Compact Development Funding and Due Diligence
|(in millions of $)||FY 2020||FY 2021||FY 2022|
|Compact Development Funding||36.0||30.0||30.0|
Compact development and oversight are composed of both Compact Development Funding, as authorized under Section 609(g) of the Millennium Challenge Act, and Due Diligence funding. These funds support pre-compact planning and assessment, oversight activities during implementation, and post-compact evaluations—activities that are critical to the success of MCC programs and ensure that the agency, partner countries, and the development community may take advantage of learning created through MCC programs.
For FY 2022, MCC requests $114 million for compact development and oversight, including $30 million for Compact Development Funding and $84 million for Due Diligence to support monitoring, programmatic oversight, and data collection and evaluation.
Compact Development Funding 1
Compact Development Funding allows MCC to award contracts or grants to any eligible countries for the purposes of facilitating the development or implementation of a compact, as noted in section 609(g) of MCC’s authorizing statute. Laying the groundwork for compact programs helps MCC improve the quality of its compact programs and the ability of its partner countries to implement compacts successfully. Such essential groundwork includes project design studies, feasibility studies, environmental impact assessments, engineering and geotechnical designs, economic baseline surveys, technical assessments of financial management and procurement capabilities, and other specialized analyses that help partner countries fully prepare projects that can be implemented within the fixed five-year timeframe, within budget, and achieve substantial results for compact programs.
MCC utilizes due diligence funds at every stage of the compact and threshold program lifecycle. Due diligence funds allow MCC to obtain information that is necessary to evaluate, assess, and appraise proposed projects during compact and threshold development, to effectively oversee and monitor projects during implementation, and to evaluate the results after closeout. These funds are used to procure the requisite technical expertise throughout the compact and threshold lifecycles, allowing MCC to right-size support based on the relative size and diversity of its portfolio. Due diligence funds are also used after compact closure to commission independent impact evaluations that use rigorous statistical methods to measure changes in beneficiary incomes related to MCC activities. In addition to offering valuable lessons on how MCC can improve, impact evaluations provide critical information about program successes that are also useful for the broader development community.
Due diligence funds also support data and technical expertise needed for calculating economic rates of return for compact projects. Through pre-compact economic modeling of expected economic rates of return, MCC chooses which projects are most likely to generate benefits—specifically with regard to increased income for program beneficiaries—and serves to refine program design to optimize results. Economic modeling after compact closeout helps to assess the cost effectiveness of the agency’s programs.