House of Commons - Department for International Development's Annual Report and Accounts 2011-12

Department for International Development's Annual Report and Accounts 2011-12 - International Development Committee Contents

3 Costs and staffing

Operating costs

Figure 6: The composition of the Department's operating cost budget over the Spending Review

NOTES

The values for 2010-11 are the baselines agreed by the Department with HM Treasury in October 2010. Actual outturn for operating costs in 2010-11 was £195 million.

The budget values for 2011-12 to 2014-15 are those agreed during the 2010 Spending Review.

Front-line delivery costs are funded from the Department's programme budget.

Source: NAO presentation of material from the Department for International Development and from HM Treasury, Spending Review 2010, Cm 7942, October 2010

50. DFID's operating costs were £190 million in 2011-12. These costs comprise the Department's administration costs and its front-line delivery costs.[48] Over the Spending Review period administration costs will decline considerably while front-line delivery costs will rise. As a result, the Department's operating costs are likely to grow by a small amount in real terms but they are due to fall as a proportion of the Department's total budget, to around 2.2%.

Front-line delivery costs: front-line staff

TRENDS IN STAFFING

51. In previous reports we have expressed concern that DFID has insufficient staff in relation to its increasing budget. This situation has been addressed. The number of frontline staff in the Department is increasing. Its workforce is due to increase by 525 (23%) full-time equivalent posts over the four years of the Spending Review period to March 2015; almost 70% of that planned growth had happened by September 2012.[49] Largely as a result of the growth in the number of advisers, the seniority of staff employed by the Department is increasing.[50]

ADVISERS

52. The main increase in staff has been in the numbers of professional advisers DFID employs to help manage its programme budget. The Department employed about 230 more advisers (some 45% increase) during 2011-12, although it encountered some delays in recruitment and barriers to filling posts in some locations.[51]

53. The Department now plans a further increase of about 80 advisers (11%) in the second half of 2012-13 (taking the total to around 760), including increases in the governance and infrastructure cadres where posts have previously been hard to fill. [52]

Figure 8: Number of adviser posts by cadre, planned growth between September 2012 and March 2013, and March 2013 and March 2015

September 2012 actual Planned increase (REDUCTION) September 2012 to March 2013 March 2013 planned March 2015 planned Planned increase (REDUCTION) March 2013 to September 2015

Conflict 29 1 30 33 3

Economics 122 14 136 131 -5

Education 35 6 41 41 0

Environment 54 5 59 58 -1

Governance 108 17 125 124 -1

Health 70 3 73 73 0

Humanitarian 23 5 28 27 -1

Infrastructure 25 7 32 31 -1

Private Sector Development 46 13 59 54 -5

Rural 27 5 32 34 2

Social Development 73 1 74 76 2

Statistics 41 -1 40 43 3

Evaluation 35 3 38 37 -1

Total 690 77 767 761 -6

Source: NAO presentation of departmental data

54. The figure above shows changes in the number of advisers by expertise. We are unclear what the rationale is for the mix of advisers and how far the Department has the right staff to monitor the expenditure of multilateral programmes. We also wondered why DFID was increasing the number of professional advisers rather than traditional civil service generalists. We were informed:

I would not draw such a clear distinction between advisers and nonadvisory staff. For me, the distinction is between staff doing programme delivery, which comprises a range of professional advisers but also the core programme management staff. If you go to a country office, as you know, you meet a mix of staff who are doing core programme management and some people who are there with a specific professional discipline. The shift is into that group of staff and out of the staff doing support work in particular.[53]

The professional advisers in DFID are very much integrated into our business units, whether they are country offices or policy teams in London.[54]

55. In the past we had expressed concerns that DFID did not have adequate numbers of staff to spend cost-effectively its budget. DFID has addressed this and is rapidly increasing the number of professional advisers and increasing the proportion of its staff working overseas. However, we have some concerns about the mix and skills of staff, including whether it has the staff to oversee the huge expenditure of UK taxpayers' money undertaken by multilaterals. In its reply to this report the Government should explain the reasons for increasing the number of professional advisers to a greater extent than any other group of staff and for the variations in numbers of advisers in each category.

THE DEPARTMENT'S STAFFING OF COUNTRY OFFICES

56. Increasingly, DFID staff are based overseas.[55] Country offices are staffed by a mix of home civil servants and locally engaged staff, known as staff appointed in-country (SAIC). The number of posts the Department expects to be filled by staff appointed in-country is growing at a similar rate to the numbers of overseas posts for home civil servants. The seniority of posts for staff appointed in-country is also expected to grow but at a rate which is lower than the departmental average.[56]

UK-BASED STAFF

Institutional memory and knowledge of local languages and cultures

57. During our overseas visits, we have observed that DFID staff do not always have a good institutional memory or appropriate levels of local language skills, nor knowledge of cultural issues. One way of addressing this would be for staff to serve for longer periods than the typical three year tour of duty, especially in more secure countries. We were informed that in such countries DFID staff were in post for four or five years in some cases. DFID officials acknowledged the benefits of longer tours of duty:

having some kind of institutional memory and longevity of understanding is really important…we…need it in our UK-based staff when we are posting them.[57]

On the other hand, the Department had to encourage people to get sufficiently broad experience to be able to develop their career and move on.[58]

58. The Permanent Secretary added:

We also try to make sure we get the best out of our local staff in informing us of what is going on in the wider environment. I was in Rwanda three weeks ago and Uganda last week, and some of the best intelligence I got on what is going on and what we should really be caring about was not actually from President Kagame or President Museveni, both of whom I had conversations with, but from what the citizens of the country, not least our own staff, said to us.[59]

59. On the question of the language knowledge of UK staff, the Permanent Secretary told us that there was a cost barrier to language training,[60] but he added:

I will have another look at that. It is very expensive to equip someone from a standing start with a high level of knowledge for some of the languages that you need in the places we operate. One of the reasons we have larger numbers of highly professional local staff is to get that capability inside the organisation in a cheaper way.[61]

60. The Department did not routinely collect aggregated data on the language skills and cultural awareness of its home civil servants or the length of time they have been in post. Mark Lowcock informed us that the information was collected, but the Department had not aggregated it.[62]

61. Subsequent to the evidence session DFID informed us that it

makes language training available to staff and is currently engaged in a Government wide e-learning solution for language learning in 31 spoken languages. The learning is suitable for a range of students, from beginners to level A2 of CEFR (Common European Framework of Reference). This learning is paid for centrally by DFID and is the first option for individuals who need to develop their language skills at this level. Where language learning is required above this level it may be supported through a variety of options e.g. extensive - one or two days a week; intensive - one-to-one training (short and long periods as required); and immersion - generally prior to taking up post.

We were also informed that DFID:

aims to recruit the best person for a post based on a range of skills and competencies, rarely making language skills a mandatory requirement. Where language skills are considered necessary to be able to function effectively in country intensive language training is provided to DFID staff. In terms of length of posting, it should be noted that three years is not a maximum but is the standard tour length in most countries. There are many occasions where DFID staff have remained in-country for significantly longer, sometimes up to six years where it suited business needs. Even where a UK Civil Servant is fluent in the local language they will often be accompanied by a local member of staff at key meetings as local dialects can make it difficult to be confident in interpretation.[63]

Institutional memory in high risk countries

62. Problems are particularly acute in high risk countries. On our recent visit, we found that in some respects there were more members in the Committee who had knowledge of Afghanistan and had previously visited than the staff who were there.[64] Mark Lowcock noted he too had a bit more institutional memory than some of the team on the ground.[65]

63. In our report on Afghanistan, published in October 2012, we concluded:

While we…commend DFID staff for the job they have done under these [difficult] circumstances, we are concerned about the short postings, resultant loss of capacity and knowledge and weak institutional memory. We recommend that DFID create a cadre of experts with knowledge of Afghan language and culture, who will work on Afghanistan, in London or in country... Longer tours and routine rotations to Afghanistan would also aid in this

64. In its response, published in January 2013, and therefore after the evidence session on DFID's Annual Report, the Government stated that it partially agreed with this recommendation. It recognised that that the length of postings posed 'challenges for institutional effectiveness'.

65. However, the Department pointed to the difficulty in longer postings in dangerous countries:

Something like a quarter of those UK-based staff who are posted overseas are in places where they cannot have their partner or their children with them. ...[66]

it is not sensible in the most dangerous environments to have people in post too long. Three years, for somewhere like Afghanistan, is really the outer limits of what somebody should do for their own physical and mental health...[67]

in Kabul … average tour lengths for DFID staff are currently 20 months, providing us with a reasonable degree of continuity. Extending tours and rotation lengths ..could … impact on our ability to attract and retain good quality, experienced staff. We will however keep these issues under review as the situation evolves.

66. DFID was dealing with the lack of institutional memory in a number of ways. First it was increasing the number of Afghan staff in the Kabul office. Secondly, DFID was ensuring thorough induction and handover periods for UK staff. Thirdly, DFID would also continue to draw on (and build up as needed) a team or DFID advisers and policy managers working on Afghanistan but based in the UK,

we have built a 'talent pool' of DFID staff who have expressed an interest in working on our Afghanistan programme and a list of specialists that are able to deploy for short-term assignments as required. This remains a high priority area for our senior managers.

a steady stream of staff have returned to Afghanistan on a second posting, or are working on Afghanistan in policy teams in London. .. [we have] larger numbers of staff now than we used to who would do a London-based job on Afghanistan before they go to Kabul and Helmand, and then maybe again afterwards.[68]

67. Nevertheless, DFID admitted that there was room for improvement:

we have a lot of people … in the organisation who have experience of Afghanistan. One of the things we are currently working on is to see how we can do a better job of harnessing those skills and experiences of people who may, for obvious or good reasons, have moved on to a different area of DFID but still have an institutional experience. We need to find a way of making that knowledge and skill base available to the current staff who are working there.[69]

68. The typical posting of a home civil servant to a DFID country office is for three years, and is usually shorter in fragile countries. Short postings bring risks to continuity and institutional memory. We recommend that the Department consider the merits of extending the standard length of posting so that staff have more time to ground themselves in the local culture and environment and then utilise that knowledge. For more fragile environments, we repeat our recommendation that the Department develop a cadre of staff who would have several postings to the same location over a period of years, and who could providing on-going support to country based staff once they had completed individual postings.

69. The effectiveness with which DFID country based staff engage with local people will in part depend on their language and knowledge of local cultures. We recommend that the Department spend a small part of its rapidly growing budget on improving the language skills of its staff. We recommend that the Department put in place a strategy for addressing any gaps or shortfalls and take greater account of language skills in making appointments and promotions.

STAFF APPOINTED IN COUNTRY

70. The Department's latest plans are that the number of SAIC posts will increase from 745 in March 2011 to 980 by March 2015. As we have seen, the use of SAIC staff has many advantages. SAIC staff have invaluable local knowledge and cost less to employ, including lower non-wage costs such as flights home to the UK.

71. While in-country staff responses to the 2011 Civil Service People Survey have been generally positive resignation rates for staff appointed in-country are high compared to those of home civil servants.[70] Mark Lowcock told us:

One reason for that is most of the people we hire in countries, by definition, are not available to work for us in third countries or in the UK, so the number of additional opportunities available to them, in an office of 50 or 60 people, is obviously smaller than if you are one of our UK-based staff, for whom there are 2,000 or 1,800 opportunities available. That is the first thing to say.

72. The results of the survey also indicate that a significant minority of staff-appointed in-country have reported concerns over discrimination, harassment and bullying and most are not satisfied with levels of pay and benefits.[71] Mark Lowcock informed us:

There are some places where our local staff have said to us that we are not keeping up with the pay and benefits of other comparable employers. We operate a cross-government approach to terms and conditions for local staff, so we do that together with the Foreign Office. We are not trying to compete, because we cannot afford to, with the top employers in every market. On the whole, we think that some degree of churn and refreshment is a good thing, as I said earlier. We do not at the moment have any places where we have a major problem in recruiting and retaining staff of the calibre we need.[72]

73. On bullying and harassment we were told:

On the issue of other things that matter to people when they come to work, our We have just taken delivery of this year's staff survey. 2,300 people around the organisation have answered 50 or 60 questions telling us exactly what they think about that whole set of issues. We are digesting the results at the moment. We absolutely have something to do on this bullying and harassment issue, but it is very localised, and so we need a local response to those kinds of issues. The managers in charge of each location or business unit have a personal responsibility to work out what is going on in their area.

74. There have been some instances where standards of behaviour of a few SAICs were inadequate. Mark Lowcock informed us:

We absolutely expect our local staff to absorb and display behaviours that are consistent with the values we have across the public service in the UK. ...as part of the induction and support and training we give them, we are very clear about standards of behaviour that are expected. That touches on a whole range of issues. Lots of people have possibly previously worked in environments where corruption or bribe-taking is tolerated in a way in which it absolutely is not in our system.[73]

75. SAIC have a key role to play in DFID country programmes. DFID is bound by HMG rules on pay and conditions and thus if it is to retain good performing staff it must ensure they are well managed and motivated. While generally positive, the results of the Civil Service People Survey show that a significant minority of staff-appointed in country have reported experience of discrimination, harassment or bullying. We welcome DFID's determination to address discrimination, harassment and bullying. DFID must also ensure that SAICs' behaviour is in accordance with the values of the UK public service.

DFID's use of consultants

76. DFID spends approximately £500 million on technical co-operation. In our report last year we recommended that DFID should improve its assessment of which types of projects and services it should use consultants for, and in particular it should assess more carefully the use of consultants to manage the department's own service delivery programme. In its response to the report, DFID recognised that there was room for improvement and said it was considering the full range of options to resource projects for service delivery. Moreover, the additional front line delivery staff would increase DFID's capacity to manage service delivery programmes. The Committee also recommended that DFID identified expenditure on technical co-operation by purpose. In its response DFID said it would consider what could be done.

77. This year DFID undertook a review of its use of consultants. It found that there had been considerable overall growth in the number and total value of supplier contracts awarded and that the size of programmes and of contracts with suppliers is increasing. As a result, DFID made changes

Ministerial approval for the award of all supplier contracts over £1million;

the Secretary of State engaging directly with top suppliers to DFID to reinforce the need to improve value for money and;

the introduction of tougher monitoring of supplier performance

78. The submission from the UK Aid Network/BOND called for additional measures: It

argued that there was currently a lack of data on DFID's commercial contractors which made it difficult to judge whether they offered the best value-for-money for the work they were contracted to undertake.
recommended that DFID instruct all commercial contractors and consultants to release open data conforming to the International Aid Transparency Initiative (IATI) by the end of 2013.[74]

The TUC urged DFID to 'where possible, invest in strengthening in-house capacity to deliver aid, rather than excessively relying on commercial contractors and consultants, and require the latter to release open data conforming to the International Aid Transparency Initiative (IAIT) by the end of 2013'.[75]

79. On the other hand, Adam Smith International (ASI), one of DFID's largest contractors, argued that good quality DFID technical assistance was much appreciated by beneficiaries in developing countries and achieved excellent value for money. We were informed of seven projects which

have together cost less than £100 million but have to date generated benefits of at least £3,600 million. Moreover, after another five years the benefits generated will be much more - of the order of £12,000 million.

...input costs are very modest compared to the cost of professional services used by other parts of the UK government, and are surprisingly roughly equivalent or a little less than the daily cost of civil servants, military personnel and international donor officials. The questions that need to be addressed are not 'how can we make technical assistance inputs even cheaper' or 'what else could we do instead' but rather matters such 'how can we make technical assistance more effective', 'how can it be provided faster and more flexibly,' and 'how can procurement processes take proper account of excellent past performance.'[76]

Administration costs

80. In 2011-12 the Department reduced its administration costs by £21million (about 20%) to £103 million (£18 million below its budget).[77] Figure sets out the cost reductions by type of cost.

Figure 9: The Department's administration costs, 2010-11 to 2011-12

Type of cost (income) 2010-11 £million 2011-12 £million Increase (reduction) in cost between 2010-11 and 2011-12 Percentage increase (reduction) in cost

Employee costs (salaries, pensions, contract & agency staff) 75.2 62.8 -12.4 -16%

Property costs 26.1 24.0 -2.1 -8%

Staff training costs, business travel, subsistence and overseas costs 10.7 8.9 -1.8 -17%

Communications and information technology 8.9 6.3 -2.6 -29%

Consultancy, service and supply costs 4.7 2.5 -2.2 -47%

Other 4.1 5.3 1.1 27%

Income (5.9) (6.5) - 0.6 -10%

Total Cost 123.8 103.3 - 20.6 -17%

NOTES
2. The values for the individual cost elements may not sum exactly to the total because of rounding.
Source: NAO presentation of Departmental data

81. The majority of the savings in administration costs arose from a £12 million reduction in employee costs. Reductions were also made in most other areas of administrative spending, with large percentage reductions (47%) in consultancy, service and supply (NB not to be confused with spending on consultants to provide technical co-operation) and communications and information technology (29%) (see Figure 11 on page 23).

82. The Department's administration budget will decline in cash terms to £94 million in 2014-15, equivalent to a real terms reduction of one third over the Spending Review period. The Department expects that its employee costs will fall again in 2013-14 and 2014-15. By 2014-15, the London accommodation move should contribute net savings. [78]

Costs associated with the location of staff

THE DISTRIBUTION OF STAFF BETWEEN LONDON AND EAST KILBRIDE

83. DFID's UK staff are based in London and East Kilbride. The number of staff in each office is shown in Figure 10. The numbers of staff in both locations increased from March 2011 and will increase to March 2013 and thereafter decline. In both locations there will be more staff in senior posts in March 2015 than there were in March 2011.

Figure 10

Number and grade of posts in London and East Kilbride, actual March 2011 and September 2012, planned March 2013 to March 2015

NOTES

There are three bands of staff below Senior Civil Service, with Band A being the most senior.

Source: NAO presentation of departmental data

84. The overall costs of running an office in Scotland are significantly less than those in London.[79] While maintaining two offices imposes travel costs, these have remained relatively stable over the last three to four years and DFID hopes to make increasing use of video technology to communicate between the two offices. We were told

That travel costs us £400,000 to £450,000 a year, so it is quite a small element of our overall global travel budget. ... we are stepping up our video capability, so everyone will be able to run videos over their own office laptop, and the spaces in both buildings to make that work sensibly will be much better than they have been in the past. We do expect video to still be really important, but face-to-face travel and meetings will also be important. In the context of the overall savings and costs of accommodation, even if we had a 10% or 20% increase in travel, you are talking about tiny sums of money in relation to the overall value that we gain by having an office in Scotland.

85. DFID UK-based staff are split between London and East Kilbride. At the latter location, there will be 290 Band B and C staff and 290 senior civil service and Band A staff. We will be undertaking an inquiry later in the year to look at the implications for jobs in East Kilbride of Scottish independence.

THE LONDON ACCOMMODATION MOVE

86. The Department will move its London-based staff to 22-26 Whitehall in early 2013, which should reduce steady state accommodation costs by around £6.5 million per annum.[80]

87. The accommodation in 22-26 Whitehall is significantly smaller than Palace Street and thus the Department is moving some posts from London to Abercrombie House in East Kilbride.[81] The Cabinet Office, the previous occupant of DFID's new premises, had 600 staff in the new offices, DFID will have 800.[82]

SECURITY COSTS

88. In 2012 we visited Afghanistan and Pakistan and noted the high level of security. DFID provided information about its operating costs (Admin and Front Line Delivery) related to overseas offices charged to Close Protection, Property—Insurance charges, Property Protection, Property Security and Patrols, Security Equipment Maintenance and Upgrades. Total costs have varied considerably from year to year but operational security costs in Afghanistan consistently represent a significant proportion.

89. In confidential meetings with a number of individuals the Committee heard concerns about the provision of security for DFID staff. Organisations have been unwilling to criticise DFID publicly but privately have argued that DFID might make more use of local drivers and less high profile vehicles. Non-governmental organisations use low profile cars with trained drivers who are always in radio contact and only use armoured cars in very dangerous provinces. A relaxation of the security rules for civil servants and related costs with accompanying reductions in security costs has been suggested.

90. We were told

To draw this comparison with the NGOs is the right question to ask. I am afraid to say, though, that, in some of the countries where we operate, there is a material difference between working for an NGO and being associated with the UK Government in a Government Department. We have to take the security of our staff extremely seriously and we have to make these kinds of judgments about how to keep them safe.[83]

We...have a legal obligation to provide a proper duty of care to our staff... the cost of dealing with it [a problem], with a kidnapping for example, is very high. Minimising the number of times we have to deal with those costs is also something we need to bear in mind.[84]

91. We also wondered whether security inhibited the ability of DFID staff to do the job. We wondered whether 'if we could not do this in a slightly more low profile way, maybe through third parties rather than directly, maybe we should not do it at all'. The Permanent Secretary agreed to consider this issue.[85]

92. Security expenditure in high risk countries is significant. We understand the Permanent Secretary's concerns about the Department's duty of care to its staff but there appears to be less attention paid to how this impinges on the ability to deliver departmental objectives on the ground. We recommend that the UK Government consider changing working and/or delivery methods to take this fully into account.

ADMINISTRATIVE STAFF COSTS

93.  While the Department is increasing the number of frontline staff, it is planning to cut the total number of administrative posts by around 100 (18%) to around 450 over four years to 2014-15. By May 2012 it had made a net cut of 28 posts, with a 45 post reduction being made in its Business Solutions Division which is responsible for IT and telecommunications.[86]

Figure 11:

Number of administrative posts by division, actual change between March 2011 and May 2012, and planned change May 2012 and March 2015

Division March 2011 Actual Actual increase (decrease) between March 2011 and May 2012 May 2012 Actual Planned increase (decrease) between May 2012 and March 2015 March 2015 Planned

Corporate Hub and Business Change & Strategy 28 0 28 1 29

Internal Audit 22 -1 21 5 26

Communications 60 -7 53 -5 48

Human Resources, Security and Facilities 129 25 154 -57 97

Business Solutions 156 -45 111 8 119

Finance and Corporate Performance 158 -3 155 -21 134

Total 551 -28 523 -69 453

NOTES
1.  A small team transferred from Business Solutions to the Corporate Hub in 2011-12. The March 2011 baseline figures for the two Divisions have been revised to strip out the effect of this move.
2.  The values for individual elements may not sum exactly to the total because of rounding.
Source: NAO presentation of departmental data

94. The TUC argued that:

DFID has slightly increased its staff over the last two years to help deliver the increased aid budget. However there has been a significant reduction, around 10%, of administrative staff which is impacting upon DFID's ability to deliver aid effectively. With DFID due to increase its budget significantly, continuing to maintain arbitrary restrictions on staffing levels, or indeed any further cuts to staffing levels, will exacerbate this problem. [87]

The UK Aid Network and BOND state

We believe that DFID's human resources need to be at a sufficient level to deliver its aid programmes effectively. We are concerned that a rising DFID budget is not matched by a rising DFID headcount. We do not think that an arbitrary departmental headcount is the best way of ensuring value-for-money.[88]

95. Officials were asked what impact the cuts in administrative staff would have on DFID's capacity to scale up the aid programme and, in particular, the consequences of reducing administrative costs by a third while increasing the numbers of frontline staff. We were told:

We are doing it over a three to four year period, so I think that gives us enough time to get it right... There is a significant chunk of staffing reductions that will follow from automating a lot of our HR processes. We are also looking at the staff who essentially do corporate activities around the network and ... whether we simplify some processes there. The timescale means that we have been able to do this in a way that has not compromised our ability to provide the support that we need to provide from the centre to the business.[89]

My current estimate is that we do have the capacity to deliver, particularly across the bilateral programme, because we have so substantially grown the professional capability of the major overseas offices.[90]

96. We also asked officials about concerns that tasks which were previously done by administrative staff were now being done by people on high salaries. Mark Lowcock replied:

Most of the tasks are being automated away. We used to have hundreds of people in DFID whose job was to put papers on to files. We do not have those jobs anymore, because we have automated our recordkeeping.[91]

Richard Calvert added:

we also want people who are doing programme management and doing professional jobs to care about the people and the money side of what they are doing. If you had gone back 15 years, you would have found a lot of professional advisers in DFID thinking that looking after the money was someone else's job, and we had a layer of administrative people to do that.[92]

97. The Department has made clear its intention to reduce administration costs despite an increasing budget; however, the evidence relied upon to support these reductions is either historical, in relation to changing from paper based systems to computerised systems, or lack detail, described as simplifying processes. There is a lack of substance in the explanation provided by the department. We recommend that DFID provide a detailed breakdown of the changes of processes that have allowed savings to be made.

98. Employee costs have borne the largest reduction in administrative costs. It is important that as a result too many administrative tasks are not farmed out to front-line staff, thereby reducing the overall efficiency of the Department. The level of administrative costs should not be an arbitrary target, but should be determined by what is best for delivering the Department's results.