Australia's new aid policy: Risks and opportunities for contractors

The changes in Australian foreign aid policy laid out two weeks ago by Foreign Minister Julie Bishop will inevitably bring changes in how the country’s official development assistance is delivered by development partners, including, of course, private sector contractors. Bishop’s “new aid paradigm” will implement performance benchmarks to gain more value for money, along with an increased focus on private sector participation in delivering aid projects — a progress largely welcomed by the international development community clamoring for more details and direction following the Abbott government’s highly scrutinized aid decisions since elections last September. So what do private sector implementers think of the reforms? GRM International, for one, believes Australian aid is evolving in tune with the changing development landscape. “The landscape for financing and delivering development continues to evolve. Managing contractors and other partners … must evolve with it,” Ken Marshall, Asia-Pacific regional director at GRM, said in a statement sent exclusively to Devex. “Adapting and innovating to achieve the most impactful, sustainable and evidence-based change is at the very core of what we all do as thought leaders and development professionals.” As with any policy reform, the performance benchmarks and other aspects of the “new aid paradigm” represent new risks and new opportunities for private firms and contractors, and we asked five of DFAT’s top private contractors to share their views. Opportunities One of the biggest opportunities that the new aid policy provides, according to these contractors, is the relatively heightened transparency and accountability of the Australian aid program — something that could bode well for those actually footing the bill. “The Australian taxpayers deserve to get a clear and robust information on what their aid program is achieving,” Jacqui de Lacy, general manager for international development at Abt JTA, told Devex. “Through this, I think it will build understanding and support … in the long-run.” Mark Pruden, Cardno’s business unit manager, added this is also positive for the firm’s image as a “good corporate citizen especially in countries where we’re working at,” while Mel Dunn, URS vice president for international development, explained that all development partners — not just contractors — need to be accountable and to make sure aid programs “add value” and are “making a difference.” Contractors are also keen to become more engaged in the whole development process with the new 140 million Australian dollars ($132 million) innovation hub within DFAT. The new structure will encourage cutting-edge solutions to development issues to gain more impact. This is something Coffey was “pleased to see,” Sam Spurrett, general manager for Asia-Pacific development business, told Devex, adding that the focus on research and innovation shows that the Abbott government is listening to the recommendations of its development partners. Pruden and de Lacy said they hope this could be a window for contractors to be more dynamic in sharing and implementing ideas — moving away from the very “prescriptive” method that was implemented prior to the new aid policy. “What we would like to see is for tenders to be a lot more open in terms of setting what the development problem is and the outcome that we’re working toward,” Pruden explained. “Looking at private companies to propose solutions and be held accountable to those … more flexibility on how we deliver them. There will be more incentive to innovate and try new approaches.” Lastly — and arguably the best — opportunity for contractors is continued and improved business operations. De Lacy mentioned for instance how the performance benchmarks system “clearly provides new commercial incentives for firms and organizations” not just to do more, but to deliver development outcomes in a more effective and efficient manner. “We believe the new system will make it clear for organizations and programs that are performing better … to be rewarded with more work,” she noted. “The new framework does link additional funding to performance.” Risks While the new framework provides many opportunities for contractors, there are also risks. De Lacy suggested that the new aid paradigm may be perceived as biased toward well-established firms and contractors over startups and small groups who want to partner with the Australian government. “I think there are risks for those organizations which don’t have access to such organizational strength. If you are a small organization that doesn’t have very robust institutional capacity, it’s going to be more challenging to demonstrate against the new performance benchmarks,” the Abt JTA official explained. This raises the question of whether the new framework levels the playing field or not, and it will be interesting to see how this issue plays out once the new policy is fully rolled out. Pruden, meanwhile, admitted that the lack of details on the new policy poses some risk to firms — especially on their operations — given that part of the compensation “would be more directly linked to performance.” The Cardno official said that understanding the program and the overarching development goals is crucial to avoid getting into a “dispute about how success is measured and dispute about the level of ability of managing contractors” to ensure development outcomes are effective and efficient. The new policy, despite the lack of details, may also inevitably push firms to alter their operations — particularly on finances — given the changes, according to these contractors. De Lacy said that once DFAT becomes clear about the level of monitoring and evaluation that they want in a development program, that’s the only time they can properly adjust — on top of concerns of how much support the government is also willing to give them for the adjustment period. “[M&E systems] cost money. You’ve got to invest in baseline surveys, evaluation research questions, qualitative and quantitative evaluation, etc.,” she explained. “All of that costs money so we would hope that the new benchmarks systems are clearer … so when we’re designing and bidding for work, the costs will be consistent across different phases.” But above all these, de Lacy concluded that the biggest risk DFAT and private contractors should avoid is veering away from the idea that development is for the poorest people. “What you need to do is be clear that you’re engaging with the private sector to solve public policy problems or to maximize benefits for poor people,” she concluded. “You’ve got to be very diligent and careful.” Check out more insights and analysis provided to hundreds of Executive Members worldwide, and subscribe to the Development Insider to receive the latest news, trends and policies that influence your organization.