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

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.

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

Comparing Cash and In-kind Food Transfers Food transfers generally recommended when: 1. Food intake is prioritized for nutritional purposes (including targeted feeding and micronutrient objectives) 2. Markets do not function well; food supply is limited 3. Women have more control over food resources 4. Markets are distant, or during the lean season 5. Inflationary risks are a significant concern 6. Security conditions permit (i.e. food commodities are highly visible) 7. Cash transfer systems do not exist 8. Cost savings is sought through individual/household targeting

Comparing Cash and In-kind Food Transfers Cash transfers generally recommended when: 1. Overall humanitarian need, as well as choice and flexibility are prioritized 2. Markets function well; supply is sufficient to meet demand 3. Markets are nearby, or during the peak, post-harvest season 4. Production disincentives due to food aid delivery are a significant concern 5. Security conditions permit (i.e. cash is less visible but offers greater incentive for theft) 6. Cash transfer systems exist 7. Cost savings is sought through lower logistical and management overhead

Comparing Cash and Vouchers Disadvantages of vouchers, vis-à-vis cash: 1. More administrative costs for vouchers 2. More decisions on programmatic design for vouchers (e.g. number of vouchers/distribution, denominations, criteria for participating vendors) 3.Vouchers can be exclusionary, particularly with respect to small vendors that are difficult to include in voucher schemes 4.Often a tradeoff between increased consumer and trader benefit and administrative costs

Comparing LRP and Transoceanic food aid LRP is generally recommended because: 1. Likely to arrive faster than transoceanic aid 2. Potential for costs savings 3. May be better timed to arrive during lean season, minimizing production disincentives 4. Serves as an incentive for increased production and investment in marketing Transoceanic food aid is generally recommended because: 1. LRP can cause inflationary pressure in source markets 2. Traders may increase prices, anticipating NGO purchases 3. Traders may default on tenders 4. Quality and safety standards may not be met 5. Cash to buy food locally is not available from donors

Comparing Cash and Vouchers Benefits of Vouchers: 1. Gives beneficiaries varying levels of choice, while still having some control over how transfer is used 2. Vouchers can be targeted within the household; can potentially give more decision-making power to females 3. Ability to learn more about consumer/beneficiary demand. This information can be used for future programming

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

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

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)

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

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)

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

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

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