4 areas for DFID to work on in its approach to contracts

Yesterday, the Independent Commission for Aid Impact (ICAI) launched the second part of its performance review of the approach to value for money taken by the Department for International Development (DFID) through tendering and contract management.

This comes after ICAI released its first procurement review last November.

The report covers a wide range of issues including the DFID Supplier Review, clarity and consistency in the DFID guidance and DFID’s commercial capability, but also pays credit to the steps DFID has taken to strengthen its approach to procurement.

Here are my four takeaways from the review.

The Supplier Review discourages new suppliers

The ICAI review reports that DFID didn’t consult with suppliers during the Supplier Review. Instead, they ran contrary to Cabinet Office guidelines and only consulted with other donors and organisations outside the development sector.

Bond’s Commercial Contracts Group has engaged with DFID on the Supplier Review on a number of occasions to feed back on the likely and unintended consequences that it would have on suppliers. Feedback from our members made it clear that the Supplier Review was likely to reduce DFID’s supplier base, rather than increase it, and would ultimately discourage local, southern organisations from even applying.

Bond’s members have also reported that they struggle to find local organisations who are willing to partner up on bids due to the high levels of compliance, a concern also picked up by ICAI, which states the new measures “may discourage smaller firms and NGOs from competing for DFID contacts, potentially reducing competition and therefore value for money”. To mitigate these consequences, we recommend that DFID reviews the threshold levels of compliance to encourage more local organisations and NGOs to apply.

Inconsistency within DFID guidelines causes confusion

ICAI reported that there is inconsistency within the DFID guidelines and they have “concerns about version control” of documentation and templates which may put some suppliers at an unfair advantage and inevitably causes confusion for NGOs and other suppliers.

Bond’s Commercial Contracts Working Group recommended that DFID post version numbers of their templates so that suppliers can track them and are clear about the changes to requirements. In August 2018, DFID updated their 94-page Standard Terms & Conditions, and for the first time included a summary document that highlighted the version changes to suppliers. DFID should continue with this practice, and we urge them to post online the most up-to-date version of the Standard Questionnaire, Due Diligence and proforma to ensure version control and the ability of supplies to pro-actively respond to changes.

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Ageing information systems means DFID can’t process all data

ICAI reported that DFID “have multiple and ageing information systems, both online and offline, which do not interface or integrate with each other” and use offline spreadsheets to store data. This constrains their capacity.

As a result of the Supplier Review and open book accounting, DFID will now have access to more information and data from suppliers which means they will be able to benchmark fee rates and assess the true value for money of activities. However, old information systems and duplication will limit their ability to make the most of these benefits.

We suggest that DFID invests in their systems so that they can manage information from suppliers. In the long run this will build knowledge, improve value for money and increase development impact. If DFID were able to publish more regular and forward-looking information and updates on procurements in the pipeline, NGOs would be better positioned to partner with local and global organisations and to respond to opportunities quickly.

Procurement processes stifle innovation and adaptive programming

ICAI reported that DFID contracts don’t encourage adaptive programming. Supplier payments are linked to output milestones which “locks programmes into pre-defined activities that can only be changed through contract amendments”. Overly bureaucratic processes for challenging agreed milestones and contracts with DFID disincentivises innovation, flexibility and adaptation – which are the key ways of ensuring that contracted work is relevant to the context and achieves maximum impact.

Bond’s Commercial Contracts Group will continue to work with DFID to feed back on civil society’s experience of implementing the Supplier Review, and on the other issues raised in the review.

Bond members can join the Commercial Contracts Group here.