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GovDiscovery AI Podcast with Mike Shanley
Ep 35: UK Aid Market Funding & Elections Update
00:30:53
Aron Cronin, Managing Director and Anthony Gardner, Principal Consultant at GIC Limited, join Mike Shanley to discuss the UK Aid Market and the impact of the elections. RESOURCES Subscribe to the FCDO Supplier Portal,...
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- [00:02]
A
Welcome to the Aid Market Podcast where foreign aid partners connect to learn about key funding trends and market insight. The podcast is co hosted by Aid Connect Data, the pipeline and market intel software for USAID Partnering and Connected International, the leading USAID partnering support consulting firm. Now here's your host, Mike Shanley.
- [00:28]
B
Welcome to the Aid Market Podcast. We have a special show today focused on the UK aid market. Our guests are Aaron Cronin, with 40 plus years of experience in the UK foreign aid market, including at DFID and he is now the director at GIC Limited and Tony Gardner, also with 40 plus years of experience in the UK aid market, including at Diffid as the Head of the Procurement Department and Vice Deputy Head of Overseas Offices in Ghana and Kenya and Uganda. Aaron, you and I have known each other for a while during my regular trips to London and always look forward to our check ins over coffee or at the various foreign aid events that we host there. And for those of you in London, I'll be back there on October 21st with USAID for two events. Feel free to message me Mike Shanley on LinkedIn for more information on those. So with that, let's get right into it. Aaron, for those of us who have not been paying attention to the UK aid market the last few years and since dfit, could you give a brief summary of what's happened in the last four or so years?
- [01:38]
C
Thanks very much Mike. Good morning, good afternoon, good evening. We're aware that we have people joining us right across the board from the US, UK, Continental Europe, Africa and Asia. DFID was abolished in 2020 and taken into the Foreign Office becoming the Foreign Commonwealth and Development Office. And one of the particular impacts of that was that there was a great loss of international development expertise. A large cohort of the experienced development practitioners moved on. Also in 2020 there were major budget cuts. It's written into UK legislation that the aid budget has to stand at 0.7% of gross national income. That was cut to 0.5% of gross national Income, which remains the position for the foreseeable future in the fiscal year 2023-24. That is the government expenditure year that finished in April. This year the expenditure outturn was 11 billion for US watchers at about 20 25% for the dollar figure. So 11 billion sterling, about 13 odd billion US. But there was a but of that 11 billion, approximately 30% has been spent on non developmental activities, specifically housing and other services for refugees in the uk, which has effectively reduced the outturn for international development spending to around 7 billion. So the situation over that time since 2020, and there are a number of contractors I see on the list I know who experience this directly, was reductions in programs they'd already been contracted for, or reprogramming, extension of contracts so that the expenditure that was available was dispersed over a much longer period and a number of projects in progress were simply curtailed and there were very limited new projects coming into the pipeline. So that's the situation as we come to the position today.
- [04:15]
B
Great. And then the recent elections. What did that change in what people anticipate will change? Are there any actual changes that happened before? It'd be great to hear how, how that has or how you anticipate it might affect the foreign aid funding for the uk.
- [04:35]
C
Right. Well, as everyone watching will know, a new Labour government was elected in July with a massive majority, which should give it scope for freedom of action. What we're going to be coming into is a period of transition where the government has to consider what its real policy objectives are going to be, acknowledging the state of the world today and UK's scope for influence post Brexit. In particular, they've got to look at how to move from the given resources and policy objectives that will be defined to make FCDO a capable machine to deliver outputs. And I will return to how they are approaching this very shortly. Way back when, in opposition, Labour, responding to the merger of DFID into the Foreign Office, announced that they would recreate DFID as soon as they came to power. That is not going to happen. It's seen as too expensive and too disruptive. But there is discussion of creating a defined development department within fcdo. Very early shoots of that. There's also the intention announced that the whole budget would go on international development and that the development spend would not lose the money that has been going on refugees and welfare. However, at the moment that 30% spend remains and there is no definite plan to shift this. We will also expect to see a continuation of other departments spending the official development assistance budget, like Health and Environment. We think that it will be a 60% plus a bit spent by FCDO and the balance spent by other departments on international development projects. There is the intention announced to take the budget up to 0.7% of Gross national income as soon as fiscal circumstances allow. But we think that's unlikely to happen very soon. In particular, the Chancellor of the Exchequer, that is the Financial Secretary of the government, is going to give a hard no giveaways budget at the end of October and We don't think there's going to be additional money splashing around. We do expect, in line with the transition, for there to be a policy refreshment. In particular, there's a review being commissioned by the Foreign Secretary from Minouj Shafiq, who was previously a Permanent Secretary in dfid, that is the most senior civil servant in the department. And the review was originally aimed at rebuilding international development capacity in fcdo and it's now been widened to answer the bigger question, capacity to do what? So a combination of policy and implementation we see coming out of this. The interim report is due in November and the full report is due in February. And I'll return to the significance of that in just a bit.
- [08:08]
B
Great. Thanks, Aaron. Tony, to you. We always like to get into the so what, what does this mean for UK and international aid organizations around the world, including in the us? How should they respond? How are, how are they responding? What are the. So what details or takeaways from the elections and the recent developments Aaron updated us on?
- [08:35]
D
Thank you. Yeah, I think it's fair to say that has so far been no substantive policy announcements on international development by the new government. Those who studied the manifesto would have noted references to partnership with the Global South. Now, traditionally, all manifestos in respect to DFID type work saw the Global south as the area of the greatest need, the area of the greatest poverty. In the last few years we have seen instead an integrated approach, including all the British government departments that have an interest in foreign affairs and a rather vague plan of what was called the Asian Pacific tilt, focusing attention in that direction instead. This didn't really come to very much, partly because it was disrupted by conflict elsewhere in the world that took the British government's attention, notably Ukraine. The new manifesto of the Labour Party seems to be taking us back to focus on the Global south with some of the traditional references of tackling global poverty and instability. I think colleagues on the call today will also see if they, as probably some of them have before, that whatever work you do, there's going to be climate proofing right through it. Climate proofing will not be kind of additional extra to development programs. It will be at the heart of them. New government has, however, made clear that it wishes to give greater focus than its predecessors to playing its part in trying to reduce global inequality and increasing human rights. And a desire also that any work the government commissions should have real social value, that is that it will directly or indirectly benefit communities living around the program areas. American friends on a call today will Be familiar now, I think with the content of localization because of US IDs greater attention to this. The British government has also been focusing on this for some time and it appears in the manifesto. And we recognize that this concept for us anyway is not new. But we believe the government is serious about its plans to try and engage communities in developing countries more in the design and planning of programs, not make them just recipients. Then I think some of the priority areas from before are certainly remaining naturally enough, supporting economic transformation and growth, empowering women and girls, holding conflict prevention. I think as well a recognition that a number of countries, notably in Sub Saharan Africa are beginning to return to high levels of indebtedness, having been released from much of their debt in the early part of this century through multilateral initiatives that seems to be turning. So that will be a focus area. And I think the government will also want to use its influence as effectively as it can to increase the number of actors in the climate scenario, notably unlocking private sector support for climate finance. Since the election, we've noted the government stated its commitment to reinvigorating reform of multilateral development institutions. Certainly not a short term gain, it will take time. But I certainly think they have a strong interest in trying to do this. There is a feeling, I think, that the influence and effectiveness of some of the main multilateral organizations is beginning to wane somewhat. We may well therefore see more money being spent directly by bilateral agencies including the UK and America. The government has noted its interest in building what they call a clean power alliance in which light minded countries try to help other countries towards net zero target on climate. Then the government also has an aim to try and restore greater transparency in how it spends its international development money and increase the standards and quality and effectiveness. I think personally that this is very much an expectation that the international development has to take its share of some of the criticism that a lot of the very fast Covid spend to try and remedy and stop the spread of COVID was possibly lacking in transparency in how partners were selected and how effectively value for money was achieved. Now we should talk a bit about what we see the governments like the approach to consultancy. Given the nature of the audience. The government has already said that it would like to reduce its spend on consultants. I think Aaron and I you referred to our many years of work in this area. We could probably say that we have never known a time when a new British government didn't say it intended to reduce its spend on consultants. We can hardly think of any occasion where it succeeded in that we forecast though that that the Foreign and Commonwealth and Development Office will remain a commissioning department, continuing to call on consultancy to help with program implementation. We do not see the management of long term development assistance programs being handled in house within the Foreign Office. They will continue to put this work out to competitive tender and contracting and maybe it's a possibility. The consultancy has been in other British government departments but we honestly do not see that happening in the Foreign Office, at least not the development side of it. We know there's some NGOs present on the call. I may be pleased to hear that. We judge NGOs remain important providers, particularly for humanitarian and emergency responses. They will continue to be, I'm sure interested in seeking accountable grants, but they will also be free to bid for business alongside the for profit sectors. And one of the more, you know, optimistic parts of this presentation is when we tell you about the current status of funding and procurement. So we've been keeping a very close eye on these particularly since the start of the new British financial year and as of now there have been 39 pipeline opportunities as of last week in this particular financial year. Now that is massively more than have been for the last few years. Of those 39, 23 are advertised by overseas offices and managed by the British development offices there. 16 are managed from the UK. But I should stress that doesn't follow that the work stereotypes place in the UK a lot of centrally managed branches programs have six or seven like minded countries under their reading often often particularly for research type projects where aim is to, you know, try the same or different things in different countries and compare the result. Of the 23 that I said are described as being overseas. Of those 23, 15 are in Africa, notably the Democratic Republic of the Congo, Kenya, Uganda, Zambia, Nigeria, Ethiopia, Sudan, all cropped up. Six are in Asia, but there's not such a country spread there. There's a quite a lot, quite a lot of. Two of those six are in Pakistan, two are in Afghanistan, the others one is, one is, one is the Palestinian territory, I forget the other one. And then there's also two programs in Ukraine. Now the procurement enthusiasts will understand this part of it better probably but of those 39, 24 are advertised as being open. That means that anybody is entitled to put in a tender. 10 on the other hand are being managed through the Global Development Delivery framework for which entities need to be pre qualified before they get the chance to have a shop.
- [17:09]
B
Tony, I'll jump in there. For those more familiar with the USAID market, that's similar to an idiq, the UK Framework Agreements.
- [17:17]
D
Thanks, that's really helpful, thank you. Thanks. And then five of them are accountable grants. Now, one of the things that first the FID did and then the FCDO carried on with is organizing what's called Early Market Engagement meeting, in which anybody interested in bidding is called to a meeting, sometimes even before the project has finally been signed off by ministers. So they actually get a chance really still to influence the design. More often though, they're held once the approvals have been obtained internally and the terms of reference are available and then people get the chance to join. They will hear about the program and what the FCDO team want to achievers output and outcomes to the program. They will hear more detail than the papers perhaps give them on the procurement strategy. They will get the chance to ask questions and maybe also team up with others. All of these are held electronically, so you know, you're unable to participate in this in a meeting anywhere in the world, really. Of those 39 pipeline opportunities, 29 this year have featured an early market engagement session. So you can see from those numbers really how institutionalized this concept now is.
- [18:43]
B
And Tony, for someone that wants to attend one of those, how do they find out about them? How do they sign up for them? Where, where are the, where are those, where are those events announced?
- [18:53]
D
Well, they're announced mainly on this, on the supplier newsletter which we are going to give a plug to right at the end of the session and people can take email and it'll be in.
- [19:04]
B
The show notes for those on the live call. We'll put it in the chat now.
- [19:07]
D
Yeah. Aaron and I regularly attend meetings of another trading forum of which we're members, which has regular meetings with the heads of development in British embassies and very often the ambassador, him or herself, every single one of them. Their presentations refer to the greatly increased budgets for the international development in in their countries this year. So we do think this is a much better story than it would have been had we been given this presentation in the last few years and a sign that the new government is definitely committed to enhancing the value in cash terms and hopefully valuing quality as well of the program as it begins to climb back towards its old size. Now, we thought we should talk a bit about something called Transforming Public Procurement. This is the new law which is enacted early in the year governing all centrally funded UK public sector purchasing. It will become effective for all UK public sector departments and bodies. That is, you know, notably FCDO from the end of February 2025 the period from now to then. The government has decided to write a new national Procurement Policy Statement to reflect the priorities of new government. So that's under preparation. That's ready. They kind of go live properly with the new law. We will Aaron and myself will be in due course assessing what the state the new public procurement statement says and any potential effects it may have on parallel inputs and work going on. He referred obviously to the MINU Shafiq review which will be reaching its conclusion about then any other policy announcements and of course the impact of the budget to be read on 30 October. We also plan to do our best to find out in due course how the procurement personnel in the Foreign and Commonwealth Office intend to manage the transition from the current legislation and common practices towards what the new law requires. Let me just say a few words briefly for the benefit of the audience. The purpose of new act essentially is to simplify and standardize all public procurement. Untying of international development opportunities globally will continue. There are no intentions of or references to changing that. The what the act wants to do and to be honest with you, time will tell how successfully this works. But what they want to do is mean that there will be less time for all of us spent on registration instead of having to keep registering the new and putting exactly the same data and information into questionnaire after questionnaire. The idea is there'll be one document in use in all departments and you register once and then all British government departments would have access to that information. If that works, fantastic. There will be still be a common foundation for tendering just as there was before. But there is. The new law allows much wider scope for the procurement teams, the commissioning department to bring in variations in the procurement cycle and in the actual bidding process. So you may for example have more scope to be making presentations electronically, but maybe in person in support of your table's proposal. There could be opportunities to clarify your offer, to discuss various different things that the FCDO people might like, where they might want to be a bit more short about elements of your proposal. They may do it as a bit of a kind of talent show where they kind of cut numbers round by round, etc. What seems to be clear though is it will give you more opportunities to reinforce your proposal and influence the out. I guess it's good news for everybody who's kind of up for the fight and wants to try and win business. Okay, thank you very much for that.
- [23:28]
B
Thank you for that, Tony. What I'd love to hear from you and maybe Aaron too are great for organizations that are, say new to UK aid, that are hearing some of this and thinking, okay, that matches our past performance, we might be a fit for that. You mentioned these, you know, pre solicitation calls for some of the procurements. What are some suggestions you would have for an organization that is interested in maybe taking the next step and exploring if there might be a fit and it might be worth pursuing the UK aid market?
- [24:01]
D
Aaron, I think you're on mute.
- [24:03]
B
Oh, Aaron, go for it.
- [24:07]
D
Yeah, you're on mute.
- [24:09]
C
Got it, got it. Thank you. Thank you being so well behaved. Looking into 2025, we're entering a period of bedding in. I mean the Labour government's been in post three months after 14 years of cons of government. There's new ministers. We're expecting a refreshed international development agenda after the reviews, a realignment of FCDO in terms of its commitment and delivery to development and the launch of TPB based tenders which will be a learning curve to be climbed by both the purchasers and the suppliers. We'll expect policy announcements, the National Procurement Policy Statement that Tony mentioned, the outcome of the Shafik review. We should know the actual budgetary limits and TPP should all come together by February next year. So we see that we are gliding in to a situation where there should be much more certainty and clarity. Excuse me. Early in the new year, we're expecting bidding opportunities to grow under the new government. We think that greater political stability and the intention to rebuild the UK's international reputation in international development will be big drivers. So encouraging message, but we have to balance that with a context of a struggling economy, little spare cash, conflicts in Ukraine, Middle East, Sudan, that could cause all sorts of diversions and many conflicting priorities. So competing priorities. So we particularly have our telescope focused on the situation in February next year where we think the picture will be hardened. So for organizations looking to partner with FCDO and work in that sector, first, very important point to stress for US observers and other non UK players, tendering will remain untied. UK aid will remain untied. You don't have to be a UK organisation to tender or participate in UK opportunities. We don't see there'll be any requirement for a UK base that would be very exceptional in line with localization. We see in country base becoming a more common requirement and the way UK contractors meet this is commonly through a teaming arrangement with a local teaming partner. We also expect to see more points in the evaluation grids on localization elements like developing Local capacity, inclusion of local consultants in the offer. As Tony alluded, we expect to see greater use of frameworks for programs delivery and the option is always open for US and other non UK actors to join framework bidding consortia. The Conflict Stability and Security framework expires in September 2025. The global delivery Development, the Global Development Delivery Framework that Tony alluded to earlier expires in December 2025. And the gem for two, the evaluation framework. The bidding for that is in progress. So there are framework opportunities coming up and also very significantly, which will be a big change. Under tpp, it will be possible to be admitted as a provider during the life of the framework, which is not possible under the current rule.
- [28:23]
B
Oh, that's interesting. And that's also. And for those frameworks then, if they were USAID IDIQs, bidding pre positioning would already be well underway. Is it the same for the UK market that now.
- [28:35]
C
Absolutely.
- [28:35]
B
Do not wait until December 2025. You're actually like now. You should be actively preparing now if you're interested. Is that.
- [28:43]
D
Is that absolutely right?
- [28:44]
C
What I say is if the call has appeared, you're too late. So we talked about attendance at EMEs. They're all now online and with EMEs the attendance lists are published, so that's an easy way to find to identify bidding partners. Tony's mentioned contact with FCDO overseas embassies. Make yourself known there, subscribe to the FCDO portal which you've put up and once our participants go on that, they'll also see other sources such as Contracts Finder and the FCDO procurement Twitter account.
- [29:28]
B
Great. Well, Aaron and Tony, we're already at time. This was wonderful. Thank you so much for the insight. For those interested in working with them, please message me on LinkedIn at Mike Shanley or email us at connected connectonnected.com c o n n e c t connected.com and we'll be sure to connect you. Anyone interested in our USAID market entry support. Happy to talk with with you as well. We'll put the FCDO supplier engagement list in the in link. Sorry in the show notes. And I'll look forward to seeing hopefully both of you at the end of the month when I'm back in London and really appreciate the insight. Look forward to staying in touch in the coming year to follow these developments and maybe checking in after February to see to see what comes out of that.
- [30:22]
C
Thank you.
- [30:23]
D
Thank you very much. Thank you.
- [30:25]
B
Thank you both. Thanks everyone for attending. Have a great day.
- [30:27]
D
Cheers. Thank you. Bye.
- [30:32]
A
Thank you for tuning in to the Aid Market podcast. If you enjoyed today's show, be sure to subscribe wherever you get your podcasts. And connect with Mike Shanley on LinkedIn to stay updated on the latest USAID funding trends.