Payment by Results: past its sell by date?

Duncan Green has posted an excellent take-down of Payment by Results (PbR), the latest donor trend which is increasingly being used to impose conditionality on implementing partners. He quotes David Cameron himself, who believes this to be the best thing since sliced bread but draws in multiple other viewpoints to question whether this really is likely to improve outcomes. His main analysis is that this is a fad, does not particularly work and risks decreasing rather than increasing the effectiveness of aid. And then, bewildered, asks why on earth donors keep doing this.

To answer that last question and to think about how those of us at the sharp end navigate this trend I think it’s worth considering (a) the motives driving donors to do this, (b) alternatives to PbR that might meet those motives in a more effective way and (c) highlight that there are some grounds for hope that a more holistic approach might soon replace this very technocratic, transactional way of doing aid in future.

Motives

On one level you can see the attraction of PbR. There is sadly no shortage of wasteful spending within the sector and there is nothing whatsoever wrong with challenging that. For the UK it’s also worth reminding ourselves that the current Conservative leadership have consistently gone out on a limb to defend aid spending, frequently against attacks from their own side, so PbR is a helpful way of placating those for whom the idea of aid in and of itself is questionable. The power of sceptical MPs and the Daily Mail, together with public cynicism is a powerful force.

It also, as Duncan points out, transfers risk from the donor to the implementing agency. Or does it? While that may be the motive I would argue that this form of funding has aided the growth of another trend, which is the emergence of large global accounting firms who are increasingly awarded donor tenders. The reality is that a global firm can handle more financial risk than a hand-to-mouth I/NGO. Are we really sure that a global company driven by profit rather than other motives is better placed to actually deliver results, though?

Alternatives

A more radical solution to meeting the needs of sceptical polities and electorates, while dealing with risk, might be to totally re-shape the I/NGO environment. This is within the gift of the top 5 large donors alone. A fundamental and co-ordinated shift in their funding strategies would do it. How about deciding that they will only fund Southern programming which is run from the South, and which is clearly building a capacity base in the South rather than maintaining those in donor capitals? Some agencies have already seen that this might be on the way and are relocating accordingly. Perhaps we should go the whole hog sooner rather than later. The message to sceptics and electors is that we are building a long term capacity which is by definition closer to the problems they are trying to solve and is therefore better placed to navigate risk.

An alternative to PbR is surely Positive Deviance. This is an idea that has been kicking its heels since the late 1990s, just waiting for people to try it at scale. It is far more based in the reality of messy power, politics and conflict and is thus far better placed as a methodology to try to meet those challenges. It is also likely to be far cheaper to try to incubate localised approaches to political problems than the sort of top-down pre-cooked approaches which PbR encourages. Twaweza has already done some useful and pioneering work on this in East Africa, reflected in its current strategy.

Allied to Positive Deviance programming how about a dash of Problem Driven Iterative Adaptation (PDIA), which at last is becoming more widely accepted as a means by which we move from tick-box approaches to M&E towards actually setting out to LEARN and act on that learning at every stage. For the sceptics here we would therefore have a combined Positive Deviance & PDIA model – which is enabling local people themselves to put forward their own ideas about how to meet challenges, and to do so in a way that is flexible enough to deal with the most complex and challenging of contexts. Surely better than PbR – which sees development as some kind of series of transactions between a ‘purchaser’ (donor) and ‘supplier’ (aid agency). Looks good on paper. Looks silly in real life.

Grounds for Hope

I suspect the large statutory donors will be embarrassed into abandoning PbR. A number of the more agile and free thinking donors, notably the Foundations of this world, are pursuing far more innovative approaches. Ford Foundations Darren Walker has railed against the “tyranny of donors” – and PbR was the sort of thing he had in mind. Micro-management at its most tyrannical. He has adopted a version of funding which involves agencies themselves being incentivised to learn, experiment and innovate – and be held accountable throughout. If this model proves more effective, then it is hard to see how the more lumbering statutory donors can maintain the pretence that PbR is a worthy alternative.

That said, Mr Walker has also warned that the I/NGO world needs to be slimmer, fitter and involve far less duplication. For reasons that may be obvious, I/NGOs have preferred to concentrate on the first part of his message, and not the second.

The new SDG framework also gives grounds for hope that this sort of approach will soon be heading of into the annals of past fads. It is simply not credible to claim that you could pursue Goal 16 on peace, governance and justice by an approach which is characterised by a series of linear and results driven transactions. More flexible, innovative, locally driven and learning based approaches will surely prevail.

And lastly, we finally see the importance of dealing with power and politics being placed centre stage by the new SDG framework. I witnessed the extraordinary sight of Jim Kim and others, the very authors of technocracy, pledging to end that approach and adopt a new politically driven approach in order to tackle conflict and governance at the Bank’s Fragility Forum recently. While there is a world of difference between a pledge at a conference and what the Bank does at local level, it seems the tectonic plates are finally grinding in the right direction. As it becomes increasingly clear that PbR is an entirely inappropriate way to tackle complex, volatile and changeable contexts, I suspect it will not survive that tectonic movement for long.