DFID should manage aid contractors better, says watchdog

17 May 13
The UK Department for International Development needs to improve its management of private sector aid contractors, the Independent Commission for Aid Impact said today.

By Nick Mann | 17 May 2013

The UK Department for International Development needs to improve its management of private sector aid contractors, the Independent Commission for Aid Impact said today.

In 2011/12, private sector contractors accounted for almost 9% of the department’s aid spending, providing services ranging from day-to-day operational support to advice on designing aid programmes.

In a report published today, the watchdog said the contractors were an effective option for delivering aid but there were some problems. In particular, four out of five large contracts it examined had ‘major’ difficulties getting off the ground.

These problems were made worse by ‘weak’ DFID management over the life cycles of the five programmes, which account for a total of £264m spending.

The department was also criticised for the rigidity and simplicity of its bid evaluation process, which inhibited balanced judgements, the watchdog added.

Overall, DFID’s work with the private contractors was rated ‘green-amber’ under the ICAI traffic light system, which means it is performing relatively well against the watchdog’s criteria for effectiveness and value for money.

But the department was told to develop a ‘resourced plan’ to improve its programme management capability. This would ‘ensure end-to-end accountability for programme delivery and minimise disruption from staff rotations’, the report explained.

DFID should also prioritise reforming its central procurement group so it can foster more productive relationships with contractors. The group, known as the PrG, is under-resourced and would benefit from bringing in people with stronger commercial experience, preferably gained in the aid sector, it added.

A DFID spokeswoman said the department had ‘radically overhauled’ its approach to using contractors since last year, and tightened both procurement controls and ministerial oversight of contracts.

‘We have made huge progress so far, introducing strict new ministerial controls on the award of contracts, a tough code of conduct and a monitoring system for suppliers,’ she said.

‘We will not stop here but will continue to drive through reform. We are already looking at the strategic choices the department makes in its use of contractors. This includes a fundamental look at when the department should be delivering in-house and when and how it should bring in suppliers to maximise results and value for money,’ she added.

A separate report published by ICAI today also gave DFID a ‘green-amber’ rating for the grant funding mechanism it uses to fund civil society organisations such as Action Aid and the Ethical Trading Initiative.

The department is spending £120m a year between 2011 and 2014 on these bodies using the Programme Partnership Arrangement approach, which gives recipients the flexibility to choose exactly how they spend the money they receive.

PPAs are helping to encourage innovation in recipient bodies and in particular improving the quality of performance management and the organisations’ accountability for the results they achieve, the report said.

‘We think it is likely that these changes will lead to improved results for intended beneficiaries, not just from PPA funding but across the CSOs’ full range of activities,’ it explained.

However, if the department decided to use PPAs again after 2014, it would be more effective if it used a more ‘strategic, transparent and fair process’ for choosing recipients. DFID should also consider making money available for periods of longer than three years to allow the ‘strategic and innovative’ aspects of the funding to develop.

The department should also create a ‘less cumbersome’ process for evaluating and monitoring the effectiveness of its funding, the ICAI report added.

ICAI chief commissioner Graham Ward said: ‘The case studies that we examined for both DFID’s use of contractors and programme partnership arrangements show promise for impact on intended beneficiaries. Civil society organisations and private sector contractors are valuable delivery mechanisms for aid and we have made a series of recommendations to increase the value that they deliver.’

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