UK International Development Spending – More Commercial Resource Needed?

Before Christmas, and indeed since then, there has been a lot of publicity - not much of it good – around the UK’s Department for International Development, and how it spends the considerable sums of money that the UK government (and taxpayer) gives to overseas aid projects around the world.

There were reports that too much money was finding its way to highly paid consultants and agents, and some of the “consulting” projects certainly did not seem to represent good value for money. Paying £10,000 apparently for a single blog article got our interest; we would charge a little less than that were DFID to ask, we guarantee! However, without knowing the whole story we won’t be too critical.

Other criticism includes the perennial issues around whether the UK should be providing aid at all to countries like India, which has its own space programme. Then there are questions around the money that flows through the CDC Group, a UK government-owned investment company that puts money into luxury hotels and shopping malls amongst other more obviously “worthy” investments.

DfID spends no less than £12 billion annually on aid, which is huge even by the standards of government departments. In the UK, only the Ministry of Defence spends more with third-party providers of any sort; the aid budget is twice as much as the Department of Work and Pensions “procurement” spend for instance, the highest of all the non-military departments.

However, we do believe the department when it talks about improvements in recent years; indeed, we featured one impressive story here back in 2014. But to move forwards, we would suggest three areas of focus – constructive suggestions we hope.

  1. The commitment that the UK will spend 0.7% of GDP on aid is worthy and something the UK should be proud of. However, it does seem to lead to a mentality where simply spending that money becomes the primary driver, sometimes at the expense of spending it well. As the end of the financial year approaches, there seems to be some pressure just to get the money out of the door, which can’t be a healthy situation. We suggest that the 0.7% should be an intent, with a caveat added saying, “that level of spend is subject to ensuring that all expenditure is made in a controlled manner and with a clear view that it delivers appropriate benefits and is cost-effective”.
  1. All aid expenditure should be treated in a similar way to more conventional “procurement” expenditure. So ideally there would be some objective “competitive” process wherever possible to decide where and how to spend the money, and then most importantly, the spend should be managed in a similar way that we would hope it would be in a good practice public organisation, whether this is MOD, DWP or a local council. That means robust contract management, and for instance any contract (or aid grant) for more than about £5 million should have a designated and professional “contract manager” who would aim to ensure the “provider” delivers what they’re contracted to deliver.
  1. There must be a strong focus on the commercial skills and capabilities of the procurement and contract management teams in DFID. We have met a handful of the procurement team, and they seem very capable, but we suspect there are issues of capacity, as well as potentially capability and seniority. The top procurement officer in DFID is called “Head of Procurement” and is an SCS1 in grade terms, while other departments now have SCS2 or even SCS3 staff and Commercial Director posts. It may also be that having the team based in the main in East Kilbride adds to the challenge of finding staff - no offence to that town, but when there is shortage of top-class procurement talent, those issues are real. And in terms of numbers, a spend of £12 billion could reasonably require a couple of hundred contract managers (even one contract manager per £50 million spend, which is far from excessive, would mean 240 people doing that role).

So this looks like another key priority for Gareth Rhys Williams as government’s Chief Commercial Officer, as well as being high on the list for the department’s top management. A Board-level Commercial Director for DFID and a review of commercial resources are vital for 2017 we believe, along with a stronger focus on competition, clear deliverables and outcomes from this aid expenditure.

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