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Spend better, not less: The challenge for UK aid effectiveness

11 April 2017 - Tim Midgley

Last week, an influential committee of UK parliamentarians released two reports investigating the Department for International Development’s (DFID) allocation of resources and use of private sector contractors in the delivery of aid. The reports examine recent changes to how aid is allocated and spent, and ask tough questions about whether the government is doing enough to help build peace and promote sustainable development in conflict-affected contexts.

The International Development Committee (IDC) reports land within a difficult political environment: even constructive criticism of aid delivery is taken by some as a reason to scrap the whole aid budget; and this anti-aid agenda is creating pressures which may actually undermine effective aid delivery. There is an urgent need to address these dynamics to make sure that UK aid delivers for those that need it most. Importantly, the IDC, a cross-party group of MPs, agrees that aid is an effective and efficient use of tax-payer money, and asserts that there is no evidence that “poor or wasteful spending is any more of a problem in DFID than any other government department or international donors,” noting that DFID should “strive to spend better, not spend less”.  

So, how can this be done? The reports highlight a number challenging trends that DFID (as well as private sector and non-governmental contractors) need to address in order to ensure that programmes are able to maximise their effectiveness in conflict-affected states, and contribute to peace. Many of these flow from intense pressure on DFID to amplify value for money and avoid any perception of wasted resources, in part driven by the media campaigns mentioned above.

One important finding is that the squeeze on the money DFID has to manage the programmes it funds is having detrimental impacts on the size, structure and quality of programming. The UK’s aid budget has been steadily increasing since the government committed itself to spend 0.7% of GNI on development assistance in 2015. DFID, however, has not seen a comparative increase in staffing levels (see fig. 1): as budgets have grown, not enough staff have been brought in to manage them. At the same time the introduction of new and ever-more stringent accountability mechanisms, designed to avoid perceptions of wasted resources, are placing ever-greater strain on already over-worked civil servants. As a result, the IDC notes:

DFID’s administrative capacity appears to have fallen below what is required to manage its increasing budget optimally, causing it to become more reliant on larger external organisations”.

Even some DFID partner organisations who could stand to benefit from these administrative strains have called on DFID to bolster its technical capabilities. DAI, one of DFID’s largest commercial partners, has stated that it would “welcome greater investment by DFID in its technical depth”, warning that “a ‘hollowed out’ DFID would be a less effective department”.

Fig 1 : Index of growth of DFID staff and Net ODA Budget, 1998- 2015

This is echoed in Saferworld’s experience. DFID has some of the world’s brightest and most committed experts, including specialists in conflict analysis, conflict sensitivity and peacebuilding. However, too much of their time is taken up with corporate compliance, whereas more is needed to ensure programme quality.

Another consequence of squeezed administrative budgets is that many DFID programmes have been consolidated, resulting in larger and more complex programmes. The IDC’s report on private contractors does an excellent job of laying out the ways in which this trend, and many of DFID’s current procurement processes, are limiting opportunities for smaller, locally-based organisations to access DFID funding. It notes, for example, that in many conflict affected contexts, the large majority of DFID programmes are delivered through a small number of predominantly UK-based private contractors. These organisations are often the only ones with operational capabilities and financial reserves necessary to manage huge budgets, and absorb the associated risks. The costs associated with simply preparing a bid for a large DFID programme can be prohibitive for all but the biggest firms. The report notes that the costs associated with preparing a bid “can be as high as £120,000 for a large project”.

However, we know from long, and often bitter experience, that successful programmes in conflict affected contexts must be built on a solid understanding of the local context in order to be effective. Otherwise they risk exacerbating conflicts and can do more harm than good. This requires a nuanced understanding of local political, economic and social dynamics, and an ability to pick up on and respond to these as they change. The best way to achieve this is by developing and maintaining close, sustained relationships with local people, and whenever possible, ensuring that local groups take the lead in the design and implementation of projects.

In 2015 the UK successfully asked world leaders to commit to improve people’s participation in decision-making, access to justice and fundamental freedoms – establishing these as global priorities for addressing the conflicts and governance deficits that underpin the bulk of extreme poverty in the world today. Focused and sustained support to embattled grassroots civil society actors is critical to achieving these priorities. But the trend towards large programmes is diminishing DFID’s appetite for the partnerships it needs to achieve these aims.

One reason for this is that the sub-contracting model commonly employed distances the contract holder from local realities. Local organisations end up being hired to implement distinct components of the programme, often far removed from the lead agency and disconnected from and unable to influence the wider strategy.

Equally, short-term commercial imperatives can disincentivise long-term, sustainable development approaches. It is, for example, often cheaper to fly experts in and out of very expensive, ‘hostile’ environments, rather than invest in long-term, capacity building support necessary for local organisations to be able to take the lead on donor-funded projects. Likewise it is often more profitable for large contractors to deliver as much of their contracts themselves as possible. This often results in local partners being squeezed out of action plans once a contract is won.

Finally, it does not necessarily make commercial sense for a contractor to challenge the client (i.e. the donor, often working with the host government) about where, how or to whom their services are delivered. In contested areas, where the delivery of development services may be used to favour one group or punish another, or where the state itself is contested, this failure to challenge can reinforce patterns of privilege or exclusion, and contribute to conflict. 

Of course, these risks do not apply solely to private contractors. All development actors, including INGOs, face these risks. It is also important to recognise that private contractors can and do play an important role, especially in conflict-affected contexts. The fact that they can manage large budgets, front-up costs and absorb financial risk makes them strategically valuable partners for a wide range of smaller development actors.

Aid has an important role to play in supporting the prevention of violent conflicts around the world and DFID has been at the forefront of efforts to make aid more effective in pursuit of this objective. The challenge for DFID, and other donor agencies, is to better account for the potential downsides of an over-zealous or narrowly conceived pursuit of value for money. So DFID should heed the IDC’s advice to improve the quality of its programmes by spending more on running them. It should likewise encourage programmes to engage a strategic mix of different types of agencies (from both the profit and not-for-profit sectors), making sure that bigger contracts support local empowerment, capacity development and the attainment of freedom, justice and inclusion. Ultimately however, DFID must ensure that all operational systems and incentive structures are aligned and that they place the long-term needs of poor and conflict-affected people above all other considerations.

Tim Midgley is Senior Conflict and Security Adviser at Saferworld.

 

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The challenge for DFID, and other donor agencies, is to better account for the potential downsides of an over-zealous or narrowly conceived pursuit of value for money.

Tim Midgely