Using foreign aid contracts to pursue participatory approaches to development within large foreign aid agencies

Participatory development has become, ‘development orthodoxy’, receiving widespread proclamations of support from foreign aid agencies. Participatory development engages international development beneficiaries in making decisions about project activity selection and design. Yet, many foreign aid donors deliver project assistance through top‐down, highly controlled systems that may constrain the flexibility needed to delegate decision‐making power to project beneficiaries. This paper explores whether and under which conditions these foreign aid agencies delegate decision‐making power to project beneficiaries, focusing on the key mechanism for delivering foreign aid: government contracts. The analysis relies on a novel dataset of U.S. Agency for International Development (USAID) projects that incorporates contract specifications for beneficiary decision‐making during project implementation. Despite an expectation that delivery system constraints would prohibitively exclude contract specifications for beneficiary decision‐making, donors are found to commonly use contracts to delegate decision‐making power to beneficiaries, but within pre‐determined parameters. The results suggest that USAID is using contract specifications to engage in bounded delegation, providing some decision‐making power to beneficiaries, but using boundaries to ensure the right ‘fit’ with institutional goals and constraints. By focusing on contract specifications and variation within these specifications, this study identifies widespread use of a ‘middle ground’ in how donors motivate participatory development.