of a compiled and sorted scoresheet for determining overall application rankings, please see the Sample Overall Ranking Scoresheet .

Inform Applicants of TEC Results

Inform the top-ranked candidates via email that they are “selected to proceed with partnership negotiation.” Note that they are not informed that their application has been “approved” or “funded” — that decision still depends on due diligence and negotiation. You should also wait before informing lower-ranked applicants about their status, as some top-ranked applicants may get knocked out of consideration because of issues that arise during due diligence or partnership negotiation. Therefore, lower-ranked applicants could potentially still receive funding if other candidates fall through. Ultimately all applicants reviewed during the TEC meeting should receive written feedback on the strengths and weaknesses of their application; this step strengthens selected applicants’ work plans and helps rejected candidates to improve and refine future proposals. For an example of an email informing applicants that they have been selected to proceed with negotiation, please see the Sample Applicant Email; for an example of written feedback provided to successful applicants, please see the Sample Applicant Feedback Letter.

6. Conduct Due Diligence

An investment relationship begins with due diligence. This is different than negotiation, where you discuss the activities in which you want to invest — or budget verification, where you determine how much it will cost to implement those activities. Rather, the purpose of due diligence is to determine whether or not the company you selected for potential investment has the operational, financial, and administrative systems in place to manage your funds effectively and ensure that they will be used as you intended. Use the following steps to ensure that the selected company or proposed partner has the organizational capacity to appropriately manage your investment:

Draft Technical Questions

Review the full proposal and supporting documentation for each of the businesses shortlisted by the TEC and draft a list of technical follow-up questions based on the TEC’s feedback listed in the TEC memo. Before contacting the businesses or sending the follow-up questions, you should also send the full application to your funder or regional representative for feedback as well, in case they have any country context or local portfolio concerns that are important to know about upfront; in addition, they may be familiar with the applicants and able to provide valuable insights or potential references that can be interviewed during the due diligence process. You can send a technical feedback letter with targeted questions. For example, you can ask: what percentage of farmers have access to modern agriculture inputs, equipment including irrigation, and training? What percentage use modern agriculture inputs, equipment, including irrigation? etc.

Confirm Intent to Negotiate

After all the reviewing and ranking and checking is done, you finally get to talk to the businesses. Schedule a phone call or in-person meeting with each proposed partner to communicate your intent to negotiate an investment agreement with them. During the phone call, provide an overview of the investment opportunity, describe the negotiation process, identify the key partnership decision makers, discuss technical feedback questions, and review next steps. Even at this stage it is important to convey that milestones are used and no payments are made unless the negotiated milestones and verification documentation are approved. Be sure to document all discussions and share call notes with the proposed partner after the call. Immediately following the phone call or initial meeting with the potential partner, email the proposed partner to formally communicate in writing your intent to negotiate an investment agreement. For an example of a due diligence kick-off call agenda, please see the Sample Initial Partner Call Agenda; for an example of an email informing businesses or your intent to begin negotiating an investment, please see the Sample Intent to Negotiate Email.

Complete a Pre-Award Survey

Conduct a pre-award survey for each proposed partner focusing on assessing the strength of the proposed company’s organizational and operational systems and processes, including organizational structure, principal corporate officers, financial management systems, technical experience, scale of operations, and past performance on previous awards. This work includes requesting and compiling copies of all management, administrative, financial, and technical documentation required in the pre-award survey to ensure that the proposed partner has the necessary working capital and organizational structure to carry out the proposed work successfully. The pre-award survey also includes questions to clarify the application, the business model, the level of leadership involvement, and acceleration needs that may be helpful to achieving entry or expansion into smallholder farmer markets. These questions include those that clarify the business environment, business strategy, role of smallholder farmers, and fully understanding current and future potential market share toward which the business is aspiring. The pre-award survey may be initiated before or during the site visit and System for Award Management visual compliance list should be completed immediately upon return. For an example of Partnering for Innovation’s pre-award survey for their selected candidates, please see the Pre-Award Survey.

Conduct Reference Checks

As part of the pre-award survey, interview at least three business references, or other companies or investors that have partnered or done business with the proposed partner. In particular, if the proposed partner has received any other major investments or past donor funding, then contact those organizations to check past performance and previously funded activities regardless of whether or not the company includes them as one of their three references. Also contact any current investors or donors to ensure that there is no overlap with the activities to be funded under your proposed investment. Each reference check call should take approximately 20-30 minutes, and all responses must be documented thoroughly. Reference checks should be conducted before or during a site visit if possible, so that any issues raised may be addressed directly with the proposed partner.

Conduct a Site Visit

The site visit is a critical hands-on way for you to confirm the commercial viability of the proposed partner’s technology or business proposition and ensure its eligibility for investment. Prepare for your site visit to the proposed partners by reviewing the required pre-award survey documentation, proposed partner proposal, technical feedback letter, reference check feedback, and any other collected documentation to determine the agenda for the visit. Consider who you need to meet to answer technical, organizational, and past-performance questions, and request that the company schedule meetings with other key partners and business references. Additionally, review the market analysis and consider country-level agricultural cycle s in preparation for the field-site visit, as well as political calendars, as many countries slow down or even stop conducting business on national holidays. During the site visit, make sure to meet with the key decision-makers at the proposed partner, strategic partners , product retailers, and other key value chain stakeholders to discuss the implementation of the proposed activities. Also visit any factory, processing plant, or other operations involved in proposed activities. Plan to see the company’s product or service in action on the farm and talk to farmers or other end-users about their relationship with the company, the quality of services or products the company provides, and the impact of those services or products on their production. You may also meet with the company’s business references or other donors without representatives from the proposed partner present.

Send Formal Follow-Up Questions

Following the site visit, document your findings in a formal site visit memo and provide the proposed partner with a formal technical feedback letter via email. This letter should include any questions that were raised during due diligence or the site visit. The proposed partner is expected to respond to these questions by a deadline that is communicated explicitly in the email. In addition, they should be made aware that these responses are considered part of their technical application, and any further discussion about these questions and their responses must be documented formally.For an example of a feedback letter to proposed partners, please see the Sample Technical Feedback Letter.

7. Review the Budget and Verify Costs

Budget review and cost verification ensure that the investor is paying accurate, allowable, reasonable, and realistic prices for the proposed partner activities. This process often occurs concurrently with due diligence and negotiation, so once the TEC shortlists a proposed partner for potential funding, you should begin the process of budget review and cost verification. However, note that budget line items may change as activities are negotiated such that the final budget may look completely different from that which was originally proposed. Use the following steps to ensure that the proposed partner has budgeted reasonable and realistic costs for implementing investment activities:

Review All Budgeted Line Items

For the budget review, start by checking that you have all the needed documentation for the proposed partner’s cost proposal, which includes an exhaustive list of specific expenditures and related cost notes for all costs over the life of the project, as well as the rationale for the cost item. It should also include the projected unit price and quantities needed for each line item, along with a written description for each line item stating how the prices and quantities were determined and why the expenditure is critical for the success of the investment. Request any missing information until the budget and cost notes are complete. The final budget is a spreadsheet and associated budget narrative that provides a detailed justification for each expenditure funded under the proposed activity. For budget templates to include with your application or share with proposed partners, please see the Partner Budget Template and Cost Notes Template.

Confirm Prices Quoted for Budgeted Line Items

With all costs documented and justified, evaluate the proposed partner’s submitted budget to ensure that both investment funds and leveraged line items are reasonable, allowable , and allocable . First, to determine that individual line items are reasonable, conduct market research to confirm that the prices the proposed partner quoted are realistic market prices for the items or services being purchased. If you discover that the proposed partner has budgeted unrealistically low prices for specific line items, then these amounts should be corrected, even though the correction may increase the overall budget total. Likewise, if you discover that the proposed partner has budgeted unrealistically high prices for items, then you should also correct these amounts. Partners may not simply add additional line items to make up the difference and reach the budget ceiling.

Document Price Verification Information

All price verification documentation is collected and filed as supporting documentation for the proposed partner’s budget (see chart below for common cost categories along with the corresponding documentation required). If you can verify costs based on partner budgets previously negotiated within the past year or the experience of other related projects currently operating in the country, then additional supporting documentation is not required. This situation is most likely to apply to standard operating costs such as ground transportation, office leases, telecommunications, travel, and vehicle fuel. At this point, you should also establish a fixed exchange rate for conducting price verification. A fixed rate is a good approach because even if the team were to renegotiate new costs based on updated exchange rates, the cost of goods would eventually adjust in response to currency fluctuations so that any difference in the final price is negligible.
Cost Category Verification Documentation
Labor employee or consultant contracts, paystubs
Travel, Transportation, and Per Diem airfares, in-country taxi receipts, hotel quotes
Equipment items quotes received by candidates; quotes from manufacturers of comparable
Other Direct Costs (including office space, communications, office supplies, etc.) invoices, lease agreements, telecommunication contracts, etc.
Indirect Costs (including fringe, overhead, G&A) audited financials, Negotiated Indirect Cost Rate Agreements (NICRA) letters, invoices for all expenses included in the overhead rate.
 

8. Negotiate Proposed Activities

 

LEARNING BRIEF #4: Upfront Negotiation

Read more about how upfront negotiations create stronger partnerships that brings together the expertise of all stakeholders.


TIPS: Developing Strong Milestones

When developing milestones, think of a chocolate cake. If you simply ask a partner for a chocolate cake, you might not get what you expect. Instead, specify how many layers the cake should have, the frosting flavor, and if there’s cream filling or coconut sprinkled on top. Likewise, milestones should be specific deliverables that demonstrate clear progress toward overall award goals.


LEARNING BRIEF #3: Performance Based Subawards Using Milestones

Read more about how to develop strong milestones with meaningful means of verification for performance-based partnerships

Confirm Allowability of Budgeted Line Items

Check any regulations that you or your funder might have around allowable expenditures to make sure that each proposed partner’s budget complies with those rules. For example, Partnering for Innovation is a USAID-funded program, so we must adhere to USAID guidelines to avoid non-compliance using the relevant Automated Directives Systems (ADS) and Code of Federal Regulations (CFR) guidelines, which means that proposed costs such as vehicle purchase or construction of new facilities must be managed more carefully to ensure compliance. Commonly regulated items to watch for include vehicle purchase, construction activities, restricted goods like pesticides and fertilizers, and unallowable costs such as alcohol or fundraising.

Evaluate Necessity of Budgeted Line Items

Once you determine that budget prices are reasonable and individual expenditures are allowable, review the entire budget to ensure that each line item is required for the overall success of the proposed activity. To do this, use your understanding of the country context, technical specifications, and expected milestones to evaluate whether the proposed partner has included all necessary expenditures or if they overlooked any expenses that are critical to successful implementation. You must be willing to cut any costs that are excessive or non-essential. For example, if a proposed partner has budgeted monthly meeting costs that include a hotel conference room, catering, and transportation for stakeholders, you must ensure that those expenditures fully align with the proposed partner’s technical application and are necessary to achieve the projected targets. If there are any doubts about the necessity or applicability of these expenses, then they must be negotiated with the proposed partner and potentially removed from the budget.

Request Partner DUNS Number

If your investment funds come from a US government agency, then any proposed partners you invest in must have a data universal numbering system (DUNS) number. Even if your investment funds do not come from a US government agency, it’s still a good idea to require proposed partners to have a DUNS number. This number is like a social security number for a business — it is a unique identifier that businesses need to provide to credit institutions, financial backers, and other business partners. If a proposed partner does not have an assigned DUNS number, they can request one online for free.

In conjunction with the budget review and cost verification, you should begin the process of negotiating partnership activities, milestones, and deadlines with the proposed partner. In fact, these two steps often get underway simultaneously during the site visit, as budget negotiation inevitably leads to broader activity negotiations. Use the following steps to ensure that the proposed partner’s funded activities meet your global and regional goals and encourage the greatest possible impact for the invested funds:

Negotiate Proposed Activities and Targets

The first step in the negotiation process is to review the proposed partner's planned activities from their original proposal (including their responses to the review committee’s technical feedback) to ensure that all activities that are necessary for the success of the partnership are included and adequately described. To do this, use your understanding of the country context, market conditions, technology specifications, and expected milestones to evaluate whether the proposed partner has included all necessary activities or if they overlooked certain activities critical to successful implementation. You must also be willing to cut any activities that are excessive or non-essential, or even redesign the scope of work with the proposed partner as needed. As you initiate discussions with the proposed partner on their activities, be sure that the funded activities meet your global and regional goals and encourage the greatest possible impact for the funding. You should not just accept the proposed partner’s proposal at face value; rather, push the proposed partner to achieve the highest realistic targets possible.

Negotiate Partner Leverage

Leverage is defined as direct funds, in-kind contributions, and intellectual property that a proposed partner contributes to partnership activities. It can include technical assistance, essential equipment, indirect costs (such as project oversight, administrative support, office rent and utilities, etc.), and land or property used explicitly for the proposed activity. Your RFA should include the required ratio of leveraged funds relative to the investment opportunity, so confirm that the proposed partner’s leverage meets the needed threshold. In addition, all partner contributions should meet the following criteria to be considered as partner leverage:

  • They are verifiable from the proposed partner’s records (back-up must be included in the partnership agreement documentation).

  • They are not included as contributions for or funding by another investor or development project.

  • They are necessary and reasonable for proper and efficient accomplishment of partnership objectives.

  • They are allowable under the applicable cost principles (see the Applicable Cost Principles).

Due diligence, cost verification, and negotiation of leverage follows the same process as directly funded expenditures; however, you should also use best practices when negotiating leverage categories to ensure compliance with regulations and corporate policies.

Draft Proposed Milestones

All milestones are based on concrete business achievements that help the proposed partner expand its business in the target market and provide crucial outcomes that contribute to the overall impact and sustainability of the partnership activities. Milestones are results-based and represent a clear achievement toward the overall partnership goals. In addition, milestones are specific, measurable, and verifiable, and are based on common business metrics such as total dollar value of product sold, total volume of commodities purchased or sold, number of training or demonstrations or concrete deliverables like a marketing strategy, business plan, or website wire frame, depending on the scope of the partnership. As a general rule, the first milestone is a project work plan due between two and four weeks after partnership signature. Examples of other milestones include marketing strategies, training targets, production or installation goals, sales targets, and a final deliverable that addresses sustainability, such as a business plan or growth strategy (see the milestone learning brief). Depending on the scope and value of an agreement, a milestone plan can include approximately 10-12 milestones; it is possible to include more milestones if necessary, but at that point the milestone schedule becomes more difficult to manage. For specific information on how to draft milestones, as well as milestone and means of verification examples, please see the Milestone and Means of Verification Guidelines.

Determine Milestone Payment Schedule

Once the proposed milestones and total partnership budget are finalized, determine the associated milestone payment schedule. When developing a milestone payment schedule, it is important to balance the financial or cash-flow needs of the proposed partner and incentivize the proposed partner to meet future milestones and overall targets. In addition, avoid front-loading the payment schedule or paying too much of the total budget for the first milestones; rather, structure the schedule to incentivize the partner to see the project through to completion by creating “stretch” milestones of higher payments at the end. For specific information on how to draft a milestone schedule, please see the Milestone and Means of Verification Guidelines.

Draft Negotiation Memorandum

The negotiation memo is essentially a detailed summary of your due diligence, responsibility determination, cost verification, and negotiation process. This lengthy and comprehensive document includes background information on the investment opportunity and evaluation criteria, a detailed budget negotiation review (including both program-funded and leveraged cost items), a milestone negotiation review, dates of key negotiation elements, and potential risks and mitigation measures. Specifically, the first section in the negotiation memo lists key dates in partnership negotiation, from proposal submission to key communications to partner site visit to final budget and milestone acceptance by the partner. The next section provides detailed descriptions of key points in the partnership process, scope of work design, budget verification, and price negotiation. The third section provides a detailed budget table that highlights both requested and leveraged funds negotiated for the partnership. This section also indicates precisely what costs are included in each line item in the budget proposal and how they were calculated. Finally, the negotiation memo includes a section outlining how the milestone plan was developed and how individual milestones were prioritized, as well as a risk mitigation section highlighting potential risks to the success of the partnership and negotiated strategies for addressing those risks. For a template of a negotiation memo to get you started, please see the Award Negotiation Memo Template.

9. Develop Final Partnership Agreement

 

TIPS: Best Practices for Technical Writing:

  • answer who, what, where, when, and how activities are implemented

  • use concise sentences and do not use contractions

  • write in the active voice to ensure clear individual responsibilities

  • be direct; write specific and explicit instructions to avoid confusion

  • avoid generalities that could result in loopholes where the partner meets milestone requirements without achieving desired results

  • describe partner actions using “shall” or “must” and program actions using “will” or “may”, as this approach denotes certainty for the partner and flexibility for the program

Once you have all the partnership activities and investment costs worked out with the proposed partner, the next step is to draft a legal partnership agreement. This agreement could be a contract or an investment, but should follow the basic template for performance-based partnerships outlined in the Partnership Subaward Template. Use the following steps to generate a clear legal document that explicitly identifies the expectations for partner activities, deliverables, outcomes, and associated payments:

Draft Proposed Scope of Work

Based on the proposed partner’s application, due diligence documentation, budget review, and negotiations, draft a scope of work (SOW) that outlines the objectives, activities, and expected outcomes of the proposed activities. The SOW should clearly describe the activities the proposed partner will undertake, the implementation methodology they will use, responsible parties for each major task, and the expected farmer impact that will result from these. In addition, the SOW should be written using lessons learned and best practices for technical writing and legal documentation (see box). If you’re finding it difficult to write a clear, detailed SOW, then you should reconsider whether the partnership is feasible. Once you have a draft SOW completed, share it with the proposed partner so that they can make edits or provide additional details. This approach not only results in a more comprehensive SOW — it also ensures that the proposed partner understands and agrees with the project scope.

Request Initial Environment Examination

Once the partnership management team and the proposed partner have accepted the SOW, submit the SOW to your program’s external environmental consultant to complete the Initial Environmental Examination (IEE). The purpose of an IEE is to identify any potential adverse environmental impacts the proposed partnership activities may cause, and to recommend effective mitigation measures to address those impacts. For many potential partners, the environmental impact may be negligible, but for proposed activities such as major construction or biological or chemical pest controls, the IEE may be more complicated. For a template with the information you need to address to ensure that your investment will not have any adverse environmental impact, please see the Initial Environmental Examination Template.

Draft a Full Milestone-Based Agreement

Based on the proposed partner’s negotiated budget, milestones, and SOW, draft an agreement that clearly states the partner’s proposed activities, deliverables, outcomes, and associated payments. Since the SOW, milestone plan, and payment schedule at this point are already written, the most challenging part of writing the agreement is the development of required means of verification (MOV) for each milestone. MOV are the means by which you will determine whether or not a milestone has been completed, and they serve as a checklist for partners when submitting documentation of achieved milestones for payment. Just like the milestones themselves, the MOV must be specific, measurable, and verifiable; recordkeeping and reporting of MOV should not be unnecessarily burdensome for the partner. They should read clearly to someone who is less familiar with the partnership, and not rely on any special knowledge that is not explicitly included in the MOV. Finally, MOV should not include any specific budget information or request receipts for specific line items, as these are not required after budgets are negotiated and approved. For detailed guidance and templates on developing strong milestones and means of verification, please see the Milestone and Means of Verification Guidance; for a milestone-based partnership template, please see the Partnership Subaward Template.

Complete Agreement Attachments and Certifications

In addition to the agreement itself, several attachments may be included in the partnership agreement. Most of these attachments are standard certifications and agreement clauses, but some attachments may be specific to the partner’s activities, such as the mandatory standard provisions for your organization or company or a partner-specific branding and marking plan.

Submit Agreement for Required Approvals

Once you assemble the complete subaward package including the agreement, related attachments, and negotiation memo, you should submit the package for all relevant approvals; for example, internal corporate approval or external donor approval. The objective of these approvals is to ensure that all partnerships are consistent with program guidelines, compliant with any corporate requirements, and officially authorized by your funder. First submit the agreement, negotiation memo, and final budget to the required internal reviewers on your team for their approval, and then send it to the proposed partner to see if they have any questions or comments that require editing the partnership. Once the partnership package has been reviewed internally and all partner concerns are addressed, submit it for your organization’s corporate review and written approval, then submit it to your donor for final approval. Finally, once written donor approval has been received, send the partnership agreement to the partner for their signature. Once both you and the partner sign the subaward, copies of the fully executed subaward are sent to the partner for its files. The partnership is now officially underway!

10. Provide Hands-On Partnership Management

 

LEARNING BRIEF #5: Managing for Partner Health

Read more about how to facilitate equal partnerships, build trust, and address problems proactively by monitoring partnerships’ health.



LEARNING BRIEF #6: Smallholder Farmers as Customers

Read more about how businesses can strengthen their bottom line by developing marketing strategies for targeting different segments of smallholder farmers for their products.

In addition to targeted applications, upfront negotiations, and performance-based agreements, strategic relationship management is key to successful shared-value partnerships. As the funder, it is your responsibility to take a proactive approach to partnership management that builds trust, facilitates open dialogue, and fosters collaboration. To achieve these strong relationships, you must go beyond simply ensuring compliance with the partnership agreement. You must also work closely and constructively with partners to optimize outcomes, address challenges, and ensure partner viability in smallholder markets. Use the following steps throughout the implementation period to maintain clear and open communication, leverage resources and expertise to help partners address unforeseen challenges, and support overall partner activities and impact:

Host Partner Kick-Off Call

The kick-off call is an opportunity for you to walk new partners through the goals phases, roles, and timelines of your partnership. A welcome packet should be provided before the kick-off call, covering topics such as roles and responsibilities, partner expectations, partnership mechanics, required reporting, and communications protocols. By the end of the call, the partner should understand how their agreement works, how to submit milestones, when to contact the partnership management team, and what to do if they might not achieve a milestone by the deadline. You should take notes during the call, share them with the partner, and file them in the partner’s ongoing file. For an example of a partner welcome packet and the types of information it should include, please see the Partner Guide to Working with Partnering for Innovation.

Coordinate Monthly Partner Check-Ins

You should coordinate a regular monthly phone call with the partner’s technical lead or project manager to ensure that you both get in the habit of regular communication. Calls may be set up via calendar invite for a regularly repeating appointment — for example, every third Thursday of the month. On the monthly calls, check in with partners on any upcoming milestones, current activities, future activities, donor coordination, or any pending action items. If project implementation is not going according to plan, the monthly check-in call is also a good time to discuss this issue with the partner to troubleshoot challenges they may be facing and to ensure that milestones and funding goals are still achievable. You should take meeting notes for every monthly call and save them in the partner’s file, as well as track the level of partner engagement during your monthly check-ins by filling out a partnership health assessment on a quarterly basis. Finally, you should also share any updates on milestone progress, potential activity delays, and any other partnership management issues with the other members of your teamto help coordinate activities across the program. For an example of a partnership health assessment questionnaire, please see the Partnership Health Assessment Tool.

Address Partner Challenges

Despite the best efforts of all parties, partners may have difficulty achieving their milestones for a variety of reasons. In some cases, these challenges may be beyond the partner’s control, such as extreme weather, government policy, or shipping delays. In these cases, you may consider modifying the partner agreement (see section on modifying agreements). In other cases, the challenges may be an issue of management capacity or technical expertise, and you may want to consider whether internal resources such as staff or consultant-provided technical assistance could affect the partner’s ability to achieve milestones. In addition, consider if there are other local partners, distributors, financers, or donor-funded programs that could contribute to the success of the partner’s activities. Whatever approach you use, discuss the proposed strategy with your program director or portfolio manager to ensure that resources are available and to communicate any necessary updates to your donors.

Provide Acceleration Services

In addition to providing partners with technical assistance to address specific problems, you may also recommend that partners receive targeted, customized expertise from local consultants, technical experts, and business mentors to assist with scaling up their businesses. This support is often coordinated through annual partner site visits where you have the opportunity to work with the partner in person to develop a technical SOW and list of qualifications for the proposed consultant. These consultants are identified based on their hands-on expertise strengthening the performance, commercial viability, and sustainability of businesses targeting smallholder farmers. Partners interested in these acceleration services are prioritized according to potential impact of the provided services, their subaward end date (partnerships that are coming to an end are given higher priority), and the internal resources available.

Conduct Annual Monitoring Visits

If possible, visit partners in the field at least once a year to see partnership products and services in action. The timing and agenda for these visits will depend on partner availability, product seasonality, and coordination with other partner site visits, conferences, or local events. For best value, schedule multiple monitoring visits within the same country or region at the same time. Once you’re in the field, plan to meet with partner contacts, senior management, subpartners, retailers of partner products or services, and farmers that the partner activity affects. In addition, meet with other local development practitioners or other key actors in the field to identify potential market outlets for the funded products, or other potential alliances. Finally, you may also want to coordinate with your donor to organize local partnership meetings, where partners have the opportunity to meet with local donor staff, develop business relationships with other partners, share best business practices, and improve their management systems. After a trip to the field, be sure to schedule a meeting to debrief your donor representative on the highlights and takeaways from your trip.

Support Monitoring and Evaluation (M&E) Activities

You will have to report on your progress to your donor or board of directors using the data that partners provide for their milestone means of verification and quarterly or semi-annual progress reports. To ensure that the data partners submit is of the highest possible quality, perform milestone verification surveys for the final cumulative sales milestone or any sales milestone with a corresponding payment of more than $100,000. You may also elect to perform additional farmer-level impact surveys to provide data and insight into various aspects of the partnerships. These surveys should be designed to not only get you the information you need on smallholder farmer impact, but should also provide the partner with key marketing information they can use to tailor and refine their marketing strategies, target customers, retail outlets, or price points. One way to approach this work is to build the cost of this survey into the partnership and include a milestone requiring the partner to contract an external marketing firm to complete a customer survey once it is approved by the program; another option is for you to hire the marketing firm directly through your program’s operational funds. Either way, you should work closely with the marketing firm and the partner to ensure that the survey meets both your reporting needs as well as the partner’s marketing interests. For detailed guidance and templates on developing strong milestones and means of verification, including a milestone for farmer impact surveys, please see the Milestone and Means of Verification Guidance.

11. Review and Approve Milestone Deliverables

As partnership activities continue throughout the implementation period, partners achieve milestones and submit completed milestone documentation for payment. Your role is to review and approve milestone documentation to ensure that it fully meets the means of verification, and that the milestone deliverable confirms the success of the partner’s overall implementation approach. In addition, ask questions about upcoming milestones during regular monthly check-ins and informal communications to ensure that partners are aware of deadlines and other requirements and to head off any issues that may arise with meeting milestones. Once you receive milestone submissions, use the following steps to review milestone documentation and ensure that partners receive payment for their successes:

Review Submitted Milestone Documentation

As soon as a partner completes a milestone, they may submit the means of verification documentation to for approval. As the partnership manager, you should be the first person to review submitted documentation, and you are likely to have clarifying questions or may need to request any missing documentation. For deliverables such as work plans, marketing strategies, or business growth plans, you should work with partners to get the highest quality product possible by providing initial feedback on the deliverable within two days of milestone submission.

Submit Milestone Documentation for Approval

Once you approve the milestone and means of verification documentation, submit it for technical approval according to your program’s internal processes. The technical approval should come from a senior-level corporate manager or their representative. The approver may provide feedback or ask technical questions before providing their approval. Your donor may also be invited to provide feedback on milestone documentation. With technical and donor approval in hand, forward the milestone documentation to your program director to provide final approval.

Submit Milestone Invoice for Payment

If an invoice was not already submitted with the milestone documentation, then following final approval request that the partner submit an official invoice requesting payment for the submitted milestone. The invoice must be on partner letterhead and addressed to the program. The invoice must also include a description of the milestone, including milestone number and value. Once the invoice is received, submit the milestone invoice, approval documentation, and technical documentation to the program’s finance or operations team for payment. The finance or operations team prepares the payment voucher, including milestone description, supporting milestone documentation, partner W-9 (if the partner is a US-based entity), internal or donor approval, and the fully executed agreement.

12. Modify Agreements as Needed

Private-sector businesses operate in uncertain environments, so sometimes partners may have difficulty achieving their milestones. In cases where these challenges are beyond the partner’s control, you may consider modifying the partner’s agreement to allow them more time or a different strategic approach given their altered circumstances. However, modifications should not be taken lightly! One of biggest strengths of a performance-based partnership that pays only upon delivery of results is that it significantly reduces your risk as an investor providing funds for new, untested products and markets—if partners don’t meet your expectations, then they don’t get paid. Therefore, a strong case must be made before you can consider changing a partner’s activities, outcomes, or milestone deadlines to ensure that the partner is still capable of meeting your investment goals given the obstacles they are facing. If a modification is in fact justified, make sure you have enough time to renegotiate the partnership terms and submit the modification for all required approvals before any modified milestones are due. Use the following steps to review modification requests and develop partnership modifications when necessary:

Consider Modification Justification

Partners should request modifications no fewer than 30 days in advance of the deadline so that there is sufficient time to consider the request, draft an agreement modification, and submit it for approvals (both internal and donor). As soon as the partner requests a modification, you should use your understanding of the country context, market and business conditions, technology specifications, and expected milestones to evaluate whether or not a modification is warranted. If the partner’s challenges are internal – such as weak management capacity or failure to train enough staff to implement activities – then a modification should not be considered. In addition, if the partner’s challenges are external but insurmountable, then a modification should not be considered. If the partner’s challenges are external and can be overcome with additional time or a change in strategy, you should confirm your justification for modification including the reasons for the modification request, how the partner plans to adjust activities to ensure that targets are still met, and the consequences for partnership impact if the subaward is not modified with your technical, corporate, and donor approvers. Letting them know early on that this modification is in the pipeline allows you to get their buy-in upfront and identify any immediate questions they may have that will impact how you renegotiate the terms of the partnership.

Renegotiate Activities and Milestones

If you determine that a modification is warranted, renegotiate project activities and milestone adjustments to ensure that the partner still achieves your original investment goals. Target impact numbers are not reduced except in extreme situations; in these cases, the partnership manager renegotiates the partner’s budget to better reflect the cost of the new, restructured activities. Once you renegotiate activities and deadlines and you confirm with the partner that they agree with the proposed changes, draft a modification that clearly states the changes to the partner’s proposed activities, deliverables, outcomes, or associated payments, and replaces the modified sections of the partner’s agreement. In addition, if the total cost of the agreement is changing, draft an addendum to the negotiation memo that documents the evaluation, verification, and negotiation of new costs included in the agreement budget. For a partnership modification template, please see the Award Modification Template; for a negotiation memo addendum template, please see the Award Negotiation Memo Addendum Template.

Submit Modification for Approval

Modifications follow the same approval process as the agreements themselves. Again, the objective of these approvals is to ensure that all modifications are consistent with program guidelines, compliant with any corporate requirements, and officially authorized by your funder. First submit the modification to the required internal reviewers on your team for their approval, and then send it to the proposed partner to see if they have any questions or comments that require editing the proposed changes. Once the modification package has been reviewed internally and all partner concerns are addressed, submit it for your organization’s corporate review and written approval, and then submit it to your donor for final approval. Finally, once written donor approval has been received, send the modification to the partner for their signature. Once both you and the partner sign the subaward, copies of the fully executed modification are sent to the partner for its files. At this point the fully executed modification supersedes the original partnership agreement and any previous modifications.


13. Close Out Ending Partnerships

 

TIPS: Close-Out Documentation

Application: original technical and cost applications, any TEC questions and answers from negotiation

Due Diligence: pre-award survey, reference checks, cost verification, site-visit documentation

Agreement: fully executed agreement and modifications, final budget, negotiation memo, donor approvals

Communications: monthly call notes, emails on key decisions, donor comments related to implementation

Milestones: milestone verification documents, internal approvals, invoice, payment documentation

Close-Out: email or memo confirming final milestone payment or passed deadline, partner confirmation

Because performance-based partnerships are fixed-price agreements that make payments based on partners achieving specific milestones, they close out automatically either when the final milestone payment is made or when the contract expires. As a result, there is no formal close-out procedure; however, you should take some final actions to formally confirm that an agreement has ended and to ensure that all appropriate payments are made and materials are collected from the partner before the official funding relationship ends. Use the following steps to officially close out partnerships:

Conduct an Exit Interview

As the partner approaches their final milestone, schedule an exit interview with them to assess the impact of the partnership on their business. As the interviewer, be sure to cover the partner’s business growth and market success, lessons learned in partnership management from the partner’s perspective, and future support or acceleration services that could help the partner expand its market reach even further. The exit interview results should be shared with the rest of your team for lessons learned, and included in the partner’s partnership file. For an example of Partnering for Innovation’s partner exit interview, please see the Exit Interview Questionnaire.

Confirm Partnership Closure

To officially close out the subaward, send the partner a confirmation that either the final milestone payment has been made, the deadline for the final milestone has passed, or the agreement end date has passed. In addition, this confirmation should include a list and total of all paid milestones, as well as all unpaid milestones, so that both you and the partner are clear on exactly how much of the partnership investment has been paid out. The partner should at least confirm receipt of this confirmation, and, preferably, confirm the investment amount that has been paid while relinquishing rights to any unpaid milestones. For a template of a partnership close-out confirmation memo, please see the Closeout Confirmation Template.

Organize Final Partnership Files

While you will likely file most partnership documentation throughout the life of the investment, once a partnership is closed you should confirm that both electronic and paper versions of the full partnership documentation are filed. A complete file for a subaward contains the original application, due diligence documentation, fully executed agreement, relevant communications, milestone verification documentation, and close-out confirmation (see box). For a list of all the documents that should be included in a complete partnership file, please see the Partnership File Checklist.