New ICAI information note – UK aid spending during COVID-19: management of procurement through suppliers

4 Dec 2020

Aid-spending government departments worked flexibly with suppliers to minimise the impact of the COVID-19 pandemic on their work, but lack of transparency about the government’s new aid priorities hampered delivery – and the long-term impact of the cuts to the UK aid programme remains to be seen, according to a new information note from the Independent Commission for Aid Impact (ICAI).

The report from the aid watchdog describes how the government prioritised the aid programme to meet the urgent health and humanitarian needs faced by developing countries as a result of the pandemic, allocating nearly £800 million of new aid to respond to the challenge by the end of August. Separately, the sharp fall in projected gross national income (GNI) resulted in £2.9 billion of cuts to the aid budget and the cancellation, pausing or postponement of ongoing and planned programmes – with major implications for suppliers and those receiving aid.

The information note, which describes the mid-year reshaping of British aid procurement, does not reach evaluative judgements or make recommendations, but proposes four future lines of enquiry for further scrutiny. Work on the note was completed before the announcement in last month’s Spending Review reducing the aid budget to 0.5% of GNI in 2021.

ICAI commissioner Sir Hugh Bayley said: “The COVID-19 pandemic triggered rapid changes to priorities across government, and our information note sheds light on the way decisions were taken about the aid programme and the effect they had on aid suppliers. It is not yet clear what impact the cuts that were made, and any further reductions, will have in the longer term.

“The government aimed to minimise disruption by working flexibly with suppliers, and by delaying some of its payments to multilaterals, it avoided private sector and NGO suppliers bearing the brunt of this year’s cuts. Nevertheless, we heard concerns that the lack of transparency about the government’s prioritisation exercises hampered the ability of suppliers – who play a crucial role in delivering aid on the ground – to adjust their programmes. We have therefore set out four lines of enquiry to be explored further in the months to come, which take on even more significance in light of the further cuts to the aid budget announced last week.”

The note, which covers the period from late January until September 2020, focuses primarily on the work of the former Department for International Development (DFID) and the Foreign and Commonwealth Office (FCO), before their merger in September. It looks at the two separate aid prioritisation processes that were carried out as the pandemic took hold – firstly, when government departments were asked to prioritise their work in order to respond to the pandemic, and later when all aid-spending departments were asked to identify “large cuts” in order to avoid exceeding the target of spending 0.7% of GNI on aid. It examines how procurement processes were managed since the cuts, which came late in the year, required rapid changes to be made to existing grants and contracts, and to the pipeline of planned procurement.

ICAI said that the government recognised that the prioritisation would have a major impact on its suppliers, including potentially causing them financial difficulties. As a result, from March FCO and DFID began monitoring the impacts on its supply chain and assessing possible mitigation measures. ICAI also highlighted that previous improvements to procurement processes – prompted in part by two earlier ICAI reviews – had left the departments better placed to minimise the disruption to their supply chains.

However, while ICAI said that efforts were made to increase engagement with suppliers, the government’s decision not to provide any information about the prioritisation process or the impact on individual programmes until the entire package of cuts had been approved caused uncertainty and hampered organisations’ ability to plan effectively. Some suppliers complained that communication was primarily one way, from them into government.

ICAI also noted that the government’s supplier relief scheme, which allows suppliers at risk of financial distress to request up to a 25% advance on their contract value, had not been used, with some suppliers making use of the furlough scheme or other government support instead. However, the note said that departments worked with suppliers to provide ‘performance relief’ as an alternative, accommodating supplier needs by adjusting commitments in their contracts relating to activities, outputs, timescales or ways of working.

ICAI added that the government’s decision to focus on rescheduling contributions to multilaterals – institutions that are better placed to handle disruption to their operations – meant that private sector and non-governmental organisation (NGO) suppliers were not affected by the majority of the cuts. However, ICAI warned that cuts on such a scale at short notice would inevitably have long-term development impacts that will become clearer over time.

ICAI proposed four lines of enquiry for further investigation, including: whether programme performance and value for money was factored into the prioritisation process; whether the needs and vulnerabilities of recipient countries and populations were taken into account during decision making; what impacts the interruptions to aid programmes had on recipient communities; and how the new Foreign, Commonwealth and Development Office could strengthen its procurement engagement with NGOs and other not-for-profit suppliers.

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