Summary
The Department for International Development (DFID) is a commissioning agency that partners with various types of organisations to implement programmes that facilitate poverty reduction around the world. As DFID’s budget has increased in recent years, so too have the funds channelled through these partners—a fact that has been noted in recent media reports and has raised some concerns, particularly with respect to private sector contractors. For the purpose of this report, the term ‘contractors’ refers to private sector organisations, many of which operate on a for-profit basis. Contractors can act as an effective channel for aid delivery, and one that we support where it is proven to be most effective and offer the best value for money. However, it is not evident that DFID has an effective process for assessing this at the programme level, nor whether it undertakes a sufficiently robust appraisal of all available options. We also have concerns that the contractors strategy is being driven by a lack of administrative capacity in the Department. Evidence suggests that DFID does not have a sufficient understanding of the way its procurement processes are shaping the market, particularly with respect to its procurement through framework agreements. While DFID has been explicit about its wish to expand the market and facilitate entry to smaller organisations, many of the procurement processes it uses work against this stated aim. DFID relies on the pressures of competition in its supplier market and assumes that the levels of competition assure it value for money. While we recognise that it is ahead of other donors in creating a competitive supplier market, there are aspects of its procurement, such as framework agreements and other barriers to entry, which are undermining this. The way the market is set up also means that the rewards for contractors lie in winning contracts, not in delivering on them. DFID should strengthen its approach to following up on implementation, particularly through greater use of independent evaluations. We also note concerns about DFID’s oversight of the supply chain, from lead contractors down to smaller, local organisations. Serious examples of sub-contractors being mistreated by lead contractors point towards an insufficient level of oversight that DFID should take concrete steps to improve. We are also greatly concerned about the appalling conduct of some contractors who have behaved in a way that is entirely misaligned with the Department’s purpose. We recognise that not all contractors have behaved poorly, though we also stress that recent examples highlighted in the media should not be viewed as isolated cases. We have heard that there are fundamental flaws in the working practices of some organisations. While DFID requires contractors to sign up to its Statement of Priorities and Expectations, there is a worrying over reliance on self-regulation and a complete lack of enforcement. We urge DFID to ensure that a key focus of its forthcoming Supplier Review is on ensuring greater compliance and a more robust system of incentives and consequences to shape the behaviour of contractors to the highest ethical standards.
6 April 2017