International Development CommitteeWritten evidence submitted by Adam Smith International

1. Introduction

One of the areas in which the Committee has specifically invited short written submissions is “DFID’s use of consultants and whether they offer value for money”.

Our view is that the technical assistance provided to developing countries by consultants can have a hugely positive effect and deliver excellent value for money. It is a form of development assistance that can have a major impact out of all proportion to its cost and help achieve transformational change. As examples we cite below demonstrate, the return on investment in well-designed and well-delivered TA can be very high indeed.

Moreover, effective change achieved by technical assistance is sustainable. It does not require further UK aid funds. In that sense it is true development.

However, some newspapers have recently targeted consultants working in international development for criticism. They have alleged that DFID international development spending on technical assistance provided by consultants is all “waste.” Their reporting uses pejorative language, for example saying that £500 million of DFID funds has been “diverted” to consultants. That’s like saying that spending on the NHS has been “diverted to pay for doctors & nurses”.

Consultants who provide DFID’s technical assistance are acting as the implementing arm of DFID’s policies, programmes and projects. This is very different from internal change management type consultancy in the UK and we believe that more must be done both to ensure that this important distinction is understood and that the benefits of technical assistance are more widely understood.

Most consultants who provide DFID’s technical assistance to developing countries deserve praise, not carping criticism. They work very hard in very difficult conditions, often at considerable personal risk to their safety and security, and deliver outstanding results. The facts show that this form of development assistance is one of the most effective of all aid modalities, and provides the best value for money. This note provides clear evidence of this.

Moreover DFID’s spending on technical assistance is easier to direct, control and account for, and when considering DFID’s reputation, it is less prone to corruption, misuse and waste than DFID’s other major spending vehicles—such as budget support and funding through agencies such as UNDP and the European Commission.

2. The Supply of Technical Assistance Services to DFID

Technical assistance accounts for about £500 million of DFID’s £8.8 billion budget. A much smaller percentage of the UK development budget is implemented by private contractors than in the case of other major bilateral donors. Moreover the programmes implemented by contractors in the UK are much smaller than those implemented by contractors for donors such as AUSAID and USAID.

There are a considerable number of organisations which supply technical assistance service to DFID. The market for the supply of these services is fragmented rather than concentrated. No organisation has more than 8 or 9% of the market. There is significantly higher competition for DFID contracts than there is for other well respected bi-lateral donors. AUSAID’s rapidly growing budget for Technical Assistance (TA) is dominated by four firms each enjoying more than a 20% share of the TA budget. All four firms have turnover more than £100 million a year from AUSAID contracts. Two of these Australian firms are in the top five or six DFID suppliers. DFID’s top ten suppliers also include American and French owned companies.

DFID has recently moved to procuring the bulk of its technical assistance through framework contracts, which were competitively bid for by a large number of firms. A considerable number of firms now hold framework contracts, enabling them to bid on each tender without any prequalification. For example a total of 21 firms hold a governance framework contract and 41 firms hold a fragile and conflict-affected states framework contract. Organisations holding these contracts include NGOs such as Save the Children, Care International and Saferworld.

Accessing technical assistance allows DFID to access and use specialist skills which are not readily available elsewhere. A vast range of specialists are deployed, from electricity regulation experts to international trade lawyers. Moreover they are managed effectively by firms specialising in the management of coherent teams and are focused on achieving the desired results.

3. The Value for Money provided by Technical Assistance

3.1 Leverage: Technical assistance is able to create the leverage that provides very high value for money. By causing change it is able to achieve major advances that can deliver an impact much, much greater than its cost.

While one pound of budget support paid to a developing country Government generally buys one pound of public sector services, technical assistance has the potential to buy exponentially more and often does.

Measuring impact is much easier in some areas that others. Where technical assistance has a direct financial impact, vfm is clearly much more straightforward to measure. Where it is focussed on institution-building with a relatively broad impact it is much more difficult to quantify or monetise. Below we provide examples of value for money achieved by seven different ASI projects.

We seek to quantify the benefits in each case. Of course one cannot attribute 100% of the benefit to the respective project. In each case however the project made a critical contribution without which the benefit would not have occurred.

3.2 Legislative, Institutional & Economic Reform of Sierra Leone’s Mining Sector: In Sierra Leone Adam Smith International (ASI) has taken the lead in installing an international standard mining sector institutional and legal framework, and is transforming Government capacity to ensure effective mining sector governance. The resulting stability, institutional effectiveness and transparency has had, and continues to have, significant impact on investor confidence, economic development of the sector and corporate compliance. It has been critical to the mining industry becoming Sierra Leone’s economic “game-changer”, in that it is the main source of the world-leading 34% GDP growth forecast by the IMF for 2012 and the much higher economic growth over the next decade as a whole that will transform the country’s economic position.

The sustainable impact on Sierra Leone’s long-term financial independence is very considerable. The Government and the IMF estimate that by 2015, annual revenues from mining should reach £130 million, or 29% of all Government revenue. This would mean that in just a short space of time, mining revenues will far exceed the total support provided by DFID across all aid projects in 2012 of just over £50 million. The chart below sets out the gains made:

The effectiveness of our work has been confirmed by independent evaluations. One such evaluation for DFID stated:

“ASI has carried out an exemplary project in terms of their management, technical competence, engagement, and commitment. The Govt of Sierra Leone has high regard for the quality of the work. The project outputs are clearly evident in two new Acts, Bills, Regulations and Guidelines totalling more than 500 pages of official text. Some components of the work... should be disseminated as examples of good practice internationally.”

The Government of Sierra Leone has stressed its appreciation of the work done. The Deputy Minister of Mineral Resources said “I would like to thank ASI for bringing about this fundamental change to our country. It is a new era for Sierra Leone”, and George Pessima, Cabinet Secretary, said “You people [ASI] have demonstrated commitment not only to the project but to the country of Sierra Leone”.

3.3 Burundi tax reform: In Burundi ASI has been working since September 2009 to reform Burundi’s tax administration, the Office Burundais des Recettes (OBR), and increase tax revenues.

At the start of the project, establishing an operational, unified revenue and customs agency was a key requirement to fulfil Burundi’s commitment to facilitate trade and to participate in the East African Community (EAC) Common Market. Between September 2009 and April 2011 ASI facilitated the transition of the existing Tax and Customs Departments of the Ministry of Finance to the newly-created OBR. Working in tandem with the OBR’s Commissioner General (CG), ASI assisted in the retrenchment of staff and the recruitment of 425 senior and mid-level replacements With the foundations for reform thus laid, in June 2011 ASI began the second phase of support: to strengthen capacity for rolling out comprehensive tax and customs reform.

The OBR’s numbers attest to ASI’s success: revenue for 2011 amounted to £202 million, representing an increase of 30% over 2010. 2012 figures are expected to record an increase of circa 20% on 2011. Commenting on the OBR’s reform in 2011, the International Monetary Fund (IMF) said that “the remarkable performance of 2010 shows Burundi’s real tax revenues not only growing faster than the EAC average, but also being the fastest growing in the EAC. Real tax revenue growth increased ten times from 2008 to 2009 and more than doubled from 2009 to 2010.” Such rapid increases in revenue are enabling the Government to better serve its people and improve its delivery of basic services including in health and education. There is also anecdotal evidence of a reduction in corruption.

Our major role in this success has been stressed by the Director General of the OBR, who stated:

“Over the last three years, Adam Smith International advisers have worked closely with me and my team at the OBR... The project managers and advisers provided by ASI have all been of high calibre, highly committed and extremely responsive to the needs of the OBR. They have been a big part of our success in delivering revenue growth and building the OBR as an effective institution.”

The increase in revenue has been as follows:

Year

2009

2010

2011

2012*

2012**

Total revenue (BIF billion)

301.21

362.76

471.71

445.92

545.39

Total revenue (£ million)

129.1

155.4

202.1

191.1

233.7

% increase on previous year

N/A

20.5%

30%

11.5%^

15.6%

* January to October 2012.

** expected outcome.

^ Compared to January to October 2011.

Overall, the OBR’s revenue increased by £73.1 million/56.6% between 2009 and 2011, and by the end of 2012 is targeted to have increased by circa £104.6 million/81.1%. During the same period the cost of ASI support has been ASI has been £2.73 million. This represents exceptional value for money.

3.4 Support to the Afghan Ministry of Mines (MoM): ASI’s support to Afghanistan’s MoM is helping to provide the economic base for Afghan self-sufficiency. Development of the billions of dollars worth of mineral resources in Afghanistan is the country’s best hope for economic growth & long-term revenue generation.

With ASI assistance the MoM is transitioning from an inefficient owner-operator role to that of a policy-maker and regulator able to attract private sector investment. With DFID-funded ASI support, the MoM has developed a five-year business plan to oversee its restructuring aims and is two years into its implementation. Under this business plan, key directorates have been staffed, and significant capacity development has been undertaken. The project has supported the ministry in updating the legal environment for mining in the country, which was previously outdated and unfriendly to investors, and investment is now flowing in.

Overall the project has played a critical role in transforming the effectiveness of the MoM, catalysing significant private investment and creating new hope for the Afghan economy. If the MoM’s plans are implemented the Afghan Government estimates its revenue from mining will increase to $3.5 billion over 15 years which will cover 77.7% of the core Government budget.

It’s not just the revenue that will benefit Afghanistan. The mining investments will have a major effect on economic growth and open up many employment and business opportunities for Afghans. For example a study commissioned by the Ministry of Mines has identified OPEX and CAPEX opportunities for Afghan businesses at two mines, Aynak and Amu Datya, of more than $900 million.

Our project started in early 2010. In subsequent years there have been substantial increases in revenue from the mining sector. The increased revenue above what was being collected before is some £61 million, taking only the mining specific taxes and disregarding ordinary corporate taxes paid by mining operations. Of course, as noted above, that is a tiny sum compared to the revenue that will arrive in future years, but it is nevertheless vastly in excess of the costs of our technical assistance.

Our project’s role is central to these advances. To give just one example, we have drafted a new minerals law to replace the current one which deters investment because it does not provide internationally required guarantees to investors. That new law is close being approved, and the biggest investment in the history of Afghanistan—(USD12 billion for the development of the Hajigak Iron deposit including infrastructure and a smelter)—rides on amending the Law. The deal is already negotiated but the winning Indian consortium won’t sign the contract under the current Law.

3.5 Strengthening central Government institutions in South Sudan: Our Strengthening Executive Government project in South Sudan played a key role in the building of Africa’s newest state. The project—led by a former Chief of Staff from the Australian Premier’s Office—helped create and streamline Government decision-making processes and built capacity to communicate these decisions and their implications effectively to local, regional and international audiences.

The ability to take good decisions and communicate them well is central to Government effectiveness. The project can best be described by Deng Alor Kuol, Minister of Cabinet Affairs in the Government of the Republic of South Sudan:

“This relatively modest project underpins the rest of the UK’s development assistance to my country, in sectors like education, health, roads and food security.

The DFID [ASI] project team has played an important role in building the core institutions of our new Republic, both in the lead-up to Independence and since. In particular it has helped develop new Cabinet procedures that will enable us to make better national decisions in future, especially on complex issues where we have to think across sectors and ensure our plans are implementable. The Cabinet’s enthusiastic approval of these new procedures is one measure of the project’s success. With the DFID [ASI] team’s assistance, we are now moving to implement these new Cabinet procedures, including establishment of a Cabinet liaison network across all ministries, another of the project’s initiatives, which will have an impact long after the project finishes as CLOs train other staff in their ministries to prepare better proposals and implementation reports.

The project has been helping all Ministers to perform their roles more effectively, especially with practical advice on how to work better with their ministries to deliver development priorities. It has played a pivotal role in establishing the new role of Deputy Minister in South Sudan, with advice on the Constitutional provisions and an induction program for all Deputy Ministers within a few weeks of their appointments. The project has also conducted successful training workshops with women Ministers and Deputy Ministers, as well as all Undersecretaries, again focused on building real capacity to deliver results for our nation. I cannot speak too highly of the project team’s achievements”.

DFID commented:

“The project was very relevant and timely in its response to key specific needs of the newly formed Government of South Sudan. It has certainly created a lasting impact. The fact that the training and technical inputs were demand driven is also worth pointing to, together with the significant appetite within Government, at a high level, for this type of support. It’s worth keeping sight of some of the key lessons learnt for this type of engagement, such as maintaining flexibility and building trust; using a small team of highly experienced advisers, with a sustained involvement”.

But how does one quantify the benefit of improved decision-making at the centre of Government? Clearly an effective decision-making process is central to a properly functioning state. The benefits are myriad. But putting a monetary value on the benefits is not easy. A conservative approach could place a value of say 2% of the South Sudan annual budget from improved decision-making and greater effectiveness of spending. Over a five year period that would amount to £81.25 million.

3.6 Creation of and support to centre of Government institutions in Iraq. Our DFID-funded programme of support to Iraq over the period 2004–10 was instrumental in setting up from scratch the central Government structures in Baghdad, including the Office of the Prime Minister, the Cabinet Office and the Presidency, and associated policy analysis and decision-making systems. The effectiveness and success of this work was praised repeatedly by senior witnesses giving evidence to the Iraq inquiry.

It was to these new central institutions and the politicians and officials that worked within them that authority/sovereignty was transferred by the Coalition Provisional Authority (CPA) in 2004 the first step in a process that concluded several years later with the exit of US and British forces from Iraq.

ASI supported several transitions over the period of these years the most recent being the transition to the administration of the current Prime Minister Maliki whose administration, although not without faults, was robust enough to allow an exit of external military forces. The structures that ASI/DFID established are still in place—indeed a small team of ASI advisers remains in place within them funded by SIDA—and their robustness and resilience were key factors in allowing UK and other troops to withdraw and Iraq to return to relative stability and to begin the process of reconstruction—particularly in the wealth generating oil sector. But how do we put a value on the impact? To take just one aspect of the assistance once could say that robust institutions at the centre of Government capable of leading the country accounted for some 5% of the factors that permitted Britain to withdraw its troops from Iraq. The cost of that deployment was running at £2 billion in its last year so 5% of that figure for one year only is £100 million. To that one could add a fairly nominal £50 million per year to account for the increased efficiency of Government spending due to more effective decision-making.

3.7 Revenue reform in Afghanistan: The Strengthening National Provincial Tax Administration in Afghanistan project started in 2004 and is credited with playing a central role in reforming Afghanistan’s tax administration system and providing a reliable and expanding source of revenue for the Afghan Government. We deploy a team of advisers drawn from a range of tax authorities from around the World: our team leader for example had served as a senior revenue commissioner in New Zealand. He was awarded an OBE for his/ASI work in Afghanistan in 2011.

As Secretary of State Greening stated to the House of Commons on the 13 September 2012, Afghanistan’s domestic revenues have increased eight times since the programme of DFID support was initiated in 2004 and now stand at more than $2 billion dollars, with a 23% year on year increase for domestic revenues raised.

In the context of revenue collection, an important point to bear in mind is revenue collection as a proportion of GDP; the revenue collection figures mentioned above have outstripped economic growth considerably during the period of the project, with revenue as a proportion of GDP rising from less than 7% to more than 11% in the space of three years. Along with the high nominal revenue growth figure, this is an extremely strong indication of the very successful impact the project has had. By helping the Afghan Government increase substantially the revenue it raises the project is contributing considerably to both creating a viable Afghan state and the conditions in which the international community can greatly reduce its involvement.

Using figures supplied by the Afghan Ministry of Finance for the full capital and running cost of public services, the extra funds raised would enable the Afghan Government each year to provide a complete education to 18 million young Afghans. Of course there are only some seven million young Afghans requiring education, but let us imagine how much education would have been purchased had the DFID funds of about $8 million per annum been spent instead on direct budget support to the Afghan Government. In that case the number of school pupils that could be educated would be 85,100 per annum, a tiny figure compared to the 18 million. The charts below illustrate the stark difference:

3.8 The Nigeria Infrastructure Advisory Facility (NIAF): We are assisting the Nigerian Government in reforming its infrastructure sectors. Power is a particularly critical sector since absence of sufficient electricity is the most significant barrier to economic growth. The potential gains of effective reform are huge. The Nigerian Government estimates the cost of unserved energy to be (in terms of lost GDP) 20 trillion Naira per year (circa USD$ 130 billion), vastly in excess of DFID’s annual global budget. So far improved service delivery in power, to which NIAF has made a key contribution, has already produced savings to Nigeria worth £500 million a year.

Our recommendations of how to tackle the power sector problems have been accepted by the Nigerian Government and power sector reform is now the Nigerian President’s highest priority. We are well on the way to achieving transformative change with tariffs up hugely, the sector now viable and privatisation about to occur. The economic effect will be gigantic.

Work done by NIAF on improvement in roads maintenance and the completion of road improvement projects will address the second most significant perceived constraint on Nigeria’s economic development (after power). Better roads at the national, state, and district level will benefit all sections of the community—improving access to markets and services, reducing climate vulnerability, reducing operating costs, and saving lives lost in RTAs. Total gross targeted savings of c £3.5 billion pa have been identified. A rough estimate of the annualised costs falling on Government (spread over 10 years) is £2.75 billion giving a net annual benefit of about £0.75 billion pa.

Another part of the project is helping improve capital project selection, procurement and delivery, where Nigeria’s track record is extremely weak. We expect that at least 10% of the federal capital budget (currently approximately N1.5 trillion pa) can be saved from being wasted, with the annual saving to the Nigerian economy amounting to c $1 billion pa (c £625 million).

NIAF is also working on the introduction of urban mass transit schemes in Nigeria’s cities. There is clear state level demand to develop urban mass transit, achieved as a result of the demonstration effect of successful NIAF-supported reform in Lagos. The 30% reduction in peak hour journey times achieved on the BRT corridor in Lagos, together with the doubling of passenger trips achieved in three years has already yielded an annual benefit of some £28 million. We expect this to increase to an annual benefit of £86 million across Nigeria.

In summary, NIAF is providing technical assistance to key Nigerian public bodies engaged in infrastructure development, management and reform. In partnership with these bodies, NIAF has made—or will be making—a vital contribution to the achievement of very significant benefits. Many of these benefits cannot readily be evaluated in monetary terms. Where such “monetisation” has proved possible, however, the estimated values referred to above total £528 million to date and £1,961 per annum over the next five years. This does not include any estimate for the savings from increased power generation due to new investment or the pent up economic growth released by lifting the constraints off electricity supply. Both these will be huge.

3.9 Conclusion. The combined impact of just these seven projects alone demonstrates the value for money achieved and justifies DFID’s whole annual technical assistance budget of some £500 million rather than just the seven projects cited. The summary benefits are as follows:

Project

TA cost (£m)

Benefit (£m)

Net benefit to date

Projected benefit after five years

Afghan tax

35.50

2,592.80

2,557.30

5,607.30

Burundi tax

2.73

265.90

263.17

1,572.17

Sierra Leone mines

2.80

35.88

33.08

465.58

Nigeria infrastructure

45.30

528.00

482.70

2,443.70*

Afghan mines

4.00

61.00

57.00

1,525.00

Sudan CoG

1.70

48.75

47.05

128.30

Iraq CoG

6.00

250.00

244.00

494.00

Total

98.03

3,684.30

12,236.05

*In respect of Nigeria infrastructure we state only the annual benefit over the next 5 years not the combined benefit, as the total remains unclear.

4. Price of Inputs

It is often taken as a given consultants anywhere are paid too much. For example, an IDC report of February 2011 suggested that DFID should “examine whether, as a major purchaser of [consultancy] services, DFID could do more to drive down fee rates”. In fact it would be very easy to drive down the price of consultancy services purchased by DFID, but it would not be wise.

All of DFID’s main suppliers source the majority of their proposed project team members from the open market on a contract, project specific basis. Although they will prefer to use tried and tested consultants on whom they can rely, in practice they have full flexibility in choosing the consultants they bring onto bids and thus the price of those consultants. There is a vast range of consultants who are available in every field, and many are of low quality, because many purchasers of international development TA services, such as the EU and in particular the UN organisations, use cheaper consultants.

To drive down the price of consultancy services DFID could, for example, increase the emphasis on price in bid evaluations, thus pushing firms into hiring cheaper consultants. Firms who tender for DFID contracts look carefully at the precise evaluation criteria. If putting forward cheaper consultants is a key criterion then they will do it in order to try and win. Projects will be staffed by cheaper consultants and the impact will be significant.

The market for international development consultants is large and highly competitive. Price is closely correlated with quality, as one might expect. Low quality consultants generally do a poor job, as is evidenced by the very poor performance of projects run by organisations such as UNDP (as confirmed by numerous evaluation reports). It is however very easy to spend just as much budget on poor quality consultancy services—often more, as little is achieved and activities need to be prolonged.

In some cases of cheaper services, the nature of the technical assistance is different. For example, a typical EU technical assistance assignment is very much focussed on implementing the specific and narrow tasks identified in the terms of reference. There is little room for flexibility, even if the requirements on the ground change, as they usually do. Consultants on EU projects do generally cost a little—but not much—less than those on DFID projects, but most are of a quite different standard, being used to the “tick box” approach.

The price of consultants hired by DFID is already much below the price paid by other UK Govt. departments. The Cabinet Office has issued a “rate card” providing guidance for departments on reasonable consultancy costs. The example fee rates issued in 2008–09 are as follows:

Managing consultant—£1,750.

Principal consultant—£1,445.

Senior consultant—£1,225.

Consultant—£1,100.

Junior consultant—£700.

The rates in a framework contract between the Office of Government Commerce and a major UK professional services firm for the years 2009–10, 2010–11 and 2011–12 are as follows:

Junior Consultant

Consultant

Senior Consultant

Principal Consultant

Director/Partner

£500

£1,030

£1,390

£1,580

£2,200

Higher rates were achieved by the public sector practice of a major international management consultancy in 2008 in a project for a UK Government Department:

Junior Consultant

Manager

Senior Manager

Principal Consultant

Director

£900.00

£1,650

£1,650

£2,300

£2,600.00

These types of rate are very much above the rates paid by DFID the bulk of which are generally in the £400 to £850 range, with only a few outliers.

The price of consultants hired by DFID is also generally below the cost of deploying civil servants in developing countries. For example, the cost of paying a grade six civil servant (about two-thirds up the grade scale) to Juba in South Sudan is £854 per day, taking into account the various benefits, general allowances and post specific allowances. Very few consultants in Juba cost more than that. Moreover it would be natural to expect to pay more for a consultant, who has no job security unlike a fully employed civil servant. To take the case of the Grade 6 civil servant, if that risk premium was 30% one would expect to pay £1,137 per day. This does not take into account the lower utilisation (no of days sold per year) which also acts to increase the price of consultancy services.

Similarly, if one looks at the cost of paying a Lieutenant Colonel, a Colonel or a Brigadier—an alternative to consultants in the case of security projects—this is respectively £875, £973 and £1,069 per day, before the addition of any risk premium.

If we look at the cost of paying World Bank and IMF staff again we can see that consultancy rates paid by DFID compare very favourably with these. A lead professional grade in the World Bank, (grade GH) receives £220,717 a year in salary and benefits, (marked up for tax which because World Bank salaries are free of tax). Similar figures for the A13 grade in the IMF (Economic specialists) and the A14 grade in the IMF (senior economists, deputy division chiefs) are £208,174 and £247,166. Thus the daily cost of these donor staff is £1,003, £946 and £1,126.

Data regarding World Bank and IMF salaries versus other comparables is difficult to find. There was a comprehensive study done by the General Accounting Office of the US Congress in 1995. It found that that Bank and Fund pay rates were “approximately equal to the 75th percentile level (P75) for comparable positions in the US market and are higher than overall European P75 levels. However they do not provide the overall margin over pay levels in European private sector organisations.” Interestingly the GAO report commented as follows:

“The system is designed to provide competitive compensation that will permit recruitment and retention of the highest quality multinational staff...Bank and Fund officials stressed the need for the highest quality employees in light of the potential economic impact of the two institutions’ lending activity and policy reform recommendations.”

The same argument applies of course to consultancy advice procured by DFID.

The data above demonstrates that daily rates paid by DFID to consultancy firms are generally below public sector full-time staff equivalents, which is not what one would expect. Consultants, who can be hired to suit a particular specialism or task and only for as long as is required to carry it out, represent better value for money in the roles that DFID recruits them for. Driving rates down further would likely have a very deleterious effect on quality and this value for money. A critical question that needs to be addressed is whether consultancy rates have already been pushed down so as to damage the achievement of value for money.

There is a separate but related issue as to whether companies providing international development services are in some way too profitable. The evidence suggests that this is not the case at all. Research demonstrates that consultancy firms which provide services to DFID have considerably lower profit margins than consultancy firms in general. The average profit margin over two years for 6 firms which provide services to DFID is 9.6%. By contrast consultancy firms specialising in business process reengineering and IT services have an average profit margin of around 16% and general management consultancies an average profit margin of around 26%. Profits for companies supplying DFID are necessary to enable them to maintain and expand their operations and maintain adequate working capital to service projects, including the pre-financing required by DFID.

In summary DFID can take the decision to go down-market and join the low quality technical assistance providers. It is, however, difficult to see how this is in the interest of either the UK or the recipient countries. Higher quality advice from the UK is very much appreciated and welcomed by developing country recipients.

Value for money rests on achieving results. Without results there can be no value for money. In technical assistance results are best achieved by deploying good people and managing them well. DFID has a reputation for delivering superior performance to other development agencies. It would not be wise for DFID to undermine that reputation by lowering the quality of the technical assistance that it delivers.

5. Conclusion

This analysis has demonstrated the extremely high impact of technical assistance, when programmes are designed well and managed and implemented effectively. We have shown from a set of seven projects that we implement that exceptional value for money can be achieved. Those seven projects 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.

This note also shows that 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.”

Good quality DFID technical assistance is much appreciated by beneficiaries in developing countries. It achieves excellent value for money. It is something of which Britain can be proud.

November 2012

Prepared 30th January 2013