By Brian Pratt.

As all good bloggers should do, I need to declare an interest here because at INTRAC we do a great deal of work on a consultancy basis. Indeed, we do more than we used to as a proportion of our work. This is a result of most donors now offering work on a contractual rather than grant-funded basis. The origins of this change I will return to below.

The press is full of attacks on consultants in the aid business, while similar practices in domestic sectors such as health and the Home Office go unnoticed and unreported. One reason is that people may think of international aid as glorified welfare, and in part we can blame ourselves given the messages we put out. Whether we are a large NGO or even DFID, we give the perception of wonder cures, rather than stressing the difficulties of facing entrenched political opposition to improved services, governance or redistribution. So the debate already starts on a false footing.

There is another underlying set of problems, however, that organisations like DFID have themselves barely recognised.

1) Indeed, DFID themselves have more money and less staff. In part this is because their own ability to hire temporary contract staff seems to have shrunk. In the past DFID was full of people working on projects based overseas, some as technical officers, others were managing programme offices. For the most part these have gone because of employment legislation, so most staff are now full-time civil servants. As such, governments are generally trying to reduce the head-count of permanent staff, and in doing so they have lost many experienced staff. Many of these old jobs are now carried out by contractors, both private companies and sometimes NGOs.

2) To save transaction costs DFID, like many other official donors, now package more individual tasks or jobs into very large contracts. So whereas previously a DFID administrator would hire several smaller organisations or individuals to perform very specific tasks, these are now assembled into grand, multi-million pound programmes. Inevitably this means that very few companies (and even fewer NGOs) are of the size to finance the proposal writing and cover cash flow, given that payment is made in arrears for many contracts. This means that DFID and other donors are now in the hands of very large consultancy companies who charge higher rates per day, but can afford to cover the expenses required in advance. This has inflated many of the rates paid, and led to the dominance of the sector by very large companies, including financial multinationals with no previous experience except in auditing. These companies are driven by profits and are more concerned about meeting the last letter of their TOR rather than achieving lasting social change. This can work against tackling more difficult development issues in favour of “picking the low hanging fruit” at lower cost. In other words, policies of reducing direct staff costs have led to shifting costs to often expensive providers. In the search for safety, a risk-averse civil servant culture means that they could never be criticised for giving contracts to large companies and institutions set up to service their needs, regardless of whether their track record is strong or not. However, current concerns in the press and from DFID’s minister about high-cost consultant firms may lead to change.

3) The shedding of staff also led to many companies being set up by former DFID staff with comfortable links to their ex-colleagues. Hence they faced very little competition at this level. Recent changes are likely to break some of these uncompetitive arrangements. However it is not an accident that some of the companies criticised in the press are founded and often operated by former employees of DFID.

Behind all of these issues is the move to operate in accordance with overall government policies elsewhere. In the rush to privatise we find ourselves doing more consultancy work because the mode of implementation has moved from grant funding to contracting tied to ever tighter terms of reference. It makes sense for a donor to tie sub-contractors to specific goals, but it has the effect of reducing the risk-taking and innovation which was found under grant-based systems. This is compounded by short-term measurable work, as opposed to more qualitative work in capacity building, policy influencing, attitudinal change or improved local governance. Very large NGOs are finding that they are increasingly constrained in their actions by tighter contractual obligations, something which has always affected small and medium sized NGOs. This narrows what NGOs can do. Some have tried to find ways of remaining flexible, but this assumes they have the unrestricted funds to be able to treat their contracts accordingly. As a result they find themselves subsidising government-funded contracts in order to implement them to a standard higher than they are paid for. So the ‘consultancy’ can actually cost NGOs more than they receive through their contracts.

So we need to be more nuanced when we look at issues around consultancies and whether they provide value for money or not, and to recognise that some of the issues are a result of previous decisions on staffing, conversion from grants to contracts, and the sizes of contracts now put to tender. The use of consultants can be a powerful input into the processes of development, bringing in a wide range of experiences and skills if managed well and by people with the right backgrounds and commitments to the longer term impacts of their work.