Priti Patel: Crackdown on aid budget profiteering

• International Development Secretary sets out plan to end ‘crony’ market for aid contracts
• Free-market reforms will inject competition  
• Legally-enforceable Code of Conduct will drive out unethical practices 

Conservatives will today announce plans for a radical shake-up and clean-up of the market for DFID’s aid contracts. The move follows revelations of severely unethical behaviour by certain firms, and wider concerns over a lack of competition in the market for DFID’s aid contracts.  The reforms will seek to drive out excessive rewards for the consultants and middle-men who implement aid contracts, and call an end to some of the underhand practices that have been seen in recent years.

The comprehensive package of reforms will include:

•          A tough new Code of Conduct which will lead the way across Government to ensure the highest standards of ethical and professional behaviour by DFID suppliers, with legally enforceable sanctions - such as ending contracts early - for those caught breaking the rules by a new compliance team

•          New clauses in contracts to allow DFID to inspect costs, overheads, fees and profits of suppliers in detail, together with new powers to intervene to tackle profiteering and cut out waste

•          Publishing annual league tables of supplier performance to name and shame those who fail to deliver value for money

•          Cutting red tape to boost competition and open up DFID’s market to new entrants, driving down costs for the taxpayer

•          Calling a halt to so-called “bid candy” practices, by which large suppliers include smaller businesses to win bids, but then drop them from the contract

Addressing the Conservative Party Conference, Priti Patel, Secretary of State for International Development, said:

“Today, I am announcing the conclusion of a comprehensive review of DFID’s relationships with suppliers.

“I am setting out tough reforms that will encourage the private sector to work with DFID and end the appalling practice of fat cats profiteering from the aid budget.

“I am introducing a tough Code of Conduct, with legally enforceable sanctions for non-compliance, to root out unethical behaviour.

“I‘m taking the toughest approach in Whitehall to crack down on contract costs.

“I‘m cutting red tape and simplifying the bidding process to help small British firms win with DFID and create jobs up and down the UK. 

“On my watch I will end the crony-market where a handful of suppliers, would win contract after contract, which blocked innovation and competition.

“I will always put the interests of taxpayers and the world’s poor ahead of consultants and middle-men.”

ENDS

Notes to Editors

• ·         Unethical practices have been exposed. The aid contractor Adam Smith International has faced serious allegations including making use of improperly obtained DFID documents for commercial gain^[1]. Particular issues were raised by the International Development Select Committee in their special report on the conduct of Adam Smith International^[2].

• ·         Serious concerns have been raised over how the market for aid contracts works. Concerns have been raised over inadequate competition in the market for DFID’s contracts^[3]. Small suppliers sometimes face barriers, including complex tendering processes and pre-financing requirements. Unclear requirements at tender stage could lead to higher bid prices and poor value for money. In some unstable countries, a shortage of firms with the right set of capabilities has raised concerns over inadequate competition.

• ·         New steps will boost competition and tackle unethical behaviour.  Last year, Secretary of State for International Development Priti Patel commissioned a comprehensive review of how to improve DFID’s procurement practices. Today, we are publishing the outcomes of that review. These add up to comprehensive package of reforms which will help drive better value for money for British taxpayers, and the world’s poorest. The reforms will include: 

• ·         Driving down costs along the supply chain.
• ·         Levelling the playing field for small suppliers and sub-contractors.

• Tough new measures to bear down even harder on costs and provide greater transparency in contracts and throughout supply chains, including Open Book Accounting. New clauses in contracts will allow DFID to inspect costs, overheads and fees of suppliers in detail and give new powers to intervene to end excessive profiteering and cut out waste.
• Annual information will be produced on DFID’s own commercial practices, setting out improvements during the year and making further recommendations for improvement.

• Ending agreements whereby sub-contractors are restricted in their ability to work for other suppliers. DFID will introduce new protections for small suppliers and sub-contractors in consortia, including contract checks to eradicate so called ‘bid candy’ practices in which major suppliers drop sub-contractors once they have won the contract.
• Breaking up suitable contracts into manageable sizes and services for smaller suppliers.

• ·         Ensuring the highest standards of ethical and professional conduct by suppliers.

• Introducing a tough new DFID Supply Partner Code of Conduct for all new tenders, with legally enforceable sanctions for non-compliance. This Code will go beyond DFID’s current commercial requirements and cover ethical behaviour, new transparency obligations, environmental sustainability and social responsibility.  Specific measures include a requirement to sign up to the UN’s Global Compact and assurances to tackle modern slavery.  No longer relying on self-certification, DFID will set up a dedicated team to ensure that suppliers are complying. 

• ·         Opening up DFID procurement to new entrants.

• DFID will run expanded Early Market Engagement events across the UK to reach out to new suppliers, particularly SMEs. DFID will launch a rolling programme of events, opening up contracts to a wider range of businesses.
• Reducing red tape and de-mystifying processes for small and micro suppliers. This will include new updated digital platforms and improvedinformation for potential suppliers about contract opportunities, and simplified documentation to enable easier interaction with DFID. 

• ·         Robust relationship management to deliver better value for money.

• Introducing a new approach to supplier management which will allow DFID to examine and hold suppliers to account. This will bring DFID into line with best practice in the private sector and will enable it to challenge delivery partners on value for money, enable DFID to identify underlying performance problems, such as financial management, and help DFID to tap into a supplier’s wider areas of expertise.

• ·         Building the commercial capability and systems to deliver.

• Introducing a new training package for DFID staff and a mandatory staff Code of Practice, together with a specialist supplier ccompliance team to enforce adherence to DFID’s expectations.

Taken together, these reforms will inject more competition, innovation and choice into DFID’s supplier market and bear down on costs.  In turn, this will assure hard-working taxpayers that their money is being well spent, and help our aid money go further in tackling global poverty.