Outsourcing could reduce UK aid effectiveness, say MPs

12 Mar 12
The UK Department for International Development’s use of outside agencies and consultants as a cost-cutting measure could reduce the effectiveness of its aid programmes, MPs said on Friday.

By Nick Mann |12 March 2012

The UK Department for International Development’s use of outside agencies and consultants as a cost-cutting measure could reduce the effectiveness of its aid programmes, MPs said on Friday.

In a report on the department’s annual report and resource accounts for 2010/11 and business plan for 2011–2015, the Commons international development committee said contracting outside agencies to achieve savings targets was ‘not cost-effective’.

By 2014/15, the DFID needs to cut its operating costs to 2% of its budget and its administrative costs by a third in real terms – from £128m in 2010/11 to £94m.

But, by reducing its own administrative costs through outsourcing, the department runs the risk of ‘exporting’ these costs to other organisations, such as non-governmental organisations and multilateral aid organisations, the report said.

Doing so could actually result in higher administration costs, the MPs added, and the department should assess whether it could deliver programmes more effectively in-house.

Committee chair Malcolm Bruce said: ‘We need to ensure that the £5.1bn of funding through multilaterals in 2010/11 is reaching the people who need it and is not being frittered away along the delivery chain in a series of unknown administration fees and charges.’

According to the report, DFID currently spends £450m a year on ‘technical co-operation’, but MPs said it was unclear what this money was spent on, how effective it was and to what extent external providers were used.

Bruce said: ‘We questioned why the department was paying consultants large amounts of public money in fees for frontline development work when it was cutting its use of consultants advising on internal strategy.

‘Worryingly, the department was unable to quantify how much it had paid on different types of technical co-operation as its information systems do not enable it to identify expenditure by purpose.’

International Development Secretary Andrew Mitchell said: ‘We make no apology for reducing administration costs in line with every other government department, to give taxpayers value for money.

‘We are focusing our resources on frontline staff who directly oversee programmes on the ground and ensure expenditure is managed well. Following our aid reviews, we focus on far fewer countries, meaning our finances are more targeted and administration costs are reduced. We have set up an independent aid watchdog to ensure every pound is well spent.’

Mitchell added that a review of multilateral spending was improving financial management standards across the agencies DFID worked with and funding had been withdrawn from several organisations.

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