Major for-profit contractor says FCDO business not key to its survival

The chief executive of Palladium International has told U.K. lawmakers that the company — one of the Foreign, Commonwealth & Development Office’s biggest contractors — would survive without FCDO contracts, despite acknowledging the agency comprises 80% of its U.K. business. Speaking at an International Development Committee hearing Tuesday examining whether FCDO is getting value for money from its use of private contractors, Sinéad Magill said the company is working toward reducing its global reliance on FCDO, with a target that no single client represents more than 10% of its international portfolio. The department’s contracts now account for 22% of Palladium’s global business — up from 16% prior to cuts to U.S. development assistance. Asked whether the firm could remain operational if it lost its U.K. government business, Magill responded: “We would still be able to function as an organization. We’re very committed to retaining our presence here and to diversifying our presence here.” Magill added that Palladium’s business with FCDO had already declined by around 30% since the merger of the defunct Department for International Development, or DFID, and the Foreign Office, due to cuts in the U.K. aid budget. Brendan Whitty, a lecturer in nonprofit management at the University of St Andrews, also gave evidence at the hearing. He said that while the U.K. government had historically succeeded in clamping down on profiteering, private contractors remained an expensive delivery model, particularly under current fiscal constraints. He noted that increasingly outsourcing management responsibilities to contractors added significant cost — a trade-off that may have been more justifiable when the aid budget was growing, but which he argued is harder to defend now. Magill pushed back on the idea that private contractors were inherently more expensive than other delivery partners. “I’m not quite sure the evidence stands on the expensive point when I look at fee rates relative to NGOs,” she said. Whitty described a broader trend that began under DFID and continued into FCDO: A shift toward private-sector development, with commercial concerns increasingly taking precedence over technical quality when assessing bids. He said this shift, combined with the loss of internal consulting capacity at FCDO, had contributed to a thinning out of smaller suppliers and reduced predictability in the contracting pipeline. Whitty also raised concerns about what he described as a “commercial squeeze” on contractors, warning that it had led to a loss of expertise across the sector. In some cases, he said, profit margins had been driven so low that firms were struggling to maintain quality — with negative implications for aid effectiveness. He also highlighted concerns about transparency and financial reporting. While some organizations were rigorous in tracking spend, others were “much patchier,” he said, making it difficult for researchers and civil society to follow the money. He suggested that stronger links between FCDO and contractors were needed to improve reporting, though acknowledged this would be a time-consuming and demanding undertaking. Whitty told the committee that Palladium had been approached to participate in his team’s three-and-a-half-year study into FCDO’s engagement with the for-profit supplier market, but the company had not responded. Magill apologized, saying the invitation had been missed. Committee chair Sarah Champion responded: “I look forward to this blossoming into a beautiful exchange of information as we go forward, because it would be very unfortunate if one of the biggest providers wasn’t open and transparent about where taxpayer money is going.”