DfID's spending on consultants to come under increased scrutiny

DfID's spending on consultants to come under increased scrutiny

Government inquiries will assess whether UK development department's spending on outside skills represents good value

Monday 17 September 2012 14.14 BSTLast modified on Wednesday 21 May 201408.51 BST

The use of consultants and independent contractors by the UK's  Department for International Development (DfID) is set to come under heightened scrutiny over the next few months through two separate government inquiries.

Justine Greening, a former accountant who took over from Andrew Mitchell as development secretary this month, has launched an internal review of the department's spending on technical experts.

The announcement follows an investigation by the Sunday Telegraph, which found DfID is paying hundreds of millions of pounds to a group of primarily UK-based consultants, some of whom earn six or seven-figure incomes and used to work in government.

The newspaper, which branded DfID's top contractors as "poverty barons", honed in on consultancies such as Adam Smith International (ASI), which grew out of the Adam Smith Institute, a rightwing thinktank. ASI reportedly received £37m from DfID last year, nearly 70% of its turnover.

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"Several of the best-paid consultants are former DfID officials who appear to have gained substantial increases in their personal wealth since leaving the department, even though they are still doing essentially the same work," said the newspaper.

Labour's shadow international development secretary, Ivan Lewis, said DfID's spending on consultants is likely to be the "tip of the iceberg" in a bigger push to spend less through aid charities and more via private companies.

"From day one in government, the Tories have instructed DfID officials to massively increase the amount of funding being spent via private companies including consultants," said Lewis. "This has nothing to do with value for money and everything to do with ideology."

Government commitments to spend 0.7% of gross national income (GNI) on aid by 2013, recently reiterated by Greening, have pushed the department's ringfenced budget under increasing scrutiny.

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Last Friday, the UK aid watchdog announced details of its plans to examine DfID's use of contractors. The Independent Commission on AidImpact (ICAI) has intended to review DfID's use of consultants ever since it was launched by Mitchell last year. But as ICAI's investigations are themselves led by consultants who receive DfID funding, the watchdog's inquiry has been postponed numerous times.

ICAI published an advertisement last week to find a separate provider to lead its study of how the UK aid agency uses contractors to deliver programmes, and "how this contributes to wider development outcomes and to sustainability through the build-up of local expertise".

The watchdog aims to interview DfID staff, experts and other UK stakeholders, and will use case studies to evaluate how the department decides when to use contractors, and how it chooses them and oversees their work.

ICAI's work is led by a consortium of consultancy firms, three of which – KPMG, Agulhas Applied Knowledge and the Swedish Institute for Public Administration (Sipu) – also frequently bid for and win DfID contracts, creating a clear conflict of interest and pushing the watchdog to seek additional outside help.

Companies bidding for ICAI's contract must not have carried out work for DfID or other UK departments administering British aid for at least the past five years. The watchdog aims to open its inquiry this autumn, with a final report published in early 2013.

Earlier this year, a parliamentary report warned that the UK government's drive to cut costs could make it over-reliant on contractors and put the effectiveness of its aid programmes at risk.

MPs on the international development select committee said their concerns about DfID's use of contractors and other external partners were compounded by the lack of publicly available information on UK aid-funded contracts.

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The select committee's report echoedbroader concerns expressed by the public accounts committee regarding the UK government's spending on consultants, suggesting issues of transparency aren't confined to DfID.

In late 2010, the committee warned: "Despite spending over £1bn a year on consultants and interim staff, central government departments are largely in the dark about whether this represents value for money. There are of course legitimate reasons for a department to buy in specialist skills where they are in short supply internally. But departments have become too reliant on buying in core skills rather than developing them in their own staff."

Giving evidence to the select committee in March, DfID explained it is essentially a "commissioning organisation", unlike the aid organisations of other governments, which often employ thousands of people.

On Sunday, a statement on DfID's website defended the department's use of consultants. It said: "Organisations have won contracts to work for DfID through a best-value, competitive bid process."

A department spokesperson added on Monday: "As the new international development secretary, [Greening] is taking a close look at every aspect of the department's spending." DfID's internal report on the department's use of technical experts should be completed by the end of the month, but will not necessarily be made public.

Last week, the development expert Charles Kenny argued on the Guardian's Global development site that Greening was in an ideal position to add weight to global conversations about the need for increased transparency in government contracting. "The most common argument against contract publication – that parts of contracts sometimes contain commercial or national secrets which would be complex and costly to redact – doesn't stand up," he said.