Introduction

 

  1. LAMP Development has a deep, longstanding knowledge of FCDO’s 2011 Value for Money Framework and subsequent VFM documents. LAMP led value for money reviews of over 20 UK Aid funded programmes, with a combined value of £1.2bn over the last 10 years.  LAMP currently leads VfM work across 12 countries in Africa and Asia. Projects | LAMP Development

 

  1. LAMP’s work with FCDO and governments globally combines economic analysis with practical advice to help programmes and funders improve aid impact. Our vision is that everyone has confidence that aid money is spent wisely and not wasted. 

 

  1. We welcome this opportunity to submit evidence to the International Development Committee, to make a significant contribution to the learning of this important inquiry. Like the IDC, LAMP is committed to learning. A cornerstone of our approach is developing a freely available repository of resources and materials related to applying VFM on ODA funded programmes Resources | LAMP Development

 

  1. The following observations are based on over 10 years’ experience of applying FCDO’s 2011 Value for Money Framework in practice with UK Aid funded programmes. Where appropriate we have named specific FCDO supported programmes. During the IDC hearings we would be pleased to provide further details and examples based on our extensive work.

 

How does the FCDO currently define the term Value for Money? Are there any other aspects of Value for Money that the FCDO should be considering in its assessment?

 

We begin our response here by defining VFM before addressing other aspects of VFM that we recommend FCDO should be considering.

 

  1. The commonly used definition is “maximising the impact of each pound spent to improve poor people’s lives”. This definition is underpinned by an assessment framework based on the NAOs 3Es (Economy, Efficiency, Effectiveness) to which Equity and Cost-effectiveness have been added in the FCDO framework, which also includes Risk and Sustainability.  There are a number of issues we recommend FCDO should be considering linked to VFM definitions.

 

  1. Firstly, in practice, VFM definitions and frameworks are and need to be variably applied.   We have seen positive examples of adaptation. For example, adaptation for high-risk contexts such as Somalia, where a greater emphasis on risk is consistent with the VFM ‘profile’ of the programme.  In sum, VFM application is about balancing cost, quality and risk. So, when a programme is implementing in conflict affected areas where there are security risks, the costs related to this need to be understood and justified. 

 

  1. Less, positively, variability in the application of VfM definitions and frameworks occur due to misinterpretation of VfM definitions.  Most commonly, we find that the term ‘value for money’, with its roots in procurement practice, leads to narrow definition and interpretation of FCDO requirements often limited to achieving value for money in the programme’s procurement activities e.g. VFM of programme inputs, rather than FCDOs commissioning of aid programmes.  Where this occurs, we spend time with programmes developing an understanding of the FCDO approach, which is about achieving longer-term development results whilst making best use of resources, as opposed to just driving down the cost of programme inputs.  Longer-term, to address misinterpretation and ease communications we recommend changing the term VFM to ‘value for investment1’ or ‘aid impact assessment’.  These terms help convey the multifaceted nature of FCDO’s VFM definition, including sustainability and the importance of taking the long view when evaluating value for money.

 

  1. There is a particular need to emphasize a longer time horizon when implementing system-strengthening interventions. In this case, outcomes take a longer time to manifest, yet there are often pressures on programmes to focus on short-term FCDO results linked to inputs and outputs. A common issue is pressure to reduce daily fee rates for consultants. For example, in health system strengthening programmes in Nigeria and Pakistan in the last 5 years we saw pressure from FCDO to reduce the daily fee rates for consultants providing technical assistance, whilst it is important to ensure the market rates are adopted, there is also a need to recruit consultants who will deliver quality technical assistance that can contribute to longer term changes.

 

  1. We share the UK governments’ commitment to achieving the SDGs and ending poverty. In practice, when conducting VFM analysis we have found that focusing on whether UK Aid improves ‘poor peoples’ lives’ is inconsistent with programmes’ own definitions of equitable development – which may be broader than poverty reduction.  For example, how UK Aid is improving lives of vulnerable populations.  Alongside programme teams, we often rephrase the definition to maximising the impact of each pound spent to improve people’s lives, as this better aligns with the perspectives of stakeholders.

 

  1. Alignment of the 4 Es framework with the logframe and standard programme management terminology, is particularly useful, in facilitating implementers’ understanding and programme analysis. For example, if data is being collected at input, output and outcome through programme reporting, it makes sense to have an analytical framework which is aligned to these existing points of data collection.  However, key elements such as risk and sustainability are equally important to integrate. 

 

  1. The 2011 approach describes how important programme management processes are to achieving value for money.  So, when applying the 2011 FCDO framework, we often include an assessment of key management processes e.g. financial management, risk management, procurement.  Whilst it is possible to overlay the 4 Es to this type of assessment, in practice, we find it useful to separate assessment of key management processes to achieve VFM, and we look at this separately to the VFM indicators (Economy, Efficiency, Effectiveness, Cost-effectiveness and Equity).

 

  1. Understanding how to combine VFM with commonly applied evaluation frameworks, such as OECD DAC criteria is key. We regularly lead value for money assessments as part of a wider programme evaluation, using OECD DAC criteria.  When wider evaluation frameworks are applied, it is clear that there are key aspects of these frameworks that can be used to draw conclusions on whether the programme is delivering VFM (and what the drivers are). For example, alignment with national priorities and coherence and coordination with national and other development programmes can influence programme effectiveness and efficiency, Therefore, alignment and coherence are two areas that could be made more explicit in the way FCDO articulates to partners how they can design and implement development programmes to achieve the most impact with the resources available.

 

  1. In terms of definition and implementation of VFM, FCDO does not only rely on the 2011 guidance. They have updated the 2011 framework, in 2015 and 2020 (the latter specifically for service providers). Further, DFID developed specific VFM guidance for multiple sectors including: climate and environment, governance, humanitarian, and infrastructure. These documents have more detailed examples of addressing VFM including indicators that can be used for VFM monitoring and assessments. FCDO continue to develop ‘Best Buys’ in each sector. These tailored approaches are important to ensure the relevance and usefulness of VFM frameworks and guidance in different sectors and we commend FCDO development of them.

 

To what extent did the merger of DFID and the FCO affect what the FCDO considers to be Value for Money?

  1. For the development programmes we have supported since the merger, we have seen a similar and continued focus on VFM as before although we have experienced some minor assessment challenges.

 

  1. Since the merger, in the programmes we support, such as the Lafiya programme in Nigeria and the What Works Hub for Global Education programme, we have seen a similar focus on value for money (VfM) as before. For example, programmes continue to use the 4 Es framework and emphasize cost-effectiveness, ensuring that resources are used efficiently to achieve the desired outcomes.

 

  1. One practical illustration of where we saw a change was related to leading VFM analysis of the £36m Skills For Prosperity programme which was originally implemented by FCO and then under a merged FCDO.  The observation to make here is that the VFM framework initially included reporting of ‘secondary benefits’ which are benefits targeted by the programme from the perspective of UK.  This presented a challenge to the traditional approach to assessing the cost-benefit of and ODA programme, which typically be conducted from the perspective of the recipient country. 

 

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

 

  1. The programme monitoring and reporting system appears robust, as evidenced by the ICAI review of the programme operating framework in 2023.  Programme monitoring data and documents are published on devTracker, providing a useful resource for external organisations such as ours for third-party monitoring. For example, the annual review process and quarterly reporting against logframe indicators, together with routine financial reporting, provide a sound basis for assessing Value for Money (VfM). Whether this is cohesive across the merged FCDO, we are not in a position to fully comment.

 

  1. Compared to aid funded through other channels (such as multilaterals), monitoring of delivery and outputs of programmes implemented through service providers and NGOs facilitates value for money analysis. The application of the VFM framework has brought a greater understanding of delivery costs in international development, and (DFID and now) FCDO has been instrumental in this.

 

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

 

  1. There are several levels to ODA oversight mechanisms.  The 2011 VFM framework refers to the programme management cycle, outlining how VFM is considered at different stages.  However, it does not fully cover fundamental questions on how to ensure Value for Money of ODA through strategic decisions such as channeling ODA to LMICs through direct sector budget support or whether, and how much, spend ODA domestically.  These are important questions when considering oversight mechanisms to ensure VFM of the ODA budget, but our response here focuses on the oversight mechanisms in place to ensure VFM of ODA channeled through country level programmes.

 

  1. FCDO programmes appear to provide oversight mechanisms in two main ways to ensure Value for Money. One relates to assessment of Value for Money as part of annual and end-of-programme reviews. The other is compliance with principles of good practice in programme design, set-up, and implementation.

 

The effectiveness of these oversight mechanisms could be improved by:

    1. Implementing standardised financial reporting templates that collect data in categories that can be used for cost analysis at output and outcome levels. We have found in the course of undertaking VFM assessments on health and education programmes over the last 10 years, detailed cost data is more available, and this has helped us work with programmes to identify areas where efficiencies can be gained and resources better allocated.
    2. Integrating compliance with the FCDO programme operating framework, where relevant for cost-effective implementation of aid-funded programmes.
    3. Training FCDO staff and implementers in common approaches to ensure consistency and accuracy in VfM assessments.
    4. Enhancing the integration of risk management and sustainability considerations into programme design and implementation.
    5. Strengthening the feedback loops between monitoring results and programme adjustments to ensure continuous improvement.  For programmes we support, we develop a VFM Action Plan which can be used to track actions to implement recommendations from an annual VFM Assessment
    6. Increasing the use of independent evaluations to provide objective assessments of programme performance and VfM, and developing standards for these assessments which can help to quality assure, and not unnecessarily reinvent the wheel when it comes to undertaking a value for money evaluation.

 

  1. In practice, good and credible cost-effectiveness data is lacking from the majority of programmes, and Equity is another area that is underreported and lacks standard approaches embedded into monitoring and evaluation. Integrating data collection and reporting to facilitate analysis of these key components of VfM will be helpful to improve oversight mechanisms. For example, developing standard indicators for equity and cost-effectiveness and incorporating them into regular monitoring processes can enhance the comprehensiveness of VfM assessments.

 

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

  1. FCDO has a varied funding model, which allows flexibility to select different modalities which are most appropriate (and cost-effective) for the context.  For example, at the business case stage of the design process, the commercial case considers options and can be informed by the commercial strategy for that country or sector.  Consideration of the best mechanism to channel funds needs to be informed by a broad understanding of risk.  From experience, only relying on an assessment of intervention cost-effectiveness, is insufficient to guarantee the programme will deliver good value for money.  For example, when ‘best buys’ in global health or education are selected for funding and implementation, it is equally important to consider implementation risks and contextual realities at national and sub-national levels.  Political economy analysis, commercial strategy and risk assessments are used alongside a cost-effectiveness lens to inform programme design and guide ongoing decision making.  These approaches can be embedded within programme management, but this also requires adequate programme management capacity to be deployed. A funding model that includes programme-delivered interventions (as opposed to other types of funding mechanisms) requires adequate programme management capacity – strategic and operational - to ensure aid funded programmes can be implemented in a cost-effective manner.

 

  1. Finally, with short-timeframes and funding uncertainties (frequency of which seems to have increased since the merger), programmes are less able to focus on delivering longer term outcomes, as these will only materialize after the time-frame in which the programme is expected to deliver, and can affect the delivery of good VFM. For example, programmes with uncertain funding need to prioritize short-term outputs over sustainable, long-term impacts, potentially compromising overall effectiveness.