Our Programmes



Sign up to our newsletter.

Follow ODI

Aid effectiveness and value for money aid: complementary or divergent agendas as we head towards HLF-4

Time (GMT +00) 10:00 12:00

Brenda Killen
- Head of Aid Effectiveness Department, Development Cooperation Directorate, OECD
Liz Ditchburn- Director, Value for Money, DFID
Claire Melamed- Head of Growth and Equity Programme, ODI
Gideon Rabinowitz- Coordinator, UK Aid Network

Marcus Manuel 
- Head of Centre for Aid and Public Expenditure, ODI

Marcus Manuel - Head of Centre for Aid and Public Expenditure, ODI (Chair)

·         There is both a lot of concern within recipient countries to keep the aid effectiveness agenda going, as well as enthusiasm within donors to get greater value for money (VFM) in development finance. In theory the two agendas should be complementary. However, there is a potential tension between the aid effectiveness agenda and how the (VFM) agenda is implemented. VFM is most easily demonstrated through a series of simple, single focus, single donor projects. Yet aid effectiveness criteria – ownership; alignment; harmonisation – are most easily achieved through multidonor multisector budget support.

Brenda Killen- Head of Aid Effectiveness Department, Development Cooperation Directorate, OECD

·         As we move towards HLF4, we must remember to communicate that aid does work and that there has been unprecedented development progress over recent decades.

·         At the same time we must also remember that there is a strong demand from within recipient countries for donor engagement as well as more effective aid. The aid community has learnt a lot in recent years on how to effectively deliver aid (eg channelling aid through country systems, supporting country ownership) and should continue to apply these lessons.

·         In order that we move towards a more effective implementation of VFM it is essential that we combine considerations of economy, efficiency and effectiveness.

·         VFM and aid effectiveness are complementary in regard to issues surrounding accountability, but particularly in regard to effectiveness and efficiency.

o   Efficiency: Donor harmonisation and the use of country systems and  reduces transaction costs and increases efficiency

o   Effectiveness: Ownership and alignment essential building blocks for long term sustainability and contributing to achieving intended outcomes.

·         The question of ‘VFM for whom’ should not be an issue. It should be evident that donor and recipient interests are the same.

·         However, implementing VFM is not without difficulty, as advanced economies such as the UK can ascertain from their own experience.

o   Difficulty integrating both quantitative and qualitative measures (such as quality of governance or education).

o   Challange measuring VFM over the long term

·         There are different levels involved in implementing VFM: the global level, the programme level and the project level. Each level faces challenges and risks, in regard to developing suitable indicators and the coordination of donor activity.

·         Pitfalls of VFM:

o   Avoiding the tyranny of indicators. Efforts to measure absolutely everything can lead to unnecessary transaction costs.

o   Ensuring there is no bias against “soft sectors” such as governance due to measurement difficulties.

o   Recognising different cultural values and expectations around Value for Money.

o   Taking care not to ignore political cycles in partner countries.

o   Placing domestic accountability at the heart of any value for money effort. The influence of bodies such as parliaments, national audit institutions.

·         Major HLF4 objectives:

o   Draw conclusions on the Paris/Accra process and reaffirm commitments to aid effectiveness.

o   Address impact and role of aid in the broader development agenda. How does aid interact with other sources of revenue?

o   Draw on evidence to develop aid quality framework towards 2015 (MDGs)

·         Expected outcomes at Busan:

o   A partnership inclusive of all development stakeholders, China in particular

o   Focus on results, transparency and accountability.

o   Full recognition of the contribution of aid to development, but also recognition there are other issues that are important – trade; migration etc.

o   Further country-based monitoring

·         Moving forward on the results agenda requires a complete overhaul of the approach:

o   Need to address lack of harmonisation, fragmented and uncoordinated data collection, cumbersome reporting systems (strengthening country systems in regard to data collection and analysis is particularly important), as avoiding the continued undermining of ownership, capacity and accountability in partner countries.

·         Improving communication with donor taxpayers is crucial to support honest and realistic objectives as well as enable donors to take risk. An informed and realistic discussion about the purposes and priorities of aid at Busan is crucial to improving both VFM and aid effectiveness.

Gideon Rabinowitz- Coordinator, UK Aid Network

·         Keystones of aid effectiveness agenda are country ownership; donor alignment behind use of country systems; donor harmonisation; a results focus, and; mutual accountability between donors and partners for results.

·         VFM is a subcomponent of the aid effectiveness agenda, specifically in regard to a focus on results.

·         The results agenda has not received enough attention in comparison to the rest of the Paris principles.

·         Notably, ODI research on sector budget support has shown that while there has been a lot of activity at the ministry level regarding how donors can harmonise their activities, there has been less progress in improving results in regard to the quality and effectiveness of service delivery systems. 

·         Implementing a results agenda will always face resistance to some extent or another and will continually need promotion.

·         The Paris principles have given recipients a great deal of leverage in holding donors accountable for their performance and negotiating effectively.

·         However, coordination/harmonisation of donor activities is lacking, and there is generally a long way to go before the Paris principles are effectively institutionalised. It is therefore important that donors continue to work towards fulfilling the Paris agenda.

·         The previous champions of the Paris principles are currently much less vocal

·         Developing countries desperately want issues addressed by the Paris principles such as ownership and alignment and budget support on the agenda at the Busan HLF. Unless donors take an active role in putting this broader agenda is put on the table at Busan, it will be difficult to move implementation of the Paris principles forward.

·         In pressing forward new frameworks for donor action, we may be throwing the baby out with the bath water.

·         In the context of growing public scrutiny of the aid budget, the aid sector needs to be more proactive in informing the public about how the sector operates and explaining the challenges of delivering aid effectively, specifically in regard to increasing country ownership and alignment.

·         Politics, power relations and institutional capacity are key to improving aid effectiveness. A purely technical fix in regard to implementing results frameworks and expanding the availability of aid data is not the answer.

Claire Melamed- Head of Growth and Equity Programme, ODI

·         When evaluating VFM and aid effectiveness is important to determining who the beneficences of greater value and effectiveness are.

·         Poor people are ultimately the beneficiaries of aid, and when evaluating VFM and effectiveness it is essential to consider what poor people want (eg Jobs, roads, personal security, dignity).

·         There is currently a disconnect between what poor people identify as development priorities and the overarching goals of the aid industry (eg the MDG's).

·         Much greater effort should therefore be given to align the priorities of donors, government s and poor people.

·         Broader measurements of poverty such as the Participatory Poverty Assessments and the Multi-Dimensional Poverty Index provide a basis on which to identify development priorities and measure progress.

·         Quantitative indicators, however, have much more power in policy making circles.

·         Lessons in measuring results and obtaining value for money can be learned from methodological approaches used by the NHS – who have been struggling with these issues for a considerable period of time.

o   Three stage process: 1) what outcomes do patients want, 2) how do people value the different outcomes, 3) what are the costs/benefits of different methods of resource utilisation.

·         A first step in applying this methodology to development is to generate a set of development priorities through the use of qualitative surveys, focus groups etc (Integrating the priorities of poor people is key.) A second step is to identify what combination of outcomes can development practitioners and recipients identify as the most immediate priorities. Once priorities of identified it is then possible to compare different ways and combinations of using resources to achieve outcomes.

·         NHS indicators such as patient reported outcome measures (PROMS) and Quality Adjusted Life Year (QALY) used in determining resource allocation and measuring outcomes can be adapted and piloted in development contexts.

o   Similar methodologies have been used in broader public policy issues such as tackling deprivation in the UK.

o   Further work needs to be undertaken to identify the issues and challenges in applying these approaches to a development context.

o   If this proves to be a useful approach, it is important to develop a standardised approach comparable across countries from the beginning. Current multi-lateral initiatives such as Busan are an opportunity to raise and develop such initiatives.

Liz Ditchburn - Director, Value for Money, DFID

·         Aid effectiveness and VFM are neither complementary nor divergent – they are one and the same, aiming for the same goal – more impact from our money for poor people.

·         “Aid effectiveness” as a term has been used so much that it’s easy for it to lose meaning and for us to forget what we were trying to achieve through it.  But it still means effective aid, in other words, aid that achieves its intended outcomes.

·         And we’ve all learnt the hard way that the Paris principles are critical to the effectiveness of aid.

·         Value for Money - getting the most out of our resources - is aiming for exactly the same thing – aid that makes the most difference.

·         Results runs strongly through both aid effectiveness and value for money – the one possible difference is that value for money forces us to look much more explicitly at cost – and in a world where the financing gap remains large we cant ignore this.  Getting the most out of the collective resource – external and domestic resources – matters.

·         In taking forward any approach or set of principles, there is a risk that we implement in ways that undermine our goals.

·         There is a risk that the Paris principles can be used as justification for poor decisions. Development practitioners may avoid challenging weak monitoring frameworks, for example, on the grounds that to do so would contradict the Paris principles.  But if that weakness means it’s less likely that the programme will be successful and achieve it’s goals, we must be prepared to have honest discussions with recipients about this.

·         And just as the Paris goals can be undermined by poor implementation, there are risks that we must manage in seeking Value for Money.   Many people have spoken about these:  the risk of focussing only on the measurable, on the short term not the long term, of doing the easy things not the difficult things.  If we fall into these traps, we will not be achieving value for money – building something that falls down the next day is not value for money. 

·         One of the ways in which we can mitigate these risks is by sticking to the Paris principles.

·         What does this mean for the Agenda for Busan: Strengthening country systems, increasing domestic as well as donor accountability and making relevant information and statistics more available to all – these are all things that can strengthen results and value for money in a “Paris-like” way. The drive to greater transparency is critical here as well with donors and recipients using internationally comparable standards and formats.

·         Can we achieve these things without running into the same problems many are observing with our implementation of Paris – lots of process and bureaucracy and less impact that we hoped for?

·         For example we all saw how much activity was generated in the production of PRSP s but questions remain about how much real ownership they generated. For Busan to be effective, we will need to find the right entry points and the ways to unlock change and transformation in how aid is delivered.

·         In DFID’s own practice, the whole of our operations are being put under a value for money lens.  You’ve seen this through the Bilateral and Multilateral Aid Reviews – resource allocation is one of our most important value for money levers.  DFID is also learning that sectors offer really important value for money opportunities both in terms of evidence and theories of change linking outputs to outcomes and impact, and in metrics and implementation.  At the intervention level, all new DFID Business Cases will be published and you will be able to see the basis for decisions.

·         As part of the development community, many of you are grappling with the same issues.  All of us need to identify the most important value for money opportunities for our own organisations, and learn and share information, for example on unit costs, to enable us collectively to make progress as quickly as possible.

·         Value for money for DFID means an absolute determination to get the most change and impact possible with our money.  Making issues about cost and value more explicit will lead to better decisions and programmes more likely to achieve the intended impacts – that is, effective aid.

Questions/Points raised from the floor

·         How can we work more effectively with the media in order to promote greater public understanding of aid issues? This is an area of DFID operations in which funding is currently being cut.

o   Airtime currently given to development issues is too short to delve into complexity.

o   However, for many critics, aid is a moral issue concerning whether it is right to spend funds overseas instead of domestically. Engaging such critics with information campaigns explaining the complex reality of aid is unlikely to change mindsets.

·         Are there best practice methodologies to measuring VFM at the NGO/ project and programme levels?

·         Isn’t the key political risk to the UK government that large corruption scandals are uncovered in recipient countries? Shouldn’t efforts should be aimed at reducing such risks instead of pursuing VFM measures which we know from experience are sometimes impossible to implement (for example in soft sectors such as governance and research)?

·         Do DFID VFM methodologies inform what aid modalities will use going forward, and were these modalities chosen according to past performance or predicted future performance?

·         Donor progress on aid transparency as we move towards HLF4: In the last year agreements have been made on an Internal Aid Transparency Initiative (IATI) standard. Although the pace of implementation is varied, this is a big step forward.

·         The Paris Declaration and Accra agenda have not produced principles that are entirely appropriate for the contexts post conflict and fragile states.

·         There is a danger that by implementing VFM, donors will target those easiest to reach rather than the most deprived and marginalised who are in greater need.

·         Part of the agenda for Busan should be showcasing successful country designed and led initiatives which predate the Paris principles (such as support to Indian education system).

·         Getting politicians engaged and catching the political appetite is the most important determinant of success at Busan. This may mean talking more about results and value for money and less about aid effectiveness.

·         There is a risk that VFM initiatives bias towards donor driven modalities rather than NGO aid modalities.

·         How does the focus on results relate to recipient countries desire to talk about an end to conditionality at the HLF?

·         Looking at the recent history of development, almost all experts can agree that country ownership is the key to delivering results. This was the basis of the Paris declaration. In the DFID bilateral aid review there is literally not a mention of country ownership. Does this illustrate a worrying move away from an emphasis on country ownership within DFID?

·         High level actors need to explicitly reaffirm commitment to the Paris principles at Busan. This needs to be done publically as well as behind the scenes.


OECD countries deliver $120 billion in aid a year. Yet significant concerns remain about the impact of much of this aid, despite a decade of efforts to address them.  In late-2011 the OECD's 4th High Level Forum on Aid Effectiveness (HLF-4) will review achievements from past efforts and agree priorities for future action to improve the impact of aid.

As preparations for this crucial gathering begin, two major approaches are dominating the debate:

  1. A continuation of efforts to implement "aid effectiveness" reforms, such as those in the Paris Declaration;
  2. A focus on improving "value for money" from aid, through focussing on investing resources in the most cost-effective way.

This meeting will be chance to:

  • reflect on these approaches

  • explore the degree to which they represent complimentary or divergent agendas; and

  • discuss how they might combine to help ensure that HLF-4 is a turning point in the future impact of aid.
ActionAid UK