Parliamentary Committees and Public Enquiries
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More robust approach required for aid contractors

The Department for International Development (DFID) is urged to take a more robust approach to the procurement, oversight and evaluation of the delivery of aid programmes by contractors. 

The growing role of aid contractors in the delivery of UK aid presents new challenges for DFID, which has become a commissioning organisation rather than one of delivery. For the purposes of this report, the term ‘contractors’ refers to private sector organisations, many of which operate on a for-profit basis.

In DFID’s use of private sector contractors, the Committee says that contractors can act as an effective channel for aid delivery and one that the Committee supports - where it is proven to be most effective and offers the best value for money.

However, weaknesses in procurement, noted by the National Audit Office as a challenge across Government departments, mean this is an area where effective scrutiny is essential to delivering value for money. The Report concludes that while there may be good reasons for DFID to employ contractors, there are also longstanding concerns.

DFID’s understanding of the contractor market: We recognise that DFID is ahead of other donors in creating a competitive supplier market, but the rewards for contractors should lie in delivering contracts, not winning them. DFID assumes that levels of competition in the supplier market will assure value for money but their procurement processes influence and shape the market in a way that evidence suggests it does not fully understand. Greater understanding of the supply chain, including the impact of procurement processes on smaller organisations, is necessary to achieve the Department’s aims of more effective use of contractors.

Conduct of contractors: DFID sets rules for contractors but relies on self-regulation and fails to enforce them. It is not evident that DFID has an effective process for assessing effectiveness of individual contractors at programme level, nor whether it undertakes a sufficiently robust appraisal of all available options.  It needs to do more to ensure that contractors are adhering to the principles that drive the Department’s mission. While competitive pressures in the market can drive value for money, they can also drive poor behaviours in contractors trying to seek a commercial advantage.

Fees for contractors: DFID should consider a framework to ensure greater control and transparency over fees charged by consultants.

The report calls for a direct response to an earlier call for DFID to investigate the idea of an arms-length body to assume programme management responsibilities.

Chair's comments

Stephen Twigg MP, Chair of the Committee, said:

“The Committee has recently commended DFID’s effectiveness in fighting poverty around the world, but also noted even more could be done. This report seeks to expand on how the Department can achieve this by enhancing its strategy, procurement processes and supplier market to deliver more effective programming through contractors.

DFID has taken some steps to improving working relationships with contractors. However, there are real concerns, also reflected by the Secretary of State and in media that clear parameters should be set for this work.  We agree with Priti Patel that DFID’s contractors and partners should be held to the highest standards and there should be ‘no room for excessive profiteering or unethical practices’ in this work to deliver aid to the poorest people across the globe.

We urge DFID to ensure that a key focus of its forthcoming Supplier Review is on ensuring greater compliance and a more robust system of incentives and consequences so that the behaviour of contractors is shaped to the highest ethical standards.

The International Development Committee has a role in holding Ministers to account. In the process of this inquiry, we have responded to media and public concern about the proper administration of public money. This inquiry demonstrates how Parliament can investigate and scrutinise these issues in a balanced and evidence-based way.”

Conduct of Adam Smith International

During the inquiry, the Committee had cause to investigate allegations of improper behaviour by Adam Smith International, a leading aid contractor. The report concluded that the organisation went well beyond what was appropriate and ‘acted improperly.’

While it is recognised that not all contractors behave poorly, the Report reflects the Committee’s serious concern that some contractors behave in a way that is entirely misaligned with the Department's purpose. DFID requires contractors to sign up to its Statement of Priorities and Expectations, but the report highlights a worrying over-reliance on self-regulation and a complete lack of enforcement.

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