The Department for International Development (DFID) has developed
a credible approach to enabling fair and open competition in its
supplier market and to achieving value for money in its
procurement, a new review has found.
The Independent Commission for Aid Impact (ICAI) – which
scrutinises taxpayer-funded UK aid – said the department had made
a concerted effort to build up its commercial capacity and
develop its supplier base.
It also said DFID had identified areas of its procurement
practices which might inhibit competition among its suppliers –
such as the size and complexity of contracts – and had launched
new initiatives to address these issues.
The review, which is the first of two reviews examining DFID
procurement, awarded the department a ‘green-amber’ score
overall, highlighting recent progress and a positive direction of
travel. It praised DFID for introducing a range of measures to
analyse its supplier market and identify constraints facing
smaller suppliers in particular.
It stressed, however, the need for improved communication about
procurement opportunities and a more sustained focus on market
creation in partner countries, one of the areas which DFID
committed to focus on in its recently-published Supplier Review.
DFID has exceeded cross-government targets for the share of
contracts won by small and medium sized enterprises – but the
review found that the department still needed to do more to
increase the range and diversity of suppliers. It warned that
there was limited competition in some sectors, finding that just
3% of contracts were won directly by suppliers from developing
countries.
The review found that despite introducing open-book accounting,
which should allow DFID to see supplier fee rates and costs
transparently, and more recently committing to preventing
“excessive profiteering”, the department had been slow to
exercise these open-book rights due to capacity constraints.
And it warned that some suppliers with a track record of
delivering DFID programmes could, through the Key Supplier
Management programme, have advantages over new entrants that may
have the unintended consequence of limiting competition.
Dr Alison Evans, ICAI’s chief commissioner who led the review,
said: “Shaping the supplier market is an emerging, and
increasingly significant, area of public procurement. Ensuring
that a wide range of suppliers are able to bid and compete for
DFID contracts is important to ensure that UK aid programmes have
access to specialist skills at the best possible price.
“Overall we found the department had a welcome increase of
ambition in this area, and a positive direction of travel,
including the many of the initiatives announced in the
recently-published Supplier Review.
“However there are some important areas where improvement is
needed, such as tackling the constraints facing local suppliers,
pushing ahead with open-book accounting for greater transparency,
and addressing long and complex procurement processes.”
The review made four recommendations to help improve DFID’s
approach to its supplier market:
- · Adopt a more
systematic approach to promoting participation of local
suppliers.
- · Develop clear
plans on progressing use of open-book accounting, and improve
fee-rate transparency.
- · Accelerate efforts
to improve communication of forthcoming procurement
opportunities.
- · Accompany
commercial reform plans with a stronger change management
approach.
Notes to editors:
- The
Independent Commission for Aid Impact works to improve the
quality of UK development assistance through robust, independent
scrutiny. We provide assurance to UK taxpayers by conducting
independent reviews of the effectiveness and value for money of
UK aid. We operate independently from government, reporting to
Parliament, and our mandate covers all UK official development
assistance.
- In light of
the importance of how DFID uses contractors to the overall value
for money of UK aid, ICAI is conducting two reviews of aspects of
DFID’s procurement practices. This first review assesses how DFID
influences and shapes its supplier market in order to secure the
best value for money over time. The next review, to be published
in 2018, will explore DFID’s use of competitive tenders and its
oversight and management of suppliers.
- The review
considered the performance of DFID – the behaviour and practices
of DFID’s suppliers were not reviewed.
- The
research and writing of ICAI’s review took place in parallel to
DFID’s own Supplier Review. Several of the actions announced by
the International Development Secretary on 3 October affect
DFID’s market-shaping activities and are relevant, in particular,
to our first two recommendations. Some of the announced
initiatives resonate with ICAI’s findings, but DFID’s review had
a different scope and emphasis, and did not cover identical
issues.
- For more
information about this ICAI review, including the Approach Paper
which sets out the methodology in more detail,
click here.
