Value for money in UK aid: the good, the bad and the ugly

May 11, 2018

     By Duncan Green     

Cathy Shutt
Craig Valters

Cathy Shutt (left, on vintage phone) and Craig Valters unsugar a recent pill on DFID’s approach to Value for Money

All aid programmes should be good ‘Value for Money’ – hard to argue with that, right? 8 years ago, DFID put this principle at the heart of its work. Here we reflect on a recent report by the UK aid watchdog, ICAI.

The good

At first glance, the review appears good news. DFID is portrayed as a ‘global champion’, using value for money tools and approaches to increase the returns on its investment while influencing the practice of other donors, implementers, partner governments and NGOs.

DFID 4e value for money framework

ICAI concludes that DFID staff and implementers have a good grasp of the 3E framework (see diagram), which is used across the UK government to describe and assess value for money at various stages in programme cycles. Furthermore, at the behest of a previous ICAI review, DFID added a fourth ‘e’, equity. This aimed to ward off concerns that penny pinching would lead to the prioritisation of programmes aiming to benefit large numbers of people, but missing the poorest who are more expensive to reach.  At a theoretical level, this is a good start.

In practice, value for money considerations have helped DFID curb waste, fraud and inefficiency. They’ve also driven down costs. It is sensible and right that this happens. Money wasted could be spent more effectively to help people both abroad, or indeed at home. The report suggests that DFID has taken this seriously.

The bad

That’s about it for the good news. Within programmes, the value for money focus tends to be on economy and efficiency in delivery, with effectiveness analysis proving highly erratic. The only convincing story of a value for money argument increasing cost effectiveness cited by ICAI relates to a programme in Uganda, where DFID staff drew on global evidence and encouraged implementing partners to use cash transfers rather than food aid. Failing to focus on effectiveness across the board undercuts the promise of value for money: what’s the point of doing things cheaply and quickly without demonstrable evidence that they are having sustainable impacts?

What’s more, the value for money approach of DFID is a bit too Mystic Meg: that is, it assumes DFID can make financial and social predictions when it can’t; DFID often works in complicated contexts, on complex problems. But ICAI found few cases of programme managers or participants monitoring the costs and outcomes of ‘small bets’ with a view to evaluating and learning what worked best and then adapting their approach. Instead they found that what might best be described as DFID’s blueprint planning approach is in tension with its commitment to learning and adaptation, emphasised in the Smart Rules.

Another alarm bell: ICAI commented that DFID staff regularly set overambitious results targets in their business cases – presumably to get them authorised (or more generously due to ‘optimism bias’). But then suppliers tend to reduce them once the stark reality of implementation kicks in.  We worry this gaming of targets will be wrongly associated with adaptive management (‘ooh look, now we’ve banked the donor cheque, we can reduce our targets and call it being adaptive’). Adaptive management involves understanding we often don’t have solutions to problems upfront and puts in place serious learning processes to work them out. It’s not about not duping the system.

The ugly

According to ICAI, DFID’s value for money approach is narrow, focusing on individual projects, not their country or sector spending on complex and cross cutting issues like climate change. If DFID is serious about tackling the causes of poverty and conflict, as suggested in their aid strategy, then this is a false economy. It’s critical to consider the overall positive and negative contributions of DFID (and indeed wider government) in each country or region they work. In the absence of this, ICAI’s messages appear contradictory. DFID is a ‘global leader’ in value for money on the one hand, yet it resorts to the kind of bean counting that ignores issues of country strategy, complexity or long-term change on the other.

This accountability paradox is about methods – but also politics. Assessing the contribution of the British pound to a change process overseas is not easy, yet there are evaluation methodologies available (see here, here, and here). So, why haven’t alternatives been taken up?

As one of us outlined here before, the reality is that over the past 10 years DFID’s political leaders became more interested in demonstrating quantifiable results to tax payers than longer term institutional change. The UK legitimately has a mix of development aims: from simple to complex, from short-term to long-term. But DFID’s value for money approach is reflective of the narrower political priority. Hence, we have ended up with misleading methods that suggest DFID and its suppliers are in control of development outcomes, when they’re not, and which ignores aid effectiveness principles of local ownership.  This begs the perennial question, when it comes to value for money and accountability, whose values count and accountability to whom?

What’s to be done?

ICAI have sent a strong message that current value for money approaches are inadequate. So, what are the options for DFID and its implementers moving forward?

Can they get away with business as usual? DFID and the UK aid community could play the politics of the value for money game – appearing to be a global leader in using value for money for accountability while continuing to fall short in practice.  The immediate prioritisation of the ‘global leader’ message by DFID communications department following ICAI’s report appears such a response.

Or, should we scrap value for money altogether? Pablo Yanguas has recently argued that value for money language will only suit simple initiatives like vaccination programmes. It thus leaves no option but to continue to mislead the public about the risks of supporting local actors to pursue institutional change. According to Yanguas, scrapping the idea of aid as a value for money investment is the way forward. It could force a more honest conversation with the public about the realities of aid, development and social change.

For now, we propose a compromise. Making financial savings in aid is a good thing. As is seeking to understand which interventions, comparatively, can be most effective for the money being spent. It is also unlikely and undesirable that pressures to spend taxpayers’ money well will disappear. So, the starting point must be that senior DFID leadership take this report seriously. A recent performance in front of MP’s suggests they are doing so. The challenge will be for them to reframe how value is understood in the department and by its implementers: that may mean taking possibly unpalatable messages to politicians about the uncertainty of developmental change processes, rethinking evaluative methods, and telling a better story of the UK’s role in long-term change.

May 11, 2018
Duncan Green