Achieving value for money through procurement Part 2: DFID’s approach to value for money through tendering and contract management

An appropriate overall approach to procurement with good performance in most areas of tendering, but significant weaknesses in contract management.

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Published
25 Sep 2018
Assessment
Green - Amber
Lead commissioner
Tina Fahm
Subjects
Beyond aid

In 2016-17, the Department for International Development (DFID) spent £1.4 billion, or 14% of its budget, through commercial suppliers on contracts ranging from school construction to family planning services and the delivery of humanitarian aid.

The quality of its procurement and contract management – how it engages and manages commercial firms to support the delivery of aid programmes on time, to budget and at the appropriate quality – is a key driver of value for money for UK aid. It is also a subject of considerable Parliamentary and public interest.

In recent years, DFID has implemented a range of initiatives to strengthen its procurement practices and embed commercial capability across the department – including its 2017 Supplier Review, undertaken to address concerns about excessive profit-making by DFID suppliers.

ICAI has conducted two reviews of how well DFID achieves value for money through procurement. The first review explored DFID’s approach to its supplier market. This second review examines whether DFID maximises value for money from suppliers through its tendering and contract management practices. These reviews complement a further ICAI review on DFID’s approach to value for money in programme and portfolio management. Together, these three reviews cover the key processes by which DFID ensures value for money for the UK taxpayer and the beneficiaries of UK aid.

Scope and methodology

This is a performance review, providing Parliament and the public with an assessment of whether DFID makes appropriate use of competitive procurement, and whether its tendering and contract management practices secure quality programme delivery at competitive prices. It also assesses whether DFID has adequate controls in place against uncompetitive practices and unethical behaviour.

This review covers DFID’s procurement of goods, works and services in relation to aid programmes over the period 2012-13 to 2016-17, including ongoing contracts initiated during that period. It assesses the full range of procurement and contract management practices, from defining supply need and identifying delivery options through contract award to oversight and monitoring of suppliers and contract compliance. It explores how well DFID captures and applies lessons on procurement. The review does not cover agreements with multilateral organisations, grant making to non-governmental organisations (NGOs), financial aid to partner governments, the procurement of goods and services for DFID’s own administrative use or procurement by other aid-spending departments.

Findings

  • Since 2015, DFID has progressed towards a more mature procurement approach.
  • DFID’s tender process follows current EU legislation and UK government guidelines and cross-government peer reviews confirm improvements in DFID’s procurement approach.
  • The Supplier Review lent momentum to the reforms but risks having unintended consequences.
  • Poor consultation with suppliers has heightened the risk of unintended consequences.
  • DFID is reviewing its business processes to protect aid recipients from sexual abuse and exploitation.
  • DFID does not always choose the most appropriate procurement process but a new strategic sourcing process has resulted in stronger procurement planning.
  • DFID has built up its commercial capability, but this will need to be an ongoing process.
  • The contract management function in DFID is poorly defined and contracts are frequently amended or extended beyond their advertised length and values.
  • Inception phases are often too short for adequate preparation and planning.
  • Progress on flexible and adaptive programming will require more innovative approaches to tendering and contract management.

Recommendations

  1. Before the next major revision of its supplier code and contracting terms, or future changes that may materially affect suppliers, DFID should conduct an effective consultation process with its supplier market, to ensure informed decisions and minimise the risks of unintended consequences.
  2. DFID should accelerate its timetable for acquiring a suitable management information system for procurement, to ensure that its commercial decisions are informed by data.
  3. DFID should instigate a formal contract management regime, underpinned by appropriate training and guidance and supported by a senior official responsible for contract management across the department. The new regime should include appropriate adaptive contract management techniques, to ensure that supplier
    accountability is balanced with the need for innovation and adaptive management in pursuit of development results.

Government response

The government publishes a response to all ICAI reviews. The government response is available to read online.

International Development Committee

Parliament’s International Development Committee (IDC), or its ICAI sub-committee, hold hearings on all ICAI reviews. The IDC hearing into DFID’s approach to value for money through tendering and contract management is available to watch online.