Department for International Development's Performance in 2013-2014: the Departmental Annual Report 2013-14 - International Development Contents

6  Programming and Staffing

106. This chapter looks at how DFID's programming has adapted to its changing management requirements. We look at three aspects: DFID's programme management reforms, its use of Payment By Results, and its staffing.

Programme Management

107. In last year's report on DFID's performance, we stressed the need to streamline programme management. We are pleased that DFID[190] has reformed its programme management processes, following a review by the Secretary of State which found:

·  DFID's conventional approach to programme management needs to change. DFID needed to strip back our process and focus on real-world delivery. Its programmes need to be flexible and responsive to changing political realities and conflict dynamics on the ground;

·  Programme excellence requires collective responsibility for delivery. This means making decisions that are contextually aware, proportionate in their management, and clear in their audit trail;

·  Streamlining processes will only get the Department so far. Culture and behaviour are in practice more important than the fine print of the rules.

Following this review, DFID developed reforms to its programme management including: improving programme management rules, skills and accountability

SMART RULES

108. DFID has improved its programme management processes through the introduction of the Smart Rules in June 2014, streamlined documentation, and tighter governance of the DFID programme cycle. DFID told us that the Smart Rules have simplified requirements for business cases, and encouraged DFID senior staff to use their judgement on what is necessary.[191] Many witnesses welcomed the increased flexibility of the Smart Rules, although further improvement was needed; Coffey International stressed the need for more flexible and adaptive programming so that changes were easier to make.[192] ICAI undertook a Rapid Review of the Smart Rules which Box 1 highlights.[193] This included the need for the rules to be part of a wider transformation of the Department.Box 1: ICAI's Rapid Review of Smart Rules

ICAI recently reviewed DFID's new Smart Rules. It found:

·  There has been a serious attempt through the End to End Review and Smart Rules to grapple with some of the worst examples of procedural inefficiency.

·  The Smart Rules are a good beginning to the streamlining process, with the previous 200 compliance steps distilled to 37 rules. Country offices report they are pleased with the greater flexibility and simplicity.

·  The rules could be pared down further. Further clarity on what is mandatory and what is guidance is needed. The document still contains many 'musts' beyond the 37 rules.

·  The changes to the rules are necessary but not sufficient. The rules need to be part of a stronger vision and strategy supported and resourced by DFID senior management team, and part of a wider transformation of the department.

·  There has been an effort to reinforce the focus on delivery, with the introduction of the Delivery Plan as a key document a major step forward.

·  The Smart Rules are still not focussed sufficiently on the implementation stage of the programme cycle. Little in the rules provides clarity on how staff should oversee day-to-day implementation. Of the 37 rules, only 3 sit under the 'delivery' sub heading.

ICAI recommended that the Smart Rules need to:

·  be more explicit about intended beneficiary involvement;

·  clarify the relationship between value for money, sustainability and impact;

·  ensure a consistent approach to risk, adaptation and learning;

·  enable mobilisation and increased realism in planning; and

·  make senior staff (such as heads of office) specifically accountable for continuous learning

109. Similarly, Adam Smith International highlighted three additional weaknesses of the Smart Rules:

·  Multilateral bias: The rules discuss support to multilateral organisations, but only mention positive attributes of these organisations, despite many of them being highly defective in a wide number of respects.[194]

·  Goldplated Business cases: The actual instructions on how to prepare a business case are still too complicated, and do not do enough to reduce incentives towards producing gold-plated business cases, which inevitably become outdated.[195]

·  Loss of MOUs: There is no reference to the necessity of DFID signing MOUs with beneficiary countries on programme implementation. This leads to significant problems in understanding with beneficiary countries.[196]

PROGRAMME SKILLS AND CAPABILITY

110. DFID reported that it is developing its programme management capability. Previously ICAI highlighted this as a significant weakness:

We were concerned, however, at DFID's poor end-to-end programme management practices and the apparent lack of priority given to project management skills in DFID's staffing. We have seen instances of relatively junior DFID staff struggling to manage large contractors with far greater experience; with DFID personnel turning over much faster than the contractors' staff, leading to gaps in accountability.[197]

111. DFID told us that since this finding senior professional staff have been recruited and over 400 existing DFID staff have been on programme management training with 250 staff formally accredited into the "programme management cadre."[198] DFID reported that it has not sought to set up a separate programme management team, but to have programme management seen as a core skill for all frontline staff.[199]

112. DFID also informed us that it was important to change the culture of the Department,[200] but Adam Smith International noted that DFID faced real challenges in moving its culture towards the flexibility and adaptability necessary for effective programme delivery, and supporting staff to take risks.[201] The DAC Peer Review also noted that DFID staff did not always feel they could change the way things were done in the Department.[202]

113. Nonetheless, DFID reported that it is seeing a changing focus in its staff's efforts, and in how seriously programme management and monitoring is now taken by staff.[203] Though it should be noted the Committee's recent Parliamentary Strengthening report found that there were still considerable delays in when annual reviews or completion reports were publicly reported.[204]

ACCOUNTABILITY FOR PROGRAMME DELIVERY

A key focus of DFID's reforms has been on clearer accountability for programme delivery, rather than just design. The Springfield Centre highlighted the need:

Staff incentives are typically not aligned with good development but with meeting spending targets, and with the ability to deliver politically-appealing symbols of progress… The emphasis is on new programming and projected spending, not quality of implementation… By the time the performance of an initiative is scrutinised-they typically take eighteen months or so to set up-the advisor will be on the way to a different posting, so there is little accountability for performance… There is a fundamental misalignment between personal and organisational incentives and genuine development goals.[205]

114. DFID is introducing Senior Responsible Owners (SROs) for every DFID programme, responsible for the vision and overall performance of a programme and providing leadership throughout the programme life cycle. It has 200 SROs now in place. Witnesses welcomed the SRO mechanism, and stressing the importance of its oversight role.[206] However, one major limitation to its ambitions to ensure SRO accountability is the high level of staff turnover in DFID country offices (see below). ICAI notes that this means:

Several staff are likely to be SRO over a project lifecycle. DFID staff often move to new positions and countries with incomplete handovers. We think that there might be scope for DFID to consider whether and how staff remain accountable for their actions, when SRO of a project, after they have moved to new jobs (as happens in other organisations)… The SRO duties will need to be updated to reinforce the handover obligations and that a formal record of accountability should be established which can access past SROs for programme review and adaptation.[207]

Payment By Results

115. Another key change in DFID's approach is its increasing use of Payment By Results (PBR) mechanisms, where payments are made only after the achievement of pre-agreed results, rather than up front to fund future activities. DFID's new strategy aims to make PBR a core part of the way it funds projects, and for PBR to become the Department's default delivery option.[208] In the DFID 2013-14 Annual Report, DFID states: "DFID is at the forefront of international activity, mainstreaming more used forms and testing the most innovative forms of PBR."[209]

116. Following this ambition, DFID has begun to issue many PBR contracts. DFID reported in the 12 months to September 2013 that 71% of contracts for services issued centrally by DFID had a performance-based element, where payment is conditional on results, and that it was using more contracts where payment is based on delivering pre-agreed outputs.[210]

117. While witnesses acknowledged that there are benefits in looking to improve on existing funding mechanisms, a strong sense of concern was expressed by witnesses that the wholescale move to PBR was premature. Bond and UK Aid Network highlighted: "the strategy and the pace of its implementation has run ahead of evidence."[211] The Committee received a number of concerns over DFID's limited piloting of PBR ahead of this extensive roll out, as Water Aid observe:

We note that DFID's annual report confidently asserts several benefits to PBR approaches, including improved performance, innovation and transparency. As explicitly recognised by DFID in their recent Strategy for Payment by Results, there is no evidence to support any of these assertions. We would urge caution about increasing the use of PBR before current contracts have produced some evidence on their effectiveness.[212]

118. When questioned, DFID acknowledged that there is limited evidence available on the effects of using PBR in developing contexts. Rather DFID suggested its current use of PBR should actually be seen as a "pilot phase."[213] Witnesses also identified a number of more detailed concerns which should be kept in mind in these pilots caused by PBR's requirements for: results and measurability, short-term certainty, its effects on flexibility and innovation, risk transfer, and incentives for over-reporting.

RESULTS AND MEASURABILITY

119. Witnesses suggest that PBR has a number of requirements to make it work, including:

·  Definitions: Results in development projects are often hard to specify, with circumstances changing and confusion rife. Clarity and agreement over the definition of what a "result" actually is are essential to prevent disputes or distracting negotiations.[214]

·  Measurement: Coffey International stress that "PBR can only be applied where the results can be measured, and to be financially workable… only where the results can be measured within a reasonable timeframe."[215] It also requires a significant level of resources devoted to measuring and reporting results regularly.[216] This can place can place significant bureaucratic burdens on DFID and its suppliers.

·  Measurability: There is a consequent tendency towards "measurability", for projects to pursue "change that is most easily measured, rather than change that is most important."[217] This tends to focus on output targets rather than outcomes. DFID admitted that its current use of PBR is still focused on output targets, and that it is often very challenging to find outcome targets.[218] DAI Europe explained:

DFID has tried to set output targets (and therefore payment milestones for implementers) on a rolling, short term basis. Outputs for the near term will usually be clear. However, this solution creates a number of perverse incentives. Targets tend to focus on easily measured, quantitative results, instead of the systemic and behavioural change that development programmes often really need to achieve. The constant focus on the output level of the logical framework obscures the higher level outcomes and impact objectives. Implementers focus on achieving the immediate output target over laying the foundation for achieving the higher level outcomes.[219]

120. The danger of this focus is to squeeze areas that do not directly lead to 'results', like initial engagement, or institutional transformation, or to push organisations to show results promptly rather than establish the foundations necessary for more fundamental reform.[220] This means that PBR can often shift incentives away from systemic change or building local capacity.[221] The Development Results Forum noted:

If the deliverables chosen for payment do not cover all of the activities required to deliver the results, then there is a clear incentive to drop the other activities, as no payment is attached to them. This makes achieving the overall goals of the project is less likely.[222]

SHORT-TERM CERTAINTY

121. PBR tends to encourage a short term focus. The Development Results Forum note that if a project is relatively short-term, with clear deliverables, and where the delivery of the result is fully within the control of the provider, then PBR can be effective.[223] However, other witnesses warned that in most development contexts PBR can encourage a short-term focus on the quick wins-on doing things right, rather than doing the right things.[224]

As a consequence, witnesses suggest that this encourages implementers to take a narrow focus on the things they can control.[225] ICAI observes that DFID's commissioning can already tend to set unrealistic targets for suppliers,[226] which PBR could exacerbate. The Springfield Centre notes PBR carries the false assumption that development projects should be predictable in their outcomes.[227] Witnesses stressed that PBR creates a particular tendency for implementers to avoid uncertain work in two areas:

·  Less work with the most vulnerable. PBR provides a clear incentive against: seeking results in higher risk, more difficult locations, or seeking to reach more vulnerable, poorer communities.[228] Bond and the UK Aid Network observe: "For NGOs, there is emerging evidence of undesired behaviour arising from the use of PBR, such as challenges supporting the hardest-to-reach."[229]

There are also concerns over the combination of central management of funding with Payment by Results contracting methodologies. These give the service provider a direct incentive to direct funding to the less challenging locations where results are easier to achieve, and towards target groups who will yield results more easily. It is more difficult to achieve results in poorer and more disadvantaged communities.[230]

·  Bypassing national systems. Rather than encouraging contractors to work with and facilitate national systems, PBR promotes a focus on delivering directly, bypassing efforts to deal with messy national systems.[231] Water Aid suggests that PBR should be judged precisely in terms of these 'results', its impact on the sustainability of developing country systems.[232]

FLEXIBILITY AND INNOVATION

122. Witnesses also suggested Payment By Results has a tendency to inhibit programme flexibility, since it requires results to be defined in advance of work, and provides a framework that is hard to move away from. In conflict-affected and fragile environments, projects typically require great degree of flexibility, not only in how they are implemented but also in what realistic objectives are. Changing political realities, counterparts and timescales all mean that what is agreed today, might not be sensible or even viable in three months' time.

123. Moreover, witnesses suggest that PBR "provides a clear incentive against innovation."[233] Bond highlight that PBR risks excluding the most innovative approaches.[234] WaterAid state that its experience from DFID's WASH Results Programme, a finalist in the Government Excellence in Public Procurement Awards, was that it actively discouraged innovation:

WaterAid's reputation and finances would be at risk if we did not deliver on the contract, so we have ensured that the proposal covers activities for which we have a high level of confidence we can predict and ensure stated outputs, which means our most experienced country programmes and tried-and-tested approaches.[235]

RISK TRANSFER

124. Payment By Results marks a transfer of risk for delivering results from the Department to those implementing programmes. This has often unseen implications:

·  Cost Implications: Risk transfer typically costs money, and leads to higher cost for those wishing to transfer it away. DFID will need to be mindful of this in the management costs it is paying, especially when working with delivery partners where these are not clear (see chapter 4).

·  Risk of Exclusion: Marie Stopes note that PBR risks excluding those suppliers who cannot absorb this risk.

Many of the contexts in which development agencies work are risky and challenging. DFID should consider the risk that payment by results contracts ask NGOs to assume. Contracts with large payment by results components risk excluding technically strong suppliers from a tender process, even where they may be able to demonstrate good value for money.[236]

It has the consequence of creating additional barriers to entry for smaller groups. Because the risk of payment lies with the delivery partner, delivery organisations can need large reserves to cope both with the wait until payment for long term results, and uncertainty around the payment level. This level of financial risk is often too much for smaller organisations. DFID notes that its current pilots have already highlighted this risk.[237] Careful consideration of milestone payments is essential.[238]

MISREPORTING

125. Finally, when payment is directly linked to results the incentives to over-report results are greatly increased. These risks have in recent times manifested elsewhere in government, such as in the Ministry of Justice. ICAI have previously identified risks in partners over-reporting their results, and weaknesses in DFID's identification of this, for instance in its nutrition report.[239] DFID told us that it is looking to monitor these risks quite closely.[240]

126. Overall, witnesses suggested DFID needs to understand when it is appropriate to use PBR, and when not. As Coffey International note: "PBR is not a panacea to address the apparent weaknesses of input-based contracts."[241] Witnesses argued that PBR is not a suitable default option for lengthy programmes in uncertain areas such as Fragile and Conflict Affected states (which account for 21 out of DFID's 28 priority countries), and PBR is ill-suited for many development circumstances. The Development Results Forum concluded:

PBR is not a silver bullet which will enable DFID to achieve better development results without the hard work of close involvement in development interventions. In general, as DFID Chief Economist Stefan Dercon has pointed out, PBR is not suitable for most technical assistance interventions. It should be used very sparingly and only in the right circumstances; the exception rather than the rule.[242]

127. DFID also needs to understand how to use PBR. Witnesses stressed that currently there is a disconnection between central ambitions to use PBR, and how country offices actually manage programmes.[243] Looking forward, the Development Results Forum added that PBR will only be made effective through close cooperation between DFID and its implementing partners.[244]

128. DFID recognised that while PBR could produce a strong focus on results, problems could arise:

What we have been trying to do in our PBR contracting is to strike an appropriate balance between incentivising a stronger focus on results, but recognising that sometimes, through no fault of the implementing organisation, things take a bit longer than they were expecting to or other problems arise. We are trying to strike a balance there." [245]

Staffing

Numbers

129. DFID staff numbers have grown in the last 3 years, but at a lower rate than the growth in the Department's expenditure. Figure 10shows that DFID's staffing (Full Time Equivalents) grew by 24% in the 3 years from 2,325 (FTE) in 2011 to 2,847 in 2014.[246] Figure 11 shows that this means that DFID spending per staff member has risen from £2.5 million per FTE in March 2009-10 to £3.3 million per FTE in 2013-14.Figure 10: Rises in DFID Staff Numbers

Figure 11: DFID Spending per Staff Member

130. DFID staff are well paid, when compared to peer Departments. The median salary for DFID staff in 2013-14 was £52,901. This is significantly higher (almost £19,000 or 55% higher) than the median salary for Foreign and Commonwealth Office staff (£34,090).[247]

131. Figure 12 shows that the proportion of DFID's staff that are posted overseas has remained roughly constant during this period of growth, at just over half. As at September 2014, 53% of staff were based overseas.[248]Figure 12: Location of DFID Staff

Source: NAO report, Figure 29, Appendix 6

132. Witnesses stressed the importance of DFID maintaining this in-country capacity. Adam Smith highlighted the achievements of DFID's Afghanistan programme, "widely viewed as the gold standard among donors in the country"[249] precisely because it has maintained a strong presence.

These successes both on project delivery and project management have come about as a result of an investment that DFID has made… in the form of maintaining a good headcount for the DFID Afghanistan office in Kabul. Unlike other donors, DFID has maintained a strong presence of capable and experienced DFID staff to design, develop, procure and deliver high quality programmes.[250]

Adam Smith added that DFID needed to employ more staff in its country offices to increase its effective bilateral programming:

There is a need for an increase in DFID's headcount… on the frontline, so there are sufficient qualified personnel in-country to oversee and guide programmes…It makes much sense for DFID to maintain a sufficient headcount in order to maintain quality bilateral programming rather than channelling more money through multilateral programmes that suffer from myriad problems of ineffectiveness and unaccountability.[251]

There is also an argument for keeping staff in post for longer, as we have argued before. [252] Other agencies have postings for longer periods than DFID.

133. There are particular concerns about the high level of staff turnover in Fragile and Conflict Affected states. ICAI pointed out that DFID has not yet had success in changing this.

One of the key challenges that we have witnessed in our work has been the churn of DFID staff in post, both at the centre and especially in the field, which results in loss of institutional memory. We have seen no indication that DFID's high staff turnover rate (particularly in more fragile countries) is changing.[253]

134. DFID was unable to provide the Committee with data about staff turnover rates. While it collects annual returns from country offices on staff numbers to report in the accounts, it does not include as part of this exercise questions on how many staff have arrived or left the country office during the year, or the average level of service for the country office, and so has no overview of the level of churn in its country offices or if particular country offices at risk from high turnover. DFID did acknowledge that there is an issue of high turnover in Fragile and Conflict Affected states. However, it also noted that short postings are in part deliberate given the stress levels involved in working in these countries,[254] though it is making increasing use of staff's country knowledge while back in London. This short duration of postings to fragile states will be an increasing challenge going forward as DFID moves more of its programmatic focus onto FCAs, and DFID will be required to think radically about what it can do here to retain expertise and continuity.

STAFF SKILLS

135. As DFID's operations evolve, DFID staff need new skills. DFID acknowledged to us that there are some skills gaps in particular professional areas. It has identified mechanisms for addressing some of these gaps, and is rethinking its skills needs.[255] Aside from programme management and commissioning skills discussed earlier in the report, the Committee received concerns about DFID's skills in two areas:

·  DFID's ability to influence across government needs strengthening. Despite its growth into an increasingly significant Department, there is also concern that DFID's need to spend means that it is losing some of its previous skills around relationship building and brokering. The Committee's recent 'Beyond Aid' report highlighted that DFID staff need enhanced brokering skills to cope with the changing context of development-particularly so DFID can influence across Whitehall.[256] Bond and the UK Aid Network echoed this concern over DFID staff's influence over the rest of Government.

There remain some concerns about the capacity and ability of DFID and staff to successfully and productively engage across Whitehall-in particular about whether or not DFID 'look in as well as out' sufficiently to engage with, draw expertise from and lead other departments on policies affecting development.[257]

DFID responded that the Department needed to enhance its ability to lead a wide variety of organisations and stakeholders in the UK.[258]

·  DFID's ability to affect partners in the countries in which it operates. As we discussed in our Beyond Aid report, DFID needs to influence local partners and understand and be engaged with politicians. This requires an understanding of the local and political context. Locally-based staff make a major contribution to DFID's ability to do this, but UK-based staff posted overseas must be able to play their part. This means they must be in post for an adequate time and should have a knowledge of local languages.

·  DFID does not sufficiently prioritise language skills. The Committee has expressed frequent concern that DFID needs to enhance its skills in the major languages spoken in its priority countries like Swahili.[259] This ongoing concern is shared raised by the Foreign Affairs Committee looking at the FCO's shortage of language skills, particularly in languages spoken in key FCAs, such as Middle Eastern languages.[260] Language is currently not a required competency for DFID overseas postings, and training is not normally offered to staff prior to departure. Though DFID did report that it is encouraging staff to learn languages while in post. Currently under half of DFID staff speak a second language, and less than a quarter speak it proficiently, which leaves it largely reliant on local professionals, as DFID itself recognises.[261]

There absolutely is an issue with some rarer languages, especially in a number of African countries. There it is the case that we are quite reliant on our local professionals to help us really understand the context, but we are encouraging the UK­based staff, when they go to take up postings, to invest in their own language skills.[262]

Conclusion and Recommendations

136. There have been a number of changes to DFID's approach to programming. DFID has placed increased emphasis on Payment By Results, which was a concern to many witnesses. We recommend that DFID introduce Payment by results with considerable care and caution to ensure the many potential difficulties are addressed. PBR presents particular difficulties in FCAs. We recommend that DFID develop a specific strategy for PBR in FCAs. We further recommend that DFID monitor the impact of PBR on its market of suppliers, particularly small suppliers, and provide an update in its 2014-15 Annual Report.

137. We welcome DFID's improvements to programme management, notably the introduction of SMART rules to reduce the amount of bureaucracy, time spent in preparing business cases and increase the amount of time spent monitoring impact. As DFID acknowledges, it needs to ensure that the new rules are accompanied by a real change in culture.

138. While the emphasis on programme management is and has been particularly important as its budget has increased, DFID must also recognise the importance of other skills such as the ability to influence its partners, including developing country governments and to use effectively the excellent access DFID has to many governments. We have been and remain concerned that DFID's policy of standard three year overseas postings is too short. We recommend that this be increased to four. We recommend that DFID provide in its 2014-15 Annual Report comparative data on staff turnover and the average service period in country offices for each of its country offices, with risk ratings for country offices where it judges this to be too high.

We also recommend that DFID place more emphasis on language skills. Knowledge of a local language should be a competence for a posting, learning key languages such as Swahili should be encouraged from the start of careers and staff should have relevant language lessons before they begin their posting.

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190   DFID Submission, Section 2 Back

191   "The smart rules process has hugely simplified the guidance on business cases and given much more responsibility and accountability on SROs to decide how detailed they want their business case to be and whether they want to invest much more in particular aspects of that." Oral evidence from Richard Calvert, Director General of Finance and Corporate Performance, 4 February 2015, Q46 Back

192   "UK aid is focused on fragile and conflict-affected states, many with rapidly changing political, social and economic contexts. For projects to be effective there is a need for flexible and adaptive programming, including the agility to adapt to evolving local needs. As noted in "Smart Rules: Better Project Delivery," the design of the programme should "explain how the flexible approach will operate in practice." Programme design remains crucial to delivery - without a strong design foundation, the programme has little chance of success. This is as true for flexible programming as for any other type of programme. Comprehensive monitoring and evaluation systems need to be in place to allow for learning and for the programme to adjust its approach as it learns about its context and the effectiveness of its approach. The cost of M&E, therefore, has to be factored into the cost of the programme. When projects are being implemented by service providers, flexible programme delivery also requires clear and straightforward mechanisms for making changes to the programme's contract, objectives, and approach. The changes have to be easier to make than current procedures allow. Additionally, DFID programme managers need to be empowered and ready to use the flexibility that does already exist." Coffey International Submission, paragraph 3.8 Back

193   ICAI submission, paragraphs 2.3-2.4, 2.6, See also: Smart Rules: Better Programme Delivery, DFID, October 2014 Back

194   Adam Smith note: "The rules describe the decision to support multilateral organisations as being partly based on their "commitment to delivering improvements and reform." This is pretty extraordinary. Imagine DFID choosing a supplier because it says it will improve its performance." Adam Smith International submission, paragraph 5.3 Back

195   "Businesses cases are of little use as a guide to the future in that an intervention cannot sensibly be planned out in detail in a business case. If a business case process takes too long, changes in the implementation circumstances will render the programme out of date. In development terms this is a very real case of the aphorism of the perfect being the enemy of the good." Adam Smith International submission, paragraph 5.4 Back

196   Adam Smith International submission, paragraph 5.6 Back

197   ICAI submission, paragraph 3.16 Back

198   A Head of Profession for Programme Management was appointed in 2013. A secondee from the Major Projects Authority has been working with DFID to bring experience from across HMG. See: DFID Submission Back

199   "What we are trying to say to the organisation is that actually this is not about either/or. Managing good programmes and being a really strong programme manager is something that most people in DFID should aspire to. Most of our staff in DFID are, one way or another, managing programmes and that specialism needs to be recognised as a skill set that people build up, alongside all their other skills and capabilities. " Oral evidence from Richard Calvert, Director General of Finance and Corporate Performance, 4 February 2015, Q42 Back

200   "What is much more important here is trying to achieve a change in some of the culture and ways of working in the Department." Oral evidence from Richard Calvert, Director General of Finance and Corporate Performance, 4 February 2015, Q42 Back

201   "One DFID senior official has commented to us as follows: "Am personally finding the Smart Rules are liberating to a significant degree- but much depends on discretion. I find many in DFID have - unfortunately - simply been conditioned now to look for rules and be risk averse. So it's the culture now, not the rules, which are part of the problem." Adam Smith International Submission, paragraphs 5.11-5.13 Back

202   "Evidence from a DFID staff survey shows that many staff do not feel they can challenge the way things are done in DFID, which can discourage innovation." OECD Development Cooperation Peer Reviews, United Kingdom 2014, Executive Summary, Section 4, Managing the United Kingdom's development cooperation, p. 18. In DFID's Civil Service People survey for 2014, 66% of respondents agreed or strongly agreed with the statement "I believe I would be supported if I try a new idea, even if it may not work.", a decline on previous years. See: DFID Civil Service People Survey, Organisational Culture, Question B59  Back

203   "We are absolutely seeing a switch in effort from the pre­approval processes to the post­approval. One of the measures of that is much better compliance rates in the last few months with the core processes after approval, so annual reviews and project completion reports. A year or two ago, we had a major backlog of those. That has largely been got rid of now. What we are also seeing is a lot more attention by managers to how well their bit of the portfolio is performing, which reflects the fact that the departmental board, which the Secretary of State chairs every quarter, and the management committee, which I chair every month, look at the data and asks questions." Oral evidence from Mark Lowcock, Permanent Secretary, 4 February 2015, Q43 Back

204   Commissioning Chapter - Figure 4 & para X - full ref to add Back

205   Springfield Centre submission, paragraph 23 Back

206   "DFID's Senior Responsible Owner (SRO) mechanism is also a welcome initiative. The mechanism is an opportunity to improve project delivery, in particular by enabling service providers to discuss challenges with a DFID officer who can take an objective and strategic view of projects, from within the broader programme and country context. However, this "board level" like decision-making / oversight role will only be effective if the SRO has sufficient experience to make the types of decisions that are required and if the officer holds no other role in the project(s) she or he is overseeing ( to prevent any conflict of interest)." Coffey International Submission, paragraph 3.3 Back

207   ICAI submission, paragraph 2.5 Back

208   In her foreword to DFID's new strategy, the Secretary of State notes: "I want Payment by Results to be a major part of the way DFID works in the future. We will develop a framework to ensure that for all of our Payment by Results projects, there are rigorous, independent, comparable evaluations in place, so we can learn more about what works best, in what circumstances." Foreword, Sharpening incentives to perform: DFID's Strategy for Payment by Results. Examples of Payment by Results (DFID, Strategy for Payment by Results) p 7 Back

209   The Report highlights this is because PBR has a number of benefits, and can be used to: (i) Rebalance accountability: in traditional aid, by paying upfront DFID accepts the bulk of the risk of programme failure. PBR redresses this balance by transferring some of the risk for delivery to partners. This sharpens incentives for the implementing partner to perform. (ii) Increase innovation and flexibility in delivery: by not specifying how results should be achieved, implementing organisations are free to innovate to improve outcomes. (iii) Increase transparency and accountability for results: through being open about agreed results, everyone is clearer about what is being targeted and whether it actually gets done, driving up empowerment and accountability for results. (iv) Create a strong focus on performance in service providers, which has benefits beyond PBR. By being paid on results, service providers are strongly encouraged to examine what is, and is not, working, driving up performance standards, management and measurements. DFID Annual Report and Accounts 2013-14, paragraphs 5.10-5.11, p. 118 Back

210   DFID submission Back

211   Bond and UK Aid Network submission, Section K Back

212   Water Aid submission, paragraph 3 Back

213   "It is the case that we are in a learning phase and that is what the Secretary of State has said. We want a larger number of examples, because otherwise we will not generate enough evidence… Effectively, what we are doing in the programmes we have at the moment is a range of pilot exercises. We started some in Rwanda and Ethiopia two or three years ago. Mostly they were Government to Government. The way we are writing our contracts for the commercial sector, we are trying more regularly to get a results element into contracts as well, but we have very few contracts where the only thing that determines the payment is the final delivery of the result. Normally, the results bit of the payment is part of a wider set of arrangements under the contract, and we are doing that deliberately because we are aware of the risks and potential distortions." Oral evidence from Mark Lowcock, Permanent Secretary, 4 February 2015, Q47-48 Back

214   Development Results Forum Submission, paragraph 1.3 See also: "When PBR is used, the donor and the service provider need to work closely together before project launch to precisely define the results for which the service provider will be paid. There needs to be absolute clarity at the outset what these results are and how achievement is verified. At a basic level, there also needs to be an agreed-upon nomenclature on what "results" means, understood by all staff within both agencies of the donor and of the service provider." Back

215   Coffey International Submission, paragraph 4.3 Back

216   Bond and UK Aid Network Submission, Section K: "There is growing feeling from some NGOs that Results Based Financing requires, in many cases, a higher level of monitoring, verification and evaluation sophistication and certainty than is viable." Back

217   Springfield Centre submission, paragraph 19 Back

218   "A lot of the cases we have, including the water sector one I referred to, are basically output targets. There are some cases we have that you might think of as being a bit more outcome." Oral evidence from Mark Lowcock, Permanent Secretary, 4 February 2015, Q50 Back

219   "The timeframe in which aid-funded interventions are supposed to achieve impact is increasingly skewed towards the short term… There appears to be a growing assumption that the relationship between inputs and outputs are linear and predictable, that funding levels are directly proportional to results achieved. Again, more is better. This is not credible in a developing country context. If development means strengthening national systems (comprising national governments, the private sector and civil society stakeholders), then it must be accepted that the starting point is weak, risks are high, absorptive capacity low, and that progress towards lasting impact will not be smooth." DAI submission - full ref to add Back

220   "The beginning of a project is extremely important for putting down the foundations for good delivery. Building relationships with stakeholders, getting local ownership for a project, and understanding the political economy, for example, are vital for setting a project up for success. Rushing these steps can have negative consequences for the project down the line. DFID too often urges contractors to cut costs for basic programme foundations such as good office set up and proper local engagement. DFID needs to be realistic about what can be achieved in the project's first months and what enablers are required to catalyse later delivery." Coffey International submission, paragraph 3.10 Back

221   "The prevailing approach in DFID centres almost exclusively on delivering the 'what'… and ignores the 'how'… Sustainable development is not about delivering insecticide-treated malaria nets directly; it is about developing sustainable systems of net provision…. Delivering solutions directly might result in a short term splash of impact… but all too commonly direct delivery displaces the emergence of the local capacity, investment and ownership that is needed to continue delivering solutions into the future." Springfield Centre, paragraph 13 Back

222   "The PBR approach demands clear and simple indicators that must be produced in a project timeframe that is inevitably relatively short. This may come at the cost of longer term data collection and analysis to monitor aid effectiveness more properly understood, as articulated through the Paris, Accra and Busan principles" Development Results Forum, paragraph 3.4 Back

223   Development Results Forum Submission, paragraphs 2.2-2.3 Back

224   Water Aid submission, paragraph 7.3 Back

225   "In certain contexts or on certain types of projects so many external factors will affect the project that the service provider will have a very low level of control over expected results, … in situations where random variation or other actors are very important, service providers "are more likely to be punished for misfortune and rewarded for good luck. This will in turn dampen their incentives to exert effort." Coffey International submission, paragraph 4.5 Back

226   "The procurement process created incentives for firms to over-promise on results and underestimate their costs in order to win bids, causing problems with delivery. Furthermore, delays in procurement led to DFID placing pressure on contractors to meet unrealistic spending and results targets, forcing them to shortcut key processes like stakeholder engagement" ICAI submission, paragraph 3.16 Back

227   The Springfield Centre submission, paragraphs 11-12 Back

228   Development Results Forum Submission, paragraph 4.7 Back

229   Bond and the UK Aid Network submission, Section K Back

230   Adam Smith International Submission, paragraph 4.4 Back

231   The Springfield Centre submission, paragraph 20 Back

232   "Any assessment of the effectiveness of [PBR] must therefore go beyond consideration of outputs and outcomes to assess the extent to which it supports long term sustainable development through the strengthening of country systems. The development of the capability of governments to ensure the delivery of basic services is the only way that countries can escape aid dependence and deliver sustainable services." Water Aid submission, paragraph 6 Back

233   Development Results Forum Submission, paragraph 4.7 Back

234   "The rise of PBR is dis-incentivising innovative and higher risk programme methodologies. Following learning from a flagship RBF programme (DFID WASH Results), some NGOs have reported being deterred from entering into DFID RBF funding streams in both high risk / fragile states, and also for more complex work (such as governance work and highly community based work). This is because the complexity and uncertainty of the work is not suited to the lack of sophistication in RBF approaches." Bond and UK Aid Network submission, Section K Back

235   Water Aid submission, paragraph 7.1 Back

236   Marie Stopes submission, paragraph 9 Back

237   "Some of the organisations that we are working with are themselves a bit cash­constrained, so you have to avoid putting them in an untenable position by holding back money if the results are not absolutely perfectly done, because it is not in our interest to put people out of business for good but not brilliant performance, so there is that cash management issue." Oral evidence from Mark Lowcock, Permanent Secretary, 4 February 2015, Q47 Back

238   "PBR requires service providers to pre-finance activities, using significant upfront resources before being paid. Therefore, milestones need to be fairly spaced to take into account the cash flow realities of service providers. This is also necessary to prevent creating significant barriers to entry for NGOs and small firms." Coffey International submission, paragraph 4.8 Back

239   "Monitoring data is often of low quality: In Zambia, our research found that coverage of Vitamin A and deworming had increased but significantly less than DFID had reported. In Mbala district, only 25% of children had received two doses a year of Vitamin A, while in Mufumbwe district 75% of children had. DFID reported coverage of 65% and 100%, respectively but this referred to children receiving Vitamin A and deworming once, which is not the recommended annual dose.88 In the India UNICEF Partnership villages we visited, 15 villages were reported as having 100% coverage of latrines. Only seven villages actually did. Some 20% of households in these villages did not have latrines." ICAI, DFID's Contribution to Improving Nutrition, Report 36, July 2014, Figure 7, p. 19 Back

240   "This is one of the distortions you need to be careful about. People respond to incentives. In a way that creates a helpful incentive on us. We are aware of that risk, so that means we have an incentive to make a better effort really to look at the data that is being reported to us, to assess its credibility, to satisfy ourselves that it is legitimate. Those are all good things for us to want to do more of. Clearly, that would be fraud, if people over­claim and get paid on the basis of that" Oral evidence from Mark Lowcock, Permanent Secretary, 4 February 2015, Q52 Back

241   Coffey International submission, paragraph 4.1 Back

242   Development Results Forum submission, paragraph 5.1 Back

243   "In some cases there seems to be a disconnect between DFID's Procurement and Contracts Department (PCD) in East Kilbride and country offices. PCD tends to favour OBC whereas DFID country offices like to have visibility and control over inputs. This can lead to circumstances where the contract is based on output milestones but the country office still requests a detailed breakdown of inputs and control over those inputs - the worst of both worlds." Development Results Forum submission, paragraph 4.5 Back

244   "For it to work effectively it needs to be appropriately and consistently applied in the right circumstances only and requires a maturity of relationship between the parties to allow for the flexibility that is required on the ground." Development Results Forum submission, paragraph 5.3 Back

245   "Oral evidence from Mark Lowcock, Permanent Secretary, 4 February 2015, Q47 Back

246   NAO Report, Figure 11. September 2014 figure is not a year-end value. Back

247   See: Department for International Development Annual Report and Accounts 2013-14, Section 6.5, Remuneration Report, p. 148; Foreign and Commonwealth Office Annual Report and Accounts 2013-14, Remuneration Report p.64  Back

248   NAO Report, p 71, Figure 29 Back

249   Adam Smith International submission, paragraph 2.10 Back

250   Adam Smith International submission, paragraph 2.12 Back

251   Adam Smith International submission, paragraphs 4.5, 2.20 Back

252   In last year's Report on the Departmental Report 2012-13, the Committee noted: "We have long been concerned that DFID UK-based staff are not posted abroad for long enough periods and lack adequate language skills. The result, we have believed, is both a lack of good political contacts, which can do a great deal to facilitate development projects and a lack of institutional memory … Home civil servants are usually posted to country offices for an initial three year tour, but there are shorter postings to six of the Department's priority countries" IDC DAR Report 2012-13, paras 62-63 Back

253   ICAI submission, paragraph 2.5 Back

254   "We are not concerned in general about a retention problem for the Department…In terms of within a country team, there is a big difference between the fragile and the non­fragile, which is essentially about whether people can have their family with them while they are on their posting. For places where people cannot have their family with them, the tour lengths are shorter and that is a policy. That is deliberate. It is not just for family reasons, but because the stresses and pressures of being in a place where there are large threats to your personal security make it wise to turn people over." Oral evidence from Mark Lowcock, Permanent Secretary, 4 February 2015, Q53 Back

255   "There are one or two areas where it remains hard to hire the calibre and numbers we would like, and they typically tend to be in expensive niche disciplines for difficult places. Sometimes, it is not as easy as we would like it to be to get another couple of public finance specialists to go and work in Kabul. That is a difficult combination of things to get at an adequate rate. We have created a new professional entry system into the Department to train more younger people for those shortage areas so I hope, over time, that problem will recede to some degree, but it is the case that there are one or two areas that remain a challenge for us." Oral evidence from Mark Lowcock, Permanent Secretary, 4 February 2015, Q53 and Q54 Back

256   IDC, The Future of UK Development Cooperation: Phase 2: Beyond Aid, Tenth Report of Session 2014-15,January 2015 paragraph 77 Back

257   Bond and UK Aid Network submission, Section L Back

258   "I was very struck about the point you make about thinking beyond the Department about all the institutions there are in the UK. You partly make the point about Government-engaging a wider variety of Government organisations-but you also make the point that there are a lot of other institutions beyond Government-corporate, wider public sector, standard­setting bodies, universities and civil society. The Secretary of State basically said the same thing to you when she gave evidence on this. This is something that she thinks is an important area for us to explore more fully." Oral evidence from Mark Lowcock, Permanent Secretary, 4 February 2015, Q53 Back

259   IDC DAR Report 2012-13, Recommendation 23 Back

260   "It is alarming that the strongest criticisms that we have heard about the FCO's capacity to gain local knowledge, and the most striking evidence of a shortfall in proficiency in foreign languages, relate to regions where there is particular instability and where there is the greatest need for FCO expertise in order to inform policy-making." Foreign Affairs Committee, FCO Performance and Finances 2013-14, Ninth Report 2014-15, HC 605, p3 Back

261   "Last time I looked at this, we had 1,300 staff out of 3,000 in the Department with recorded spoken language skills, half of them fully proficient, across 46 languages." Oral evidence from Mark Lowcock, Permanent Secretary, 4 February 2015, Q57 Back

262   Oral evidence from Mark Lowcock, Permanent Secretary, 4 February 2015, Q57 Back

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Prepared 21 March 2015