5 Commissioning
We have moved largely to countries where we do
not have sufficient confidence in the fiduciary framework in that
country to deliver things directly through Government, so we are
then left with essentially three major choices: we can find a
delivery partner that is a multilateral organisation; we can work
through NGOs; or we can contract through the private sector. In
the fragile and conflictaffected states that we are talking
about, all of those elements have grown over the last few years.[129]
79. This chapter looks at the varying challenges
facing DFID's commissioning in the three delivery routes the Permanent
Secretary identified: its use of private sector contractors, large
and small, its use of non-governmental organisations (NGOs) and
charities, and its management and monitoring of multilateral organisations.
80. DFID's commissioning others to implement development
programmes is central to its capacity to spend increased funds.
We received a variety of differing criticisms about DFID's commissioning,
from the various perspectives of private sector contractors and
NGOs. We have also discussed with multilateral organisations DFID's
commissioning in recent inquiries. DFID has also been criticised
for its commissioning by those who oversee it. As ICAI notes:
DFID's choice and oversight of its delivery partners
has emerged as a key vulnerability in the effectiveness of UK
aid. DFID relies on others to deliver its programmes. The quality
of its procurement processes and its engagement with implementers
are, therefore, key elements in its effectiveness. Yet one of
our most persistent concerns across our reviews has been the lack
of due attention by DFID to the management of delivery partners.[130]
81. DFID told us that it has no ideological preference
for using particular delivery models, just what gets the best
results.[131] Witnesses
also highlighted the importance of diversity, for DFID to have
a variety of suppliers and approaches to call on to respond appropriately
to different circumstances.[132]
The Permanent Secretary agreed on the importance of diversity
in the UK development effort:
One of the great strengths of the UK as a country,
not the Department, trying to support development is that we have
thousands of institutions that have a really valid role to play.
The Government are keen to use the Department to harness the capability
and facilitate the engagement of hundreds and hundreds of institutions.[133]
82. In its commissioning role, DFID is the largest
'customer' of UK development work. It has a huge impact on the
market of providers. Because DFID has become such an important
commissioner of international aid organisations, it needs to understand
how its commissioning variously impacts on different sectors,
and fosters effective suppliers and it needs to see how it can
better foster healthy competition between providers-and can learn
from other government departments, who have similar challenges
to ensure supplier competition and effectiveness in other sectors,
such as the Department of Health as the dominant customer for
health care services[134],
or the Department of Work and Pensions for social welfare.[135]
Private sector suppliers
83. In recent years there has been significant growth
in the value of DFID's work outsourced to the private sector through
open commercial procurement channels. Bond suggested that in 2010-11
DFID spent £0.6 billion (or 7.4% of DFID's total budget)
through commercial channels; by 2013-14, that figure had doubled
to £1.2billion (11.4% of the total).[136]
ICAI estimated the majority of this increase was in the last year,
with the amount of aid delivered by contractors rising from £0.9
billion in 2012-13 to £1.4 billion in 2013-14.[137]
DFID forecasts this level will be stable for 2014-15, and that
its procurement expenditure, i.e. programmes with a commercial
contract will be £1.2 billion.[138]
84. DFID has set up a system of prequalified consortia
for consultancy companies, who are viewed as key suppliers for
DFID's priority sectors. According to Garth Glenworth, an ex-DFID
employee of 25 years, eleven suppliers within this system now
win 60% of all DFID's contracts.[139]
Their commercial backgrounds cover a broad range of expertise
from finance and administrative reform, engineering and IT, agriculture,
though less in traditional development areas like education and
health.
85. As well as delivering programmes, a key role
for some private sector contractors is to help manage DFID's programmes.
Witnesses reported that as DFID's programming has expanded at
a greater rate than its staffing (see chapter 5), it has gradually
become more reliant on using large contractors as managing agents.
Garth Glentworth noted:
DFID needs agents to implement its programmes
which have grown enormously in the progression to 0.7% of GNI
for the aid budget. Its own staff is far too small to take on
a direct role in implementation. Under the present system, the
only agents available, which have the capacity and organisation
to work in developing countries are consultancy companies.[140]
DFID acknowledged to us that resource constraints
are one factor in its choice of commissioning and programming
programmes, but not the only one.[141]
KEY SUPPLIER MANAGEMENT
86. With this growth in the use of the private sector,
DFID has strengthened its supplier management in 2013-14. Witnesses
identified a number of improvements:
· DFID
has established a Key Supplier Management programme. Coffey International
note that this Key Supplier Management programme has allowed for
regular dialogue between DFID and service providers, quicker problem-solving,
and more accountability for performance, helping create "a
sense of partnership in aid delivery."[142]
· DFID
has strengthened its early market engagement. As it has developed
its pipeline of projects DFID has engaged suppliers earlier. DFID
noted that early market engagement benefits all potential partners.[143]
Coffey International suggested it has allowed them to have a better
understanding of projects' contexts and resources needed, leading
to better bids and a better chance for effective delivery. It
also noted that early market engagement was inconsistently applied
by country offices.[144]
· DFID
has improved its staff commercial guidance and skills. ICAI reported
DFID has improved its guidance to programme managers and rolled
out commercial advisors.[145]
87. However, witnesses also identified a number of
ways in which DFID still needs to adapt to be able to commission
from the private sector effectively:
· DFID
does not have the right frameworks to react quickly. Adam Smith
note that rather than use call down contracts where assistance
can be mobilised rapidly, staff still tend to hold competitions
among pre-selected firms or retain consultants on contracts designed
for very different things.[146]
· DFID
staff can attempt to renegotiate agreed contracts. Witnesses note
the cultural gap with commercial suppliers, where some DFID staff
attempt to use the 'post-tender clarification' process to renegotiate
fee rates and other key aspects of an agreed commercial tender.[147]
· DFID
approval processes are increasingly centralised. DFID processes
require Ministerial approval for all contracts above £1 million.
As Adam Smith International notes: "This rule wastes a considerable
amount of time and results in considerable delays to mobilisation."[148]
INCLUDING SMALL SUPPLIERS AND SPECIALISTS
88. Some witnesses expressed concern to the Committee
at DFID's increasing use of the private sector.[149]
They highlighted a number of particular fears:
· Concerns
that 'barriers to entry' are increasing and that DFID's key supplier
framework means DFID is favouring its familiar suppliers. Such
"barriers to entry" include the higher costs and risks
of working in Fragile and Conflict-Affected states, higher demands
for results reporting and higher risks from Payment By Results
(see chapter 5). The Springfield Centre noted that "framework
agreements had concentrated power within a few large contractors."[150]
Bond and the UK Aid Network called for DFID's procurement to ensure
it facilitates broad and varied competition, and avoids favouring
the 'usual suspects' within the private sector.[151]
· Concerns
over the loss of development specialists and their transformation
into task-based subcontractors. ICAI highlighted concerns that
DFID has not issued guidance on using specialists.[152]
The Springfield Centre notes:
DFID's concern with efficient procurement has
re-shaped the way development industry works, with a detrimental
impact on quality and innovation… DFID has historically benefited
from the technical expertise of smaller, specialist organisations
which are able to be more agile and innovative. However, now these
organisations are beholden to large contractors, their ability
to shape the work they do is limited and they become task-based
consultants with less control of technical delivery. They are
obliged to comply with the demands of larger contractors, having
been unable to meet compliance requirements to be eligible for
the framework agreements.[153]
89. Particular concerns over the exclusion of small
suppliers. Small organisations do not have the resources available
to invest in the tendering process that larger contractors do,
and so are rarely able to compete.[154]
90. On small suppliers, the Government has set an
aspiration that 25% of central government spending, by value,
should flow to SMEs directly and through the supply chain, by
2015. DFID pointed out that it was doing well in meeting this
target, and even suggested it was "ahead of what the Government
are trying to do in that space."[155]
It reported that over the past three financial years, an average
of 30% of DFID's procurement spending has been through SMEs, with
£360 million forecasted for SMEs in 2014-15[156]
It should be clarified though that DFID's 'direct procurement
spending' in 2013-14 only refers to £1,018 million, or 9%
of ODA. DFID does not have figures for SME use across its whole
programme. It should also be noted that SMEs are defined as companies
with an annual turnover of less than €50 million[157],
which is significantly different from the thresholds it uses for
small NGOs.
91. Nonetheless, DFID pointed out that it was making
a number of efforts to increase opportunities for small suppliers.[158]
The Permanent Secretary also undertook to investigate whether
its commissioning practices were excluding small suppliers due
to staff limitations.[159]
92. In this context, how DFID perceives its role
is key: does DFID understand how its way of commissioning is affecting
suppliers as a sector, and not just in terms of the effectiveness
of individual procurement decisions? In our recent Parliamentary
Strengthening report we noted DFID did not properly understand
its supply chain; it had not given any consideration to how it
should develop a healthy market of UK suppliers; and did not know
how much money was going to its major suppliers in the sector
without undertaking a manual exercise at the Committee's request.
Non-Governmental Organisations
93. In 2013-14 DFID increased the value of its programme
that it delivered through NGOs by £252 million from 2012-13
to £1 billion (Figure 8). This is likely an understatement
of DFID's spending on NGOs since it excludes humanitarian spending.
According to the NAO, £262 million of NGO funding (26% of
the identified spending) was awarded in November or December 2013.[160]
The proportion of its bilateral programme that DFID has spent
via NGOs remained roughly constant, at approximately 18% for the
last three years, though as a proportion of DFID's total programme,
NGO spending has declined as the multilateral programme has grown
so significantly.Figure
8: DFID Support for NGOs
Source: Table 1-DFID GPEX statistics 2013-14
94. DFID acknowledged that historically it has preferred
to work with larger NGOs, which were typically the main beneficiaries
of its Partnership Programme Agreements (PPAs) (which provided
core funding to NGOs): "On the notforprofit sector,
it is absolutely the case that the Department's comparative advantage
is dealing with the larger organisations. Our staff are not limitless."[161]
Figure 9 lists the five NGOs which received the largest amount
of funding from DFID in 2013-14:Figure
9: Non-Governmental Organisations which received the most funding
from DFID in 2013-14
| NGO
| £ million
|
| The Save The Children Fund
| 64.4 |
| BRAC | 60.0
|
| International Rescue Committee UK
| 48.1 |
| Voluntary Service Overseas
| 45.4 |
| IMA World Health | 27.3
|
Source: DFID Additional information
95. DFID claimed that it has made extensive efforts
in recent years to widen the involvement of smaller, local NGOs
through other mechanisms, and sent us examples from Uganda, Zimbabwe
and Nepal funded by the Global Poverty Action Fund (GPAF), now
"UK Aid Direct."[162]
PPAs have become less and less significant for DFID's NGO funding,
accounting for just 12.4% of it in 2013-14 (compared to 27.1%
in 2009-10). This could help small NGOs:
If you look at our NGO funding over the last
four or five years—we have worked very hard to increase
the range of NGOs that can participate in that. There are a lot
of NGOs now, particularly small ones, which would not have been
recipients of DFID funding in the past that we have reached through
schemes like UK Aid Match and through the way that we have changed
some of our core NGO funding… If you look at the range of
organisations that traditionally we have funded through PPA arrangements,
they have been multimillionpound organisations in
terms of turnover. Through some of the schemes that we have developed
in the last three or four years, we have looked to get to much
smaller organisations.[163]
96. DFID's efforts to promote NGOs and the benefits
of its PPA framework agreements were acknowledged by some witnesses,[164]
if others suggested that their goals from DFID's perspective could
be made clearer.[165]
97. But other witnesses pointed out that there was
no equivalent to DFID's Key Supplier Management programme with
private sector contractors for NGOs, despite the fact that about
£1 billion was spent through both channels. We were told
that this "places DFID's NGO partners or lower value partners
at a disadvantage on consulting on the recent strategic changes
to DFID's financing approaches."[166].
Also Bond and the UK Aid Network conducted a survey of DFID grantees
which found that framework contracts were leading to a more distant
relationship with DFID and potential loss of learning between
DFID and NGOs-which was potentially a barrier to mutual understanding
and successful implementation.[167]
Managing multilateral organisations
98. Chapters 2 and 3 discussed DFID's extensive use
of multilateral organisations in 2013-14, and suggested that multilateral
organisations had become an increasing option for DFID. This chapter
looks specifically at how DFID manages multilateral organisations
in its bilateral programme. DFID stated that the growth in its
use of multilateral organisations is largely because of the countries
it now works in, Fragile and Conflict Affected states, which have
a more restricted range of potential delivery partners. [168]
Multilateral organisations offer wide access in a variety of countries
where few others can operate.[169]
99. However, ICAI has raised concerns that DFID does
not do enough to look for other options to some multilateral partners.[170]
It also notes that: "as the average programme size has increased,
the number of partners able to operate at the required scale narrows
and some multilateral organisations become, in effect, 'too big
to fail'."[171]
They are an easy option, as Adam Smith International state:
The framework agreements that DFID has in place
with some multilateral organisations, notably UN agencies…
make it easy to pump money into a UN organisation on a non-competitive
basis, but do not provide the ability to hold the organisation
to account… Giving money to a UN organisation is an easy
and low risk option for a busy DFID officer who does not want
to have to deal with the reams of paperwork associated with a
competitive procurement.[172]
100. The Committee received a number of criticisms
of the Value for Money of multilateral organisations. ICAI raised
particular concerns on the value for money of aid given to DFID's
largest multilateral partner, the EU.[173]
Other witnesses suggested there were a number of more general
concerns with multilateral organisations:
· They
can have high management costs. Adam Smith International described
using multilateral organisations to reduce administrative costs
as "a false economy" as "multilateral organisations
generally have much higher administrative costs."[174]
Similarly, ICAI found that bilateral aid spent through multilateral
organisations often entailed high (and not very transparent) overheads.[175]
· They
can be bureaucratic in their programming. Multilateral funding
is less responsive to circumstances, due in part to the long lead
times and approval processes that exist between initiating, designing,
procuring or launching programmes.[176]
Decision-making often requires approval from headquarters increasing
management effort for DFID country offices."[177]
· Their
results focus is limited. Monitoring and evaluation and results
measurement are not given a high priority in some multilateral
organisations, with evidence and learning rarely fed back into
project implementation. DFID has not been able to hold some of
its multilateral service providers effectively accountable for
results.[178]
· They
can be slow to address corruption. Multilateral organisations
can be relatively poor at preventing losses and fraud. For instance,
UNDP's largest programme, the Law and Order Trust Fund (LOFTA),
which helps pay police salaries in Afghanistan has been plagued
by lost monies, which UNDP has failed to address.[179]
ICAI notes:
Because multilateral institutions are seen as
development partners, rather than contractors, they are not as
closely monitored by DFID-a consistent finding across our UNICEF,
World Bank, Asian Development Bank (ADB) and European Union (EU)
reviews. This can lead to poor risk management and an insufficient
focus on results… We, therefore, encourage DFID to remain
closely engaged with the delivery of its programmes through multilateral
organisations.[180]
101. DFID noted that bilateral programmes are monitored
through its annual review process. Additionally, DFID's primary
mechanism for assessing the performance of multilateral organisations
is its Multilateral Aid Review (MAR), which periodically assesses
multilateral organisations' global capacity. Some witnesses praised
the MAR as "a useful evidence base for aid allocations."[181]
Others, such as ICAI, noted that: "While this is a useful
starting point, it does not take account of the variable capacity
of multilateral partners in different countries." [182]
In particular, witnesses suggested that future Multilateral Aid
Reviews need to be more focused on multilateral organisations'
impact and capabilities on the ground.[183]
102. DFID promised the Committee in its response
to its report on DFID's 2012-13 Annual Report and Accounts to
look at the cost effectiveness of multilateral organisations as
a route for bilateral spending:[184]
In 2013-14, this has included the introduction of a Portfolio
Delivery Review, a formalised mechanism for DFID's management
of UNICEF that will be extended to other UN agencies,[185]
and inserting the possibility of immediate suspension into its
partnerships with multilateral agencies.[186]
103. DFID stressed the improvements that had been
made by multilateral organisations in the last 12 months as a
consequence of these efforts, particularly in reducing their administrative
costs, procurement processes, and focus on results.[187]
Some witnesses agreed that DFID's intervention was having a positive
impact on making multilateral organisations more accountable for
their results.[188]
104. However, Mark Lowcock added:
We have a number of continuing concerns that
I would say are generic. One is whether there is a sufficiently
strong culture of effective fiduciary management, thinking about
risk and recovering losses, when losses occur. We would like,
across many of the agencies, a greater degree of confidence that
they are across that more effectively.[189]
Conclusion and Recommendations
105. We recognise that it is not DFID's main function
to keep suppliers in business, but we are concerned that DFID
is making too little use of small, expert, technical, suppliers
and pays too little attention to how its commissioning affects
small suppliers. This situation may have been exacerbated by DFID's
need to increase its spending rapidly. We welcome the Permanent
Secretary's agreement to look at whether restrictions on staff
numbers are affecting the extent to which DFID uses smaller suppliers.
We recommend that DFID review its approach to project design
and commissioning to ensure it is not excluding smaller suppliers.
DFID should aim to increase in 2015 both the absolute value of
business going to SMEs and the proportion of its total spending
going to SMEs, either directly or in its supply chains. DFID's
review should also consider the risks of its reliance on large
suppliers and multilateral organisations. We recommend that DFID
assess other departments such as Health or DWP, where government
is the dominant customer, to learn from their successes and failures
in this area.
129 Oral evidence from Mark Lowcock, Permanent Secretary,
4 February 2015, Q14 Back
130
ICAI Submission, paragraphs 3.1-3.2 Back
131
"What we are always trying to do is to find the best delivery
partner to solve a particular problem. There is no ideological
or doctrinal preference. We are trying to have competition between
delivery partners to get the best results." Oral evidence
from Mark Lowcock, Permanent Secretary, 4 February 2015, Q14 Back
132
Bond and UK Aid Network Submission, Section I Back
133
Oral evidence from Mark Lowcock, Permanent Secretary, 4 February
2015, Q3 Back
134
For instance, see: NAO, Oversight of user choice and provider
competition in care markets, Sept 2011, HC1458' NAO, Public Health
England: Grants to Local Authorities, December 2014, HC888 Back
135
See: NAO, The Work Programme, July 2014, HC 266 Back
136
Bond and UK Aid Network Submission, Section J Back
137
ICAI submission, paragraph 3.18 Back
138
Follow Up to IDC Evidence Session on DFID's Annual Report and
Accounts 2013-14, DFID Additional Submission. .DFID defines its
procurement expenditure as: "expenditure underpinned by a
contract, normally awarded through competitive tendering procedures.
This differs from the remainder of DFID's spending through third
parties which is not competitively tendered and uses other instruments
such as Accountable Grants, Memoranda of Understanding and core
funding contribution agreements." Back
139
"DFID has introduced a system of pre-formed and pre-qualified
consortia of consultancy companies in priority sectors for the
aid programme… Each consortium is convened by a lead consultancy
that acts as focal point for organising team responses to DFID
invitations to tender. These lead companies play a decisive role,
first in deciding whether the consortium will respond to the possibility
with an Expression of Interest (EOI) and -then if shortlisted
-in determining which organisations in the consortium are to participate
and in finalising the proposal submitted. Lead consultancies are
self -appointed usually being instrumental in forming the consortium.
They are recognised by DFID and are usually large companies which
have become the major contractors in the aid programme… One
result so far has been that eleven large consultancy companies
win 60% of all DFID contracts. They are known to DFID as the "key
strategic suppliers" and more colloquially as the "Top
Eleven". They are alphabetically: Adam Smith International;
ATOS: Coffey; Crown Agents; the recently merged DAI and HTSPE;
GRM; KPMG; Maxwell Stamp; Mott Macdonald; Options; and PWC."
Garth Glentworth submission Back
140
Garth Glentworth submission. He further notes: "These [consultancy
companies] do compete for DFID business, though there has to be
some doubt about how strong that financial competition is when
fee levels are compared. The large consultancy companies have
expanded taking an ever increasing share of the aid budget and
enjoying generous profit margins." Back
141
"DFID judges the best approach to commissioning and managing
programmes on a range of factors. DFID's resource capability and
capacity to effectively manage the programme is one factor we
consider along with others, including our comparative advantage
in managing that type of programme, market delivery route analysis
and the need to support the development of local suppliers. This
analysis and approach, including whether to break down or consolidate
programmes requirements in order to realise efficiencies, is generally
done on a case by case basis." Follow Up to IDC Evidence
Session on DFID's Annual Report and Accounts 2013-14, DFID Additional
Submission Back
142
Coffey International Submission, paragraph 3.2 Back
143
"DFID has also increased the amount of early market engagement
activity taking place with potential partners from all sectors
to help make informed decisions on delivery routes and the most
appropriate procurement strategy." Follow Up to IDC Evidence
Session on DFID's Annual Report and Accounts 2013-14, DFID Additional
Submission Back
144
Coffey International submission, paragraph 3.4 Back
145
"We found that the quality and intensity of practical procurement
guidance offered to programme managers had improved and that the
roll-out of commercial advisors in-country had continued."
ICAI submission, paragraph 3.18 Back
146
"DFID has two types of framework - call-down contracts in
which rates have already been set through a competitive process,
and frameworks involving rosters of firms who can participate
in mini-competitions. The bulk of the frameworks unfortunately
involve the latter approach, whose only advantage is to cut out
the PQQ/shortlisting part of the process. There is no call-down,
but still a time-consuming tender process which means that it
is still difficult to mobilise assistance quickly. There are a
very small number of call-down framework contracts, called PEAKS
are designed for research and very small pieces of advice. These
are now being used more widely by DFID staff for larger interventions
because they are the only fast mechanisms available. Because they
can only draw upon a narrow base of resources this leads to sub-optimal
outcomes… DFID staff use the inappropriate PEAKS frameworks,
designed for research and little bits of advice, to retain contractors
to do quite significant interventions. It is the only remaining
fast means of retaining contractors. DFID needs to put the right
mechanisms in place so it can hire the right people quickly."
Adam Smith International submission, paragraphs 5.7-6.4 Back
147
"Some claim that they need to make savings in fee rates
in order to get the approval of the Secretary of State, although
the leadership of PCD says this is completely untrue. The attempt
to use the 'post-tender clarification' process to renegotiate
the commercial tender is unlawful under the UK public procurement
regulations." Adam Smith International submission, paragraph
5.8 Back
148
Adam Smith International submission, paragraph 5.9 Back
149
"At present, commercial procurements are used by DFID for
a very wide variety of work across their geographic scope, and
it is often unclear from business cases what the justification
for this decision is and whether alternative financing mechanisms
have been considered." Bond and UK Aid Network Submission,
section J Back
150
Springfield Centre Submission, paragraph 21 Back
151
Bond and UK Aid Network submission, section J Back
152
"We remained concerned, however, that DFID had yet to develop
strategic guidance on when and how contractors of different sizes
and specialisms can deliver most effectively so that the appropriate
contractor is engaged for the programme or project. The choice
about the delivery route is still left to programme teams on a
case-by-case basis, supported by central or in-country procurement
resources. We regard this as a serious gap." ICAI submission,
paragraph 3.18 Back
153
Springfield Centre Submission, paragraph 21 Back
154
For example, DFID's fast-track payment terms for small businesses
are seldom reflected in the contractual terms or payment practices
of large framework contractors who sub-contract small organisations.
See: Springfield Centre submission, paragraph 21 Back
155
Oral evidence from Mark Lowcock, Permanent Secretary, 4 February
2015, Q7 Back
156
Follow Up to IDC Evidence Session on DFID's Annual Report and
Accounts 2013-14, DFID Additional Submission Back
157
The Cabinet Office which promotes the Government's target follows
the EU definition of a SME. DFID told us it defines SMEs as follows:
"DFID counts as SMEs those suppliers who have declared themselves
as such when bidding for DFID contracts via competitive tenders."
Follow Up to IDC Evidence Session on DFID's Annual Report and
Accounts 2013-14, DFID Additional Submission Back
158
"DFID has highlighted the Government's desire to work with
SMEs at supplier forums, such as those run by British Expertise,
encouraging large suppliers to look for ways of improving the
opportunities for SMEs in the supply chain. DFID regularly holds
SME forums, some in partnership with UKTI, and recently hosted
one in our East Kilbride office specifically targeting Scottish
SMEs. DFID has also put in place a range of framework agreements
which include a number of SMEs. These frameworks make it possible
for SMEs to bid direct for financially viable sized projects and
also make it easier to form consortiums to bid for larger projects.
Additionally, we have an active engagement plan with BOND to help
and encourage non-governmental organisations (NGOs) to bid for
DFID contracts." Follow Up to IDC Evidence Session on DFID's
Annual Report and Accounts 2013-14, DFID Additional Submission
Back
159
"Let me have another look and see if I can establish if
there are decisions we have taken to bundle things together for
reasons of scarcity of admin cost that, if we were more generously
staffed, we would have taken different decisions on." Oral
evidence from Mark Lowcock, Permanent Secretary, 4 February 2015,
Q11 & 12 Back
160
NAO report, Figure 28, p. 68 Back
161
Oral evidence from Mark Lowcock, Permanent Secretary, 4 February
2015, Q7 Back
162
For NGO funding, DFID defines small NGOs as those with average
income of less than £1 million per annum for the past three
years. Since August 2011, DFID has provided 72 grants through
this scheme to 62 small NGOs with a total value of £15 million.
The grants range from £45,000 to £250,000, with an average
grant value of £208,000. See: DFID, Follow Up to IDC Evidence
Session on DFID's Annual Report and Accounts 2013-14, Additional
Submission Back
163
Oral evidence from Richard Calvert, Director General of Finance
and Corporate Performance, 4 February 2015, Q4,6 Back
164
"Strategic funding of CSOs through the PPA framework agreement
delivers sustainable development outcomes for poor people. For
instance, Oxfam's PPA is invested into its enabling environment,
driving forward programme quality to improve the effectiveness
of its programmes. This means partnering on quality, accountable
programmes which target the most in need, reaching them faster,
in partnership with others, and delivering innovative solutions
in the most cost-effective way. The flexibility allows for innovation,
risk-taking, adaptive management of funds, policy engagement and
learning and sustainable change at scale." Bond and UK Aid
Network Submission, Section J Back
165
"Over the past three years, DFID has provided around £120
million per year in core funding to a group of 41 development
NGOs in the form of Programme Partnership Arrangements (PPAs).
Core funding is highly appreciated by the NGOs, giving them the
resources and the flexibility to innovate and develop their capacity.
While we found some good emerging results from this mechanism
when we reviewed it in May 2013, we were concerned that DFID seemed
unclear in what it hoped to achieve from it, which diminished
its overall impact. We found evidence that the funding had led
to a stronger focus on managing for results. Some of the NGOs,
however, felt under pressure to use the funds for activities that
yielded readily reportable results, which partly undermined the
value of core funding." ICAI submission, paragraph 3.20 Back
166
Bond and UK Aid Network submission, section J Back
167
Bond and UK Aid Network submission, section J Back
168
Oral evidence from Mark Lowcock, Permanent Secretary, 4 February
2015, Q14 Back
169
"Multilateral development institutions (MDIs) carry the
benefits of institutional reach and expertise and decades of learning
and experience. In delivering development assistance they are
often aligned with important political or diplomatic processes
(e.g. at the UN in New York or the World Bank in Washington, DC),
and they have influence with and access to host country governments
and stakeholders." Adam Smith International Submission, paragraph
2.4 Back
170
"We were concerned that DFID is not systematically assessing
alternatives to UNICEF, believing (sometimes erroneously) that
there were no other delivery choices available." ICAI submission,
paragraph 3.10 Back
171
ICAI submission, paragraph 3.4 Back
172
Adam Smith International Submission, paragraph 6.4 Back
173
"Our key concern was about the limited assurance DFID has
on the significant contributions it makes to the EU, especially
given DFID's limited discretion to vary them. We found that greater
focus is needed on gathering more on-the-ground evidence about
EU programmes". ICAI submission, paragraphs 3.7-3.8. These
echo the Committee's own critical findings of the VFM of EU work
in its Parliamentary Strengthening report. Back
174
Adam Smith International Submission, paragraph 2.3. See also
paragraph 2.9: "The management structures of MDIs may raise
costs and complicate programming for DFID. MDIs have high administrative
overheads and interaction with them involves considerable transaction
costs. Their use therefore adds an administrative layer with implications
for value-for-money." Back
175
"Funding the delivery of bilateral programmes by multilateral
institutions often entails cumbersome management processes and
high (and not very transparent) overheads. For example, in our
review of 'DFID's Water, Sanitation and Hygiene programming in
Sudan', we found that it was impossible for DFID to assess the
value for money of its funding via the UN-managed Common Humanitarian
Fund. We, therefore, encourage DFID to remain closely engaged
with the delivery of its programmes through multilateral organisations.
Delegation of functions must not amount to abrogation of responsibility."
ICAI Submission, paragraph 3.5 Back
176
Adam Smith International Submission, paragraph 2.6 Back
177
Adam Smith International Submission, paragraph 2.9 Back
178
Adam Smith International Submission, paragraphs 2.6-2.7 Back
179
Adam Smith International notes "Reports of mismanagement
and fraud at LOTFA have been around for some time, focusing in
particular on procurement fraud. The US Office of the Special
Inspector General for Afghanistan Reconstruction (SIGAR) has just
divulged that up to $200m had been diverted from the LOTFA funds
for pensions that had not been properly accounted for, and that
there was an unconstitutional "cooperative" fund channelling
tens of millions of dollars away from LOTFA salaries to an account
within the Ministry of Interior that UNDP had failed to notice
until recently. UNDP's response to SIGAR was that it did not have
the "institutional mandate" for fiduciary oversight
of the funds that it had been employed to oversee. UNDP does not
engage with internal audits of the government part of the Ministry
of Interior remuneration system, and even though the programme
has been running since 2002, it has not engaged in systematic
capacity building of the Ministry of Interior internal auditors,
so that there is effectively no meaningful internal audit carried
out on LOTFA funds once they hit the government system."
Adam Smith International Submission, paragraphs 215-2.16 Back
180
ICAI Submission paragraph 3.5. Back
181
Bond and UK Aid Network Submission, Section C Back
182
ICAI submission, paragraph 3.4 Back
183
Bond and UK Aid Network Submission, Section C; ICAI submission,
paragraph 3.8 Back
184
See: Government Response to Committee Report, Department for
International Development's Performance in 2012-13: the Departmental
Annual Report 2012-13, Second Special Report of Session 2014-15,
HC 522, Recommendations 11-12 Back
185
ICAI notes that: "The introduction of the Portfolio Delivery
Review (PDR) by DFID's United Nations and Commonwealth Department
(UNCD)… is an important step in ensuring that DFID has improved
oversight of its UNICEF portfolio as a whole. We were told that
this review process was being rolled out to UNDP and UNFPA during
the course of last year. We encouraged DFID to consider extending
the process to all multilateral organisation with which it has
bilateral partnerships." ICAI submission, paragraph 3.11 Back
186
"DFID is putting its partnerships onto a more commercial
footing in its approach. For example: one change should see case-by-case
consideration being given to the return of unrecovered defrauded
funds. Additionally, DFID will have the right to suspend or terminate
a programme immediately where there is a credible allegation of
fraud (previously, termination was subject to the standard notice
period of three months)." ICAI submission, paragraph 3.14 Back
187
"We do see progress in a stronger results culture and a focus
on asking the question: what are we getting for our money in this
institution? For example, they all have better management information,
which they publish and put into the public domain, about what
they are achieving. The World Bank, for example, has a much stronger,
balanced scorecard setting out its achievements and results, so
that is open to scrutiny; you can have a better discussion on
it. Secondly, a lot of them have made progress in containing their
administration costs and driven down their share of admin costs
in their total budget. I have given figures to the Committee before
about that: 5% cuts in admin costs, year on year, across a range
of especially UN organisations. Thirdly, a lot of them have made
some progress on the effectiveness of their procurement systems.
One of the things the Department has been collaborating with a
number of multilateral organisations on is driving down the costs
of some key commodities... This whole agenda of much stronger
scrutiny of the effectiveness of these agencies is one that the
UK has played a leading role in" Oral evidence from Mark
Lowcock, Permanent Secretary, 4 February 2015, Q15 Back
188
"DFID's contributions to multilateral agencies are crucial,
with DFID's influence and leadership helping to ensure that multilateral
organisations are accountable and deliver results. DFID has made
good progress in addressing the Multilateral Aid Review's recommendations
with many multilateral organisations." Marie Stopes Submission,
paragraph 5 Back
189
Oral evidence from Mark Lowcock, Permanent Secretary, 4 February
2015, Q15 Back
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