LOCAL AND REGIONAL PROCUREMENT 1. Introduction to LRP

1. LOCAL AND REGIONAL PROCUREMENT1. Introduction to LRP LRP Market Monitoring Training

2. Local and Regional Procurement (LRP) • Local procurement or local purchase means the purchase of food in a country affected by a food crisis or disaster to assist targeted beneficiaries within that same country. • Includes cash and vouchers • Regional procurement or regional purchase means the purchase of food in a country other than the recipient country in order to assist beneficiaries.

3. Decision Tree for Food Aid Response Are markets functioning well? YES →Provide cash transfers or jobs to targeted recipients, not food aid NO ↓ Is there sufficient food available nearby to fill the gap? YES →Provide food aid sourced through local purchase/regional transactions NO →Provide food aid through transoceanic shipments Source: Barrett CB, Maxwell DG (2005). Food aid after fifty years: recasting its role. Routledge, London

4. Comparing Cash and In-kind Food Transfers Food transfers generally recommended when: • Food intake is prioritized for nutritional purposes (including targeted feeding and micronutrient objectives) • Markets do not function well; food supply is limited • Women have more control over food resources • Markets are distant, or during the lean season • Inflationary risks are a significant concern • Security conditions permit (i.e. food commodities are highly visible) • Cash transfer systems do not exist • Cost savings is sought through individual/household targeting

5. Comparing Cash and In-kind Food Transfers Cash transfers generally recommended when: • Overall humanitarian need, as well as choice and flexibility are prioritized • Markets function well; supply is sufficient to meet demand • Markets are nearby, or during the peak, post-harvest season • Production disincentives due to food aid delivery are a significant concern • Security conditions permit (i.e. cash is less visible but offers greater incentive for theft) • Cash transfer systems exist • Cost savings is sought through lower logistical and management overhead

6. Comparing Cash and Vouchers Disadvantages of vouchers, vis-à-viscash: • More administrative costs for vouchers • More decisions on programmatic design for vouchers (e.g. number of vouchers/distribution, denominations, criteria for participating vendors) • Vouchers can be exclusionary, particularly with respect to small vendors that are difficult to include in voucher schemes • Often a tradeoff between increased consumer and trader benefit and administrative costs

7. Comparing LRP and Transoceanic food aid LRP is generally recommended because: • Likely to arrive faster than transoceanic aid • Potential for costs savings • May be better timed to arrive during lean season, minimizing production disincentives • Serves as an incentive for increased production and investment in marketing Transoceanic food aid is generally recommended because: • LRP can cause inflationary pressure in source markets • Traders may increase prices, anticipating NGO purchases • Traders may default on tenders • Quality and safety standards may not be met • Cash to buy food locally is not available from donors

8. Comparing Cash and Vouchers Benefits of Vouchers: • Gives beneficiaries varying levels of choice, while still having some control over how transfer is used • Vouchers can be targeted within the household; can potentially give more decision-making power to females • Ability to learn more about consumer/beneficiary demand. This information can be used for future programming

9. Potential Benefits of LRP • Time • Cost • Incentive to local production and local market actors • Appropriate and culturally accepted commodities • Reduced carbon footprint • Integration of emergency food security responses with longer-term food security programming, e.g. increasing agricultural productivity, linking farmer groups to markets, improving food quality standards, support to small traders and businesses

10. Potential Negative Impacts of LRP • Increased prices for consumers in source markets • Increased concentration of large traders

11. LRP Methodologies Competitive procurement – traders submit blind bids to the procurement agency • Advantages – quicker, cheaper, can buy in large lots, better able to meet standards, traders can deliver • Disadvantage – usually few traders who can meet the criteria in the tenders; may concentrate market power; often cannot trace commodities to source • Examples – Burkina Faso (vegetable oil), Benin, Niger (cowpeas and maize)

12. LRP Methodologies Limited-competitive procurement – Tenders are targeted to certain suppliers (typically smallholder farmers or specific geographic areas) • Advantages – helps to develop certain suppliers, may be more local than competitive tenders • Disadvantages – small farmers may default on volume or quality requirements, often need to buy in smaller lots; procurement may require more investment (transport, trainings, sacs) • Examples – Burkina Faso (millet, cowpeas), Mali

13. LRP Methodologies Non-competitive procurement – Purchases are negotiated with a specific supplier or a few specific suppliers. • Advantages – Enhance specific vendors or supplier value chains • Disadvantages – Lack of competitive price discovery • Examples – Bangladesh (cereal bars)

14. LRP Methodologies Commodity-denominated vouchers – beneficiaries receive coupons to purchase a fixed amount of specific commodities directly from vendors • Advantages – assures beneficiaries access with respect to commodities and quality; nutritional value of ration is ensured; money is invested in local communities; supports local market systems • Disadvantages – more difficult to monitor and control food quality, supplies may be insufficient to meet demand; high monitoring costs • Examples – Full SPHERE standard minimum ration in Pakistan

15. LRP Methodologies Cash-denominated vouchers – beneficiaries receive coupons to purchase a fixed value of commodities directly from vendors (may be restricted to allowable range of commodities) • Advantages – gives beneficiaries more choice with respect to commodities and quality; money is invested in local communities; supports local market systems • Disadvantages – more difficult to monitor and control food quality, supplies may be insufficient to meet demand; high monitoring costs • Examples – Niger

16. LRP Methodologies Cash Transfer – beneficiaries receive cash to purchase commodities directly from vendors • Advantages – gives beneficiaries widest range of choice with respect to commodities and quality; money is invested in local communities; supports local market systems • Disadvantages – most difficult to monitor market impact and control food quality, supplies may be insufficient to meet demand resulting in potential for inflation; highest monitoring costs • Examples – Cash transfers in Kyrgyzstan