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 aidNO↓Is there sufficient food available nearby to fill the gap?YES →Provide food aid sourced through local purchase/regional transactionsNO →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 resources4.Markets are distant, or during the lean season5.Inflationary risks are a significant concern6.Security conditions permit (i.e. food commodities

are highly visible)7.Cash transfer systems do not exist8.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 exist7.Cost savings is sought through lower logistical

and management overhead

Comparing Cash and VouchersDisadvantages of vouchers, vis-à-vis cash:1.More administrative costs for vouchers2.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 aid2.Potential for costs savings3.May be better timed to arrive during lean season,

minimizing production disincentives4.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 tenders4.Quality and safety standards may not be met5.Cash to buy food locally is not available from donors

Comparing Cash and VouchersBenefits 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 LRPTimeCostIncentive to local production and local market

actorsAppropriate and culturally accepted

commoditiesReduced carbon footprintIntegration 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 LRPIncreased prices for consumers in

source marketsIncreased concentration of large traders

LRP MethodologiesCompetitive procurement – traders submit

blind bids to the procurement agencyAdvantages – 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 MethodologiesLimited-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 MethodologiesNon-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 MethodologiesCommodity-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 MethodologiesCash-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 MethodologiesCash Transfer – beneficiaries receive cash to

purchase commodities directly from vendorsAdvantages – 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