Today ICAI published a performance review on DFID’s approach to value for money through tendering and contract management.

This is the second of two reviews on how well DFID achieves value for money through procurement.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.

In this review, ICAI found that DFID’s procurement approach has developed progressively over the past decade. However, ICAI found the pace of change from 2008 to 2015 to be relatively slow, possibly indicating the lack of a strong champion for procurement at board level.

The Supplier Review was a nine-month reassessment of supplier practices, which concluded in October 2017. It provides DFID with some useful new tools to monitor suppliers. It also introduces new contractual provisions entitling DFID to recover supplier profits if they exceed the level agreed for that contract. ICAI finds this is not necessarily the right approach for ensuring fair profits. Ongoing efforts to boost competition are a more appropriate strategy for keeping costs and profits in check.

ICAI also find that lack of consultation with suppliers during the Supplier Review – a result of the intense political pressure surrounding the process – has increased the risk of the reforms resulting in unintended consequences. This communication gap now needs to be overcome.

DFID’s procurement approach is set out in its Smart Rules and associated guides and information notes. While these are comprehensive and well written, we identified various issues with internal consistency and version control.

ICAI has made the following recommendations:

  • 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.
  • DFID should accelerate its timetable for acquiring a suitable management information system for procurement, to ensure that its commercial decisions are informed by data.
  • 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.

Read the report