UK government under fire for failure to regulate aid contractors

Karen McVeigh
Lapis lazuli in a shop in Kabul. Civil society organisations reported that Afghanistan’s minerals law – drafted with Adam Smith International’s support – had done little to improve their lot. Photograph: Mohammad Ismail/Reuters

British MPs are calling on the Department for International Development to review how it works with private contractors to ensure that companies comply with ethical standards.

In a report published on Tuesday, MPs said the department showed a “worrying over-reliance” on self-regulation in its use of private contractors and needed to take a “more robust approach” to set and enforce rules.

There is a serious problem in the practices of certain organisations, the report concluded, and the sector needs a genuine rethink.

The inquiry by the international development committee came after it had emerged that Adam Smith International (ASI), one of the UK’s biggest foreign aid contractors, had tried to profiteer by exploiting leaked department documents.

ASI, which has received £450m in development cash since 2011, was also heavily criticised for trying to “unduly influence” a commons inquiry by engineering fake “letters of appreciation” from beneficiaries of its projects. Four executives at ASI quit last month, after the government froze contracts with the firm because of questions about its ethical integrity.

At the time, ASI, which is paid to carry out development projects in Africa and Asia for the UK government, released a statement defending its activities as having been in “good faith”.

The Department for International Development (DfID) and the aid watchdog, the Independent Commission for Aid Impact, are also carrying out separate investigations into private contractor use.

The inquiry said the findings on ASI “should not be approached as an isolated incident by DfID but as evidence that there is something inherently wrong with the culture in certain organisations”.

“DfID needs to take a more robust approach in creating regulations and incentives that shape the sector so that it operates to the highest ethical standards. While it is up to contractors to adjust their practices, it is the departments’s responsibility to establish a set of rules and parameters and, critically, to enforce them,” the report said.

The amount of foreign aid spent on contractors has surged in recent years, from £540m in 2010/11 to £1.34bn in 2015/16.

Stephen Twigg, the chairman of the committee, said it had responded to concerns from the public and the media about the administration of public funds.

“The committee has recently commended DfID’s effectiveness in fighting poverty around the world, but also noted even more could be done. This report seeks to expand on how the department can achieve this by enhancing its strategy, procurement processes and supplier market to deliver more effective programming through contractors,” he said.

“DfID has taken some steps to improving working relationships with contractors. However, there are real concerns, also reflected by the secretary of state and in the media, that clear parameters should be set for this work.

“We agree with [international development secretary] Priti Patel that DfID’s contractors and partners should be held to the highest standards and there should be ‘no room for excessive profiteering or unethical practices’ in this work to deliver aid to the poorest people across the globe,” Twigg said.

DfID needs to do more, MPs said, to ensure contractors are adhering to the principles that drive its mission.

“While competitive pressures in the market can drive value for money, they can also drive poor behaviours in contractors trying to seek a commercial advantage,” the report said.

The report said it shared concerns expressed by the cross-government stabilisation unit, which supports government activities in fragile states, over “possible tensions between profit motives and programme objectives”. In its 2015 aid strategy, the government committed to allocating 50% of all DfID’s spending to fragile states and regions, up from 30%.

The report outlined a number of recommendations, including earlier calls for an arms-length body to assume programme management responsibilities and for a framework to ensure greater control and transparency over fees charged by consultants.

ASI has also been criticised for using DfID money to pursue a free-market agenda in developing countries. A 2016 report by Global Justice Now found that electricity consumers in Nigeria faced price increases of up to 45% because of “a controversial energy privatisation programme supported by UK aid through a multimillion-pound project implemented by ASI”.

And in Afghanistan, local civil society organisations reported that the country’s new minerals law – drafted with ASI’s support – had done little to improve their lot.

Nick Dearden, director of Global Justice Now, said he welcomed the report, but said it was “too narrow” in its criticism.

Dearden said: “The central problem with aid spending is an ideological bias towards contracting out to the same handful of for-profit businesses – just as we see across all government departments – regardless of how poor the results are.

“At the end of the day, it just cannot be right that so much aid money is channelled into British for-profit companies, as opposed to building up public services, social enterprise and small businesses in Africa and Asia.”

A DfID spokesperson welcomed the report and said: “The secretary of state has been crystal clear that she expects all suppliers to deliver results for the world’s poorest, provide value for taxpayers’ money and that she will not tolerate anything less. The department is undertaking a fundamental review of its work with suppliers to instigate root and branch reform based on accountability and transparency.”

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