International Rescue Committee UK – Response to call for evidence on the FCDO's approach to value for money

About the International Rescue Committee

The International Rescue Committee responds to the world's worst humanitarian crises, including the conflict in Ukraine and the crisis in Gaza. We help to restore health, safety, education, economic wellbeing and power to people devastated by conflict and disaster. And we are proud to fight for a world where women and girls have an equal chance to succeed.

IRC’s Airbel Impact Lab combines fresh new ideas with the IRC’s decades of experience. Though we represent only 3% of the humanitarian sector's budget, we are responsible for 1/3 of impact evaluations in the sector.

Overview

The FCDO can significantly strengthen the cost effectiveness of its official development assistance (ODA) spend by implementing reforms both to its overall approach to ODA and its day-to-day operations. Strengthening partnerships, increasing multi-year and flexible funding, and prioritising ODA spend to contexts experiencing fragility, conflict, and violence will lead to overall greater value for money. Reforms to practice at the operational level, such as reforming requirements for value for money analysis and changing FCDO staff approaches, will further improve the effectiveness of UK ODA.

The analysis in this submission is drawn from IRC research, programmes, reports, and policy papers, as well as the experiences of IRC colleagues who are directly working on delivery.

Recommendations

Policy

The FCDO should:

• Increase the proportion of UK ODA support to fragile contexts to at least 50%, up from the 2022 level of support estimated by the OECD at 15.6% .
• Drive World Bank reform to better support FCAS in implementation / disbursement of IDA21, and in development of the upcoming Fragility Conflict and Violence strategy, launching in 2025. This should include:
• Advocate for the World Bank to adequately finance the fragility, conflict and violence envelope in IDA21 by allocating a minimum of 10% of the overall IDA replenishment.
• Advocate for the Bank to mainstream third party implementation (TPI) and NGO partnerships across its work, as expanded partnerships will allow the Bank to remain engaged in FCV settings where support to a national government is no longer feasible.

Funding

• Increase the amount of stable, multi-year, flexible funding available, as this approach to funding is proven to deliver greater value for money than shorter term funding.
• Ensure a greater proportion of ODA spend is allocated to women- and refugee-led organisations.

Operational

• Incorporate cost evidence into the Requests for Proposals that the Department designs, as well as the funding decisions made.
• Adopt more formal mechanisms for consulting NGOs on value for money and monitoring and evaluation of ODA delivery.
• Streamline and simplify its requirements on value for money analysis and reporting for implementing partners.
• Ensure every FCDO country office has a cost-effectiveness focal point who is responsible for understanding the cost-effectiveness evidence of different intervention packages and how the evidence applies to their context. This focal point should be empowered to help their country office design their business cases and identify the most cost-effective and appropriate intervention packages for their context.
• For intervention packages where the evidence on cost-effectiveness is unclear, the FCDO should fund research and cost analysis to generate evidence on cost-effectiveness, understand how to interpret cost analysis in a nuanced and meaningful way, publicly share cost evidence for all aid actors to strive to, and use cost evidence to inform their program funding decisions.
• Provide financial and political backing to generate and share comparable cost evidence, such as support to scale humanitarian funding monitoring tools such as Dioptra, which have come to be considered the sector standard for evaluation.

Response to specific terms of reference

How effective is the FCDO at monitoring the delivery and outputs of its programming to ensure it is achieving Value for Money? Is there a cohesive approach across the merged FCDO?

1. As of November 2024, the UK Government has been developing a cross-governmental and independent Office for Value for Money (VfM). This reflects an understanding of the importance of integrating cost-effectiveness in programming across Government.

2. However, the FCDO still has substantive progress to make in embedding VfM into its delivery and outputs. The Department’s understanding of VfM can be somewhat inconsistent between different teams. Some have a clear understanding of VfM; others have less understanding and request implementing partners (such as IRC) to report on measures that are beyond the scope of value for money.

3. There is also variable effectiveness in monitoring delivery and outputs from a VfM perspective. Some SROs, for example, only focus on VfM as a financial concept – focusing disproportionately on costs, rather than a holistic understanding of both the quantifiable and non-quantifiable benefits of a project. For example, programmes on girls’ education have value both in the quantifiable results of educational outcomes, but also in terms of shaping community perspectives on the value of girls’ education, which is an important outcome, but one which cannot necessarily be quantified.

4. For intervention packages where the evidence on cost-effectiveness is unclear, FCDO should fund research and cost analysis to generate evidence on cost-effectiveness, understand how to interpret cost analysis in a nuanced and meaningful way, publicly share cost evidence for all aid actors to strive to, and use cost evidence to inform their program funding decisions.

How could the FCDO improve its oversight mechanisms to ensure Value for Money of its ODA budget?

5. To improve oversight mechanisms, the FCDO should consider increasing financial and political backing for comparable cost evidence, such as support to scale humanitarian sector-led tools such as Dioptra. Funding the development of cross-sectoral tools such as this will help to develop a culture of collaboration, rather than competition, among those responsible for delivering ODA-funded activities. Dioptra and its methodology is recognised as an industry standard for cost effectiveness in the humanitarian sector, with UNOCHA’s 2025 Global Humanitarian Overview referencing Dioptra and IRC as exemplars.

6. The FCDO should incorporate cost evidence into Requests for Proposals (RFPs) that the Department designs, and in funding decisions made. For example, in RFPs relating to specific regions or populations, there is scope to build more room for cost-effectiveness work, such as evidence generation where existing evidence is limited or unclear, or to ensure that implementing organisations dedicate more resources to measurement and evaluation. For example, cash transfers have been evaluated to be more cost-effective than in-kind transfers (in contexts where cash is appropriate).[1] However, many RFPs and funded projects in the aid sector still include in-kind transfers of food or non-food items that are either not part of the local culture or can easily be purchased by households in the local markets through cash.

7. All FCDO projects should also include budgetary space for cost analysis, just as there is for monitoring and evaluation. The results of such cost analysis would be helpful in understanding outcomes per pound spent on the project, and in understanding which specific interventions are good value for money.

8. These measures could be strengthened by ensuring all relevant Posts have a responsible officer with value for money explicitly included in their portfolio. This officer, or ‘focal point’, would be responsible for understanding the cost-effectiveness evidence of different intervention packages and how the evidence applies to their context. This focal point should be empowered to help the country office design their business cases and identify the most cost-effective and appropriate intervention packages for their context.

9. The FCDO should ensure every relevant FCDO country office has a cost-effectiveness focal point who is responsible for understanding the cost-effectiveness evidence of different intervention packages and how the evidence applies to their context. This focal point should be empowered to help their country office design their business cases and identify the most cost-effective and appropriate intervention packages for their context.

10. A critical consideration is the need for flexible, long-term funding. No matter how strong the evidence base, neither donors nor implementers can design a perfect programme on paper. Programmes should have the time and leeway for learning, refinement, and scaling. Multi-year funding allows for this, delivering better outcomes for people, and better value for donors.

11. The FCDO should increase the amount of stable, multi-year, flexible funding available, as this approach to funding is proven to deliver greater value for money than shorter term funding.

Does the FCDO’s funding model impact the cost effectiveness of its aid budget?

12. Yes – as a major humanitarian donor, the FCDO’s funding model has significant impact on the cost effectiveness of aid. Across the humanitarian sector, more flexible and long-term project funding is needed. As stated in IRC’s UK Aid-funded report, ‘South Sudan Value for Money Case Study: Efficiency (June 2022)’, “[b]etter value for money can be realised when upfront costs in stakeholder engagement, staffing setup, and infrastructure rehabilitation are leveraged for continuous uninterrupted programming over a few years”.[2] As noted in a recent article by IRC staff, the average grant cycle in the humanitarian sector is 12-18 months, while the average conflict (and time a refugee is in exile) is roughly 10 years.[3]

13. Much FCDO funding – including multi-year funding – is precarious, resulting in diminished value for money. Implementing partners such as IRC design and budget multi-year projects, only to be asked to cut budgets during implementation, adding unnecessary time and effort to rebudgeting. This means that valuable time and effort is wasted, time which should have been spent on implementing effective programmes that deliver for the people they are intended to support.

14. Cutting budgets partway through implementation can also lead to existing spend being wasted. For example, Year 1 of a project may require us to develop engagement and trust with stakeholders, along with other set up costs and activities. If the budget is then cut in Year 2, requiring us to reduce the scope of activity or the locations worked in, much of that Year 1 spend may then be wasted. Funding uncertainty is regarded to be quite common with the FCDO and reduces the value for money of the FCDO’s ODA spend.

15. Humanitarian action is also more efficient and better tailored to the needs of affected people when it is delivered in partnership with local NGOs, civil society and grassroots organisations, and women- and refugee-led groups. Reforms to drive increases in total funding are essential but should be matched with efforts to increase the level of funding that reaches frontline local responders.

16. The FCDO should ensure a greater proportion of ODA spend is allocated to women- and refugee-led organisations.

To what extent does the philosophy of aid at the FCDO align with its finance delivery partners, including British International Investment, and other Multilateral Development Banks?

17. The UK has recognised the importance of the World Bank’s focus on fragility, conflict, and violence (FCV) – notably through its substantive contribution to the 21st replenishment of the International Development Association (IDA). IDA provides significant value for money for donors, with each dollar donated leveraging approximately 3.5 USD for recipient countries, due to its hybrid financing model.[4] The UK’s significant contribution to IDA21 should be welcomed. The UK supported a paper proposing to put FCV at the heart of the replenishment process in July 2024, which further makes the case for the FCDO to champion FCV-focused reforms at the multilateral level.

18. The FCDO should work to drive World Bank reform to better support FCAS in implementation / disbursement of IDA21, and in development of the new FCV strategy. This should include:
• Driving the World Bank to adequately finance the fragility, conflict and violence envelope in IDA21 by allocating a minimum of 10% of the overall IDA replenishment.
• Advocating for the Bank to mainstream third party implementation and NGO partnerships across its work, as expanded partnerships will allow the Bank to remain engaged in FCV settings where support to a national government is no longer feasible.

19. The UK should ensure to maintain pressure for these reforms during the remainder of the IDA20 disbursement process and during the IDA21 implementation, to integrate these approaches into the World Bank’s FCV strategy.

20. This support for FCV at the multilateral level should be reflected in the UK’s own ODA spend. This means allocating a much greater proportion of the UK’s ODA spending to FCV contexts – improving the value for money of the UK’s ODA simply by sending it to where it is most urgently needed.

21. The FCDO should increase the proportion of UK ODA support to fragile contexts to at least 50%, up from the current level of support estimated by the OECD at 15.6%.

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